REG - Rockwood Strategic - Full year results to 31 March 2025
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RNS Number : 2540N Rockwood Strategic PLC 18 June 2025
Rockwood Strategic plc
("RKW" or the "Company")
Full year results for the year ended 31 March 2025
Rockwood Strategic plc (AIM: RKW) is pleased to announce its audited results
for the year ended 31 March 2025.
Highlights
- NAV Total Return performance in the twelve months to 31 March 2025 of
21.0% to 248.79p/share*, which compares to a decline in the FTSE Aim All-Share
of 8.2% and a rise in the FTSE Small Cap (ex-ITs) of 3.4%.
- The Total Shareholder Return in this period was 20.8%*.
- NAV Total Return performance in the three years to 31 March 2025 of
54.5%, which compares to a decline in the FTSE Small Cap (ex-Investment
Trusts) of 6.6% and a decline in the FTSE Aim All-Share of 34.6%. The Total
Shareholder Return in this period was 78.6%*.
- Maintained price of shares at an average premium to NAV of 2.9%*.
- Significant investor demand resulted in issuance of 7.6 million new
shares, increasing the share count by 24.5% and, alongside performance,
growing NAV to £96.6m from £64.3m. NAV has grown 135.6% in the last three
years.
- Recognition of the strategy's success through multiple industry awards,
including Best UK Smaller Companies in Investment Week's Investment Company of
the Year Awards; Best UK Small Companies Trust in the Citywire Investment
Trust Awards 2024; and Best for UK Exposure in QuotedData's Investors' Choice
Awards.
Post Period End
- NAV Total Return performance since period end to 13 June 2025 of
10.0% and year-to-date of 5.8% to 273.59p per share.
- Realised gain in National World Plc due to a successful takeover
offer generating a 73.2% IRR.
- Entry into FTSE All-Share Index and FTSE Small Cap Index, due to
increased scale.
- Further issuance of 3,837,000 new shares, increasing NAV to
£116.7m as at 13 June 2025.
- Fund is the No.1 Small Companies Investment Trust over the last
3 and 5 years.
Noel Lamb, Chairman of Rockwood Strategic plc, commented:
"These results speak for themselves. Rockwood Strategic is clearly
demonstrating that its differentiated approach works. We are delighted that
through our issuance programme many new investors are becoming shareholders
and we are able to continue to scale the Trust and deploy capital into this
overlooked part of the UK stock market."
Richard Staveley, Fund Manager, Rockwood Asset Management said:
"Undistracted by the noise of geo-political events, we continue to work hard
at finding outstanding investment opportunities in the smallest of UK publicly
listed equities. A concentrated portfolio, full of incredibly undervalued
equities, is now in place, with identifiable catalysts across our investments
to unlock, create or realise value for shareholders. We have delivered our
target returns during a sustained challenging period for UK equities. We have
high confidence that this will continue, given the upside we see in our new
and maturing portfolio holdings; patience will be rewarded."
The full version of the RKW 2025 Annual Report and Notice of AGM has been
published and will shortly be available on the Company's website
at www.rockwoodstrategic.co.uk (https://www.rockwoodstrategic.co.uk/) .
(* These are considered to be Alternative Performance Measures (APMs).
Please see page 49 of the Annual Report for further details.)
Change of Company Secretary and Registered Office
The Company also announces that Ben Harber has been appointed as Company
Secretary with immediate effect. Mr Harber has taken over the role as Company
Secretary from SGH Company Secretarial Limited who have fulfilled the role as
Company Secretary since June 2019.
The Company's registered office has also changed to C/o Arch Law Limited,
Level 2, Huckletree, 8 Bishopsgate, London, EC2N 4BQ with immediate effect.
References to page numbers throughout this announcement relates to the page
numbers within the Annual Report of the Company for the year ended 31 March
2025.
For further information, please contact:
Rockwood Strategic plc
Chairman Noel Lamb 07903 248198
Rockwood Asset Management Christopher Hart 020 7640 3200
Investment Manager
Singer Capital Markets Advisory LLP
Broker James Maxwell 020 7496 3000
James Fischer
CHAIRMAN STATEMENT
Dear Shareholder,
I am pleased to report another successful year for Rockwood Strategic plc
("RKW"). RKW has grown Net Asset Value ("NAV") per share, increased assets
through new issuance and maintained the share price at a premium to NAV. RKW
remains one of the very best performing UK small companies funds, according to
Association of Investment Companies data for the previous one, three and five
years ended 31 March 2025.
NAV Total Return performance in the twelve months to 31 March 2025 was
21.0%(1) which compares to an increase in the FTSE Small Cap (ex-ITs) of 3.4%
and a fall in the AIM All-Share Index of 8.2%. The Total Shareholder Return in
this period was 20.8%. Our approach is clearly differentiated from other UK
small company funds; concentrated, 'value' focused, and adding value through
active engagement with our investments. It seems clear that the pressure of UK
market outflows and desire for liquidity by many professional investors is
creating opportunities for our Manager to uncover the resulting pricing
inefficiencies and opportunities for successful capital deployment to generate
our medium and longer term performance targets.
The market had an eventful year and a further 7 new holdings were established
during the period. As a result, half of the top ten holdings have changed in
the last year. This ability to re-cycle and renew our portfolio provides
confidence in the dynamism of our approach and that the seeds of future NAV
growth are being sown.
Geo-political and macro-economic headlines continue to dominate sentiment.
However, it is clear this highly stock specific approach is identifying
opportunities which can create value for shareholders irrespective of external
events. A number of operational turnarounds within the portfolio now appear on
track, strategic initiatives continue to progress and a range of new or
evolved management teams and Boards have either concluded or are underway. It
is worth remembering that performance in any short period under review will be
primarily due to the individual performances of a handful of our holdings. I
have made this comment before and will again, as in 2025 it was indeed the
case due to the outstanding contribution from Filtronic Plc and Funding Circle
Plc to Shareholders' NAV growth.
I am also delighted to report that the shares have maintained an average 2.9%
above price premium to NAV. This has allowed RKW under its authorities to
issue shares to new investors satisfying demand. Issuance continued during the
financial year and as the Trust reached its limits under existing authorities
we issued a Prospectus and conducted a General Meeting to expand this limit
which was overwhelmingly supported by shareholders, for which I thank those
who participated. We warmly welcome all our new fellow shareholders.
It was also pleasing to see external industry recognition of our progress with
Rockwood Strategic winning 'Best UK Exposure' at the Quoted Data Awards,
'Investment Company of the Year - UK Small Companies' at the Investment Week
Awards and 'UK Smaller Companies Trust' of the year at the Citywire Investment
Trust Awards. The Board also noted Richard Staveley, your manager, was awarded
the coveted AAA status by Citywire during the period.
The Board believes that, until the Company has gained greater scale, it will
retain the maximum capital allowable to maximise the compounding of NAV
growth. Our Dividend policy is that at least 85% of net income after expenses
will be paid to shareholders. During the period, modest levels of portfolio
income did not exceed running expenses and thus no dividend will be paid. Our
AGM will be held on 29 July for those that would like to meet the Board
members and Investment Manager in person.
Yours sincerely,
Noel Lamb Chairman RKW
17 June 2025
INVESTMENT MANAGER'S REPORT
Market backdrop
Rockwood Strategic derives its main investment 'edge' from individual stock
picking rather than broader market and economic insights which the media tend
to focus on. Of course, the health of the general economy, the level of
political interference in economies and the cost of money (interest rates) all
affect the outlook for our holdings, in particular the context in which they
are improving profitability and undertaking strategic initiatives.
Finally, for the first time since March 2020 interest rates started falling.
This is an important development as what Ed Chancellor calls "The Price of
Time" has such an influence over the cost of capital, asset allocation
decision-making and return expectations.
It also signalled that the main Central Banks were happy the recent
inflationary period was behind us. However, in their culturally conservative
approach, the pace of cuts has been pedestrian and during the year the Bank of
England reduced the base rate from 5.25% to 4.5%. For many mortgage holders
and businesses used to the extended period of zero rates, this remains a
challenging policy setting.
The adoption of aggressive Tariffs by the U.S. are widely expected to create
an inflationary impulse, despite equal unanimity that they will lead to weaker
economic activity, which could offset this (for illustration the oil price has
fallen from c.$82 in March 2024 to $61 at time of writing). This may temper
further cuts, its frankly unclear. However, in the UK the Consumer Price Index
hit 2.6% in the 12 months to March; broadly on track to reach, but still
above, the target of 2%. Our expectation is that slowing global economic
activity as a result of policy uncertainty around Tariffs and the lack of
fiscal headroom to provide stimulus, will enable interest rates to continue
falling, probably at an accelerated pace, which historically has been
supportive for the performance of UK smaller company shares. The U.K.s small
(only 1.9% of GDP) exports to the US appear to have received some friendly
(e.g. vs Europe) treatment, but the wider inevitable economic slowdown
combined with domestic sluggishness is supportive of lower rates and a
challenging backdrop for many businesses.
In the UK, a General Election occurred resulting in a large majority for the
Labour Party, despite a low level of the popular vote, as traditional
Conservative support tired or splintered into the Reform Party. Labour, in a
serious attempt to prove they are worthy of government (having been in power
only 13 of the 46 years since 1979), have issued 'fiscal rules' which is
important given government debt interest payments now exceed £100 billion,
more than the education budget. Clearly 'talk' needs to be translated into
'action', however clear policy support for more UK infrastructure investment,
reduced public sector costs and improved productivity, less and easier
regulation, reduced welfare benefits and closer ties with Europe sit well with
the desires of business, who will power any future improvement in economic
growth. The funding conundrum to solve remains difficult given very high
levels of taxation already relative to history and post war highs in
government debt-to-GDP ratios.
The first Budget in the Autumn was constrained by election tax promises and
the increase in National Insurance Contributions alongside higher minimum
wages and, in advance of enhanced employee protections, has clearly knocked
the wind out of many businesses. For context the national living wage is now
higher than Germany, France, Ireland, Japan, Spain and of course the U.S. We
expect further fiscal gymnastics over the next year, not least because changes
to non- domiciled tax residents are seemingly causing an exodus of some of the
wealthiest. One needs to generate a lot of tax elsewhere when the top 1% of
payers contribute 29% of all taxes (when compared to 11% in 1979) and decide
to leave the country.
We remain very frustrated that the new Government has not done more to
stimulate investment flowing into the British stock market; a critical
component of the country's ability to finance and scale our very best
businesses. New issues were essentially non existent. Takeovers and companies
leaving the market continued. However, whilst the small company dominated AIM
remains under severe pressure, and clearly not helped by a reduction in the
tax relief available, the actual performance of UK shares was good. In fact,
better than good (above long-term averages). The FTSE 100 rose 12.9% during
the year.
This compares to the S&P 500 up 7.6%. Your manager feels passionately that
if smaller British companies are to sustainably join their larger brethren in
performance terms, active policy actions by government will be necessary.
We reiterate our call for the tax relief afforded to ISAs be designated for UK
listed shares only. A self-financing policy, we believe this could funnel over
£16 billion a year into UK shares and we can bring life back to our historic
market exchange, support growing UK businesses and stimulate its wide economic
community.
"US exceptionalism" debates over recent years are being questioned. These
arguments developed to support the narrative that the much higher valuations
of US shares which had emerged were justified. We note that 2024 was only the
third time in 100 years that back-to-back performances over 20% were achieved.
Circumspection is now underway following Trump's election and in the wake of
Chinese AI developments ('Deepseek') at a fraction of existing prices. In
short Apple makes its products in China, Taiwan dominates the world supply of
semi-conductors and the US doesn't grow many bananas. Simplistic tariff policy
is being directed at complex, long- standing, interdependencies. Second and
third order impacts will be far and wide. The lack of clarity in terms of the
final policy settings under the Trump administration is now the key dampening
effect on the world economy. It's the uncertainty that kills.
Of further significance is the loosening up of Germany's fiscal position
alongside the EU. This once rock-solid conservative stance has been fractured
by Trump's pressure on Europe to carry its weight on Defence spending. With a
low, relative, debt to GDP ratio in Germany, this appears a welcome
development to underpin European economic recovery, as does a softening
attitude to the pace of climate change regulations which tend to suppress
economic growth.
In conclusion, we are thankful our stock specific investment approach at
Rockwood Strategic doesn't rely on analysing macroeconomic, geo-political or
market factors, particularly when the sitting US President has his own
crypto-coin, such as deciding upon the correct price for Gold, but we are
positive that interest rates are falling and that the UK appears in a
relatively good position on tariffs and that, quietly, with little hubris, UK
shares have started to beat US ones. Given low starting relative equity
valuations, if this is the beginning of new trend, it could be a very
significant investment opportunity and we mean to exploit it.
Portfolio Commentary and Outlook
Overall, the portfolio is diversified by number of investments (24) and
industry sectors. There remains concentration of our largest holdings, with
63.1% of NAV in the top ten holdings. 13 of our investments have net cash on
their balance sheets, completely unlevered. During the year a number of key
investments, in-line with our theses, reduced their leverage and thus risk
materially, highlights being Capita and James Fisher & Sons.
The current valuations of our holdings are materially below our estimate of
their combined intrinsic value. Low starting valuations are critical to future
positive returns.
We have had the proceeds of new issuance to invest. Cumulatively this has
meant we have been able to buy more of our maturing investments at favourable
prices and also we have, in a buyer's market, been able to purchase 7 new
investments, all of which we target at least 100% upside, and represented
23.3% of portfolio NAV at period end.
An understanding of the maturity stage of the portfolio holdings is paramount
to the confidence which underpins our view of the future NAV growth
opportunity. Typically, we spend between a month and up to 6 months
researching a new opportunity. On initial purchase the company is entering or
within a 'stabilisation phase' which lasts 6-18 months. This is usually a
volatile period for the shares (more often than not in a negative direction)
as the management and Board evolves, operational performance is stabilised,
all issues surface and the plan for financial improvement (both balance sheet
and cash flow generation) is addressed. This is the riskiest period for the
investment. On emergence, management incentivisation and team has been
finalised, operational plan created and a 'delivery phase' occurs, usually
24-30 months long, as the business is returned to decent profitability,
returns normalise, and both the balance sheet and free cash generation are
repaired. Progress is monitored through company results. Subsequently the
shares move into a 'realisation phase' where either the stock market re-rates
the company to fair value or external parties (trade buyers or private equity
funds) spot the stabilised but undervalued business and make an approach.
We expect the pickup in trade buyer acquisition activity and public-to-private
transactions to accelerate in the coming years for our targeted part of the UK
stock market and the portfolio. If the stock market doesn't fairly value or
provide growth capital to UK listed small companies then alternative solutions
for shareholders will emerge. This dynamic should deliver material, absolute
NAV growth for the current portfolio holdings as it did during the year with
the takeover approach for National World at a 53% premium. Our unrealised IRR
at year end was 84.4%.
We are excited as the majority of the portfolio is now within the delivery or
realisation phase which should be supportive of further NAV growth in the
years to come and our target return objective of 15% IRR.
Investment Philosophy
· 'Value' investor mindset and free cash flow focused
· Seek proven businesses, identifiable assets
· Establish mean reversion potential (profitability, balance sheet and
valuation re-rating)
· Identify catalysts for change
· Develop exit thesis to mitigate illiquidity risks (3-5-year time horizon)
· Engage with all stakeholders to de-risk and add value
We believe that investment returns are generated by purchasing a share for
less than the intrinsic worth of the company, (a 'value' philosophy), which is
enhanced by identifying companies which can increase their fundamental
intrinsic worth over time, thus avoiding 'value traps'. We seek to optimise
the IRR by identifying 'catalysts' which will unlock the share's discount to
the business's worth or accelerate value creation. For 'core' investments we
ourselves may be the 'catalyst' through the provision of capital, insight and
personnel through constructive engagement with the Board, management and other
stakeholders.
Top 10 Holdings as % of NAV
Company Sector %
RM plc Education services 13.9
Filtronic Technology 9.4
Trifast Industrials 6.5
Vanquis Banking Group Plc Financial Services 6.0
M&C Saatchi Media 5.2
James Fisher & Sons Industrials 4.8
Restore Business Services 4.8
Funding Circle Financial Services 4.6
Capita Plc Business Services 4.0
Mercia Asset Management Financial Services 3.9
Total 63.1
Cash and equivalents Cash and equivalents 2.6
Top 5 Investment Portfolio Holdings Commentary
RM Plc 13.9% Net Assets
Cost: £5.50m, Value as at 31 March 2025, £13.44m, IRR to date 60.8%
The company is an established and leading supplier to the education market. It
has three divisions: firstly an educational supplies business which reaches
90.0% of UK Primary schools selling everything from basic supplies to bespoke
teaching aids, often encouraged by the curriculum. The second is a leading
assessment business which facilitates the marking of exams such as the
International Baccalaureate or A-levels both in the UK and abroad. The final
division provides outsourced technology services to groups of schools.
We led the initiative to appoint Christopher Humphries to the Board who is now
Senior Independent Director. The company has high levels of debt, but
supportive banks, and we expect a divisional sale to repair the balance sheet
in the next few months. The business, which has a long history of cash
generation, is now stabilised after a recent collapse in profitability and we
expect material profit growth over the coming years, indeed management are
targeting 5x the 2023 EBITDA outcome. We believe that the shares have a
'sum-of-the-parts' valuation materially above the current share price and
expect the evolved Board and new management team to create and realise
considerable shareholder value through a well-managed divisional disposal
process and operational turnaround. During the year significant contract wins
and strategy evolution has increased our opinion of the value of the
Assessment division, which we believe exceeds the entire c. £95million
current market capitalisation itself.
Filtronic 9.4% Net Assets
Cost: £1.24m, Value as at 31 March 2025, £9.09m, IRR to date 236.4%
The company is an independent, world leader in Radio Frequency ("RF")
applications and technology. This is the art of converting analogue to digital
signals and mastering the various wavelengths on the spectrum to communicate
data effectively. The business has been in existence for many years and works
with world leading clients in its sectors, historically Telecommunications (5G
rollout for instance), Defence (Radar applications for example) and critical
communications. The opportunity for shareholders centres on the opening up of
a new, potentially huge market for Filtronic that is transforming sales and
profitability of the company creating strategic value within the industry
supply chain. The market is 'Space'. The company announced a strategic
agreement and huge contracts with SpaceX, which has been transforming the
economics of space travel, whose Starlink network of Low Earth Orbiting
satellites is global leader. Filtronic has been winning contracts to supply
components for their ground stations and is hoping to win new satellite
customers and also develop products for the satellites themselves. The company
has net cash and potentially a very bright future as other constellation
projects mature, existing clients grow and the business achieves scale.
Trifast 6.5% Net Assets
Cost: £7.03m, Value as at 31 March 2025, £6.27m, IRR to date -5.6%
The company is an international manufacturer (30.0%) and distributor (70.0%)
of fasteners (nuts 'n' bolts) and has been established for a number of
decades. With 34 locations, of which 7 are high volume manufacturing sites, 15
billion parts are sold per year and over 1200 employees. Sales exceed £230m
with a long history of profitability and cash generation. The company has
material net assets and is well invested in plant and machinery. However,
returns have fallen and Return on Capital Employed ("ROCE") is poor. The
operating margin is depressed vs its long history and competitors and a
management and Board evolution has now been completed. This included the
appointment of Nick Mills from Harwood as a Non-Executive Director ("NED").
A restructuring program to deliver savings is underway and we expect progress
from a c.5.0% operating margin to a 10.0% operating margin over the next 2-3
years. 75.0% of sales are customer-specific branded products with an 18-year
average tenure of the top ten customers, the largest being <7.5% sales. Net
Debt had become elevated not least due to a bulging inventory position of over
£100m, which is now unwinding. We can identify a significant multi-year
turnaround and recovery opportunity with scope to materially increase cash
generation, improve returns and profits leading to a normalisation and
expansion of the valuation. Tariffs effects will need to be dealt with,
although the US is a modest destination for sales and the parts are of low
nominal value.
Vanquis Banking Group 6.0% Net Assets Cost: £5.00m, Value as at 31 March 2025
£5.82m, IRR to date 35.8%
This FCA and PRA regulated Bank emerged from the historic 'door-step lender'
Provident Financial. The business now has two main lines of credit, namely a
'below-prime' credit card (Vanquis) and motor vehicle finance (Moneybarn) and
has started growing loans in second charge mortgages. There are an estimated
20 million people in the UK who are financially struggling and need to, on
occasion, access credit. Vanquis is the market leader with over 1.5 million
customers. In line with the risks to this type of lending the rates are higher
than Prime but not exploitative like the ghastly pay day lenders. For many the
alternative to Vanquis, if friends and family can't help, is the unregulated
black-market. The bank now has over £2 billion in deposits which is uses for
its profitable lending. A fully new management team is turning around the poor
performance of the company whose costs were far to high and IT systems
archaic. The plan should return the business to mid-teens return on tangible
equity which would justify a premium to Book Value. Currently the shares are
on a big discount. The turnaround has been dealing with additional challenges
from a deluge of (almost entirely spurious) customer claims created by
professional Claims Management Companies. This has cost a huge amount in
administration and has occurred under an asymmetric charging structure at the
financial ombudsmen in favour of the Claims companies. This has recently been
addressed and costs should fall in 2025-26. Furthermore, the vehicle finance
sector has been under regulatory scrutiny raising concerns of expensive
redress schemes. It is our strong view that Vanquis's exposure is modest. Well
capitalised, with attractive financial characteristics, we expect the recovery
to be considerable.
M&C Saatchi 5.2% Net Assets
Cost: £3.42m, Value as at 31 March 2025, £5.06m, IRR to date 13.9%
The company is one or the world's best known global advertising and
communications advice agencies with clients stretching from governments to
supra-national organisations (e.g. The World Bank) to the world's leading
consumer brands (e.g. Samsung) and social media sites (e.g. TikTok). Following
a period of turmoil, the Board and management team underwent significant
change. The business has been making considerable operating savings, disposing
of loss-making operations and streamlining the business, including the move to
shared services. Results demonstrated the turnaround is well underway
unveiling a growing, high margin, low capital intensive, highly cash
generative, international business. Their almost unique 'world issues'
non-cyclical division, which advises a range of governments and supra-national
organisations has material value and may need to be 'un-locked' from the
derisory stock market valuation. The company has almost finished buying out
its minority partners, has now put in place a new CEO, CFO, co-Creative
Directors and has net cash. The shares still remain below the rejected level
of the 2022 takeover offer. General concerns about the health of advertising
markets linger, however we believe the company is now in a position to
undertake share buybacks and should be actively seeking to realise and
demonstrate, value for shareholders.
Portfolio Activity Purchases New holdings Commentary
The Investment Team have been actively deploying capital during these
depressed market conditions to seed returns for shareholders over the medium
term.
Capita 4.0% Net Assets
Cost: £4.60m, Value as at 31 March 2025 £3.89m, Market Capitalisation £235m
This outsourcing business was a former FTSE 100 constituent but had a
spectacular fall from grace and is now valued at £235m. The business has a
completely new senior management team who are targeting to improve operating
margins form c.4.5% to 6-8%. There are two divisions. The first is focused on
the Public Sector where it's the incumbent administration provider of a range
of government services such as the Congestion Charge, The Student Loan Company
and the TV License. The second division is more private sector focused and has
a barely profitable contact centre business which is a key area for improving
performance relative to the levels achieved by competitors. In both divisions,
significant cost is being taken out and new technology harnessed (in
particular the use of AI) to improve productivity, efficiency and
profitability. The company had been saddled with huge amounts of debt which
have now been paid off through a series of business disposals and also had a
significant funding requirement for its pension fund, which has also been
addressed. It is clear that most investors are sceptical of the likelihood of
improved performance, which is reflected in very low valuation multiples.
However, we expect a significant increase in free cash flow generation when
the restructuring concludes in 2026 and 2027 justifying a large re-rating. A
full break-up of the group may be the end-game and in that regard it is
important the company exits its loss making closed Life & Pensions
activities, which would enhance free cash flow conversion significantly.
Mercia Asset Management 3.9% Net Assets Cost: £4.17m, Value as at 31 March 2025 £3.75m, Market Capitalisation £112m
The business is the leading regional provider of venture capital in the UK
with a network of 11 offices, relationships with 40+ universities for
entrepreneurial spin-outs and provides a mix of venture capital, private
credit and private equity alongside EIS and other scheme funds. Historically
the company used its own balance sheet to invest in exciting early stage
businesses for which it has overall a good record of success. However,
recently the company has evolved its strategy and is becoming a trading
company (enabling itself to be available for IHT relief). This will entail
exiting the portfolio of stakes in companies over the next 2-3 years, which
are currently valued by the Directors in excess of the market capitalisation
of c.£110m. In addition, the company has over £40m of cash (some of which
will be needed to fund the investments through to exit) and its fund
management activities. These will become the sole focus in the years to come
and having grown to £1.8billion of funds, the management are targeting over
£3billion. With an almost fully invested platform and team, if this scale is
achieved, significantly higher levels of profitability are likely. It is
helpful the government is keen to support regional investment as are local
public sector pensions schemes and the British Business Bank. We expect a
successful execution of the strategy to provide a much simpler investment case
(without the balance sheet investments) and a specialist, highly profitable
and thus valuable asset manager, to emerge.
Kooth 3.6% Net Assets
Cost: £4.18m, Value as at 31 March 2025, £3.45m, Market Capitalisation £47m
This digitally led 'hybrid' service provides mental health services to young
people. It is the leading provider in the UK with over 100 NHS Trusts adopting
the service which allows young people to access professional counselling,
on-line (free and anonymous). Whilst NHS budgets are stretched, the service is
intended to help prevent far more expensive problems down the line if issues
are addressed early. In 2023 against significant competition, Kooth won a
huge, landmark contract to provide the service in the State of California.
They have been mobilising the adapted service ever since which is part of a
$4billion state mental health programme. The company has also won a pilot in
New Jersey but had one in Pennsylvania stopped in the run up to the election
amidst a highly politicised environment. They have signed an agreement with a
large insurance company to access Medicaid funding and are trialling in
Illinois. The opportunity for growth in the US and the rest of the World is
significant and potentially material value can be created through scale
economics. The company has a large cash balance of over £20m and is
generating cash too. The valuation at a market capitalisation of c.£47m is
therefore very depressed given the profitability and growth prospects and
which seemingly relates to concern over the California contract performance,
its size and worries about renewal which we believe are likely to
be unfounded.
National World 3.2% Net Assets
Cost: £1.98m, Value as at 31 March 2025, £3.1m, IRR to date 84.4%
For long term shareholders in Rockwood Strategic, this will be a familiar
name. It was purchased in January 2021 at 10p and then exited in March 2022 at
29p. The business was created to acquire the regional news assets of the
former FTSE 250 company Johnston Press out of administration, shorn of its
crippling pension fund and debt liabilities. The strategy of this cash
generative business has been to invest and build digital revenue streams,
alongside cost cutting to offset the (now slow) decline of traditional print
newspapers. Local news is popular, and local businesses want to advertise and
thus there is value to the portfolio of historic titles including quality
businesses such as The Yorkshire Post and The Scotsman. With net cash, bolt-on
acquisitions were being pursued by an experienced management team. We
identified that progress was being made, but in these challenging markets, the
shares performed poorly after our prior exit, and we were able to reestablish
the investment at 13.5p on a very low multiple of improved profits.
Subsequently a cash takeover offer at 23p, c. £65m, has emerged for the
business which we have accepted at a highly attractive IRR, well in excess of
our target returns. We expect the deal to complete within the first quarter of
the new financial year.
Additions
We added materially to our shareholdings in a number of existing investments
increasing the number of shares held, the largest are shown in the following
table:
Company % increase in shareholding during the year
Capital 122
Van Elle 83
Restore 60
James Fisher & Sons 50
STV Group 47
Capital 3.1% Net Assets
Cost: £4.21m, Value as at 31 March 2025, £2.97m, IRR to date -37.9%
The company started out providing drilling services to small African based
mining companies and, having developed a reputation of best in class health
and safety, service levels and efficiency, has gradually built a diversified
client base including a number of world's major mining companies. The rig
fleet is now deployed across several continents and is complimented by other
services, the most important for our thesis being the 'laboratory services'
division which is providing leading edge, environmentally friendly assays and
sample testing to its clients. The company suffered during the year due to
delays in mobilising its new huge contract with Nevada Gold Mines and also
missed growth forecasts for the laboratories business which was disappointing
(albeit up 13.6%). We have engaged regularly with the company about its recent
performance given Capital's history of strong margins and attractive returns
on capital. These will be enhanced further over time by the strong growth of
the laboratories business, competitors of which are valued very highly. The
Founder has consequently stepped back into the business as Executive Chairman
and we expect much improved future performance. With a significant personal
stake in the company, he is highly motivated to deliver. Whilst Capital has
activities across a number of metals, it still retains a bias to Gold. We
expect acceleration and further growth in its key projects, and an eventual
realization of value in the laboratories business. The valuation is anomalous,
at a discount to Book Value, despite the ROCE and growth record, its asset
base and prospects.
Van Elle 3.8% Net Assets
Cost: £3.98m, Value as at 31 March 2025, £3.63m, IRR to date -0.4%
This investment is now five years old having been initiated during the
COVID-19 crisis. The company is the leading UK provider of ground improvement,
foundation and piling services to the construction industry, with a bias to
infrastructure and housing. During the five years the new management team have
professionalised the business and converted losses into profits, whilst sales
have grown significantly. However, financial targets have not been met with a
lack of progress on operating margins and some modest m&a which has not
delivered value to shareholders in our view. Whilst end markets have clear
growth dynamics, particularly the opportunity in sectors such as water and
energy transmission (albeit housing remains weak) this asset intensive,
c.£37m market capitalisation business, is struggling on AIM. We have
increased our stake to support our engagement initiatives with the company to
unlock value for shareholders. Despite having net cash and considerable fixed
assets (the fleet of well-invested 'rigs') the shares are valued on a discount
to book-value.
Restore 4.8% Net Assets
Cost: £4.07m, Value as at 31 March 2025, £4.60m, IRR to date 15.8%
This office services and records management business manages over 22m boxes of
paper records for a wide range of businesses, including 80.0% of the FTSE 100,
which is a highly profitable activity generating over 30.0% profit margins.
Over the years, complimentary activities have been developed and the company
is now UK No.1 or 2 in shredding, office technology destruction/recycling,
scanning, and office relocations. The long- time CEO has returned to the group
after a period of underperformance by the business and we can already observe
renewed vigour, growth and improved profitability. The boxes tend to generate
cash and collect dust, a fine business model and a more efficient property
footprint offers the opportunity for even higher profitability with the team
targeting 20% group operating margins. Now on the front foot, with central
costs right-sized for a historically nimble and dynamic firm, a first
acquisition has been announced on an attractive multiple which is likely to be
value accretive given the scope to integrate with existing assets. We
anticipate more deals and a return to its much higher valuation rating of
previous years.
James Fisher & Sons 4.8% Net Assets Cost: £4.76m, Value as at 31 March 2025, £4.62m, IRR to date -2.8%
A quality marine, energy and defence group with a very long corporate history,
management had lost focus, capital discipline and over-leveraged the balance
sheet. The new management team has now simplified the group, taking out costs
and has conservative medium-term financial targets, which would result in much
higher levels of profitability and returns on capital. A large disposal was
announced which has radically de-geared the company, allowing the operational
recovery to now unfold. Within the remaining activities are leading edge
specialist diving expertise, growing services to global offshore wind farms,
emergent defence products and cash generative shipping related services.
Within each division there are clear strong sources of IP, differentiation and
added- value for customers. Critical to the improved profitability is the
Defence division which has now moved from losses into modest profits. Recent
results unveiled a large increase in the order book and commentary for
management suggests the contract pipeline is healthy. We expect considerable
valuation upside as the turnaround progresses and risks abate.
STV 3.6% Net Assets
Cost: £4.31m, Value as at 31 March 2025, £3.62m, IRR to date -16.8%
The company is the No.1 Scottish commercial broadcaster, recently being
re-awarded a further 10 year license, which incorporates its leading digital
platform, the 'STV Player'. In recent years the company has expanded its
content production capabilities and is the largest regional UK studios
business with over 40 'returning' series. As the most popular peak time TV
channel in Scotland, STV reaches 3 out of 4 Scottish adults every month (2.9m)
and attracts 3x the audience of its nearest commercial competitor. Remaining
profitable, the difficult and cyclical advertising spend environment has
impacted recent performance yet has scope for meaningful recovery. The digital
activities are very high margin and have been consistently growing with
millions of registered and active users who can be served better targeted and
thus higher value adverts. Debt levels are conservative but the company is
saddled with a legacy pension scheme with a large deficit, which is consuming
a lot of cashflow to resolve. In time this will stop and we would expect the
Board of STV to be accelerating this process if it made sense for
shareholders. We believe the low valuation reflects an out of date perception
of business mix, as the content business is now larger than linear TV
activities and has been recently announcing new production wins with Apple,
NBC, the BBC and Netflix implying solid growth prospects and creative
reputational momentum. A new highly regarded CEO may inject fresh perspectives
into the business. His first task, though, is to ensure Studios generates
acceptable financial returns. Concerns over the advertising market have
weighed on the shares, which now offers an adequately covered high dividend
yield of over 7%. We hope this is complimented by share buybacks soon.
Sales
We exited four investments during the period, three of which were modest in
size: The Youngs & Co shares we received as part of the takeover of City
Pub Group in the prior year were sold concluding a 59.4% IRR, 2.25x Money
Multiple on our investment. The Loan we provided to Pressure Technologies Plc
was repaid resulting in a 19.6% IRR. A small position which we were unable to
scale in size was exited for a small profit.
Hostmore was also exited prior to its delisting and move into administration.
This was an unsuccessful investment for the strategy. Modest position sizing,
given the known risks regarding the level of financial leverage in the
business resulted in the loss to NAV being constrained. However, this was a
disappointing outcome as if the consumer environment had been more benign and
a recovery in trading ensued under the new management, debt would have been
rapidly reduced and our investment thesis of 3-4x investment may have been
realised. But it didn't and we have had to realise a loss of c.99%. We won't
get them all right and this situation provided some humbling lessons. During
the year we also realised significant gains through stock market sales in our
holdings of Funding Circle, Galliford Try and Filtronic, all of which remain
within the portfolio and should still generate attractive returns going
forward.
Conclusion
As managers we have invested more of our own personal money in the shares of
Rockwood Strategic during the year and have a management contract which
rewards success. We see a real opportunity to compound wealth for all
shareholders over the long-term in an inefficient stock market full of
opportunities to deliver our target returns.
Richard Staveley
Statement of Comprehensive Income for the year ended 31 March 2025
Year ended 31 March 2025 Year ended 31 March 2024
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Income 2 1,299 - 1,299 1,114 - 1,114
Net gains on investments at fair value - 15,171 15,171 - 2,715 2,715
Total income 1,299 15,171 16,470 1,114 2,715 3,829
Administrative expenses
Investment Manager fee 3 (889) - (889) (191) - (191)
Performance fee 3 - (1,090) (1,090) - - -
Other expenses 4 (711) (158) (869) (581) (161) (742)
(Loss)/profit before finance costs and taxation (301) 13,923 13,622 342 2,554 2,896
Finance costs - - - (1) - (1)
(Loss)/profit before taxation (301) 13,923 13,622 341 2,554 2,895
Taxation 5 - - - - - -
(Loss)/profit for the year (301) 13,923 13,622 341 2,554 2,895
Basic and Diluted earnings per ordinary share for profit from continuing
operations and for profit for the year (pence)
(0.87p) 40.15p 39.28p 1.25p 9.34p 10.58p
The total column of the statement is the Statement of Comprehensive Income of
the Company prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the United Kingdom. The supplementary revenue
and capital columns are presented for information purposes as recommended by
the Statement of Recommended Practice ("SORP") issued by the Association of
Investment Companies ("AIC").
There are no recognised gains and losses other than those disclosed in the
Statement of Comprehensive Income.
All items in the above Statement derive from continuing operations. No
operations were acquired or discontinued during the period. The notes on pages
38 to 48 form part of these Financial Statements.
Statement of Financial Position as at 31 March 2025
31 March 31 March
2025 2024
Notes £'000 £'000
Non-current assets
Investments at fair value through profit or loss 8 95,624 60,322
Current assets
Cash and cash equivalents 2,561 4,761
Trade and other receivables 9 122 281
2,683 5,042
Total assets 98,307 65,364
Current liabilities
Trade and other payables 10 (641) (1,103)
Performance fee payable 11 (1,090) -
Total liabilities (1,731) (1,103)
Net current assets 952 3,939
Net assets 96,576 64,261
Represented by:
Share capital 12 1,941 1,560
Share premium account 42,862 24,347
Revenue reserve 18,061 18,565
Capital reserve 22,358 8,435
Capital redemption reserve 11,354 11,354
Total equity 96,576 64,261
The NAV per share on 31 March 2025 is 248.79 pence (2024: 206.04 pence).
These Financial Statements were approved and authorised for issue by the Board
of Directors on 17 June 2025. Signed on behalf of the Board of Directors.
Noel Lamb Kenneth Lever
Chairman
Director
Statement of Cash Flows for the year ended 31 March 2025
Year ended 31 March Year ended 31 March
2025 2024
£'000 £'000
Notes
Cash flow from operating activities
Profit for the year 13,622 2,895
Net gains on investments at fair value (15,171) (2,715)
Decrease/(increase) in trade receivables 3 (52)
Increase/(decrease) in trade and other payables 1,112 (652)
Net cash outflow from operating activities (434) (524)
Cash flows from investing activities
Purchases of investments 8 (37,392) (30,336)
Sales of investments 8 16,777 12,573
Net cash outflow from investing activities (20,615) (17,763)
Cash flows from financing activities
Gross proceeds of share issue 19,579 11,527
Share issue costs (527) (110)
Equity dividends paid (203) -
Net cash inflow from financing activities 18,849 11,417
Decrease in cash and cash equivalents (2,200) (6,870)
Reconciliation of net cash flow movements in funds
Cash and cash equivalents at the beginning of the year 4,761 11,631
Decrease in cash and cash equivalents (2,200) (6,870)
Cash and cash equivalents at end of year 2,561 4,761
Purchases of investments has been adjusted by the addition of the outstanding
£901,000 due to Brokers as at 31 March 2024 and, the removal of the
outstanding £417,000 due to Brokers as at 31 March 2025 as shown in Note 10.
Gross proceeds of share issue has been adjusted by the addition of the
outstanding £156,000 proceeds due from share issue as at 31 March 2024 as
shown in Note 9
Statement of changes in Equity for the year ended 31 March 2025
Ordinary Share Share Premium Capital Redemption
Revenue Capital Total
D shares Capital Account Reserve* Reserve Reserve Equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening balance as at 1 April 2024 - 1,560 24,347 18,565 8,435 11,354 64,261
Dividend paid - - - (203) - - (203)
Gross proceeds of share issue - 381 18,515 - - - 18,896
Profit and total comprehensive income for the year - - - (301) 13,923 - 13,622
Balance as at 31 March 2025 - 1,941 42,862 18,061 22,358 11,354 96,576
for the year ended 31 March 2024
Ordinary Share Share Premium Revenue Capital Capital Redemption Total
D shares Capital Account Reserve* Reserve Reserve Equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening balance as at 1 April 2023 10 1,271 13,063 24,105 - 11,344 49,793
Unrealised appreciation transferred at 1 April 2023 - - - (5,881) 5,881 - -
Cancellation of D shares (10) - - - - 10 -
Gross proceeds of share issue - 289 11,284 - - - 11,573
Profit and total comprehensive income for the year - - - 341 2,554 - 2,895
Balance as at 31 March 2024 - 1,560 24,347 18,565 8,435 11,354 64,261
* The revenue reserve can be distributed in the form of dividends.
The notes on pages 38 to 48 form part of these Financial Statements.
Notes to the Financial Statements
Rockwood Strategic Plc (the Company) is a public company incorporated in the
UK and registered in England and Wales (registration number: 03813450).
The Company carries on the business as an investment trust company within the
meaning of Sections 1158/1159 of the Corporation Tax Act 2010.
1. Basis of preparation and material accounting policies
Basis of preparation
Following the Company's approval as an investment trust company on 1 April
2023, the annual Financial Statements of the Company for the year to 31 March
2025 have been prepared in accordance with UK adopted international accounting
standards. They will also be prepared in accordance with applicable
requirements of England and Wales company law and reflect the following
summarised policies which will be adopted and applied consistently. The
Financial Statements have also been prepared in accordance with the SORP for
investment trust companies issued in July 2022, except to any extent where it
conflicts with UK adopted international accounting standards.
In order better to reflect the activities of an investment trust company and
in accordance with guidance issued by the AIC, supplementary information which
analyses the Statement of Comprehensive Income between items of a revenue and
capital nature has been presented alongside the Statement of Comprehensive
Income.
The functional and presentational currency of the Company is Pounds Sterling
and has been determined on the basis of the currency of the Company's share
capital and the currency in which dividends and expenses are paid. The
Financial Statements are presented to the nearest thousand (£'000).
Going concern
In assessing the Company as a going concern, the Directors have considered the
market valuations of the portfolio investments, the current economic outlook
and forecasts for Company costs.
The Company is in a net asset position of £96.6 million (March 2024: £64.3
million) and 99.9% of the Company's portfolio of investments consist of listed
equities which, should the need arise, can be liquidated to settle
liabilities. The rest of the Company's portfolio consisted of 0.1% in other
unquoted investments. There are no other contractual obligations other than
those already in existence and which are predictable.
The Company's forecasts and projections, taking into account the current
economic environment and other factors, including reasonably possible changes
in performance, show that the Company is able to operate within its available
working capital and continue to settle all liabilities as they fall due for
the foreseeable future. The Company has consistent, predictable ongoing costs
and major cash outflows, such as for the payment of dividends, are at the full
discretion of the Board.
Therefore, the Directors taking into consideration the above assessment are
satisfied that the Company's ability to continue as a going concern and are
satisfied that the Company has adequate resources to continue in operational
existence for a period of at least 12 months from the date when these
Financial Statements were approved.
Segmental reporting
The Directors are of the opinion that the Company is engaged in a single
segment of business, being investment business.
Material Accounting Judgements, Estimates and Assumptions
The preparation of Financial Statements requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the Financial Statements and the reported amounts of revenues and
expenses during the reported period. It also requires Management to exercise
their judgement in the process of applying the accounting policies. The main
area of estimation is in the inputs used in determination of the valuation of
the unquoted investments in Note 8, although these amounts at the Balance
sheet date are immaterial in the current year.
Management believes that the underlying assumptions are appropriate and that
the Company's Financial Statements are fairly presented.
Investments at fair value through profit or loss
All investments held by the Company are designated as "fair value through
profit or loss". As the Company's business is investing in financial assets
with a view to profiting from their return in the form of interest, dividends
or increase in fair value. Listed equities, unquoted equities and fixed income
securities are classified as fair value through profit or loss on initial
recognition. The Company manages and evaluates the performance of these
investments on a fair value basis in accordance with its investment strategy.
Investments are initially recognised at cost, being the fair value of the
consideration. Fixed income securities are designated at fair value which is
approximation of its par value.
After initial recognition, investments are measured at fair value, with
movements in fair value of investments and impairment of investments
recognised in the Statement of Comprehensive Income and allocated to the
capital column. For quoted equity shares fair value is generally determined by
reference to quoted market bid prices or closing prices for SETS (London Stock
Exchange's electronic trading service) stocks.
IFRS 13 requires an entity to classify fair value measurements using a fair
value hierarchy that reflects the significance of the inputs used in making
the measurements. The fair value hierarchy has the following classifications:
· Level 1 - valued using quoted prices in active markets for identical
investments. There are £94,823,000 level 1 financial assets (31 March 2024:
£59,415,000).
· Level 2 - valued using other significant observable inputs (including quoted
prices for similar investments, interest rates, prepayments, credit risk,
etc). There are no level 2 financial assets (31 March 2024: £nil).
· Level 3 - valued using significant unobservable inputs (including the
Company's own assumptions in determining the fair value of investments). There
are £69,000 level 3 financial assets (31 March 2024: £907,000).
Unquoted investments are valued in accordance with the International Private
Equity and Venture Capital Valuation ("IPEV") Guidelines. Their valuation
incorporates all factors that market participants would consider in setting a
price. The primary valuation techniques employed to value the unquoted
investments are earnings multiples, recent transactions and the net asset
basis.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with
banks and other short-term highly liquid investments with original maturity of
3 months or less from inception that are readily convertible to a known amount
of cash and are subject to an insignificant risk of changes in value.
Foreign currency
Transactions in currencies other than Sterling are recorded at the rate of
exchange prevailing on the date of the transaction. Items that are denominated
in foreign currencies are retranslated at the rates prevailing on Statement of
Financial Positions. Any gain or loss arising from a change in exchange rate
subsequent to the date of the transaction is included as an exchange gain or
loss in the capital reserve or the revenue reserve depending on whether the
gain or loss is capital or revenue in nature.
Income
Dividend income from investments is recognised when the Company's right to
receive payment has been established, normally the ex-dividend date. Where the
Company has elected to receive its dividends in the form of additional shares
rather than cash, the amount of cash dividend foregone is recognised as
income. Any excess in the value of shares received over the amount of cash
dividend foregone is recognised as a capital gain in the Statement of
Comprehensive Income.
Interest income is recognised in line with coupon terms under the effective
interest method. Special dividends are credited to capital or revenue
according to their circumstances.
Expenses
All expenses are accounted for on an accruals basis and are allocated wholly
to revenue with the exception of Performance Fees which are allocated wholly
to capital, as the fee is payable by reference to the capital performance of
the Company, and transaction costs which are also allocated to capital.
Taxation
The charge for taxation is based on the net income for the year and takes into
account taxation deferred or accelerated because of temporary differences
between the treatment of certain items for accounting and taxation purposes.
The Company has an effective tax rate of 0.0%. The estimated effective tax
rate is 0.0% as investment gains are exempt from tax owing to the Company's
status as an investment trust and there is expected to be an excess of
management expenses over taxable income and thus there is no charge for
corporation tax.
Deferred tax is provided using the liability method on temporary differences
between the tax bases of assets and liabilities and their carrying amount for
financial reporting purposes at the reporting date. Deferred tax assets are
only recognised if it is considered more likely than not that there will be
suitable profits from which the future reversal of timing differences can be
deducted. In line with recommendations of the SORP, the allocation method used
to calculate the tax relief expenses charged to capital is the 'marginal'
basis. Under this basis, if taxable income is capable of being offset entirely
by expenses charged through the revenue account, then no tax relief is
transferred to the capital account.
Equity dividends payable
Equity dividends payable are recognised when the shareholders' right to
receive payment is established. For interim dividends this is when they are
paid and for final dividends this is when they are approved by shareholders at
the Company's annual general meeting.
Share capital and reserves
The share capital represents the nominal value of the Company's ordinary
shares. As at 31 March 2025 there were 38,817,663 (31 March 2024: 31,189,090)
Ordinary shares of 5p each in issue. During the year to 31 March 2024, a share
sub-division of its existing ordinary shares on a ten for one basis took
effect on the 11 October 2023.
The share premium account represents the accumulated premium paid for shares
issued above their nominal value less issue expenses. This reserve cannot be
distributed.
The capital reserve represents realised and unrealised capital and exchange
gains and losses on the disposal and revaluation of investments and of foreign
currency items. Realised gains can be distributed, unrealised gains cannot be
distributed.
The Capital Redemption Reserve represents the amount by which the share
capital has been reduced, equivalent to the nominal value of the Ordinary
Shares repurchased for cancellation.
The revenue reserve represents retained profits from the income derived from
holding investment assets less the costs associated with running the Company.
This reserve can be distributed, if positive.
Adoption of New and Revised Standards New standards, interpretations and
amendments adopted from 1 April 2024
There are no new standards impacting the Company that have had a significant
effect on the annual Financial Statements for the year ended 31 March 2025.
Accounting when there is a lack of exchangeability (Amendments to IAS 21)
The amendment is for entities to specify when a currency is exchangeable into
another currency and when it is not, and how an entity determines the exchange
rate to apply when a currency is not exchangeable. The amendments are
effective for annual periods beginning on or after 1 January 2025.
Amendments to the Classification and Measurement of Financial Instruments
(Amendments to IFRS 9 and IFRS 7)
The amendment is to help entities to clarify the date of recognition and
derecognition of some financial assets and liabilities. It provides further
guidance for assessing whether a financial asset meets the solely payments of
principal and interest (SPPI) criterion. It adds new disclosures for certain
instruments with contractual terms that can change cash and updates the
disclosures for equity instruments designated at fair value through other
comprehensive income (FVOCI). The amendments are effective for annual periods
beginning on or after 1 January 2026.
Presentation and Disclosure in Financial Statements (IFRS 18)
IFRS 18 replaces IAS 1 and is in response to investors' need for better
information about companies' financial performance. Requirements include: new
categories/subtotals in the statement of profit or loss, disclosure of
Management-defined performance measures and enhanced requirements for grouping
information. The new standard is in effective for annual periods beginning on
or after 1 January 2027.
Subsidiaries without Public Accountability: Disclosures (IFRS 19)
IFRS 19 allows for reduced disclosures without changing the fundamental
reporting requirements of IFRS accounting standards. The new standard is in
effective for annual periods beginning on or after 1 January 2027.
Standards issued but not yet effective
There are no standards or amendments not yet effective which are relevant or
have a material impact on the Company.
2. Income
Year ended 31 March Year ended 31 March
2025 2024
Total Total
£'000 £'000
Income from listed investments
Dividends 1,062 811
Loan note interest income 46 40
Loan arrangement fee - 22
1,108 873
Other income
Bank interest 191 241
Total income 1,299 1,114
3. Investment management and performance fee
Year ended 31 March Year ended 31 March
2025 2024
£'000 £'000
Investment Manager fee 889 191
Performance fees 1,090 -
1,979 191
Under the terms of the Investment Management Agreement (restated and novated
on 28 March 2025) with Harwood Capital LLP (now Rockwood Asset Management),
the Company will pay the Investment Manager a performance fee equal to 10.0%.
of outperformance over the higher of a 6.0% per annum total return hurdle and
the high watermark. The 6.0%. per annum compounds weekly and the performance
fee is calculated annually. Provided that the Company's average NAV is at or
below £100 million, performance fees in any performance fee period are capped
at 3.0%. of the Company's average NAV for the relevant performance fee period.
In such instance, performance fees in excess of the 3.0%. cap will not be paid
and will instead be deferred into the next performance fee period. If the
average NAV exceeds £100 million, the performance fee shall be further
limited such that the combined investment management and performance fees
shall not exceed 3.0%. of the Company's average NAV. In such instance,
performance fees in excess of the cap will not be deferred and will not become
payable at any future date.
The performance fee is calculated annually for each performance fee period,
which is aligned with the Company's accounting year. It is accounted for on an
accrual basis and is recognised in the Statement of Comprehensive Income once
a performance fee is triggered during the performance fee period. The Hurdle
was surpassed in the year and therefore there was a performance fee of
£1,090,000 accrued at 31 March 2025 (2024: nil).
4. Other expenses
Year ended Year ended
31 March 2025 31 March 2024
Income Capital Total Income Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Auditors remuneration
- Current 54 - 54 - - -
- Previous 9 - 9 47 - 47
Director's fees 110 - 110 102 - 102
Professional fees 452 - 452 336 - 336
Other general overheads 86 - 86 96 - 96
Transaction costs - 158 158 - 133 133
Share split costs - - - - 28 28
711 158 869 581 161 742
5. Taxation
Year ended Year ended
31 March 31 March
2025 2024
UK corporation tax
Corporation tax liability at 25.0% (2024: 25.0%) - -
- -
Current tax - -
Tax on profit from ordinary activities - -
Factors affecting the tax charge for the current period
The tax assessed for the year is different than that resulting from applying
the standard rate of corporation tax in the UK: 25.0% (2024: 25.0%).
The differences are explained below:
Year ended Year ended
31 March 2025 31 March 2024
Income Capital Total Income Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Current tax reconciliation
Return before taxation (301) 13,923 13,622 341 2,554 2,895
Tax at UK corporation tax rate of 25.0% (2024: 25.0%) (75) 3,481 3,406 85 639 724
Tax effects of:
Non-taxable dividends (266) - (266) (202) - (202)
Non-deductible expenditure 2 - 2 3 - 3
Chargeable gains not subject to tax - (3,753) (3,753) - (639) (639)
Movement in deferred tax not recognised 339 272 611 114 - 114
Total tax charge for the year - - - - - -
Deferred tax
At 31 March 2025, the Company had losses of £43,217,000 (31 March 2024:
£40,770,000) that are potentially available to offset future taxable revenue
and capital losses of £102,536,000 (31 March 2024: £102,536,000) that are
potentially available to offset against future taxable gains. A deferred tax
asset of £36,439,000 (31 March 2024: £35,827,000), based on the enacted UK
corporation tax rate of 25% that applied from 1 April 2023, has not been
recognised because the Company is not expected to generate qualifying taxable
income in future periods that the carried forward tax losses can be utilised
against.
6. Earnings per share
Basic earnings per share is calculated by dividing the profit/loss
attributable to ordinary shareholders by the weighted average number of
Ordinary Shares during the year. Diluted earnings per share is calculated by
dividing the profit/loss attributable to shareholders by the adjusted weighted
average number of Ordinary Shares in issue.
Year ended 31 March 2025 Year ended 31 March 2024
Basic and Basic and
Weighted diluted Weighted diluted
average earnings average earnings
Net Return Ordinary per share Net Return Ordinary per share
£'000 Shares pence £'000 Shares pence
Revenue (301) 34,678,653 (0.87) 341 27,356,247 1.25
Capital 13,923 34,678,653 40.15 2,554 27,356,247 9.33
Total 13,622 39.28 2,895 10.58
As at 31 March 2025, the total number of shares in issue was 38,817,663 (2024:
31,189,090). No shares were bought back by the Company (2024: None). There are
no share options outstanding at the end of the year.
7. Dividends
The Company is not recommending a dividend for the year ended 31 March 2025
(2024: 0.6p).
8. Investments at fair value through profit or loss
Year ended 31 March 2025
Investments in quoted companies (Level 1) Other unquoted investments
(Level 3)
Total
Opening Cost at beginning of year 53,465 1,523 54,988
Opening unrealised appreciation at the beginning of the year 5,950 (616) 5,334
Opening fair value at the beginning of the year 59,415 907 60,322
Movements in the year:
Purchases at cost 36,908 - 36,908
Sales proceeds (16,027) (750) (16,777)
Realised gain on disposal 8,727 - 8,727
Change in unrealised appreciation/(depreciation) at the end of the year 6,532 (88) 6,444
Closing Fair value at the end of the year 95,555 69 95,624
Closing cost at the end of the year 83,073 773 83,846
Closing unrealised appreciation/(depreciation) at the end of the year 12,482 (704) 11,778
Closing fair value at the end of the year 95,555 69 95,624
Year ended 31 March 2024
Investments in quoted companies (Level 1) Other unquoted investments
(Level 3)
Total
Opening Cost at beginning of year 33,374 - 33,374
Opening unrealised appreciation at the beginning of the year 5,881 - 5,881
Opening fair value at the beginning of the year 39,255 - 39,255
Movements in the year:
Transfer between levels*
Cost at transfer date (773) 773 -
Unrealised loss on transfer date 732 (732) -
Purchases at cost 30,175 750 30,925
Sales proceeds (12,573) - (12,573)
Realised gain on disposal 3,262 - 3,262
Change in unrealised (depreciation)/appreciation at the end of the year (663) 116 (547)
Closing Fair value at the end of the year 59,415 907 60,322
Closing cost at the end of the year 53,465 1,523 54,988
Closing unrealised appreciation/(depreciation) at the end of the year 5,950 (616) 5,334
Closing fair value at the end of the year 59,415 907 60,322
* For the year ended 31 March 2024, there was a transfer from Level 1 to
Level 3 of £69,175 Bonhill group due to voluntary liquidation.
The following table analyses investments carried at fair value at the end of
the year, by the level in the fair value hierarchy into which the fair value
measurement is categorised. The different levels are defined as follows:
I. level one measurements are at quoted prices (unadjusted) in
active markets for identical assets or liabilities;
II. level two measurements are valuations techniques with all material
inputs observable for the asset or liability, either directly (that is, as
prices) or indirectly (that is, derived from prices); and
III. level three measurements are valuations not based on solely
observable market data (that is, the measurement requires significant
unobservable inputs).
The fair values of the Company's investments is summarised as follows:
31 March
2025 2024
£'000 £'000
Level 1 95,555 59,415
Level 2 - -
Level 3 69 907
95,624 60,322
Fair values of financial assets and financial liabilities
Financial assets and liabilities are carried in the Statement of Financial
Position at either their fair value (investments), or the Statement of
Financial Position amount is a reasonable approximation of the fair value
(dividends receivable, accrued income, accruals, and cash at bank).
As at 31 March 2025 and 31 March 2024, all investments, except for the
investments in the table below, fall into the category 'Level 1' under IFRS 13
fair value hierarchy.
In the year ending 31 March 2025, no investments were transferred between
levels (31 March 2024: one investment held, Bonhill Group previously Level 1
were transferred to Level 3 following its delisting from AIM).
A summary of the level 3 investments are as follows:
31 March 2025 31 March 2024
Investments included £'000 Investments included £'000
Fair value Bonhill group 69 Bonhill group 69
Chesterfield Special Cylinders Holdings (formerly Pressure Technologies) Chesterfield Special Cylinders Holdings (formerly Pressure Technologies)
- Loan Notes - 750
- Warrants - 88
69 907
The Chesterfield Special Cylinders Holdings loan notes were redeemed in full
during the year. The warrants were still outstanding at year end and valued at
zero.
Valuation policy: Every three months, the Investment Manager is asked to
revalue the investments that he looks after and submit his valuation
recommendation to the Valuation and Pricing ("V&P") Committee. The V&P
Committee considers the recommendation made, and approves or adjust the
valuation as required.
Level 3 investments have been valued in accordance with the IPEV guidelines.
The valuation incorporates all relevant factors that market participants would
consider in setting a price.
Methods applied include cost of investment, price of recent investments, net
assets and earnings multiples.
Although the Manager believes that the estimates of fair values are
appropriate, the use of different methodologies or assumptions could lead to
different measurements of fair values.
Subsequent adjustments in price are determined by the Manager's Valuation and
Pricing Committee.
Investments in quoted companies (Level 1) have been valued according to the
quoted bid price as at 31 March 2025.
9. Trade and other receivables
31 March 31 March
2025 2024
£'000 £'000
Proceeds due from share issues - 156
Other debtors 95 112
Prepayments 27 13
122 281
10. Trade and other payables
31 March 31 March
2025 2024
£'000 £'000
Due to Brokers 417 901
Trade Creditors 224 202
641 1,103
There were no other creditors as at 31 March 2025 (2024: none).
11. Performance fees payable
31 March 31 March
2025 2024
£'000 £'000
Performance fees payable 1,090 -
12. Issued capital
Allotted, called-up and fully paid:
For the year ended 31 March 2025 £'000
31,189,090 ordinary shares of 5p each listed at 31 March 2024 1,560
7,628,573 ordinary shares of 5p each issued in the year 381
38,817,663 ordinary shares of 5p each listed at 31 March 2025 1,941
The ordinary shares have attached to them full voting, dividend and capital
distribution (including on winding up) rights; they do not confer any rights
of redemption.
Allotted, called-up and fully paid:
For the year ended 31 March 2024 £'000
2,541,046 ordinary shares of 50p each listed at 31 March 2023 1,271
146,863 ordinary shares of 50p each issued before the share split 73
24,191,181 ordinary shares issued through the share split -
4,310,000 ordinary shares of 5p each issued after the share split 216
31,189,090 ordinary shares of 5p each listed at 31 March 2024 1,560
13. Financial instruments and financial risk management
The Company invests in quoted and unquoted companies in accordance with the
investment policy. In addition to investments in smaller listed companies in
the UK, the Company maintains liquidity balances in the form of cash held for
follow-on financing and debtors and creditors that arise directly from its
operations. As at 31 March 2025, £95.6 million of the Company's net assets
were invested in quoted investments, £0.1 in unquoted investments and £2.6
million in liquid balances (31 March 2024: £59.4 million in quoted
investments, £0.9 in unquoted investments and £4.7 million in liquidity).
In pursuing its investment policy, the Company is exposed to risks that could
result in a reduction in the value of net assets and consequently funds
available for distribution by way of dividend or for re-investment.
The main risks arising from the Company's financial instruments are due to
fluctuations in market prices (market price risk), credit and liquidity risk
and cash flow interest rate risk; credit risk and liquidity risk are also
discussed below. The Board regularly reviews and agrees policies for managing
each of these risks and they are summarised below. These have been in place
throughout the current and preceding years.
All financial assets with the exception of investments, which are held at fair
value through profit or loss, are categorised as financial assets at amortised
cost and all financial liabilities are categorised as amortised cost,
amortised cost is a reasonable approximation of its fair value.
a) Market risk
i) Price risk
Market price risk arises from uncertainty about the future valuations of
financial instruments held in accordance with the Company's investment
objectives. These future valuations are determined by many factors but include
the operational and financial performance of the underlying investee
companies, as well as market perceptions of the future of the economy and its
impact upon the economic environment in which these companies operate. This
risk represents the potential loss that the Company might suffer through
holding its investment portfolio in the face of market movements, which was a
maximum of £95.6 million (2024: £59.6 million).
The investments in fixed interest stocks of unquoted companies that the
Company holds are not traded and as such the prices are more uncertain than
those of more widely traded securities.
The Board's strategy in managing the market price risk is determined by the
requirement to meet the Company's investment objective. Risk is mitigated to a
limited extent by the fact that the Company holds investments in several
companies. At 31 March 2025, the Company held interests in 24 companies (2024:
20 companies). The Directors monitor compliance with the investment policy,
review and agree policies for managing this risk and monitor the overall level
of risk on the investment portfolio on a regular basis.
Market price risk sensitivity
The Board considers that the value of investments in quoted equity instruments
is ultimately sensitive to changes in quoted share prices. The value of
investments in Chesterfield Special Cylinders Holdings (formerly Pressure
Technologies), where the valuation methodology is to estimate the value of the
conversion option of the instrument, is similarly linked to quoted share
prices. The table below shows the impact on the return and net assets if there
were to be a 25% (2024: 25.0%) movement in overall share prices.
As at 31 March 2025 +25% -25%
Impact per share Impact per share
Impact Impact
Security Valuation basis Fair value £'000 (in pence) £'000 (in pence)
Quoted investments Latest share price 95,555 23,889 61.54 (23,889) (61.54)
As at 31 March 2024 +25% -25%
Impact per share Impact per share
Impact Impact
Security Valuation basis Fair value £'000 (in pence) £'000 (in pence)
Quoted investments Latest share price 59,443 14,861 47.65 (14,861) (47.65)
The impact of a change of 25% (2024: 25.0%) has been selected as this is
considered reasonable given the current level of volatility, observed both on
a historical basis, and market expectations for future movement.
A sensitivity has not been performed for the other unquoted investments held
by the Company as they were not deemed to be material. There is no exposure to
market price risk in the valuation methodology applied for these investments.
Interest rates are less volatile than market prices; therefore, the Company
has deemed it inappropriate to consider a 25.0% upward or downward move in
interest rates. Interest rates are determined by monetary policy and have been
kept historically low due to quantitative easing and therefore we do not
believe that interest rates will be as volatile as share prices.
ii) Currency risk
The Company does not hold any significant assets or liabilities denominated in
a currency other than sterling, the functional currency. The transactions in
foreign currency for the Company are highly minimal. Therefore, currency risk
sensitivity analysis was not performed as the results would not be
significantly affected by movements in the value of foreign exchange rates.
iii) Cash flow interest rate risk
As the Company has no borrowings, it only has limited interest rate risk. The
impact is on income and operating cash flow and arises from changes in market
interest rates. Some of the Company's cash resources are placed in an interest
paying current account to take advantage of preferential rates and are subject
to interest rate risk to that extent.
b) Credit risk
Credit risk is the risk that a counterparty will fail to discharge an
obligation or commitment that it has entered into with the Company.
The Company's maximum exposure to credit risk is:
31 March 31 March
2025 2024
£'000 £'000
Loan stock investments - 750
Cash and cash equivalents 2,561 4,761
Trade and other receivables 122 281
2,683 5,972
Credit risk relating to loan stock investments in unquoted companies is
considered to be part of market risk.
The Company's cash balances at 31 March 2025 and 2024 were held in
institutions currently rated A or better by Fitch. Given these ratings, the
Company does not expect any counterparty to fail to meet its obligations and
therefore, no allowance for impairment is made for bank deposits.
c) Liquidity risk
The Directors consider that there is no significant liquidity risk faced by
the Company. The Company maintains sufficient liquidity in cash and liquid
investments to pay accounts payable and accrued expenses. All liabilities are
current and repayable upon demand.
14. Capital disclosures
The Company's objective has been to maximise shareholder value from all
assets, which in recent years has been to realise its portfolio at the most
advantageous time and reinvest the proceeds to grow shareholder value per
share over the long-term.
The capital subscribed to the Company has been managed in accordance with the
Company's objectives. The available capital at 31 March 2025 is £96.6 million
(31 March 2024: £64.3 million) as shown in the Statement of Financial
Position, which includes the Company's share capital and reserves.
The total amount of revenue reserve for the year is £18.061 million (2024:
£18.566 million) which is fully distributable and can be utilised for any
future dividends.
The Company has no borrowings and there are no externally imposed capital
requirements other than the minimum statutory share capital requirements for
public limited companies.
15. Related party transactions and transactions with the Investment Manager
The related parties of Rockwood Strategic Plc are its Directors, persons
connected with its Directors and its Investment Manager and significant
shareholder Harwood Capital Management Limited ("The Harwood Group") and its
subsidiaries.
The Directors' remuneration and their interest in the Company are disclosed in
the Director's remuneration review in the annual report.
As at 31 March 2025, the following shareholders of the Company that are
related to Harwood had the following interests in the issued shares of the
Company as follows:
31 March 2025 31 March 2024
Harwood Holdco Limited 8,340,000 Ordinary Shares 8,340,000 Ordinary Shares
R Staveley 311,215 Ordinary Shares 321,380 Ordinary Shares
Investment Management ("IM") Fees:
The total payable to Harwood is as follows:
31 March 2025 31 March 2024
Performance fee £1.09 million Nil
Management fee £0.89 million £0.05 million
Total £1.98 million £0.05 million
A monthly management fee of £10,000 (inclusive of VAT, if any) until the
Company's NAV equalled £60 million or higher (NAV threshold).
The NAV Threshold was met on 16 February 2024, since then, the IM has been
entitled to a management fee of 1/12th of an amount equal to 1.0% of the Net
Asset Value before deduction of that month's Investment Management Fee and
before deduction of any accrued Performance Fees.
Performance Fees:
The Investment Manager will also be entitled to a performance fee equal to
10.0% of outperformance over the higher of a 6.0% per annum total return
hurdle and the high watermark. The 6.0% per annum compounding weekly and the
performance fee will be calculated annually.
Provided that the Company's average NAV is at or below £100 million,
performance fees in any performance fee period will be capped at 3.0% of the
Company's average NAV for the relevant performance fee period. In such
instance, performance fees in excess of the 3.0% cap will not be paid and will
instead be deferred into the next performance fee period.
There are no other material related party transactions of which we are aware
in the year ended 31 March 2025.
16. Subsequent events note
Share issues:
The Company issued for cash 3,837,000 ordinary shares of 5 pence each from 1
April to 17 June 2025 from its block listing facility at an average price of
265.07 pence per share.
Footnotes:
1 - These are considered to be Alternative Performance Measures (APMs) and are
available on page 49 of the Annual Report.
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