Compounding wealth long-term
7
Rockwood Strategic Plc
Report and Accounts for the year ended 31 March 2024
31 March
2024
Overview
02 Chairman’s Statement
03 Board of Directors
04 Investment Manager’s Report
10 About the Investment Manager
11 Strategic Report 2024
Governance
19 Corporate Governance Report
22 Audit Committee Report
23 Directors’ Remuneration Report
25 Directors’ Remuneration Policy
26 Directors’ Report
28 Directors’ Responsibility Statement
29 Independent Auditor’s Report
Financial Statements
35 Statement of Comprehensive Income
36 Statement of Financial Position
37 Statement of Cash Flows
38 Statement of Changes in Equity
39 Notes to the Financial Statements
Other Information
52 Notice of Annual General Meeting
55 Corporate Information
Throughout this report we use the more
concise terms RKW or the Company.
Rockwood Strategic plc (“RKW”) is an Investment
Trust managed by Harwood Capital LLP, listed on the
premium segment of the Main Market of the London
Stock Exchange that invests in a focused portfolio of
undervalued investment opportunities, where the
potential exists to improve returns and where the
company
strategic or management changes. These unlock, create
or realise value for investors.
Harwood Capital LLP (“HC LLP”) was incorporated in 2003
and is the Investment Manager for Rockwood Strategic
Plc and Harwood Private Clients.
HC LLP is a wholly owned subsidiary of Harwood Capital
Management Limited and is authorised and regulated
by the Financial Conduct Authority (“FCA”), authorisation
number 224915 and is led by Christopher Mills. The funds
managed and advised by HC LLP follow an active, value
approach towards the businesses in which they invest.
Mr Mills is a member of the Rockwood Strategic Plc
Investment Advisory Group.
Rockwood Strategic Plc
Overview Governance
Financial
Statements
Other
Information
01Rockwood Strategic Plc
Highlights for the period include:
NAV Total Return performance in the twelve months to 31 March 2024 of 5.1% to 206.04p/share*, which
compares to a decline in the FTSE Aim All-Share of 8.6% and a rise in the FTSE Small Cap (ex-ITs) of 7.1%.
The Total Shareholder Return in this period was 15.4%*.
NAV Total Return performance in the three years to 31 March 2024 of 57.0%*, which compares to the FTSE
Small Cap (ex-ITs) of -6.8% and the FTSE Aim All-Share of -38.5%. The Total Shareholder Return in this
period was 70.1%*.
Price of shares moved from a discount to NAV of 7.1% to a premium of 1.9%*.
Significant new investor demand resulted in issuance of 5,778,630 new shares, increasing share count
by 22.7% and, alongside performance, growing NAV to £64.3m. NAV has now grown 58.0% in the last two
years, buildingscale.
Five new portfolio investments purchased during the period, as funds received from four takeovers and
stock issuance were re-deployed.
Conducted 10 for 1 stock split during period.
Highlights
01Rockwood Strategic Plc
* These are considered to be Alternative performance Measures (APMs). See APMs on page 51.
02 Rockwood Strategic Plc
Dear Shareholder,
I am pleased to report a successful year for
Rockwood Strategic plc (“RKW”), achieved
against challenging U.K. equity market
conditions. Whilst some in our sector are
struggling to survive with the recent exodus
from our domestic market, RKW has grown Net
Asset Value (“NAV”) per share, increased assets
through new issuance and improved the share
price from a discount to a premium to NAV. In
short, RKW has been the best performing UK
small companies fund according to Association
of Investment Companies data for the previous
three and five years ended 31 March 2024.
NAV Total Return performance in the twelve
months to 31 March 2024 was 5.1%
1
which
compares to an increase in the FTSE Small Cap
(ex-ITs) of 7.1% and a fall in the AIM All-Share
Index of 8.6%. The Total Shareholder Return
in this period was 15.4%
1
. The differentiated,
stock-specific driven approach of the
strategy has shown that positive returns are
possible despite negative macroeconomic
and market conditions or wider geo-political
developments. Management fees were charged
at a fixed fee of £120,000 per annum whilst the
assets were below £60m, yet having recently
exceeded this level, due to sustained absolute
performance and new issuance, switched
to 1.0% per annum under the terms of the
Investment Management Agreement. This is
competitive with other specialist investment
fund mandates. Long term shareholders may
recall the previous manager’s fee level was
1.5%. The hurdle for a performance fee was not
met.
Our Investment Manager has been industrious
as evidenced by 6 new holdings, a number
of positive outcomes from ‘constructive
engagement’ in existing investments and a
plethora of marketing and investor education
initiatives. Of the 20 companies in the portfolio,
15 have been initiated since 2022. With a 3-to-
5-year typical investment thesis, the Board
anticipates a fruitful period ahead. Shareholder
value realisation is expected as operational
turnarounds are delivered, strategic initiatives
actioned and our investments mature under
new or evolved management and boards. 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.
The Board shares the view of the manager that
the UK small companies market continues to
provide a significant investment opportunity,
due to the inefficient pricing of poorly
researched or misunderstood companies
trading at historically low valuations, further
depressed by industry outflow driven selling.
The Investment Manager is using their long
experience and specialist insight to identify a
small number of the very best opportunities
which, if unrecognised by domestic market
participants, will inevitably be on the receiving
end of corporate interest; indeed during the
year RKW received 4 takeover approaches for
its portfolio companies.
Our shareholders voted for the Board’s
recommendation for a 10 for 1 stock split during
the first half of the year, a measure which
often improves liquidity. Growing the NAV
remains a priority for the Trust. This will open
up a wider set of investment opportunities in
the targeted part of the UK small cap market
where the manager can purchase significant
investee company ownership stakes. I am also
delighted to report that the shares have been
trading at a 1.9% premium to NAV, unwinding
last year’s closing discount of 7.1%. This has
allowed RKW under its authorities to issue
£11.5m worth of new shares to new investors
satisfying demand. Issuance accelerated
during the financial year and the Trust has
reached its 20.0% rolling annual limit. This is
no mean feat given 34 months of consecutive
monthly UK fund outflows at a sector level
and the general level of sentiment towards
UK equities, illustrated by the almost entire
absence of IPOs, during the period. We warmly
welcome all our new fellow shareholders, who
see the investment opportunity this market
and strategy offers.
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. The portfolio
has generated good income though, including
receiving two special dividends, and RKW will
thus return to the dividend list in a modest way
with a 0.6p final payment. Our AGM will be held
on 31 July for those that would like to meet the
Board members and Investment Manager in
person. Finally, I would like to extend, on behalf
of all our shareholders, the Board’s thanks
to Mr Richard Staveley and all the team at
Harwood Capital who have delivered so well in
the period under review.
Yours sincerely,
Noel Lamb
Chairman RKW
18 June 2024
Noel Lamb
Chairman
Rockwood Strategic Plc
Chairman’s
Statement
1 These are considered to be Alternative performance Measures (APMs). See APMs on page 51.
Overview Governance
Financial
Statements
Other
Information
03Rockwood Strategic Plc
Board of Directors
Noel Lamb
Independent, Non-Executive Chairman
Noel graduated from Exeter College, Oxford
and is a barrister-at-law. Commissioned into
the 5th Royal Inniskilling Dragoon Guards, he
served as ADC to the Commandant of the Royal
Military Academy Sandhurst and Adjutant of the
North Irish Horse. He joined Lazard Brothers
& Co Limited in 1987 and from 1990 to 1997 he
was the managing director of Lazard Japan
Asset Management where he was the fund
manager for their Japanese equities. In 1997, he
moved to the Russell Investment Group where
he established the investment management
capability of Russell in London. In 2002, he was
promoted to Chief Investment Officer in North
America where he managed assets of $150bn
until his departure in 2008. Noel is also currently
a director of Nippon Active Value Fund and a
director of Guinness Asset Management Funds.
Kenneth Lever
Senior Non-Executive Director
Chairman of the Audit Committee
Ken is Chair of the Audit Committee at
Rockwood Strategic, Chairman of Cirata plc,
NED of Vertu Motors plc and Deputy Chairman
and NED of Rainier Developments Limited. Ken
was previously Chief Executive of Xchanging plc
and during his career has held listed company
executive board positions with Tomkins plc,
Albright and Wilson plc, Alfred McAlpine plc and
private equity owned Numonyx BV.
In his early career Ken qualified as a Chartered
Accountant and became a partner in Arthur
Andersen. Until 2014 Ken was a member of
the UK Accounting Standards Board. He is
Chairman of the Advisory Board of the Alliance
Manchester Business School. Ken graduated
from the University of Manchester with a degree
in Management Sciences.
Paul Dudley
Non-Executive Director
Paul Dudley is a Fellow of the Institute of
Chartered Accountants of England and Wales
and is a Member of the UK’s Chartered Institute
of Securities and Investment. Paul founded Aer
Ventures in 2011, where he is Managing Partner,
a corporate advisory business that is Authorised
and Regulated by the UK’s Financial Conduct
Authority. Previously he worked at stockbroking
firm WH Ireland where he was approved as a
Qualified Executive acting as the Corporate
Finance adviser on AIM corporate transactions.
Paul graduated from Durham University and
began his career at PricewaterhouseCoopers.
He is currently a director of a number of public
and private companies including Celsius
Resources Ltd, Watercycle Technologies Ltd
and Pyne Gould Corporation Ltd.
04 Rockwood Strategic Plc
Investment Manager’s
Report
Highlights
NAV Total Return performance in the
twelve months to 31 March 2024 of 5.1%
to 206.04p/share, which compares to a
decline in the FTSE Aim All-Share of 8.6%
and a rise in the FTSE Small Cap (ex-ITs)
of 7.1%.
The Total Shareholder Return in this period
was 15.4%*.
NAV Total Return performance in the three
years to 31 March 2024 of 57.0%, which
compares to the FTSE Small Cap (ex-ITs)
of -6.8% and the FTSE Aim All-Share of
-38.5%. The Total Shareholder Return in
this period was 70.1%*.
Price of shares moved from a discount to
NAV of 7.1% to a premium of 1.9%*.
Significant new investor demand resulted
in issuance of 5,778,630 new shares,
increasing share count by 22.7% and,
alongside performance, growing NAV to
£64.3m. NAV has now grown 58.0% in the
last two years, building scale.
Five new portfolio investments purchased
during the period, as funds received from
four takeovers and stock issuance were
re-deployed.
Conducted 10 for 1 stock split during
period.
Market backdrop
This was yet another challenging period for UK
small company investors with material mood
swings through the year and rising media
coverage about a weakening domestic capital
market environment. With a moribund lack
of new issues, sustained retail outflows from
UK funds, a stagnant (at best) economy and
interest rates rising a further 1.0% to 5.25%,
the highest for 15 years, it is not surprising
sentiment has been weak. CPI inflation
started the year at an annual rate of 8.9%. The
contrast has been exceptionally strong stock
market performances from US household
name technology companies; Amazon, Google
(Meta), Microsoft and Apple alongside the
phenomenon which is Nvidia. These stocks are
freely available to purchase now for the average
individual investor, ‘benchmark chasing’ fund
manager and ‘non-thinking’ tracker or ETF
fund. It is not difficult to see how a ‘broken’
UK narrative is leading to shunned domestic
investment and the alternative attractions of
momentum and Ai. John Templeton’s great
insight into markets, though, springs to mind:
“Bull markets are born on pessimism, grow on
scepticism, mature on optimism and die on
euphoria. The time of maximum pessimism is
the best time to buy”. How might this statement
be applied to the ‘Magnificent 7‘ and UK small
cap equities?
What should cheer everyone up? Or maybe,
more importantly, what could stop the selling,
or, we dare to ask, support the buying of
UK equities, particularly small ones? The
positive market backdrop factors appear to
be as follows: The UK inflation rate has been
consistently falling, to lower than half the
rate a year ago. It appears on track now for
the approximate target Bank of England rate
and thus interest rates should start to fall
during the next year. Unemployment is near
multi-decade lows at 3.9% and consumer
confidence in increasing, unsurprisingly
when real income growth has turned positive.
Market M&A is building as professional external
parties, both trade buyers and private equity
act on opportunities within the UK market,
signalling value. Sceptics will chuckle, but the
announcement of the Mansion House reforms,
Richard Staveley
Lead Fund Manager
Nicholas Mills
Assistant Fund Manager
Christopher Mills
Advisory Group Member
CIO Harwood Capital LLP
* These are considered to be Alternative performance Measures (APMs). See APMs on page 51
Overview Governance
Financial
Statements
Other
Information
05Rockwood Strategic Plc
where a number of huge asset managers
committed to increased UK investment,
including the AIM and the creation of a British
ISA, do imply politicians are now conscious
that help is needed to stimulate demand for
small listed equities. Indeed, without them the
country will not end up with medium sized or
large ones. These are, modest steps and will
take time to impact investor flows, but are a
good base to build upon from a policy direction
perspective.
The other key aspects of the market backdrop
remain a robust US economy, creating
headwinds for the timing of a reduction in their
interest rates and a weak Chinese economy,
where the effects of poor capital investment
and lending discipline are unwinding. High
profile conflicts in Ukraine and the Middle
East have increased ‘tail-risks’, which when
combined with Central Bank buying and
anticipation of looser monetary policy, have
provided support for Gold. Housing and
property markets are weak as they adjust
to higher interest rates and tighter credit
markets.
Outlook
We have provided a ‘market-backdrop’ section
above, but as we have previously stated, over
the medium-term, market factors will not
be the primary determinant of Rockwood’s
returns, it will be stock-specific risk and
return. In this regard, we would express strong
confidence in the portfolio. This is predicated
on three contributing factors:
Firstly 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.
Secondly, and rather frustratingly, a
number of our investments have fallen
in price during the year despite their
fundamentals actually improving or
management and Board evolutions having
been completed. In essence, these stocks
are on track with our medium-term theses,
indeed further up the maturity curve
towards shareholder value delivery, yet the
current malaise in markets has led to lower
prices than a year ago. Our experience
suggests this will be a temporary
dislocation.
Thirdly, during the year we deployed
a material amount of capital into new
holdings. This has been even more than
we anticipated at the start of the year
when the proceeds from the Crestchic
takeover had increased cash to 21.1% of
NAV: We have had a number of takeover
bids in the year, validating our approach to
identifying unrecognised value, which has
also been re-invested. We have also 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 6 new investments, all of
which we target at least 100.0% upside,
and represented 24.0% of the portfolio 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. To
simply illustrate, Flowtech Fluidpower’s new
management team is now fully in place with
initiatives to improve returns underway. In
2023 they generated 5.3% operating margins.
Management are targeting “mid-teens”. At
RM, their new strategy and cost savings were
unveiled by the new management team, in
which they stated their new goal to quintuple
2023 EBITDA. At Trifast the operating margin
in the year to March 2024 is expected to
be c.5.0%. The company target is 10.0%,
re-committed to by the new management team.
All three stocks fell in value during the period.
We bought more of all three stocks. During the
year our proposed candidate for the Board was
appointed to RM and Nick Mills of Harwood
joined the Board of Trifast. Already, Jamie
Brooke of the Rockwood Investment Advisory
Group is on the Board of Flowtech Fluidpower.
The main virtue required now is patience.
Material profit recovery is likely at all of these
key holdings above, alongside many others.
Overall, the portfolio holdings are well-financed
with strong balance sheets in almost all cases,
or are de-leveraging quickly in the remainder.
We finished the year with £3.9m of net current
assets, 6.1% of NAV. We expect a hasty reversal
of negative sentiment when interest rates
start falling. Our pipeline of new investments
remains busy with due diligence finished on
some, where we wait patiently for an optimised
entry point and is on-going on others, where we
feel no rush to execute until we have sufficient
clarity on the ‘margin of safety’.
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. 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. Whilst a dead
IPO market is not ‘re-populating’ the UK market,
we expect this to eventually pick up again as
broader confidence improves.
We ended with 7 ‘Core’ holdings and 12
‘Springboard Opportunities’ with the top ten
holdings accounting for almost the same as the
prior year end at 64.3% of NAV.
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.
06 Rockwood Strategic Plc
Top 10 Holdings as % of NAV
Company Sector %
RM plc Education services 9.4
Trifast Industrials 8.4
M&C Saatchi Media 8.1
Funding Circle Financial Services 6.8
Filtronic Technology 6.7
STV Group Media 5.3
Centaur Media Media 5.2
Pressure Technologies Industrials 4.8
Argentex Group Financial Services 4.8
Flowtech Fluidpower Distribution 4.8
Total 64.3
Cash and equivalents Cash and equivalents 6.1
Top 5 Investment Portfolio Holdings
Commentary
RM Plc 9.4% Net Assets (‘Core’)
Cost: £4.96m, Value as at 31 March 2024,
£6.07m, IRR to date 23.4%
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 marks exams from
the International Baccalaureate to A-levels
both in the UK and abroad. The final division
provides outsourced technology services
to groups of schools. During the year the
company’s lenders extended their facilities
to the company, which is important given
elevated debt levels. The new CEO completed
a number of senior hires, including a new CFO
and we were very pleased to see Christopher
Humphries appointed Senior Independent
Director. The new strategy has been unveiled
which rightly targets improved focus and we
believe strongly that RM should move to a
single division business, paying off its debt in
the process. The business which has a long
history of cash generation, now stabilised
after the 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.
Trifast 8.4% Net Assets (‘Core’)
Cost: £5.64m, Value as at 31 March 2024,
£5.38m, IRR to date -4.6%
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 £240m 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.
M&C Saatchi 8.1% Net Assets (‘Springboard/
Opportunity’)
Cost: £3.32m, Value as at 31 March 2024,
£5.22m, IRR to date 22.8%
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
have undergone significant change. Under
the dynamic new Chair, the business has
been making considerable operating savings,
disposing of loss-making operations and
streamlining the business, including the
move to shared services. H2 2023 results
demonstrated a turnaround is underway,
which as it matures should highlight a growing,
high margin, low capital intense, highly cash
generative, international business. They also
clearly expose the exciting activities the
business undertakes in ‘Passion’ sectors, such
as sport, alongside their almost unique ‘world
issues’ non-cyclical division which advises
a range of governments and supra-national
organisations. The upside to our view of fair
value is considerable. Profit progress should
be made in 2024 irrespective of the tough
end market conditions, however when these
inevitably pick-up, the profit recovery potential
will be supercharged. 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.
Funding Circle (New Holding) 6.8% Net Assets
(‘Springboard/Opportunity’)
Cost: £3.48m, Value as at 31 March 2024,
£4.34m, IRR to date 303.0%
(Note the IRR is unhelpful for evaluation purposes,
due to the mathematical extrapolation and
annualisation of a strong initial performance, after a
very short holding period)
The company has developed a leading UK and
US Small and medium (“SME”) sized company
lending platform matching professional lending
demand with SME financing leads where they
are poorly served by the mainstream banks.
The platform generates income in fees for
arranging the loans and servicing them, of
which there are c.£3.5bn currently under
Investment Manager’s Report (continued)
Overview Governance
Financial
Statements
Other
Information
07Rockwood Strategic Plc
management. To date 140,000 businesses have
successfully borrowed over $16bn, enhancing
a huge ‘data lake’ of over 2bn data points
on 29 million businesses, feeding the fast
approval process. The impairment record has
been in-line with expectations for the type of
loan risk, initial expectations that ‘peer-to-peer’
lending would nourish the platform have not
been met and the company has steadily built
income from professional capital sources.
However, it has been loss-making to date. The
company was valued at c.£1.5bn in its 2018
IPO. We have established an investment at a
c.£110m market capitalisation, a deep discount
to book value as we note the company has
£173m of unrestricted cash, £50m of regulatory
driven restricted cash, and over £60m of loans,
made to facilitate the platform. Since our
purchase the company has started evolving
the Board, announced a £25m buy-back and
that they are in discussions to sell the US
business to focus on the UK activities. We are
in support of all these initiatives, yet desire
some cost-cutting and restructuring to ensure
the UK business is stand-alone profitable. Once
achieved, the value of this platform, if it can
continue to grow, will be very significant.
Filtronic 6.7% Net Assets (‘Springboard/
Opportunity’)
Cost: £1.53m, Value as at 31 March 2024,
£4.29m, IRR to date 257.6%
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 business disposed of a lot of activities
a number of years ago and now operates
profitably in its niches, but lacks scale. The
opportunity for shareholders centres on the
opening up of a new, potentially huge market
for Filtronic that would transform sales and
profitability of the company and create
strategic value within the supply chain. The
market is ‘Space’. The company has started
to win important contracts with “the world’s
leading Low Earth Orbit satellite company” as
well as the European Space Agency. The US
company SpaceX has been transforming the
economics of space travel allowing many more
launches and the creation of huge satellite
networks, the largest of which is Starlink.
Filtronic has been winning contracts to supply
components for the ground stations of its
customer and is in trials for being within the
satellite itself. The company has net cash
and potentially a very bright future as other
constellation projects mature, existing clients
grow and achieves scale.
Portfolio Activity
Purchases
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
RM 45.4
Trifast 190.9
M&C Saatchi 42.8
Titon Group 218.7
Argentex 336.5
Hostmore 256.2
Titon 3.6% Net Assets (‘Core’)
Cost: £2.32m, Value as at 31 March 2024,
£2.34m, IRR to date 1.6%
The company has migrated from ‘Springboard’
to ‘Core’ as we purchased over 27.0% of the
company’s equity during the year. A leading
UK manufacturer of building ventilation
products and supplier of other door and
window hardware, the company has had
a succession of CEOs, falling profitability
and lacked strategic focus in recent years.
However, the company is very asset rich
with cash on the balance sheet, (too much)
stock, a large freehold asset site, and has
a growing mechanical ventilation business
where competitors deliver attractive levels
of profitability. This industry has strong
growth prospects and regulatory drivers. Our
investment has been made at a substantial
discount to book value. We successfully
proposed Jamie Brooke, of Rockwood’s
Investment Advisory Group, replace the long-
standing Chairman and we expect significant
improvements in focus, strategic clarity,
and profitability going forward. A new CEO
joins shortly with experience in improving
operations and we see scope for material
shareholder value creation and realisation.
Argentex 4.8% Net Assets (‘Springboard/
Opportunity’)
Cost: £3.71m, Value as at 31 March 2024,
£3.08m, IRR to date -20.6%
This investment has not performed to our
thesis over the medium term. Frustratingly,
following our initial investment the shares
performed strongly as a new management
team was put in place to take the business
forward after a co-founder/CEO departed.
However, the team failed to calibrate cost
investment effectively and insufficient
growth in their FX services was delivered, only
temporarily helped by the volatility around
the Liz Truss Prime Ministerial phase and our
gains were more than fully reversed. A new
Chair has been appointed and a full new team
is now being created (CEO, CFO, CTO). We still
standby by our original thesis that the business
is inherently profitable, lacks capital intensity,
has huge growth potential both domestically
and overseas and is cash generative, however
a reset of leadership and some evolution of
strategy is necessary to recover and build
shareholder value. We are awaiting these plans
from the new team. It is now 2 years from the
initial purchase, and thus we desire a ruthless
focus on shareholder value in order to meet our
target returns over an acceptable time period.
New holdings
The Investment Team have been actively
deploying capital during these depressed
market conditions to seed returns for
shareholders over the medium term.
STV 5.3% NAV, Market capitalisation £109m
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
08 Rockwood Strategic Plc
Investment Manager’s Report (continued)
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.
Restore 4.2% NAV, Market capitalisation
£296m
Restore dropped significantly below our
maximum market cap for initial purchases of
£250m during the period, following a profit
warning, resulting in a fantastic investment
opportunity in this unique services business.
The company 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 in shredding, office
technology destruction/recycling, scanning,
and office relocations. The long-time CEO
has returned to the group after a period of
underperformance of the business and we
expect renewed vigour, growth and improved
profitability to emerge. Despite recovering well
since our investment the valuation remains on
a deep discount to history and its prodigious
cash flows and we expect further significant
progress.
Capital Limited 3.2% NAV, Market
capitalisation £174m
The company’s two key founders remain
heavily involved and invested in the business
they have successfully created over the last
15 years. 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. Capital’s strong
margins, and attractive returns on capital
will be enhanced by the strong growth of this
division, competitors are valued very highly.
Whilst Capital has activities across a number of
metals, it still retains a bias to Gold. We expect
further growth in its key projects, realisations
from its strategic equity stakes in early-stage
clients and an eventual realisation of value in
the laboratories business. The valuation looks
anomalous given the ROCE and growth record,
its asset base and prospects.
James Fisher & Sons 4.0% NAV, Market
capitalisation £130m
Unlike the other four new holdings above,
James Fisher shares have fallen since our
initial purchase. We expect a full recovery of
our investment, indeed have high confidence
in, at least, meeting our target returns over
the next 3-5 years. This quality marine, energy
and defence group with a very long corporate
history had lost focus, capital discipline
and stressed the balance sheet. The new
management team is already simplifying
the group, taking out costs and has released
conservative medium-term financial targets,
which would result in much higher levels of
profitability and returns on capital. We entered
this investment with known risk around their
high debt levels, but just prior to period end, a
large proposed disposal was announced which
will radically de-gear the company, allowing
the operational recovery to 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. We expect considerable valuation
upside as the turnaround progresses and
risksabate.
Sales
We exited 4 material holdings and received
a capital return from Bonhill prior to its
de-listing. We await a final modest payment
to shareholders. We also received special
dividends from Centaur Media and Galliford Try.
City Pub Company – realised IRR 43.4%, gain
£1.49m
This represented a very clear ‘opportunity’
for Rockwood, when we began buying in May
2022. The carefully put together group of over
50, mainly freehold, pubs has been led by the
proven industry expert, Clive Watson. The
pubs experienced a sustained period of stress
due to the COVID-19 impact on leisure activity
and then the cost of living squeeze, so trading
has been challenging. However, independent
assessment of the value of the pubs, despite
this context, was much greater than the value
placed on the shares by the stock market.
This opportunity proved attractive to the
highly regarded and (much) older pub group of
Youngs & Co. They will benefit from the removal
of duplicate central costs, management
synergies, improved buying terms and gain a
high quality, well located, estate. Their offer at
a 46.0% premium was mainly cash and some
Young & Co shares, which remained in the
portfolio at year-end.
Onthemarket.com – realised IRR 94.0%, gain
£928,000
Also on the receiving end of an attractive
takeover offer, Onthemarket.com, the UK
property portal, was introduced to the portfolio
in February 2023. Our thesis centred on the
progress the company had made in recent
years, moving into attractive free cash flow
generation and with scope for price rises
given the huge discount charged relative to
the dominant market leader, Rightmove. The
low valuation appeared at odds with future
potential and the company’s strong balance
sheet. However, a multi-billion dollar US
company with expertise in the sector, has cut
short our expected holding period with a cash
takeover offer at a 56.0% premium.
Finsbury Food Group – realised IRR 33.4%,
gain £554,000
A significant UK manufacturer of cakes and
Bread products with particularly high market
share in branded ‘celebration’ cakes such as
Birthday cakes branded Disney, Minions, Mary
Berry etc. We flagged in last year’s annual
report that the company’s M&A ambitions
were “somewhat constrained by a seemingly
inappropriately low stock market multiple”
and that Private Equity may find the situation
attractive. We were therefore not surprised
when a takeover offer emerged. Frustratingly,
the premium was modest and the valuation
placed on the group was below our view
of fair value. However, the long-standing
management team supported the move off
market and other shareholders accepted the
offer or sold to arbitrageurs who did and the
approach was successful. We did achieve
over double our target IRR in this investment
and have found lots of opportunity for
reinvestmentsince.
Smoove – realised IRR 2.0%, gain £246,000
A protracted bid process also occurred for
our investment in Smoove, originally ULS
Technology, during the period. In this instance
the bidder was Pexa Group, an Australian
listed group. This investment has not met our
target returns, primarily, in our view, due to the
decision to invest a lot of the cash proceeds
received from a divisional disposal in 2022,
alongside further P&L investment (losses),
Overview Governance
Financial
Statements
Other
Information
09Rockwood Strategic Plc
into an expensive technology refresh project.
Harwood built a larger stake in the business
and engaged with the Board to reassess what
was best for shareholders. The eventual offer
received was at a 69.0% premium, which
meant we made a modest positive return on
investment, however due to the elongated
process and losses racked up by the new
management team, our original thesis was not
successful in achieving our target returns.
Update on Pressure Technologies
Pressure Technologies
Equity: 20.0% of Issued Share capital,
4.8% Net Assets (“Core”)
Cost: £4.26m, Value as at 31 March
2024, £3.1m, IRR to date -8.4%
Loan: £750,000, IRR to date 25.0%
Warrants: 966,679. Maturity 2028.
Exercise price 32p
The company has two divisions; the industry
leading Chesterfield Special Cylinders (“CSC”)
which manufactures and services a range of
high-end industries and customers including
the Ministry of Defence and the emergent
Hydrogen economy. Secondly, the Precision
Machined Components division (“PMC”),
which manufactures high specification parts
primarily for the oil and gas industry. The
investment was initiated in early 2019, however
cash generation has not been as expected
and the company has required a number of
external capital injections. During the period,
Richard Staveley joined the Board as a NED
and subsequently Rockwood arranged a loan
to the company at a 14.25% interest rate, with
a 3.0% arrangement fee, and some warrants
with full security over the company’s assets.
The loan is ‘bridging’ in nature as the company
has pleasingly agreed to exit the PMC division.
If successful, this process should bring in
sufficient cash resources to both repay the
loan and provide future funding for CSC. The
PMC division is benefitting from the improved
oil and gas pricing environment resulting
in recovering activity levels. We expect a
successful sale to result in a focused business
which should lead to a fairer valuation of its
qualities and potential.
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 and
the potential for a revitalised but inefficient
stock market full of opportunities to deliver our
target returns.
During the year the great Charlie Munger and
the legendary behavioural finance pioneer
Daniel Kahneman passed away, both have had a
significant influence on how your manager has
developed Rockwood’s approach to successful
stock market investing. Charlie would hopefully
be pleased with Rockwood’s concentrated
approach, valuation discipline, and focus on
cash generation, whilst Daniel would urge us
to keep reminding ourselves of the various
biases we will continue to succumb to as active
investors. Both advocate the importance
of patience, increasingly in short supply we
would argue, yet critical for the success of
our investments in Rockwood and also for
shareholders who want to benefit from this
strategy.
Richard Staveley
10 Rockwood Strategic Plc
About the Investment Manager
Harwood Capital LLP (“HC LLP”) was incorporated in 2003 and is the Investment Manager for Rockwood Strategic Plc and Harwood Private Clients.
HCLLP is a wholly owned subsidiary of Harwood Capital Management Limited and is authorised and regulated by the Financial Conduct Authority
(“FCA”), authorisation number 224915 and is led by Christopher Mills. The funds managed and advised by HC LLP follow an active, value approach
towards the businesses in which they invest. Mr Mills is a member of the Rockwood Strategic Plc Investment Advisory Group.
Investment Advisory Group
Harwood Capital LLP has formed an Investment Advisory Group (IAG) to support the Investment Team for Rockwood Strategic Plc. The members
are experienced financial professionals with relevant experience, their details are disclosed on the www.rockwoodstrategic.co.uk website. The IAG
members are provided with details of pipeline ‘core’ investments for the strategy prior to the completion of the research process. Their insights,
relevant contacts and investment views are incorporated into the Investment Team’s subsequent due diligence. On completion of due diligence,
research is shared with the IAG members and their perspectives actively considered prior to any investment decision by the Investment Team.
Richard Staveley
Lead Fund Manager
Richard has over twenty four years’ experience
of equity investment and fund management.
Having qualified as a chartered accountant
at PricewaterhouseCoopers, Richard joined
Bradshaw Asset Management, as assistant
fund manager in 1999. He subsequently joined
Société Générale Asset Management where
he became Head of UK Small Companies and
a CFA charterholder. In 2006, he co-founded
River and Mercantile Asset Management where
he launched both the UK Small Company
Fund, the UK Income Fund and was Head of
Research. In 2013, he joined Majedie Asset
Management to co-manage and subsequently
solely manage the UK small company
investments. In 2019 he joined Gresham House
Plc as fund manager for Gresham House
Strategic Plc, the Strategic Public Equity LP
and eventually the Gresham House UK Small
Companies Fund. In 2021, Harwood Capital LLP
were awarded the management contract for
Gresham House Strategic Plc which Richard
subsequently joined to continue his role under
its new name Rockwood Strategic Plc. He
currently sits as Non-Executive Director on
the boards of Pressure Technologies Plc and
.
Nicholas Mills
Assistant Fund Manager
Nicholas is a Director of Harwood Capital
Management Ltd and joined Harwood Capital
LLP in 2019. He has ten years of equity
investment experience, initially at Gabelli Asset
Management in New York where he spent
five years as a Research Analyst covering the
industrial sector and gaining experience in
Merger Arbitrage strategies and the marketing
of Closed End Funds. He joined Harwood
Capital LLP in 2019 and has since performed UK
equity analysis and fund management roles for
Oryx International Growth Fund and the North
Atlantic Smaller Companies Investment Trust.
He has a Bachelor of Science Degree from
Boston College’s Carroll School of Management.
He is currently a Non-Executive Director at Niox
Plc, Hargeaves Services Plc and Trifast Plc.
He was previously Non-Executive Director at
Crestchic Plc.
Christopher Mills
CIO Harwood Capital LLP
Christopher has over 50 years investment
experience and has been the Chief Executive
Officer and principal shareholder of Harwood
Capital Management since 2011. He founded
JO Hambro Capital Management with Jamie
Hambro in 1993 acting as Chief Investment
Officer and Harwood Wealth with Alan Durant in
2013 until their respective sales in 2011 and 2020.
He is CEO of North Atlantic Smaller Companies
Investment Trust (“NASCIT”) which he has
managed since 1982 and Executive Director of
Oryx International Growth Fund which he has
managed since 1995. NASCIT has delivered a
total NAV per share of nearly 200x under Mr.
Mills’ management. He has sat on the Board of
over 100 companies during his career including
most recently Augean, MJ Gleeson, SureServe,
Frenkel Topping, Assetco, Ten Entertainment,
Bigblu Broadband, SourceBio International and
is currently Chairman of EKF Diagnostics and
Renalytix AI.
Overview Governance
Financial
Statements
Other
Information
11Rockwood Strategic Plc
Strategic Report 2024
The Directors present their Strategic Report
for the period ended 31 March 2024. Details
of the Directors who held office during the
period and as at the date of this report are
given on page 3 of the Annual Report and
Accounts. This Strategic Report has been
prepared in accordance with the requirements
of Section 414 of the Companies Act 2006
and best practice. Its purpose is to inform the
shareholders of the Company and help them to
assess how the Directors have performed their
duty to promote the success of the Company, in
accordance with Section 172 of the Companies
Act 2006.
The Strategic Report contains certain forward-
looking statements. These statements are
made by the Directors in good faith based on
the information available to them up to the
date of this report and such statements should
be treated with caution due to the inherent
uncertainties, including both economic and
business risk factors, underlying any such
forward-looking information.
The Company’s business review, developments
during the year and a detailed discussion of
the individual asset performance together with
future outlook are covered in the Chairman’s
Statement and the Investment Manager’s
Report.
Business Model
Status of the Company
The Company is registered in England and
Wales as a public limited company and is
an investment company within the terms of
section 833 of the Companies Act 2006. The
principal activity of the Company is to carry on
business as an investment trust. The Company
has been approved by HM Revenue & Customs
as an authorised investment trust under
sections 1158 and 1159 of the Corporation Tax
Act 2010, subject to there being no subsequent
serious breaches of regulations, from 1 April
2023. In the opinion of the Directors, the
Company is directing its affairs so as to enable
it to continue to qualify for such approval.
The Company’s shares have a listing on the
premium segment of the Official List of the
Financial Conduct Authority (“FCA”) and trade
on the London Stock Exchange’s (“LSE”) Main
Market for listed securities. The Company is
a member of the Association of Investment
Companies (“AIC”), a trade body which promotes
investment companies and also develops best
practice for its members.
Strategy for the year ended 31 March 2024
and Strategic Review
During the year ended 31 March 2024, the
Company continued to follow its investment
objective and policy. During the year, the Board
made all strategic decisions for the Company.
Harwood Capital LLP undertook all strategic
and administrative activities on behalf of the
Board, which retained overall responsibility.
Purpose
The purpose of the Company is to achieve
predominantly capital growth in our
shareholders’ wealth over time. It aims
to achieve this by using its closed-ended
structure to invest in a concentrated number
of smaller quoted companies, which the
Investment Manager believes are undervalued
and could be generating higher returns for
their shareholders. The long-term nature of
the Company’s capital enables the Investment
Manager to undertake constructive corporate
engagement with the underlying portfolio
companies and their stakeholders, on financial
and operating performance, strategy and
governance.
The Board
The Board of the Company comprises Noel
Lamb (Chairman), Ken Lever and Paul Dudley,
all of whom are independent non-executive
Directors and male. All Directors will stand for
re-election at the forthcoming Annual General
Meeting. Further information on the Directors
can be found on page 3.
Board Focus and Responsibilities
With the day to day management of the
Company outsourced to service providers the
Board’s primary focus at each Board meeting
is reviewing the investment performance and
associated matters, such as, inter alia, future
outlook and strategy, gearing, asset allocation,
investor relations, marketing, and industry
issues. In line with its primary focus, the Board
retains responsibility for all the key elements
of the Company’s strategy and business model,
including:
Investment Objective and Policy,
incorporating the investment guidelines
and limits, and changes to these;
review of performance against the
Company’s key performance indicators
(“KPIs”);
whether the Manager should be
authorised to gear the portfolio up to
a pre-determined limit (currently no
leverage is used or planned to be used);
review of the performance and continuing
appointment of service providers; and
maintenance of an effective system
of oversight, risk management and
corporate governance.
Key Performance Indicators
At each Board meeting, the Directors consider
the performance measures to assess the
Company’s success in meeting its objectives.
The Board believes the Company’s key
performance indicators are:
Net Asset Value Total Return: the sum
of NAV per Ordinary Share growth and
cumulative dividends paid. This measure
incorporates investment performance
and Company expenses. The investment
objective is to make investments capable
of delivering 15.0% Internal Rates of
Return (IRR) over the medium term. This
was 5.1% in the current and 21.4% in the
prior year.
12 Rockwood Strategic Plc
Strategic Report (continued)
Rockwood Strategic Plc Total Shareholder
Return: RKW cumulative share price return
for the year and cumulative dividends paid.
Implicit in this measure is any movement
in the share price discount or premium to
NAV which is also measured. The discount
to the NAV moved during the period to
a premium. The TSR was 15.4% in the
current year and 28.2% in the prior year.
Ongoing charges: ensuring the costs of
running the strategy are appropriate and
proportionate. The ongoing charges ratio
for 2024 was 1.58% (see APMs on
page 51).
The Directors draw attention to the Investment
Manager’s Report (pages 4 to 9 of the
annualreport).
Business review
The Directors are of the view the investment
strategy has performed very well, given the
challenging UK smaller companies market
conditions experienced during the year.
Principal Risks and Uncertainties
The Board, on behalf of the shareholders,
manages a range of risks that might impact the
financial position of the Company, the principal
risks are as follows:
Investment value - The risk that the value
of the Company’s investments might fall.
See note 13 to the Financial Statements
for further details on this, specifically note
13a “Market Risk”. Our mitigation, as set
out in the Investment Manager’s Report,
is to manage a diverse portfolio and for
the manager to operate with controls and
diligence around new investments.
The Board reviews and discusses the
Company’s performance against its
investment objective and policy, and
assesses performance in comparison
to industry peers and the broader
comparative market. The Board also
keeps the performance of the Investment
Manager under continual review, along
with a review of significant investment
decisions and the overall rationale for
holding the current portfolio.
Investment Manager – the Company
is reliant on the Investment Manager
to implement the investment strategy
successfully and the risk that this
might not continue is managed by the
Board through regular and detailed
engagement with, and oversight of, the
manager together with the manager’s own
comprehensive investment and operating
processes.
Additional risks – as mentioned under the
Corporate Governance section, the Board
maintains a register, and in addition to
comments above, risks managed there
include, among others: the management of key
operational and financial controls; risk of key
personnel being unavailable; and maintaining
regulatory permissions.
Liquidity is not considered a risk as this is a
closed-end fund and does not have redemption
provisions, as seen in the open-ended fund
sector.
The principal risks to shareholders are
the performance of the portfolio and the
competence of the manager in pursing the
strategy.
Custodian
Caceis Bank (previously RBC Investor Services
Trust) was appointed as the Company’s
Custodian pursuant to an agreement dated
8 June 2022. Caceis is in charge of, inter alia,
safekeeping and custody of the Company’s
assets, investments and cash, processing
transactions and foreign exchange services, as
required.
Stakeholder Engagement and Statement
under Section 172
The Board recognises that the Company should
be run for the benefit of shareholders, but
that the long term success of a business is
dependent on maintaining relationships with
stakeholders and considering the external
impact of the Company’s activities.
Overview
The Directors’ overarching duty is to act in
good faith and in a way that is the most likely
to promote the success of the Company as
set out in Section 172 of the Companies Act
2006. In doing so, Directors must take into
consideration the interests of the various
stakeholders of the Company, the impact
the Company has on the community and
the environment, take a long-term view on
consequences of the decisions they make
as well as aim to maintaining a reputation
for high standards of business conduct and
fair treatment between the members of the
Company.
Fulfilling this duty naturally supports the
Company in achieving its investment objective
and helps to ensure that all decisions are
made in a responsible and sustainable way.
In accordance with the requirements of the
Companies (Miscellaneous Reporting)
Regulations 2018, the Company explains how
the Directors have discharged their duty under
Section 172 below.
The Directors have continued access to the
advice and services of the Company Secretary,
and when deemed necessary, the Directors
can seek independent professional advice.
The Terms of Reference of any Committees
are reviewed on a regular basis and further
describe Directors’ responsibilities and
obligations and include any statutory and
regulatory duties. The Audit Committee has
the responsibility for the ongoing review of
the Company’s risk management systems and
internal controls and, to the extent that they
are applicable, risks related to the matters
set out in Section 172 are included in the
Company’s risk register and are subject to
periodic review.
Further details on Section 172 reporting can be
found in the S172 Statement on pages 14 to 16.
Stakeholders
A company’s stakeholders are normally
considered to comprise its shareholders, its
employees, its customers, its suppliers as well
as the wider community in which the company
operates and impacts. The Company is
different in that as an investment trust it has no
employees and, significantly, its customers are
synonymous with its shareholders. In terms of
suppliers, the Company receives professional
services from a number of different providers,
principal among them being the Investment
Manager. The Board believes that the wider
community in which the Company operates
encompasses its portfolio of investee
companies and the communities in which they
operate.
Shareholders
Continued shareholder support and
engagement are critical to existence of the
business and the delivery of the long term
strategy of the Company.
The Board is committed to maintaining open
channels of communication and to engage with
shareholders in a manner which they find most
meaningful, in order to gain an understanding
of the views of shareholders. These include:
Annual General Meeting (“AGM”) – The
Company welcomes and encourages
attendance, voting and participation
from shareholders at the AGM, during
which the Directors and the Investment
Manager are available to discuss issues
affecting the Company and answer any
questions. The Company values any
feedback and questions it may receive
Overview Governance
Financial
Statements
Other
Information
13Rockwood Strategic Plc
from shareholders ahead of and during
the AGM.
Publications – The Annual and Interim
Reports of the Company are made
available on its website. These reports
provide shareholders with a clear
understanding of the Company’s portfolio
and financial position. This information
is supplemented by a quarterly factsheet
and regular presentations which are
available on the website. Feedback and/
or questions the Company receives from
the shareholders help the Company evolve
its reporting, aiming to render the reports
and updates transparent and informative.
Shareholder meetings – The Investment
Manager and the Company’s Broker are in
regular contact with major shareholders.
The Chairman and the other Directors
are available to meet with shareholders
to understand their views on governance
and the Company’s performance where
they wish to do so. The results from
all meetings between the Investment
Manager, the Broker and shareholders,
and the views of the shareholders are
reported to the Board on a regular basis.
Shareholder concerns – In the event
shareholders wish to raise issues or
concerns with the Directors, they are
welcome to do so at any time by writing
to the Chairman. Other members of the
Board are also available to shareholders
if they have concerns that have not been
addressed through the normal channels.
Shareholders wishing to communicate
directly with the Board should contact
the Company Secretary at the registered
office address on page 55.
Investor relations updates – At every
Board meeting, the Directors receive
updates from the Company’s Broker on
the share trading activity, share price
performance and any shareholders’
feedback, as well as updates from the
Investment Manager. To gain a deeper
understanding of the views of its
shareholders and potential investors,
the Investment Manager also meet
regularly with shareholders. Any pertinent
feedback is taken into account when
Directors discuss the share capital
and any possible new share issuance
under the Block Listing application. The
willingness of the shareholders, including
the partners and staff of the Investment
Manager, to maintain their holdings over
the long term period is another way for
the Board to gauge how the Company is
meeting its objectives and suggests a
presence of a healthy corporate culture.
The Investment Manager
The Investment Manager’s performance is
critical for the Company to successfully deliver
its investment strategy and meet its objective
to provide shareholders with attractive total
return over a long-term period.
The management of the Company’s portfolio
is delegated to the Investment Manager,
which manages the assets in accordance
with the Company’s objectives and policies.
At each Board meeting, representatives from
the Investment Manager are in attendance
to present reports to the Directors covering
the Company’s current and future activities,
portfolio of assets and its investment
performance over the preceding period.
Maintaining a close and constructive working
relationship with the Investment Manager is
crucial as the Board and Harwood Capital both
aim to continue to achieve long-term returns
in line with its investment objective. Important
components in the collaboration with the
Investment Manager, representative of the
Company’s culture, are:
Operating in a fully supportive,
co-operative and open environment and
maintaining ongoing communication with
the Board between formal meetings;
Encouraging open discussion with the
Investment Manager, allowing time and
space for original and innovative thinking;
Recognising that the interests of
shareholders and the Investment Manager
are for the most part well aligned,
adopting a tone of constructive challenge;
Drawing on Board members’ individual
experience and knowledge to support
the Investment Manager in its monitoring
of and engagement with portfolio
companies;
Willingness to make the Board members’
experience available to support the
Investment Manager in the sound
long- term development of its business
and resources, recognising that the
long-term health of the Investment
Manager is in the interests of
shareholders in the Company.
In addition to the management fee, the
Investment Manager also receives a
performance fee if certain circumstances are
met. In respect of the year ended 31 March
2024, no performance fee has been accrued.
Other service providers
In order to function as an investment trust with
a Main Market listing on the LSE, the Company
relies on a diverse range of reputable advisors
for support in meeting all relevant obligations.
The Company’s main functions are delegated to
a number of service providers, each engaged
under separate contracts. The Board, together
with the Company Secretary, and Investment
Manager maintains regular contact with its
key external providers and receives regular
reporting from them, both through the Board
and Committee meetings, as well as outside
of the regular meeting cycle. Their advice and
views are routinely taken into account. This
regular interaction provides an environment
where issues and business developments
needs can be dealt with efficiently and
collegiately. The Audit Committee reviews
and evaluates the financial reporting control
environments in place at each service provider.
The Board formally assesses performance,
fees and continuing appointment annually to
ensure that the key service providers continue
to function at an acceptable level and are
appropriately remunerated to deliver the
expected level of service.
Employees, human rights, social and
community issues
The Board recognises the requirement under
Companies Act 2006 to detail information
about human rights, employees and community
issues, including information about any
policies it has in relation to these matters and
the effectiveness of these policies. These
requirements do not apply to the Company
as it has no employees, all the Directors are
non-executive and it has outsourced all its
functions to third-party service providers. The
Company has therefore not reported further
in respect of these provisions, however, it
does expect its service providers and portfolio
companies to respect these requirements.
Integrity and business ethics
The Company is committed to carrying out
business in an honest and fair manner with
a zero-tolerance approach to bribery, tax
evasion and corruption. As such, policies and
procedures are in place to prevent the above.
The Board’s expectations are that its principal
service providers have similar governance
14 Rockwood Strategic Plc
Strategic Report (continued)
policies in place. The Company Secretary, on
behalf of the Board, will seek assurances from
service providers on a regular basis.
Environmental, social and governance issues
The Company has no employees, property or
activities other than investments, so its direct
environmental impact is minimal. In carrying
out its activities and in its relationships
with service providers, the Company aims
to conduct itself responsibly, ethically and
fairly. The Board is comprised entirely of
non-executive Directors and the day-to-day
management of the Company’s business is
delegated to the Investment Manager. The
Investment Manager aims to be a responsible
investor and considers environmental,
ethical and social issues with regards to their
investments.
The Directors believe that proxy voting is an
important part of the corporate governance
process. It is the policy of the Company to
vote at all shareholder meetings of investee
companies, and the Board has delegated voting
activities to the Investment Manager. Whilst
there is no specific policy, Investment Manager
follows relevant regulatory requirements with
an aim to make voting decisions which will best
support growth in shareholder value and will
commonly take into account best practices
regarding corporate governance, Board
composition, remuneration and Environment,
Social and Governance (“ESG”) issues.
Modern Slavery Act 2015
The Company does not provide goods or
services in the normal course of business, and
as a financial investment vehicle does not have
customers. The Directors do not therefore
consider that the Company is required to make
a statement under the Modern Slavery Act 2015
in relation to slavery or human trafficking. The
Company’s suppliers are typically professional
advisers and the Company’s supply chains are
considered to be low risk in this regard. In light
of the nature of the Company’s business there
are no relevant human rights issues and the
Company does not have a human rights policy.
Long Term Viability Statement
In accordance with the UK Corporate
Governance Code, the Directors have carefully
assessed the Company’s position and
prospects as well as the principal risks and
have formed a reasonable expectation that the
Company will be able to continue in operation
and meet its liabilities as they fall due over
the next three financial years. The Board has
chosen a three-year horizon in view of the
long-term nature and outlook adopted by the
Investment Manager when making investment
decisions. To make this assessment and
in reaching this conclusion, the Board has
considered the Company’s financial position
and its ability to liquidate its portfolio and meet
its liabilities as they fall due:
the portfolio is comprised of investments
listed and traded on stock exchanges.
These are actively traded and, whilst
perhaps less liquid than larger quoted
companies, the portfolio is well
diversified;
the portfolio is run with a net cash
position and as a result there is ample
liquidity on a day-to-day basis for the
Company to meet its obligations;
the expenses of the Company are
predictable and modest in comparison
with the assets and there are no capital
commitments foreseen which would alter
that position; and
the Company has no employees, only its
non-executive Directors. Consequently,
it does not have redundancy or other
employment related liabilities or
responsibilities.
As well as considering the potential impact
of the Company’s principal risks and various
downside scenarios, such as a withdrawal
of shareholder interest in the niche asset
class of UK smaller companies, the Board has
also considered the following assumptions
in considering the Company’s longer-term
viability:
there will continue to be demand for
investment trusts;
the Board and the Investment Manager
will continue to adopt a long-term view
when making investments;
the Company invests principally in the
securities of UK listed companies to
which investors will wish to continue to
have exposure;
regulation will not increase to a level
that makes running the Company
uneconomical; and
the performance of the Company will
continue to be satisfactory.
Going Concern
The Directors consider the Company to be well
placed to operate for at least twelve months
(18 June 2025) from the date of this report,
as the Company has sufficient cash liquidity
to pay its liabilities as and when they fall due
and also to invest in new opportunities as
they arise. The cash and publicly tradeable
investments when compared to the non-
discretionary cash outflows of the Company
are more than sufficient to allow the Company
to continue to meet these commitments, even
if investee companies cease to be able to pay
dividends or loan stock interest. This has been
further discussed in Note 1 to the Financial
Statements.
Section 172 Statement
Section 172 of the Companies Act 2006 (the
‘Act’) requires Directors to act in good faith and
in a way that is the most likely to promote the
success of the Company. In doing so, Directors
must take into consideration the interests
of the Company’s various stakeholders, the
impact on the wider community and the
environment when making decisions.
The Company has no employees and delegates
its day-to-day management and administration
to third parties. The Board considers its
key stakeholders to be its shareholders,
its Investment Manager and its third-party
service providers while also taking into
account the Company’s responsibilities to
regulators and the wider community. Given
the out-sourced nature of the Company’s
operations, the Company has very little direct
impact on the community or the environment.
However, the Directors recognise that
the Investment Manager can influence an
investee company’s approach to ESG matters.
The Investment Manager is committed
to operating responsibly. The Investment
Manager also recognises that the integration
of ESG considerations into its investment
assessments is important and that when these
factors are addressed well they can have a
positive impact on the financial performance
of the fund investments.
The Investment Manager assesses ESG
factors during due diligence and incorporates
conclusions into its engagement, strategic
and operational plan, investment thesis and
investment risk assessment. They continue to
monitor factors post-investment and engage
when appropriate. The Investment Manager
expects companies to be minimising their
environmental footprint, without damaging
the outlook for cash earnings and will engage
where necessary to address lack of active
attention in this area. The Investment Manager
believes successful companies incorporate the
interests of multiple stakeholders into their
Overview Governance
Financial
Statements
Other
Information
15Rockwood Strategic Plc
business operations and their strategy for maximising shareholder value. The governance factor is most important to our manager and investment
strategy, enabling effective approaches to environmental and social factors. The manager actively engages with companies as an integrated part
of their philosophy and process. This is often including through Board representation, which helps ensure corporate governance is structured
appropriately, ‘groupthink’ is avoided and the Board is working effectively to deliver shareholder value.
Stakeholder Engagement
The following provides specifics on how the Board evaluates the needs and priorities of the Company’s stakeholders and how these are taken into
account in all of its conversations and decision-making processes. All discussions includes a thorough analysis of the decisions’ long-term effects
and stakeholders’ implications.
Stakeholder
group
Importance of
engagement Key methods of engagement Topics of engagement Outcome and actions
Shareholders Shareholders remain central
to the Company’s ability to
access capital to support its
strategic objectives and goals
and in ensuring the long-term
success of the business.
The Board is committed
to ensuring that there
is open and effective
communication with the
Company’s shareholders on
a range of matters including:
governance, strategy and
performance against the
Company’s investment
objective and policy to ensure
that the Directors understand
the views of shareholders on
such matters.
The Company communicates
with its shareholders in a
number of ways including:
Through its annual and
half-yearly reports
Regulatory
announcements
Website – the website
provides all existing and
potential shareholders
with information
about the Company,
its investment policy
and performance to
allow shareholders to
fully understand the
risk/reward balance of
holding shares in the
Company
Informal meetings: the
Chairman meets with
the Company’s major
shareholders annually
if they wish to do so
to discuss matters of
governance, strategy and
performance against the
Company’s investment
objective and policy
Annual General
Meeting: this provides
a further opportunity
to communicate with
shareholders who
attend and for the
Board to respond to
their questions at the
meeting. All shareholders
are encouraged to
attend and vote at the
Company’s AGM, to be
held on 31 July 2024 at
10.00am.
N/A N/A
16 Rockwood Strategic Plc
Stakeholder
group
Importance of
engagement Key methods of engagement Topics of engagement Outcome and actions
Investment
Manager
The Board has contractually
delegated the management
of the portfolio to the
Investment Manager
(Harwood Capital). The
performance of Harwood
Capital is crucial to the
Company executing its
investment strategy
successfully and providing
attractive returns to
shareholders.
Therefore, maintaining
a close and constructive
working relationship with
Harwood Capital remains
important to the Board and
the long-term success of the
Company.
The Board regularly engages
with the Investment
Manager and meets with
the Investment Manager on
a quarterly basis and other
times throughout the year
enabling the Directors to
discuss the performance
of the investee companies
(amongst other matters) and
probe further should there
be matters of concern or
requirement for clarification
on certain matters.
The performance of the
Investment Manager is
monitored and reviewed by
the Board as a whole in the
absence of a management
and engagement Committee.
In addition, an annual
appraisal of the Investment
Manager’s performance is
undertaken as part of the
Board evaluation process. It is
the opinion of the Board that
the continuing appointment
of the Investment Manager
is in the interests of
shareholders as a whole.
Full annual review of all
aspects of the Investment
Manager agreement and
suitability of Manager.
Harwood Capital provided a
quarterly report to the Board
which provides an update on
the investment portfolio and
future pipeline opportunities.
The Board will review key
investments and provide
feedback.
Service
providers and
suppliers
As an externally managed
investment Company, RKW
relies on a diverse range
of advisors to support the
Company in meeting all
its relevant obligations
including: the Company
Secretary, administrator,
auditors, registrar, depositary
and corporate advisor.
The Board maintains regular
contact with its key external
providers and receives
regular reporting from them,
both through the Board and
Committee meetings, as
well as outside of the regular
meeting cycle.
The Board assesses the
performance, fees and
continuing appointment of
its service providers and
suppliers annually to ensure
that the key service providers
continue to function at an
acceptable level and are
appropriately remunerated to
deliver the expected level of
service.
The Investment Manager on
behalf of the Board continues
to manage and monitor all
service providers.
Regulators RKW can only operate with
the approval of its regulators
who have a legitimate interest
in how the Company operates
in the market and treats its
shareholders.
The Company continues
to monitor and ensure its
compliance with the relevant
regulatory, legal and statutory
obligations along with
corporate governance best
practice.
The Board reviewed its
compliance with the AIC Code
of Governance published in
February 2019 to assess the
extent of its compliance and
identify any gaps. Regular
updates are received from
the Company Secretary on
governance matters to inform
the Board of any changes in
market practice or any legal
or statutory obligations which
could affect the Company.
No specific action required
Strategic Report (continued)
Overview Governance
Financial
Statements
Other
Information
17Rockwood Strategic Plc
Risk Matrix:
A risk matrix helps to monitor the risks which
have been identified and the controls in
place to mitigate those risks. The risks are
assessed on the basis of the likelihood of them
happening, the impact on the business if they
were to occur and the effectiveness of the
controls in place to mitigate them. This risk
register is reviewed by the Audit Committee
regularly at every meeting.
Most of the day-to-day management functions
of the Company are sub-contracted, and the
Directors therefore obtain regular assurances
and information from key third-party suppliers
regarding the internal systems and controls
operating in their organisations. In addition,
each of the third parties is requested to
provide a copy of its report on internal
controls each year, which is reviewed by the
AuditCommittee.
Risk Management Matrix
Principal Risk and Uncertainties Key Mitigation
Investment performance is not comparable to the expectations
Consistently poor performance could lead to a fall in the share price
and a widening of the discount. The success of the Company depends
on the Portfolio Manager’s ability to identify, acquire and realise
investments in accordance with the Company’s investment policy.
This, in turn, depends on the ability of the Portfolio Manager to apply its
investment processes and identify suitable investments.
The Board reviews and discusses the Company’s performance against
its investment objective and policy, and assesses performance in
comparison to industry peers and the broader comparative marker.
The Board also keeps the performance of the Portfolio Manager under
continual review, along with a review of significant stock decisions and
the overall rationale for holding the current portfolio. In addition, the
Management Engagement Committee/conducts an annual appraisal of
the Portfolio Manager.
Share price performance
The market price of the Company’s shares, like shares in all investment
companies, may fluctuate independently of the NAV and therefore may
not reflect the underlying NAV of the shares. The shares could trade at
a discount or premium to NAV at different times, depending on factors
such as market conditions, investors’ perceptions of the merits of the
Company’s objective and investment policy, supply and demand for the
shares and the extent investors value the activities of the Company and/
or the Portfolio Manager.
The Board monitors the relationship between the share price and
the NAV, including regular review of the level of discount relative to
that of companies in the sector. The Company has taken powers to
re-purchase shares and will consider doing so to reduce the volatility of
any share price discount. The Company has also taken powers to issue
shares (only at a premium to NAV) to provide liquidity to the market to
meet investor demand by way of issue of further shares.
No share buybacks were undertaken during the year. The Company
issued a total of 5,778,630 new shares through tap issuances.
The Board and the portfolio management team all own shares in the
Company, by way of aligning their own interests with those of all other
shareholders.
Portfolio Manager – loss of personnel or reputation
The identification and selection of investment opportunities and the
management of the day-to-day activities of the Company depends on
the diligence, skill, judgement and business contacts of the Portfolio
Manager’s investment professionals and the information and deal
flow they generate during the normal course of their activities. The
Company’s future success depends on the continuing ability of these
individuals to provide services and the Portfolio Manager’s ability
to strategically recruit, retain and motivate new talented personnel
as required. The departure of some or all of the Portfolio Manager’s
investment professionals could prevent the Company from achieving its
investment objective and give rise to a significant public perception risk
regarding the potential performance of the Company.
The Board maintains a good level of communication and has a good
relationship with the Portfolio Manager, and regularly reviews the
Portfolio Manager’s performance at Board meetings. The Portfolio
Manager’s Compliance Officer also reports to the Board regularly and
the Portfolio Manager would report to the Board immediately in the
event of any change in key personnel.
Harwood Capital LLP as Portfolio Manager has appointed an investment
team consisting of Richard Staveley and Nicholas Mills, both of whom
are very experienced in managing the portfolio in accordance with the
Company’s principles and investment strategy.
Material changes within the Portfolio Manager’s organisation
Material changes could occur within the Portfolio Manager’s
organisation or its affiliates which are to the detriment of the
Company’s standing in respect of its competitors and its profitability.
The Portfolio Manager has advance notice of any material changes
within its organisation and would report to the Board immediately in
the event of any such changes, including within its organisation and
affiliates or to its key personnel.
18 Rockwood Strategic Plc
Reliance on the performance of third party service providers
The Company has no employees and the Directors have been appointed
on a non-executive basis. The Company is reliant upon the performance
of third party service providers for its executive function. Failure by
any service provider to carry out its obligations to the Company in
accordance with the terms of its appointment could have a material
adverse effect on the operation of the Company.
The Board has appointed third party service providers with relevant
experience. Each third party service provider is monitored by the Board
and their roles are evaluated at least annually by the Audit Committee.
UK Regulatory Risk
The regulatory environment in which the Company operates changes
materially, affecting the Company’s modus operandi.
The Board monitors regulatory changes with the assistance of the
Company Secretary and external professional advisers to ensure the at
the Board is aware of any likely changes in the regulatory environment
and will be able to adapt as required.
UK Legal Risk
The Company and/or the Directors fail to comply with legal
requirements in relation to FCA dealing rules and procedures, the
AIFMD, the Listing Rules, the Companies Act 2006, relevant accounting
standards, the Bribery Act 2010, the Criminal Finances Act 2017, GDPR,
tax regulations or any other applicable regulations.
The Board monitors regulatory change with the assistance of its
external professional advisers to ensure compliance with applicable
laws and regulations including the Companies Act 2006, the AIFM
Rules, the Corporation Tax Act 2010 (“Section 1158”), the Market Abuse
Regulation (“MAR”), the Disclosure Guidance and Transparency Rules
(“DTRs”) and the FCA’s Listing Rules.
The Board reviews compliance reports and internal control reports
provided by its service providers, as well as the Company’s financial
statements and revenue forecasts
Governance Risk
Poor adherence to corporate governance best practice or errors or
irregularities in published information could lead to censure and/or
result in reputational damage to the Company.
The Board reviews all information supplied to shareholders.
Details of the Company’s compliance with corporate governance best
practice, including information on relationships with shareholders, are
set out in the Corporate Governance Report in the Annual Report.
ESG and Climate Change Risk
Risks related to the environment, social issues and governance (ESG)
such as the impact of climate change or bad governance of portfolio
companies could have an adverse impact on the portfolio companies’
operational performance.
The Board challenges the Investment Manager on ESG matters to
ensure that the portfolio companies are acting in accordance with the
Board’s ESG approach.
The Portfolio Manager supports the UK Stewardship Code and actively
engages with portfolio companies on ESG matters including climate
change, where appropriate.
Furthermore, the Board has consideration to hold some of its meetings,
when possible, not in person but via video conference, to save on travel
and reduce the Directors’ carbon footprints on behalf of the Company.
Noel Lamb
Chairman RKW
18 June 2024
Strategic Report (continued)
Overview Governance
Financial
Statements
Other
Information
19Rockwood Strategic Plc
Corporate Governance
Report
AIC Code Statement of Compliance
The Company maintained its compliance with
the AIC Code of Corporate Governance issued
in February 2019 (the AIC Code), except as set
out below:
The Directors do not consider it
appropriate to establish a nomination,
remuneration or a management and
engagement Committee. The functions
that carried out by these Committees
are dealt with by the full Board, which is
comprised of non-executive Directors.
As the Company has no employees and its
functions are undertaken by third parties,
the Audit Committee does not consider it
necessary for the Company to establish its
own internal audit function. From time to
time, the Audit Committee will review the
requirement of an internal audit function
and material controls, and if established,
will carry out effectiveness reviews as
required under AIC Provision 34.
The Board will review on an annual basis
the Company’s application of the AIC Code
of Corporate Governance and whether it
remains applicable for a company of this
size.
The AIC Code is made up of 17 principles and 35
provisions over five sections covering:
1. Board Leadership and Purpose;
2. Division of Responsibilities;
3. Composition, Succession and Evaluation;
4. Audit, Risk and Internal Control; and
5. Remuneration.
Details of how the Company has complied
with the principles and provisions of the AIC
Code are set out its Corporate Governance
Statement which can be found on the
Company’s website.
The AIC Code is available on the AIC website
(www.theaic.co.uk). It includes an explanation
of how the AIC Code adapts the Principles and
Provisions set out in the UK Code to make them
relevant for investment companies.
The Board of Directors
The Board is responsible for the effective
oversight and long-term sustainable success
of the Company, generating value for
shareholders and controlling of all aspects of
the Company’s affairs, notwithstanding any
delegation of responsibilities to third parties.
The Board oversees the role of the Investment
Manager who are seeking to grow net asset
value over the long-term by executing on the
agreed investment policy.
The Board consists of three independent
non-executive Directors, all whom are
independent of the Investment Manager. No
one individual dominates the Board’s decision
making. The Board have an Investment
Manager Agreement in place and this
agreement is reviewed annually.
The Board considers the required time
commitment annually and during the year
under review all Directors continued to devote
sufficient amount of time to the business of
RKW. The Directors possess a wide range of
skills, knowledge and experience relevant
to the leadership of the Company, including
financial, legal, and regulatory and industry
experience as well as the ability to provide
constructive challenge to the views and
assumptions of the Investment Manager and
hold third-party service providers to account.
All members of the Board own shares in the
Company. Further detail on each of their
shareholding can be found on page 24. After
consideration of the above factors, and taking
into account guidance from the AIC, which
encourages Directors owning shares, the
Board is of the view that all the Non-Executive
Directors continue to be independent in
character and judgement and free from
relationships or circumstances that could
affect their judgement within the meaning
of the AIC Code. The Board considers that all
Directors continue to be committed to their
roles and have sufficient time available to meet
their Board responsibilities.
Ken Lever is the Senior Independent Director of
the Company. He provides a sounding Board for
the Chairman and serves as an intermediary for
the other Directors and shareholders. Mr Lever
also provides a channel for any shareholder
concerns regarding the Chairman and will
take the lead in the annual evaluation of the
Chairman by the other independent Directors.
The names and responsibilities of the
Directors, together with their biographies and
details of their significant commitments, are
set out on page 3.
Board and Committee meetings
The Board holds quarterly Board meetings (with
additional meetings arranged as necessary)
where it considers investment performance,
investor relations, share price performance and
other relevant matters. Regular discussions are
held with the manager and its advisers about
the discount to NAV at which the shares trade
and how this might be reduced.
The Company Secretary and Investment
Manager regularly provide the Board with
relevant statutory, regulatory and corporate
governance updates relating to the sector
in which the Company operates. At each
Board meeting, representatives from the
Investment Manager attend to present verbal
and written reports covering the Company’s
portfolio and investment performance over
the period. Communication between the
Board and the Investment Manager and other
service providers is maintained between
20 Rockwood Strategic Plc
The Board reviews annually the performance,
services and the terms of its engagement
with all the Company’s third-party providers
to ensure they continue to be competitive and
effective. Strategy sessions are held annually,
and the Board may meet from time to time
without the Investment Manager present, when
considering the manager’s performance, fees
and contractual arrangements.
The Board has delegated certain
responsibilities to its Audit Committee
so that it can operate efficiently and give
an appropriate level of attention and
consideration to relevant matters. Given
the size of the Board, the Directors do
not consider it appropriate to establish a
nomination, remuneration or a management
and engagement Committee. The functions
that would normally be carried out the most
appropriate experience would step in to
perform the role on an interim basis until a
longer-term solution is identified.
The Company considers annual re-election of
the Directors to be good corporate governance
and has therefore chosen to follow this practice.
The Directors have considered the performance
of each Director serving on the by these
Committees are dealt with by the full Board.
The Board and its Audit Committee are
supported by the Company Secretary who
ensures that appropriate policies and
procedures are in place in order for the Board
to function effectively and efficiently. A formal
agenda is produced for each meeting and
papers are distributed several days before
meetings take place allowing all Board members
to contribute even if they are unable to attend.
The Directors have access to the advice
and services of the Company Secretary
and individual Directors are able to take
independent legal and financial advice at the
Company’s expense when necessary to support
the performance of their duties as Directors.
During the year, the Chairman met regularly
with the Non-Executive Directors without the
manager present.
The table below sets out the attendance record
of individual Directors at the scheduled Board
and Committee meetings held during the year
ended 31 March 2024:
Current
Directors
Scheduled
Board
Meetings
Scheduled
Audit
Committee
Meetings
Number
attended
Number
attended
Noel Lamb* 5/5 n/a
Kenneth Lever 4/5 2/2
Paul Dudley 5/5 2/2
* not a member of the Audit Committee
Conflicts of interest
The Company has effective procedures in place
to monitor and deal with conflicts of interest.
A register has been set up to record all actual
and potential conflict situations which have
been declared. All declared conflicts have been
approved by the Board. The Board is aware of
the other commitments and interests of its
Directors, and changes to these commitments
and interests are reported to and, where
appropriate, agreed with the rest of the Board.
Directors’ appointment and re-election
All Non-Executive Directors are appointed on
the basis of letters of appointments which
provide for a maximum of three months’ notice
of termination by the Director or the Company.
The letters of appointment are available for
inspection at each AGM.
The Board remains committed to uphold
the principles set out in the AIC Code. We
recognise the recommendation under Principle
13 that Board members should generally serve
no more than nine years to ensure ongoing
independence and refreshment of the Board.
However, we also understand the need for
flexibility in certain circumstances to align
with the best interests of the Company and
its shareholders. In cases where a Director’s
continued service is deemed highly beneficial,
the Board will carefully assess their ongoing
independence, expertise, and contributions.
In accordance with the AIC Code, should a
Director’s tenure extend beyond the nine-year
period we will provide a sufficient explanation
detailing the rationale for such an extension.
The appointment of any new Director is made
on the basis of assessing the candidate’s merits
and measuring his or her skills and experience
against the criteria identified by the Board.
Whilst the Board has not put in place a policy
on diversity, the Board fully endorses the AIC
Code principle to promote diversity of gender,
social and ethnic backgrounds on the Board
and would always consider this when making
any new Director appointments.
The Board recognises the importance of
succession planning to refresh the Board and
the AIC provisions relating to this. Succession
plans are under review to address and review
the Board’s policy on tenure. Succession
planning also features as an ongoing agenda
item at Board meetings, it is envisaged that
should a Board member be unable to fulfil their
duties for a period of time, one of the other
Directors with the most appropriate experience
would step in to perform the role on an interim
basis until a longer-term solution is identified.
The Company considers annual re-election of
the Directors to be good corporate governance
and has therefore chosen to follow this
practice. The Directors have considered the
performance of each Director serving on the
Board, including the Chairman, and believe
that each of the Directors continues to make a
valuable contribution to Board discussions and
decisions and supports their re-election at the
2024 AGM.
Board evaluation
The Board has formalised a process to conduct
a regular evaluation of its performance and that
of individual Directors and its Audit Committee
on an annual basis. This process is led by
the Chairman (supported by the Company
Secretary) and is conducted internally using
a questionnaire designed to assess the
strengths and weaknesses of the Board
and its Committees, the composition of the
Board, how effectively Board members work
together. Each Director is required to complete
a questionnaire covering the assessment of
the composition, functioning and operation
of the Board as a whole and a similar review of
the effectiveness of the Audit Committee and
Investment Manager is also carried out. During
the year ended 31 March 2024, the performance
of the Board, the Audit Committee and
individual Directors was evaluated through a
formal assessment process. This involved the
circulation of a Board Evaluation questionnaire
which is tailored to suit the nature of the
Company. The results were discussed between
the Chairman and each of the Directors.
Corporate Governance Report (continued)
Overview Governance
Financial
Statements
Other
Information
21Rockwood Strategic Plc
The Chairman was satisfied that the structure
and operation of the Board continued to
be effective and relevant and that there is
a satisfactory mix of skills, experience and
knowledge of the Company. The Board had
considered the position of all the Directors
including the Chairman as part of the
evaluation process and believes that it would
be in the Company’s best interests to propose
them for re-election.
The Board does not consider it necessary at
present to employ the services or to incur the
additional expense of an external third-party to
conduct the evaluation process but will keep
this under review.
Internal controls and risk management
systems
The Board has established an ongoing process
for identifying, evaluating and managing the
significant risks faced by the Company.
The Board maintains a risk register to identify
any new risks and makes the necessary
adjustments required to existing risks and the
controls and mitigation measures in place in
respect of these risks.
The Company’s Ordinary Shares are quoted on
the Main Market of the London Stock Exchange
under reference RKW.
Systems have been in place for the year under
review and up to the date of approval of the
annual report and accounts.
UK Stewardship
The Board and the Investment Manager
support the UK Stewardship Code, issued
by the FRC, which sets out the principles of
effective stewardship by institutional investors.
The Investment Manager has had extensive
experience and a strong commitment to
effective stewardship.
SGH Company Secretaries Limited
Company Secretary
18 June 2024
22 Rockwood Strategic Plc
Audit Committee
Report
The Audit Committee is chaired by Ken
Lever, the Senior Independent Director. The
other member is Paul Dudley. Ken Lever is a
Chartered Accountant and is also the Audit
Committee Chair of Vertu Motors plc. The
Chair is considered to have recent and relevant
financial experience and the Audit Committee,
as a whole, has competence in the investment
company sector. The Chair of Rockwood
Strategic plc and the Investment Manager are
not members of the Committee but are invited
to attend meetings of the Committee from
time to time. Representatives of the Company’s
auditor attend the Committee meetings
at which the draft half year and full year
accounts are reviewed. The Auditor is given
the opportunity to speak to the Committee
members without the presence of the manager
and speaks directly with the Chair of the Audit
Committee as required.
The Audit Committee operates within a
scope and remit defined by specific terms
of reference determined by the Board. The
Committee meets twice a year to review and
discuss the Company’s half-year and full year
accounts.
The principal areas of focus of the Committee
are:
Monitor the integrity of the Financial
Statements of the Company and any formal
announcements relating to the Company’s
financial performance;
Review the significant issues/judgements
relating to the Financial Statements, and
how these issues were addressed;
Ensure that the Company has followed
appropriate accounting standards
and made appropriate estimates and
judgements, taking into account the views
of the external auditor;
Review and make recommendations to
the Board relating to the content of the
Financial Statements and accompanying
narrative included within the Annual
Report;
Review and assess the independence,
objectivity and effectiveness of
the external audit process and the
approach taken to the appointment or
reappointment of the independent auditor;
Approve the remuneration of the
independent auditors; and
Monitor and review the effectiveness of
the Company’s internal financial controls,
internal control and risk management
systems.
Principal activities during the year
Considered the independent auditor’s
annual scope and report on the full year
accounts and the key areas of focus;
Reviewed the full year and half-year results,
including the underlying accounting
issues, judgements and estimates and the
processes underpinning the preparation of
those documents;
Considered the report prepared by
third-party service providers with
respect to the review of internal controls,
accounting systems and processes used to
prepare the financial information;
Reviewed the information presented in the
half-year and full year reports to assess
whether, taken as a whole, the reports
are fair, balanced and understandable
and the information presented enable the
shareholders to assess the Company’s
performance and strategy;
Reviewed and recommended the
reappointment of BDO LLP as the external
auditor for the Company and agreed the
remuneration of the Auditor; and
Reviewed the need to establish or
otherwise an internal audit function.
Independent Auditor
BDO LLP has been the independent auditor
for the Company since 2013. The Auditor is
required to rotate the audit partner every five
years and the current audit partner is Peter
Smith, who has been in place for four years. It
is therefore anticipated that Peter Smith will
serve as audit partner for one more year until
completion of the audit process in 2025. No
tender for the audit of the Company has been
undertaken. The Committee will review the
continuing appointment of the Auditor on an
annual basis and give regular consideration
to the Auditor’s fees and independence, along
with matters raised during each audit.
The breakdown of fees between audit and
non-audit services paid to BDO LLP during
the financial year is set out in note 4 of the
Financial Statements.
Ken Lever
Chair, Audit Committee
18 June 2024
Overview Governance
Financial
Statements
Other
Information
23Rockwood Strategic Plc
Directors’ Remuneration
Report
The report on Directors’ remuneration for the year ended 31 March 2024 is set out in the table below. As mentioned previously, the full Board
undertake the role of the Remuneration Committee given the size of the Board.
The fees paid to the Board are reviewed periodically and may also be reviewed when new non-executive Directors are recruited to the Board. The
Directors’ fees were last reviewed and increased in 2023. The Directors Remuneration Policy can be found on page 25.
The Company was not subject to requirement of having Remuneration Report voted on by shareholders and therefore this will be the first year of
figures.
The fees payable and the percentage change over the past five financial years in respect of each of the current Directors are as follows:
Directors’ remuneration table (audited)
2024
Fees
2024
% changes
2023
Fees
2023
% changes
2022
Fees
2022
% changes
2021
Fees
2021
% changes
2020
Fees
2020
% changes
2019
Fees
Noel Lamb 44,328 11 40,000 – 40,000 – – – – – –
Kenneth Lever 28,814 5 27,500 – 27,500 – 27,500 7 25,624 2 25,000
Paul Dudley 28,814 80 16,042 – – – – – – – –
The fees payable over the five financial years in respect of each of the Directors who served during those financial years are as follows:
31 March
2024
(£)
31 March
2023
(£)
31 March
2022
(£)
31 March
2021
(£)
31 March
2020
(£)
31 March
2019
(£)
Noel Lamb 44,328 40,000 40,000 – – –
Kenneth Lever 28,814 27,500 27,500 27,500 25,624 25,000
Paul Dudley 28,814 16,042 – – – –
Graham Bird – 11,458 22,300 – – –
David Potter – – 24,400 55,000 51,250 50,000
Charles Berry – – 25,900 27,500 25,624 25,000
Helen Sinclair – – 41,300 27,500 25,624 25,000
Simon Pyper – – 27,500 – – –
Total annual fees
payable as at the
Year End 101,956 95,000 208,900 137,500 128,122 125,000
24 Rockwood Strategic Plc
Directors’ Remuneration Report (continued)
The total aggregate annual fees cap payable
to Directors under the Company’s Articles of
Association (Articles) is £250,000. As per the
Company’s Articles, the Directors are entitled
to be paid all reasonable expenses properly
incurred in the performance of their duties as
Directors including their expenses travelling to
and from Board and Committee meetings.
As the Board is solely composed of
Independent Non-Executive Directors, the
consideration of their remuneration does not
involve any variable or performance-related
bonuses, or other benefits such as pensions.
The level of remuneration has been set in order
to attract individuals of a calibre appropriate
to the future development of the Company and
reflects the duties and responsibilities of the
Directors and the value and amount of time
committed to the Company’s affairs.
The Directors are aware of the requirement
to provide shareholders and other interested
parties with an anlaysis of Directors’
Remuneration against the remuneration of
employees or the amount of distribution to
shareholders. However, the Company has no
employees. The Company is recommending
a dividend of 0.6 per share to shareholders in
respect of the year ended 31 March 2024. If
approved by shareholders at the 2024 Annual
General Meeting, the dividend will be paid on
share register on 9 August 2024.
Directors and their interests
The Directors serving during the year-ended
31 March 2024 had the following interests in the
share capital of the Company:
Five year performance record
The following graph provides the performance
of the fund over a 5 year period.
50
100
150
200
250
2019 2020 2021 2022 2023
0
2024
As at
18 June
2024
As at
31 March
2024
As at
31 March
2023
Noel Lamb 30,000 30,000 25,000*
Kenneth Lever 35,550 35,550 35,550*
Paul Dudley 15,210 15,210 5,210*
* Restated using the new number of shares in issue
following the ten for one share split.
Relative importance of spend on
Directors’ fees
The below table is required to be included in
accordance with The Large and Medium-Sized
Companies and Groups (Accounts and Reports)
Regulations 2008.
31 March
2024
(£)
31 March
2023
(£)
Total
Directors’
fees £101,956 £95,000
NAV £64,260,839 £49,793,321
The Directors’ fees as a percentage of NAV for
the year to 31 March 2024 were 0.159% and for
the year to 31 March 2023 were 0.232%.
Overview Governance
Financial
Statements
Other
Information
25Rockwood Strategic Plc
Directors’ Remuneration
Policy
The Remuneration Policy (the “Policy”) was
initially approved by shareholders at the
2023 Annual General Meeting (“AGM”) of the
Company. The Remuneration Committee is not
proposing to make any major changes to the
existing Policy however in line with industry
best practice and the three-year Policy cycle
the Company will be seeking shareholder
approval at the 2026 AGM. The effective date
of this Policy is the date on which the Policy is
approved by shareholders.
The Company follows the recommendation
of the AIC Code that non-executive Directors’
remuneration should reflect the time
commitment and responsibilities of the role.
The Board’s policy is that the remuneration
of non-executive Directors should reflect the
experience of the Board as a whole, and be
determined with reference to comparable
organisations and appointments. All Directors
are non-executive, appointed under the
terms of letters of appointment. There are no
service contracts in place. The Company has
no employees. The fees for the non-executive
Directors are determined within the limits
(not to exceed £250,000 per annum) set out in
the Company’s Articles of Association, or any
greater sum that may be determined by special
resolution of the Company. Directors are not
eligible for bonuses, share options, long-term
incentive schemes or other performance-
related benefits as the Board does not believe
that this is appropriate for non-executive
Directors. There are no pension arrangements
or retirement benefits in place for the Directors
of the Company. Under the Company’s Articles
of Association, if any Director is called upon
to perform or render any special duties or
services outside their ordinary duties as a
Director, they may be paid such reasonable
additional remuneration as the Board, or any
Committee authorised by the Board, may from
time to time determine. The Directors are
entitled to be repaid all reasonable travelling,
hotel and other expenses properly incurred
by them in or about the performance of their
duties as Director, including any expenses
incurred in attending meetings of the Board
or any Committee of the Board or general
meetings of the Company. Directors’ and
Officers’ liability insurance cover is maintained
by the Company on behalf of theDirectors.
Fees are reviewed annually in accordance with
the above policy. The fee for any new Director
appointed to the Board will be determined on
the same basis. The Company is committed
to ongoing shareholder dialogue and any
views expressed by shareholders on the fees
being paid to Directors would be taken into
consideration by the Board when reviewing
the Directors’ remuneration policy and in the
annual review of Directors’ fees. Compensation
will not be made upon early termination of
appointment. The Directors’ Remuneration
Report was approved by the Board and signed
on its behalf by:
Component Role
Rate as at
31 March 2024 Purpose of Remuneration
Annual Fee Chairman £48,000 Commitment as Chairman
Annual Fee
Independent Non-
Executive Director £30,000
Commitment as
Non-Executive Director
Additional Fee All Directors N/A
For extra or special services
performed in their role as a
Director
Expenses All Directors N/A
Reimbursement of expenses
incurred in the performance
of duties as a Director
Noel Lamb
Chairman
18 June 2024
26 Rockwood Strategic Plc
Directors’ Report
The Directors present their Annual Report and
the audited Financial Statements for the year-
ended 31 March 2024.
Activities
Rockwood Strategic plc (the Company) is
a Main Market listed investment company
invested in a focused portfolio of smaller UK
public companies. The strategy identifies
undervalued shares, where the potential exists
to improve returns and where the Company is
benefitting, or will benefit, from operational,
strategic or management changes. These
unlock, create or realise shareholder value
The Company has no employees but has a
Board consisting of three non-executive
Directors.
Directors
The Directors in office at the date of this
Annual Report are shown on page 3.
Substantial shareholdings
As at the date of this report, the Company has been notified of the following substantial interests
representing 2.8% or more of its total voting rights:
Shareholder
% of total
voting rights
Harwood Capital (London) 26.98
Interactive Investor (Manchester) 8.57
Hargreaves Lansdown Asset Mgt (Bristol) 7.30
Unicorn Asset Mgt (London) 4.38
James Sharp & Co (Bolton) 4.33
Charles Stanley (London) 3.22
A J Bell Securities (Tunbridge Wells) 2.90
Dividends
The Directors have recommended the payment
of a final dividend of 0.6p per share in respect of
the year ended 31 March 2024. The dividend will
be subject to shareholder approval at the 2024
Annual General Meeting, the dividend will be
paid on 2 September 2024 to shareholders on
the share register on 9 August 2024.
Global Greenhouse Gas Emissions for the Year
ended 31 March 2024
The Company is an investment trust, with
neither employees nor premises, nor has it
any financial or operational control of the
assets which it owns. It has no greenhouse
gas emissions to report from its operations
nor does it have responsibility for any other
emissions producing sources under the
Companies Act 2006 (Strategic Report and
Directors’ Report) Regulations 2013, including
those within the Company’s underlying
investment portfolio.
Consequently, the Company consumed less
than 40,000 kWh of energy during the year
in respect of which the Directors’ Report is
prepared and therefore is exempt from the
disclosures required under the Streamlined
Political Donations
The Company has not made any political
donations in the past, nor does it intend to do so
in the future.
Qualifying Indemnity Provision
The Company has maintained Directors’ and
Officers’ Liability Insurance on behalf of the
Directors, through a policy arranged by the
manager, indemnifying the Directors in respect
of certain liabilities which may be incurred
by them in connection with the activities of
Acquisition of Own Shares
There was no acquisition of own shares during
the year.
Share capital
As at 31 March 2024, the Company’s issued
share capital was 31,189,090 Ordinary Shares
of 5 pence each, of which none were held
Financial risk management
The principal risks and uncertainties regarding
the Company’s future financial performance are
set out in note 13 of the Financial Statements.
The Directors do not consider that the Company
faces any significant credit risk, liquidity risk or
cash flow risk.
Going Concern
The Directors consider the Company to be well
placed to operate for at least twelve months
(18 June 2025) from the date of this report, as
the Company has sufficient cash liquidity to
pay its liabilities as and when they fall due and
also to invest in new opportunities as they arise.
The cash and publicly tradeable investments
when compared to the non-discretionary
cash outflows of the Company are more
than sufficient to allow the Company to
continue to meet these commitments, even
if investee companies cease to be able to pay
dividends or loan stock interest. This has been
further discussed in Note 1 to the Financial
Statements.
Overview Governance
Financial
Statements
Other
Information
27Rockwood Strategic Plc
Share price
In the year, the share price reached a maximum
of 210.0p (1 decimal place) and a minimum of
162.5p (1 decimal place). The closing share price
on 31 March 2024 was 210.0p (1 decimal place).
Post Balance Sheet Events
The Company has issued for cash ordinary
shares of 5 pence each in April and May
2024 from its blocklisting facility, the details
of which are set out in note 16. Future
Developments are covered in the Investments
Managers Report on page 5.
Audit information
Each of the Directors who held office at the
date of approval of the Report of the Directors
confirms that:
1. So far as the Director is aware, there is no
relevant audit information of which the
Company’s auditor is unaware; and
2. The Director has taken all the steps that
they should have taken as a Director in
order to make themselves aware of any
relevant audit information and to establish
that the Company’s auditor is aware of
that information.
Annual General Meeting
The Notice of Annual General Meeting to be
held at 10.00am on Wednesday, 31 July 2024
is set out on pages 52 to 54. Details of the
business to be transacted are outlined below:
Resolution 1: Report and accounts
As required by company law, the annual report
and accounts will be laid before shareholders.
Resolutions 2: Remuneration Report
The Directors are seeking the authorisation to
approve the Directors Remuneration Report for
the financial year ended 31 March 2024 as set
out on pages 23 to 24.
Resolution 3: THAT the final dividend for the
year ended 31 March 2024 of 0.6 pence per
ordinary share be and is hereby declared
payable on 2 September 2024 to Ordinary
Shareholders whose names appeared on the
Register of Members at the close of business
on 9 August 2024.
Resolutions 4-6: Re-election of Directors
Each of the Directors will stand for re-election
at the AGM.
Resolution 7: Auditor
The re-appointment of BDO LLP as auditor and
a resolution allowing the Directors to determine
their remuneration.
Resolution 8: Directors’ authority to allot shares
The Directors are seeking the usual authority
to allot shares. Resolution 8 in the Notice of
Annual General Meeting seeks authority to allot
Ordinary Shares up to an aggregate nominal
amount of £536,581.43. 17 (being an amount
equal to 33.0% of the total issued share capital
of the Company as at the date of this report).
The Directors have no present intention to
exercise this authority.
Resolutions 9 & 10: Authority to allot shares
outside of pre-emption rights
Subject to the passing of resolution 8,
resolutions 9 and 10 will allow the Company to
issue, in aggregate, up to 20.0% of the number
of Ordinary Shares in issue as at 31 March 2024,
and to sell Ordinary Shares held in treasury for
cash as if section 561 of the Companies Act
2006 did not apply. The Directors recognise
that this authority is beyond the standard
10.0% sought by investment companies, but
believe that the passing of both resolution
9 and resolution 10 is in the interests of
Shareholders, given that the authority is
intended to be used to fund future acquisitions
of investments in line with the Company’s
investment policy, thereby mitigating the
potential dilution of investment returns for
existing Shareholders. Furthermore, new
Ordinary Shares issued under this authority
will only be issued at a minimum price equal
to the relevant prevailing net asset value per
share plus a premium to cover any expenses
of the relevant issue and therefore should not
be dilutive to the net asset value (“NAV”) per
existing share.
If resolution 9 is passed but resolution 10 is
not passed, Shareholders will only be granting
Directors the authority to allot up 10.0% of the
existing issued Ordinary Share capital of the
Company.
Resolution 11: Authority to make market
purchases of the Company’s own shares
Resolution 11, which is a special resolution, will
give the Company authority to make market
purchases of up to 4,829,233 Ordinary Shares.
The resolution sets minimum and maximum
prices. The Directors will only use this authority
to undertake a further share buyback and
consider it useful to retain the authority
for the future in case circumstances alter.
The Directors shall ensure that all legal and
regulatory requirements associated with any
future purchases of the Company’s own shares
are fulfilled including, in the event that the
purchase would result in any shareholder being
obliged to make an offer under Rule 9.1 of the
Takeover Code and the requirement to seek a
waiver from the Takeover Panel.
The authorities contained in Resolutions 8,
9 and 10 will continue until the AGM of the
Company in 2025. It is intended that renewal of
these authorities will be sought at each AGM.
Resolution 12: THAT a general meeting other
than an Annual General Meeting may be called
on not less than 14 clear days’ notice during
the period from the date of the passing of this
resolution until the conclusion of the next
Annual General Meeting of the Company.
Recommendation
The Board considers that the passing of the
resolutions to be proposed at the AGM is in the
interests of the Company and its shareholders
as a whole and they unanimously recommend
that shareholders vote in favour of those
resolutions.
Approved by the Board of Directors and signed
on its behalf
SGH Company Secretaries Limited
Company Secretary
18 June 2024
28 Rockwood Strategic Plc
Directors’ Responsibility
Statement
The Directors are responsible for preparing the
Directors’ Report and the Financial Statements
in accordance with applicable law and
regulations.
Company law requires the Directors to prepare
Financial Statements for each financial year.
Under that law the Directors have elected to
prepare the Company Financial Statements
in accordance with UK adopted International
Accounting Standards. Under company law
the Directors must not approve the Financial
Statements unless they are satisfied that they
give a true and fair view of the state of affairs
of the Company and of the profit or loss of the
Company for that period. The Directors are also
required to prepare Financial Statements in
accordance with the rules of the London Stock
Exchange for companies trading securities on
the Alternative Investment Market.
In preparing these Financial Statements, the
Directors are required to:
Select suitable accounting policies and
then apply them consistently;
Make judgements and accounting
estimates that are reasonable and prudent;
State whether they have been prepared in
accordance with UK adopted International
Accounting Standards, subject to any
material departures disclosed and
explained in the Financial Statements; and
Prepare the Financial Statements
on the going concern basis unless it
is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Company’s
transactions and disclose with reasonable
accuracy at any time the Financial Position
of the Company and enable them to ensure
that the Financial Statements comply with
the requirements of the Companies Act 2006.
They are responsible for such internal control
as they determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether
due to fraud or error, and have general
responsibility for taking such steps as are
reasonably open to them to safeguard the
assets of the Company and to prevent and
detect fraud and other irregularities.
The Directors are responsible for preparing the
Annual Report in accordance with applicable
law and regulations. The Directors consider the
Annual Report and the Financial Statements,
taken as a whole, provide the information
necessary to assess the Company’s position,
performance and strategy and is fair, balanced
and understandable.
Website publication
The Directors are responsible for ensuring that
the Annual Report and Financial Statements
are made available on a website. Financial
Statements are published on the Company’s
website in accordance with legislation in the
United Kingdom governing the preparation
and dissemination of Financial Statements,
which may vary from legislation in other
jurisdictions. The maintenance and integrity
of the Company’s website is the responsibility
of the Directors. The Directors’ responsibility
also extends to the ongoing integrity of the
Financial Statements contained herein.
Overview Governance
Financial
Statements
Other
Information
29Rockwood Strategic Plc
Independent Auditor’s
Report
Independent auditor’s report to the members of Rockwood Strategic Plc
Opinion on the financial statements
In our opinion the financial statements:
give a true and fair view of the state of the
Company’s affairs as at 31 March 2024 and
of its profit for the year then ended;
have been properly prepared in accordance
with UK adopted international accounting
standards; and
have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements of
Rockwood Strategic Plc (the ‘Company’) for
the year ended 31 March 2024 which comprise
Statement of Comprehensive Income,
Statement of Financial Position, Statement of
Cash Flows, Statement of Changes in Equity
and notes to the financial statements, including
a summary of material accounting policies.
The financial reporting framework that has
been applied in their preparation is applicable
law and UK adopted international accounting
standards.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities
under those standards are further described
in the Auditor’s responsibilities for the audit of
the financial statements section of our report.
We believe that the audit evidence we have
obtained is sufficient and appropriate to provide
a basis for our opinion. Our audit opinion is
consistent with the additional report to the audit
committee.
Independence
Following the recommendation of the audit
committee, we were appointed by the Board of
Directors on 13 May 2013 to audit the financial
statements for the year ended 31 March 2013
and subsequent financial periods. The period
of total uninterrupted engagement including
retenders and reappointments is 12 years,
covering the years ended 31 March 2013 to
31 March 2024. We remain independent of
the Company in accordance with the ethical
requirements that are relevant to our audit of
the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed
public interest entities, and we have fulfilled
our other ethical responsibilities in accordance
with these requirements. The non-audit
services prohibited by that standard were not
provided to the Company.
Conclusions relating to going concern
In auditing the financial statements, we have
concluded that the Directors’ use of the going
concern basis of accounting in the preparation
of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of
the Company’s ability to continue to adopt the
going concern basis of accounting included:
Evaluating the appropriateness of the
Directors’ method of assessing the going
concern in light of economic and market
conditions by reviewing the information
used by the Directors in completing their
assessment;
Assessing the appropriateness of the
Directors’ assumptions and judgements
made by comparing the prior year
forecasted costs to the actual costs
incurred to check that the projected costs
are reasonable;
Assessing the projected management fees
for the year to check that it was in line with
the current assets under management
levels and the projected market growth
forecasts for the following year;
Assessing the appropriateness of the
Directors’ assumptions and judgements
made in their base case and stress tested
forecasts including consideration of
the available cash resources relative to
forecast expenditure and commitments;
Challenging the Directors’ assumptions
and judgements made in their forecasts
including performing an independent
analysis of the liquidity of the portfolio; and
Based on the work we have performed, we
have not identified any material uncertainties
relating to events or conditions that,
individually or collectively, may cast significant
doubt on the Company’s ability to continue as
a going concern for a period of at least twelve
months from when the financial statements
are authorised for issue.
In relation to the Company’s reporting on how
it has applied the UK Corporate Governance
Code, we have nothing material to add or
draw attention to in relation to the Directors’
statement in the financial statements
about whether the Directors considered it
appropriate to adopt the going concern basis
of accounting.
Our responsibilities and the responsibilities of
the Directors with respect to going concern
are described in the relevant sections of this
report.
30 Rockwood Strategic Plc
Overview
Key audit matter Valuation and ownership of
investments
2024
Yes
2023
Yes
Materiality Financial Statements as a whole
£640k (2023: £495k) based on 1% (2023: 1%) of Net assets
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Company and its environment, including the Company’s system of internal control, and
assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls,
including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including
those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
Key audit matter How our audit addressed the key audit matter
Valuation and
ownership of
Investments
(See accounting
policy on Notes 1, 8
and 13)
The investment portfolio at the year-end
comprised of quoted equity investments (£59m
– 98% of the total portfolio by value) and a small
number of unquoted investments (including a
loan note and a warrant) (£907k – 2% of the total
portfolio by value) held at fair value through
profit or loss.
The valuation of the unquoted investments
includes an element of subjectivity.
We considered the valuation and ownership of
investments to be a significant audit area as
investments represent the most significant
balance in the financial statements and
underpins the principal activity of the entity.
There is a risk that the bid price used as a proxy
for fair value of investments held at the reporting
date is inappropriate. Given the nature of the
portfolio is such that it comprises majority of
listed level 1 investments, we do not consider the
use of bid price to be subject to significant
estimation uncertainty.
There is also a risk of error in the recording of
investment holdings such that those recording
do not appropriate reflect the property of the
Company.
For these reasons and the materiality to the
financial statements as a whole, they are
considered to be a key area of our overall audit
strategy and allocation of our resources and
hence a Key Audit Matter.
We responded to this matter by testing the valuation and ownership of
the whole portfolio of quoted investments (98% of the total portfolio by
value). We performed the following procedures:
Confirmed the year-end bid price was used by agreeing to externally
quoted prices;
Assessed if there were contra indicators, such as liquidity
considerations, to suggest bid price is not the most appropriate
indication of fair value by considering the realisation period for
individual holdings;
Recalculated the valuation by multiplying the number of shares held
per the statement obtained from the custodian by the valuation per
share; and
Obtained direct confirmation of the number of shares held per equity
investment from the custodian regarding all investments held at the
balance sheet date.
For the loan note held at the year-end we:
Obtained the loan agreement and verified the inputs used in
calculating the value of the loan note;
We verified the loan note was issued at arm’s length;
We considered movement in market interest rates and any other
changes in the credit risk or other risks associated with the
counterparty based on the Company’s performance; and
Re-calculated the valuation and compared it to the Investment
Manager’s valuation also including a sensitivity analysis.
Key observations:
Based on our procedures performed we did not identify any matters to
suggest the valuation or ownership of investments was not appropriate.
Independent Auditor’s Report (continued)
Overview Governance
Financial
Statements
Other
Information
31Rockwood Strategic Plc
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality
to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the
basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated
as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:
2024 2023
Materiality £640k £495k
Materiality Basis for determining
materiality
1.0% value of net assets 1.0% value of net assets
Rationale for the benchmark applied As an investment trust, the net asset value is
the key measure of performance for users of the
financial statements.
As an investment company, the principal
operations of the audited entity which impact
the decision making of the stakeholders are
investments. Hence net assets has been chosen as
the benchmark to set materiality.
The Asset value of the Company is a key indicator
of the performance and as such the most
relevant benchmark for the users of the Financial
Statements.
Performance materiality £480k £372k
Basis for determining performance
materiality
75.0% of materiality. 75.0% of materiality.
Rationale for the percentage applied for
performance materiality
The level of performance materiality applied was
set after having considered a number of factors
including the expected total value of known and
likely misstatements and the level of transactions
in the year.
We considered a number of factors including
the expected total value of known and likely
misstatements (based on past experience and
other factors) and management’s attitude towards
proposed adjustments.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £32k (2023: £24k). We also agreed to
report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the Report and Accounts
other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility
is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements,
or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
32 Rockwood Strategic Plc
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is
materially consistent with the financial statements, or our knowledge obtained during the audit
Going concern and
longer-term viability
The Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and
any material uncertainties identified set out on page 26; and
The Directors’ explanation as to their assessment of the Company’s prospects, the period this assessment covers and
why the period is appropriate set out on page 14.
Other Code provisions Directors’ statement on fair, balanced and understandable set out on page 28;
Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 12;
The section of the annual report that describes the review of effectiveness of risk management and internal control
systems set out on page 21; and
The section describing the work of the audit committee set out on page 22.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006
and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and
Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
the information given in the Strategic report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we
have not identified material misstatements in the strategic report or the Directors’ report..
Directors’ remuneration
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with
the Companies Act 2006.
Matters on which we
are required to report
by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from
branches not visited by us; or
the financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the
accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit..
Independent Auditor’s Report (continued)
Overview Governance
Financial
Statements
Other
Information
33Rockwood Strategic Plc
Responsibilities of Directors
As explained more fully in the Directors’
Responsibility Statement, the Directors are
responsible for the preparation of the financial
statements and for being satisfied that they
give a true and fair view, and for such internal
control as the Directors determine is necessary
to enable the preparation of financial
statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the
Directors are responsible for assessing the
Company’s ability to continue as a going
concern, disclosing, as applicable, matters
related to going concern and using the
going concern basis of accounting unless
the Directors either intend to liquidate the
Company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from material
misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high
level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement
when it exists. Misstatements can arise from
fraud or error and are considered material if,
individually or in the aggregate, they could
reasonably be expected to influence the
economic decisions of users taken on the basis
of these financial statements.
Extent to which the audit was capable of
detecting irregularities, including fraud
Irregularities, including fraud, are instances
of non-compliance with laws and regulations.
We design procedures in line with our
responsibilities, outlined above, to detect
material misstatements in respect of
irregularities, including fraud. The extent to
which our procedures are capable of detecting
irregularities, including fraud is detailed below:
Non-compliance with laws and regulations
Based on:
Our understanding of the Company and the
industry in which it operates;
Discussion with the Investment Manager,
the Administrator and those charged with
governance and;
Obtaining and understanding of the
Company’s policies and procedures
regarding compliance with laws and
regulations.
we considered the significant laws and
regulations to be Companies Act 2006, the
FCA listing and DTR rules, the principles
of the AIC Code of Corporate Governance,
industry practice represented by the AIC SORP,
the applicable accounting framework, and
qualification as an Investment Trust under
UK tax legislation as any non-compliance of
this would lead to the Company losing various
deductions and exemptions from corporation
tax.
Our procedures in respect of the above
included:
Agreement of the financial statement
disclosures to underlying supporting
documentation;
Enquiries of management and those
charged with governance relating to the
existence of any non-compliance with laws
and regulations;
Reviewing minutes of meeting of those
charged with governance throughout the
period for instances of non-compliance
with laws and regulations; and
Reviewing the calculation in relation to
Investment Trust compliance to check
that the Company was meeting its
requirements to retain their Investment
Trust Status. This included a review of
other qualitative factors and ensuring
compliance with these.
Fraud
We assessed the susceptibility of the financial
statement to material misstatement including
fraud.
Our risk assessment procedures included:
Enquiry with the Investment Manager,
the Administrator and those charged
with governance regarding any known or
suspected instances of fraud;
Obtaining an understanding of the
Company’s policies and procedures
relating to:
Detecting and responding to the
risks of fraud; and
Internal controls established to
mitigate risks related to fraud.
Review of minutes of meeting of those
charged with governance for any known or
suspected instances of fraud; and
Discussion amongst the engagement
team as to how and where fraud might
occur in the financial statements.
Based on our risk assessment, we considered
the areas most susceptible to be valuation
of unquoted investments and management
override of controls.
Our procedures in respect of the above
included:
In addressing the risk of valuation of
unquoted investments, the procedures set
out in the key audit matter section in our
report were performed;
In addressing the risk of management
override of control, we:
Tested journals posted in the
preparation of the financial
statements
Incorporated unpredictability into
our testing by selecting a sample of
immaterial expenses that would not
otherwise have been selected for
testing
Reviewed the significant judgements
made in the unquoted investment
valuations and considering whether
the valuation methodology is the
most appropriate;
Considered any indicators of bias in
our audit as a whole; and
Performed a review of unadjusted
audit differences, if any, for
indications of bias or deliberate
misstatement.
34 Rockwood Strategic Plc
Independent Auditor’s Report (continued)
We also communicated relevant identified
laws and regulations and potential fraud risks
to all engagement team members, who were
deemed to have the appropriate competence
and capabilities and remained alert to any
indications of fraud or non-compliance with
laws and regulations throughout the audit.
Our audit procedures were designed to respond
to risks of material misstatement in the
financial statements, recognising that the risk
of not detecting a material misstatement due
to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve
deliberate concealment by, for example,
forgery, misrepresentations or through
collusion. There are inherent limitations in the
audit procedures performed and the further
removed non-compliance with laws and
regulations is from the events and transactions
reflected in the financial statements, the less
likely we are to become aware of it.
A further description of our
responsibilities is available on the
Financial Reporting Council’s website
at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s
report.
Use of our report
This report is made solely to the Company’s
members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so
that we might state to the Company’s members
those matters we are required to state to them
in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone
other than the Company and the Company’s
members as a body, for our audit work, for this
report, or for the opinions we have formed.
Peter Smith, Senior Statutory Auditor
For and on behalf of BDO LLP, Statutory Auditor
London, UK
18 June 2024
BDO LLP is a limited liability partnership
registered in England and Wales (with
registered number OC305127).
Overview Governance
Financial
Statements
Other
Information
35Rockwood Strategic Plc
Statement of
for the year ended 31 March 2024
Notes
Year ended
31 March 2024
Year ended
31 March
2023
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Income 2 1,114 – 1,114 1,348
Net gains on investments at fair value – 2,715 2,715 8,991
Total income 1,114 2,715 3,829 10,339
Administrative expenses
Investment Manager fee 3 (191) – (191) (112)
Performance fee 3 – – – (625)
Other expenses 4 (581) (161) (742) (1,172)
Return before finance costs and taxation 342 2,554 2,896 8,430
Finance costs (1) – (1) –
Return before taxation 341 2,554 2,895 8,430
Taxation 5 – – – (1)
Return for the year 341 2,554 2,895 8,429
Basic and Diluted earnings per ordinary share for profit from continuing
operations and for profit for the year (pence)* 1.25p 9.34p 10.59p 33.17p
* In accordance with IAS 33 ‘Earnings per Share’, the comparative return per ordinary share figures have been restated using the new number of shares in issue following the ten
for one share split. For weighted average purposes, the share split has been treated as happening on the first day of the accounting period. See note 12 for further details.
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”).
All items in the above Statement derive from continuing operations. No operations were acquired or discontinued during the period.
The notes on pages 39 to 50 form part of these Financial Statements.
36 Rockwood Strategic Plc
Statement of
Financial Position
as at 31 March 2024
Notes
31 March
2024
£’000
31 March
2023
£’000
Non-current assets
Investments at fair value through profit or loss 8 60,322 39,255
Current assets
Cash and cash equivalents 4,761 11,631
Trade and other receivables 9 281 73
5,042 11,704
Total assets 65,364 50,959
Current liabilities
Trade and other payables 10 (1,103) (541)
Performance fee payable – (625)
Total liabilities (1,103) (1,166)
Net current assets 3,939 10,538
Net assets 64,261 49,793
Represented by:
Share capital 12 1,560 1,281
Share premium 24,347 13,063
Revenue reserve 18,565 24,105
Capital reserve 8,435 –
Capital redemption reserve 11,354 11,344
Total equity 64,261 49,793
The NAV per share on 31 March 2024 is 206.04p pence (2023: 195.96 pence restated for the sub-division of each ordinary share into 10 new ordinary
shares, approved at the AGM held on 12 September 2023 and completed on 11 October 2023).
These Financial Statements were approved and authorised for issue by the Board of Directors on 18 June 2024. Signed on behalf of the Board
Noel Lamb Kenneth Lever
Chairman Director
The notes on pages 39 to 50 form part of these Financial Statements.
Overview Governance
Financial
Statements
Other
Information
37Rockwood Strategic Plc
Statement of
Cash Flows
for the year ended 31 March 2024
Notes
Year ended
31 March
2024
£’000
Year ended
31 March
2023
£’000
Cash flow from operating activities
Return for the year 2,895 8,429
Net gains on investments at fair value (2,715) (8,991)
(Increase)/decrease in trade receivables (52) 90
(Decrease)/increase in trade and other payables (652) 664
Corporation tax paid – (1,581)
Net cash outflow from operating activities (524) (1,389)
Cash flows from investing activities
Purchases of investments (30,336) (20,015)
Sales of investments 12,573 22,528
Net cash (outflow)/inflow from investing activities (17,763) 2,513
Cash flows from financing activities
Gross proceeds of share issue* 11,527 –
Share issue costs (110) –
Net cash inflow from financing activities 11,417 –
(Decrease)/increase in cash and cash equivalents (6,870) 1,124
Reconciliation of net cash flow movements in funds
Cash and cash equivalents at the beginning of the year 11,631 10,507
(Decrease)/increase in cash and cash equivalents (6,870) 1,124
Cash and cash equivalents at end of year 4,761 11,631
* excludes share issues not received at 31 March 2024 totaling £156,000.
38 Rockwood Strategic Plc
Statement of Changes
in Equity
for the year ended 31 March 2024
D shares
£’000
Ordinary
Share
Capital
£’000
Share
Premium
£’000
Revenue
Reserve*
£’000
Capital
Reserve
£’000
Capital
Redemption
Reserve
£’000
Total
Equity
£’000
Balance at 31 March 2022 10 1,271 13,063 15,320 – 11,344 41,008
Profit and total comprehensive income for the year – – – 8,429 – – 8,429
Total profit and comprehensive income for the year 10 1,271 13,063 23,749 – 11,344 49,437
Contributions by and distributions to owners
Return of unclaimed special dividends and capital
payments – – – 356 – – 356
Balance at 31 March 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 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 39 to 50 form part of these Financial Statements.
Overview Governance
Financial
Statements
Other
Information
39Rockwood Strategic Plc
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 2024 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 IFRS.
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 £64.3 million (March 2023: £49.8 million) and 98.5% of the Company’s portfolio of investments consist listed
equities which, should the need arise, can be liquidated to settle liabilities. The rest of the Company’s portfolio consisted of 1.2% in a loan and 0.3% in
other unquoted investments. There are no other contractual obligations other than those already in existence and which are predictable.
At the year end, Pressure Technologies had an outstanding loan of £0.75 million with the Company. The loan is valued at par which is approximate
to it fair value and there is no reason to doubt its recoverability as pressure technologies had £13.6 million net assets on its balance sheet as per the
annual report dated 30 September 2023 and had first charge over the assets of pressure technologies.
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 the 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.
40 Rockwood Strategic Plc
1. Basis of preparation and material accounting policies (continued)
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 estimates are based on management’s best knowledge of the amount, event or
actions, actual results ultimately may differ from those estimates.
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.
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 2023: £nil).
Level 3 – valued using significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments).
There are £907,000 level 3 financial assets (31 March 2023: £nil).
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 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.
Revenue
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 on a time-apportioned basis. 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
tocapital.
Overview Governance
Financial
Statements
Other
Information
41Rockwood Strategic Plc
1. Basis of preparation and material accounting policies (continued)
Taxation
The charge for taxation is based on the net revenue 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.
Share capital and reserves
The share capital represents the nominal value of the Company’s ordinary shares. As at 31 March 2024 there were 31,189,090 (31 March 2023 –
25,410,460, restated due to 1 for 10 share issue) Ordinary shares of 5p each in issue. During the year 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 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 March 2023
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
2024.
Disclosure of Accounting Policies (Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2. The amendments aim to make accounting policy disclosures
more informative by replacing the requirement to disclose ‘significant accounting policies’ with ‘material accounting policy information’. The
amendments also provide guidance under what circumstance, the accounting policy information is likely to be considered material and therefore
requiring disclosure.
Definition to accounting estimates (Amendments to IAS 8)
The amendment is to help entities to distinguish between accounting policies and accounting estimates. The amendments are effective for annual
periods beginning on or after 1 January 2023.
Deferred tax assets and liabilities (Amendments to IAS 12)
Amendment to provide a temporary exception to the requirements regarding deferred tax assets and liabilities. The amendments are effective for
annual periods beginning on or after 1 January 2023.
These amendments have no effect on the measurement or presentation of any items in the financial statements of the Company nor do they affect
the disclosure of accounting policies of the Company.
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.
Notes to the Financial Statements (continued)
42 Rockwood Strategic Plc
2. Income
Year ended
31 March
2024
Year ended
31 March
2023
Total
£’000
Total
£’000
Income from listed investments
Dividends 811 925
Loan note interest income 40 274
Loan arrangement fee 22 40
873 1,239
Other income
Bank interest 241 109
Total income 1,114 1,348
3. Investment management and performance fee
Year ended
31 March
2024
£’000
Year ended
31 March
2023
£’000
Investment Manager fee 191 112
Performance fees – 625
191 737
Under the terms of the Investment Management Agreement (7 April 2022) with Harwood Capital LLP, 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
feeperiod. The Hurdle was not surpassed in the year and therefore there was no performance fee.
4. Other expenses
Year ended
31 March 2024
Year ended
31 March 2023
Income
£’000
Capital
£’000
Total
£’000
Total
£’000
Auditors remuneration 47 – 47 37
Director’s fees 102 – 102 95
Professional fees 336 – 336 420
Investment Trust Company conversion costs – – – 470
Other general overheads 96 – 96 83
Transaction costs – 133 133 67
Share split costs – 28 28 -
581 161 742 1,172
Overview Governance
Financial
Statements
Other
Information
43Rockwood Strategic Plc
5. Taxation
Year ended
31 March
2024
Year ended
31 March
2023
UK corporation tax
Corporation tax liability at 25.0% (2023: 19.0%) – 1
– 1
Current tax – 1
Tax on profit from ordinary activities – 1
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% (2023: 19.0%).
The differences are explained below:
Year ended
31 March 2024
Year ended
31 March 2023
Income
£’000
Capital
£’000
Total
£’000
Total
£’000
Current tax reconciliation
Return before taxation 341 2,554 2,895 8,430
Tax at UK corporation tax rate of 25.0% (2023: 19.0%) 85 639 724 1,602
Tax effects of:
Non-taxable dividends (202) – (202) (227)
Non-deductible expenditure 3 – 3 103
Chargeable gains not subject to tax – (639) (639) (1,341)
Movement in deferred tax not recognised 114 – 114 (136)
Total tax charge for the year – – – 1
Deferred tax
At 31 March 2024, the Company had losses of £143,306,000 (31 March 2023: £143,142,000) that are potentially available to offset future taxable
revenue. A deferred tax asset of £35,827,000 (31 March 2023: £35,786,000), based on the enacted UK corporation tax rate of 25.0% that applied from
1 April 2023, has not been recognised because the Company is not expected to generate sufficient 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 2024 Year ended 31 March 2023
Net Return
£'000
Weighted
average
Ordinary
Shares
Basic and
diluted
earnings
per share
pence
Net Return
£'000
Weighted
average
Ordinary
Shares
Basic and
diluted
earnings
per share
pence
Revenue 341 27,356,247 1.25 8,429 25,410,460* 33.17
Capital 2,554 27,356,247 9.33 - 25,410,460* -
Total 2,895 10.58 8,429 33.17
As at 31 March 2024, the total number of shares in issue was 31,189,090 (2023: 25,410,460, restated due to 1 for 10 share issue). No shares were bought
back by the Company (2023: None). There are no share options outstanding at the end of the year.
* Restated to reflect the subsequent 10 for 1 share split.
Notes to the Financial Statements (continued)
44 Rockwood Strategic Plc
7. Dividends
The Company is recommending a dividend of 0.6p to shareholders in respect of the year ended 31 March 2024 (2023: none). No unclaimed historic
dividends were reclassified to revenue reserve during the year (2023: £355,855 ).
8. Investments at fair value through profit or loss
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* (41) 41 –
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 (635) 88 (547)
Closing Fair value at the end of the year 59,443 879 60,322
Closing cost at the end of the year 54,197 791 54,988
Closing unrealised appreciation at the end of the year 5,246 88 5,334
Closing fair value at the end of the year 59,443 879 60,322
Year ended 31 March 2023
Investments
in quoted
companies
(Level 1)
Other
unquoted
investments
(Level 3) Total
Opening Cost at beginning of year 19,129 2,917 22,046
Opening unrealised appreciation at the beginning of the year 9,563 – 9,563
Opening fair value at the beginning of the year 28,692 2,917 31,609
Movements in the year:
Purchases at cost 19,120 1,207 20,327
Sales proceeds (17,548) (4,124) (21,672)
Realised gain on disposal 12,673 – 12,673
Change in unrealised depreciation at the end of the year (3,682) – (3,682)
Closing Fair value at the end of the year 39,255 – 39,255
Closing cost at the end of the year 33,374 – 33,374
Closing unrealised appreciation at the end of the year 5,881 – 5,881
Closing fair value at the end of the year 39,255 – 39,255
* 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.
Overview Governance
Financial
Statements
Other
Information
45Rockwood Strategic Plc
8. Investments at fair value through profit or loss (continued)
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
2024
£’000
2023
£’000
Level 1 59,415 39,255
Level 2 – –
Level 3 907 –
60,322 39,255
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 2024 and 31 March 2023, all investments, except for the investments in the table below, fall into the category ‘Level 1’ under IFRS 7 fair
value hierarchy.
A summary of the level 3 investments are as follows:
31 March 2024 31 March 2023
Investments included £’000 Investments included £’000
Fair value Bonhill group 69 – –
Pressure Technologies
- Loan Notes 750 – –
- Warrants 88 – –
907 – –
Valuation policy: Every three months, the Investment Manager within Harwood Capital LLP 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 2024.
At the year-end, the Company held 20.0% of the aggregate nominal value of voting equity of Pressure Technologies, in ordinary share capital.
Pressure Technologies is incorporated in the UK and at its year end 30 September 2024 had capital and reserves of £13.6 million and had made a
revenue loss of £1.1 million.
Notes to the Financial Statements (continued)
46 Rockwood Strategic Plc
9. Trade and other receivables
31 March
2024
£’000
31 March
2023
£’000
Proceeds due from share issues 156 –
Other debtors 112 63
Prepayments 13 10
281 73
10. Trade and other payables
31 March
2024
£’000
31 March
2023
£’000
Due to Brokers 901 312
Trade Creditors 202 229
1,103 541
There were no other creditors as at 31 March 2024 (2023: none).
11. Performance fees payable
31 March
2024
£’000
31 March
2023
£’000
Performance fees payable – 625
12. Issued capital
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 year 216
31,189,090 ordinary shares of 5p each listed at 31 March 2024 1,560
2,000,000 D shares of 0.5p each listed at 31 March 2023 10
2,000,000 D shares of 0.5p cancelled during the year (10)
D shares of 0.5p each listed at 31 March 2024 –
Overview Governance
Financial
Statements
Other
Information
47Rockwood Strategic Plc
12. Issued capital (continued)
Allotted, called-up and fully paid:
For the year ended 31 March 2023 £’000
2,541,046 ordinary shares of 50p each listed at 31 March 2022 1,271
Nil ordinary shares of 50p each issued during the year 73
2,541,046 ordinary shares of 50p each listed at 31 March 2023 1,559
2,000,000 D shares of 0.5p each listed at 31 March 2022 10
NIL D shares of 0.5p issued during the year –
D shares of 0.5p each listed at 31 March 2023 10
At the AGM of the Company held on 12 September 2023, shareholders approved a resolution for a ten for one share split such that each shareholder
would receive 10 shares with a nominal value of 5 pence each for every one share held. Expenses associated with the share split amount to £28,000.
The Company’s shares are listed on the premium segment of the Main Market on the London Stock Exchange under reference RKW.
In order for the Company’s conversion to an Investment Trust to be successful, all of its ordinary share capital needed to be listed as trading on a UK
regulated market. The Deferred Shares which were issued as D Shares in October 2009 to incentivise the Investment Manager at the time were not
admitted to trading on AIM and were economically valueless. The entire 2,000,000 Deferred Shares were bought back by the Company for 1 penny in
aggregate and thereafter cancelled.
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 2024, £59.4 million of the Company’s net assets were invested in quoted investments, £0.9 in unquoted
investments and £4.7 million in liquid balances (31 March 2023: £39.3 million in quoted investments, £nil in unquoted investments and £11.7 million
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 £59.6 million (2023: £39.3 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 2024, the Company held interests in
20 companies (2023: 18 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.
Notes to the Financial Statements (continued)
48 Rockwood Strategic Plc
13. Financial instruments and financial risk management (continued)
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 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 25.0% (2023: 25.0%)
As at 31 March 2024 +25% -25%
Security Valuation basis Fair value
Impact
£’000
Impact
per share
(in pence)
Impact
£’000
Impact
per share
(in pence)
Quoted investments Latest share price 59,443 14,861 47.65 (14,861) (47.65)
As at 31 March 2023 +25% -25%
Security Valuation basis Fair value
Impact
£’000
Impact
per share
(in pence)
Impact
£’000
Impact
per share
(in pence)
Quoted investments Latest share price 39,255 9,814 38.62* (9,814) (38.62)*
* Restated for the sub-division of each ordinary share into 10 new ordinary shares.
The impact of a change of 25.0% (2023: 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 at 31 March 2024 as they were not deemed to be
material. There were none at 31 March 2023. as 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
2024
£’000
31 March
2023
£’000
Loan stock investments 750 –
Cash and cash equivalents 4,761 11,631
Trade and other receivables 281 73
5,972 11,704
Credit risk relating to loan stock investments in unquoted companies is considered to be part of market risk.
Overview Governance
Financial
Statements
Other
Information
49Rockwood Strategic Plc
13. Financial instruments and financial risk management (continued)
The Company’s cash balances at 31 March 2024 and 2023 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 2024
is £64.3 million (31 March 2023: £49.8 million) as shown in the Statement of Financial Position, which includes the Company’s share capital
The total amount of revenue reserve for the year is £18.566 million (2023: £24.105 million) which is fully distributable and can be utilised for any
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 LLP (Harwood).
The total payable to Harwood is as follows:
31 March 2024 31 March 2023
Performance fee Nil £0.63 million
Management fee £0.05 million £0.11 million
Total £0.05 million £0.74 million
As at 31 March 2024, 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 2024 31 March 2023
Harwood Holdco Limited 8,340,000 Ordinary Shares 7,340,000 Ordinary Shares*
R Staveley 321,380 Ordinary Shares 256,890 Ordinary Shares*
* Restated to reflect the 10 for 1 share split completed in October 2023
The Directors’ remuneration and their interest in the Company are disclosed in the Director’s remuneration review in the annual report.
There are no other material related party transactions of which we are aware in the year ended 31 March 2024.
Investment Management Fees:
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, Harwood 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.
Notes to the Financial Statements (continued)
50 Rockwood Strategic Plc
15. Related party transactions and transactions with the Investment Manager (continued)
Performance Fees:
Harwood 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.
16. Subsequent events note
Share Issues:
The Company issued for cash 1,005,608 ordinary shares of 5 pence each in April and May 2024 from its block listing facility at an average price of
232.64pence per share.
Overview Governance
Financial
Statements
Other
Information
51Rockwood Strategic Plc
Glossary/Alternative Performance
Measures (APMS)
AIC
The Association of Investment Companies.
Alternative performance Measures (APMs)
APMs are often used to describe the performance of investment
companies although they are not specifically defined under FRS 102.
The Directors assess the Company’s performance against a range
of criteria which are viewed as relevant to both the Company and its
market sector. APM calculations for the Company are shown below.
Cash Alternatives/Equivalent
Also known as cash equivalents. A class of investments considered
relatively low-risk because of their high liquidity, meaning they can be
quickly converted into cash.
CTA
Corporation Tax Act 2010.
Discount
The amount by which the market price per share of an investment trust
is lower than the net asset value per share. The discount is normally
expressed as a percentage of the net asset value per share.
Dividend
The portion of company net profits paid out to shareholders.
FCA
Financial Conduct Authority.
LSE
London Stock Exchange.
Market Capitalisation
The total value of a company’s equity, calculated by the number of
shares multiplied by their market price.
NAV
NAV stands for net asset value and represents shareholders’ funds.
Shareholders’ funds are the total value of a company’s assets at current
market value less its liabilities.
Ongoing charges ratio
A measure, expressed as a percentage of the average daily net asset
values during the year, of the regular, recurring annual costs of running
an investment company. This includes the Investment Management fee
and excludes any variable performance fees. In the last two years there
have been exceptional expenses, which will not be ongoing, associated
in 2023 with the Strategic Review and its related Extraordinary Meetings
and in 2024 associated with moving from the AIM to the Main Market of
the London Stock Exchange.
Ongoing charges is calculated on an annualised basis. This figure
excludes any portfolio transaction costs and may vary from period to
period. The calculation below is in line with AIC guidelines.
Year ended
31 March
2024
Investment management fee 191,000
Administrative expenses 581,000
Less: one off legal and professional fees (5,000)
Total (a) 767,000
Average cum income net asset value
throughout the period (b) 48,546,578
Ongoing expenses (c=a/b) (c) 1.58%
Premium
The amount by which the market price per share of an investment
trust exceeds the net asset value per share. The premium is normally
expressed as a percentage of the net asset value per share.
Total Return
A measure of performance that includes both income and capital
returns. This takes into account capital gains and reinvestment of
dividends paid out by the Company into its Ordinary Shares on the ex-
dividend date. This is calculated for both the Share Price and the Net
Asset Value.
Year ended
31 March
2024
NAV Total Return
NAV 31 March 2024 (a) 206.04
NAV 31 March 2023 (b) 195.96*
Increase in NAV (c=a-b) (c) 10.08
Total Return (d=c/b) (d) 5.1%
Total Shareholder Return
NAV price 31 March 2024 (a) 210.00
NAV price 31 March 2023 (b) 182.00*
Increase in share price c=a-b) (c) 28.00
Total Return (d=c/b) (d) 15.4%
* Restated for a 10 for 1 share split
52 Rockwood Strategic Plc
Notice of Annual
General Meeting
NOTICE IS GIVEN that the Annual General
Meeting (“AGM”) of the Company will be held
at the offices of Shakespeare Martineau LLP,
60 Gracechurch Street, London EC3V 0HR
at 10.00am on Wednesday, 31 July 2024 to
consider the following resolutions, of which
resolutions 1 to 8 will be proposed as ordinary
resolutions and resolutions 9 to 12 will be
proposed as special resolutions:
Ordinary Resolutions
1. To receive the Annual Report and
Accounts for the year-ended 31 March
2024.
2. To receive and adopt the Directors’
Remuneration Report.
3. THAT the final dividend for the year
ended 31 March 2024 of 0.6 pence per
ordinary share be and is hereby declared
payable on 2 September 2024 to Ordinary
Shareholders whose names appeared on
the Register of Members at the close of
business on 9 August 2024.
4. To re-appoint Paul Dudley as a Director of
the Company.
5. To re-elect Noel Lamb as a Director of the
Company.
6. To re-elect Ken Lever as a Director of the
Company.
7. To reappoint BDO LLP as auditors to
the Company to hold office until the
conclusion of the next general meeting
at which accounts are laid before the
members and to authorise the Directors to
determine their fees.
8. THAT the Directors of the Company be
generally and unconditionally authorised
in accordance with section 551 of the
Companies Act 2006 (the Act) to exercise
all the powers of the Company to allot
shares in the Company or to grant rights to
subscribe for, or convert any security into,
shares in the Company (Rights) up to an
aggregate nominal amount of £536,581.43
during the period commencing on the
date of the passing of this resolution and
expiring at the conclusion of the next
AGM of the Company or 15 months from
the passing of this resolution, whichever
is earlier, and provided further that the
Company shall be entitled before such
expiry to make an offer or agreement
which would or might require shares to be
allotted or Rights to be granted after such
expiry and the Directors shall be entitled
to allot shares and grant Rights under such
offer or agreement as if this authority had
not expired.
Special Resolutions
9. THAT, subject to and conditional upon
the passing of resolution 8 above, the
Directors of the Company be empowered
under section 570 of the Companies Act
2006 (the Act) to allot equity securities
(within the meaning of section 560 of
the Act) for cash and/or to sell or transfer
shares held by the Company in treasury
(as the Directors shall deem appropriate)
under the authority conferred on them
under section 551 of the Act by resolution
8 above as if section 561(1) of the Act did
not apply to any such allotment provided
that this power shall be limited to:
(a) the allotment of equity securities in
connection with any rights issue or other
pro-rata offer in favour of the holders of
Ordinary Shares in the Company where the
equity securities respectively attributable
to the interests of all such holders of
shares are proportionate (as nearly as
may be) to the respective numbers of
shares held by them, provided that the
Directors of the Company may make such
arrangements in respect of overseas
holders of shares and/or to deal with
fractional entitlements as they consider
necessary or convenient; and
(b) the allotment (otherwise than under
sub-paragraph (a) above) of equity
securities and/or the sale or transfer of
shares held by the Company in treasury
(as the Directors shall deem appropriate)
up to an aggregate nominal amount of
£160,974.43 (representing approximately
10.0% of the ordinary share capital of the
Company at the latest practicable date
before publication of this Notice).
and this authority shall expire at the conclusion
of the next AGM of the Company or 15 months
from the passing of this resolution, whichever
is earlier, that the Company may before such
expiry make offers or agreements which
would or might require equity securities to be
allotted after such expiry and the Directors of
the Company may allot equity securities under
such offers or agreements as if the power
conferred by this resolution had not expired
and provided further that this authority shall be
in substitution for, and to the exclusion of, any
existing authority conferred on the Directors.
Overview Governance
Financial
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53Rockwood Strategic Plc
10. THAT, subject to and conditional upon
the passing of resolution 8 above, and
in addition to the authority granted in
resolution 9, the Directors of the Company
be empowered under section 570 of the
Companies Act 2006 (the Act) to allot
equity securities (within the meaning
of section 560 of the Act) for cash and/
or to sell or transfer shares held by the
Company in treasury (as the Directors shall
deem appropriate) under the authority
conferred on them under section 551 of
the Act by resolution 9 above as if section
561(1) of the Act did not apply to any such
allotment provided that this power shall be
limited to:
(a) the allotment of equity securities in
connection with any rights issue or other
pro-rata offer in favour of the holders of
Ordinary Shares in the Company where the
equity securities respectively attributable
to the interests of all such holders of
shares are proportionate (as nearly as
may be) to the respective numbers of
shares held by them, provided that the
Directors of the Company may make such
arrangements in respect of overseas
holders of shares and/or to deal with
fractional entitlements as they consider
necessary or convenient; and
(b) the allotment (otherwise than under sub-
paragraph (a) above) of equity securities
and/or the sale or transfer of shares
held by the Company in treasury (as the
Directors shall deem appropriate) up to an
aggregate nominal amount of £160,974.43
(representing approximately 10.0% of the
ordinary share capital of the Company
at the latest practicable date before
publication of this Notice).
and this authority shall expire at the conclusion
of the next AGM of the Company or 15 months
from the passing of this resolution, whichever
is earlier, provided that the Company may
before such expiry make offers or agreements
which would or might require equity securities
to be allotted after such expiry and the
Directors of the Company may allot equity
securities under such offers or agreements
as if the power conferred by this resolution
had not expired and provided further that this
authority shall be in substitution for, and to the
exclusion of, any existing authority conferred
on the Directors.
11. THAT, the Company be generally and
unconditionally authorised to make
market purchases (as defined in the
Companies Act 2006) of Ordinary Shares
in the capital of the Company (Ordinary
Shares) on such terms and in such manner
as the Directors may from time to time
determine, provided that:
(a) the maximum number of Ordinary Shares
authorised to be purchased shall be
4,829,233;
(b) the minimum price which may be paid for
an Ordinary Share is the nominal value
of an Ordinary Share at the time of the
purchase;
(c) the maximum price which may be paid
for an Ordinary Share is an amount equal
to 105.0% of the average of the middle
market quotations for an Ordinary Share
(as derived from the Daily Official List)
for the five business days immediately
preceding the date on which the Ordinary
Share is contracted to be purchased;
(d) the minimum and maximum prices
per Ordinary Share referred to in sub-
paragraphs (b) and (c) of this resolution are
in each case exclusive of any expenses
payable by the Company.
(e) the authority conferred by this resolution
shall expire at the end of the AGM in
2025 or 15 months from the passing of
this resolution, whichever is earlier, if
unless such authority is varied, revoked
or renewed prior to such time by the
Company in general meeting; and
(f) the Company may make a contract to
purchase Ordinary Shares under the
authority hereby conferred prior to the
expiry of such authority which will or may
be completed wholly or partly after the
expiration of such authority.
12. That a general meeting other than an
Annual General Meeting may be called on
not less than 14 clear days’ notice during
the period from the date of the passing
of this resolution until the conclusion of
the next Annual General Meeting of the
Company.
By order of the Board
SGH Company Secretaries Limited
Company Secretary
18 June 2024
Registered Office: 6th Floor,
60 Gracechurch Street, London EC3V 0HR
Notice of Annual General Meeting (continued)
54 Rockwood Strategic Plc
Notice of Meeting Notes:
The following notes explain your general rights as a
shareholder and your right to attend and vote at this
Meeting or to appoint someone else to vote on your
behalf.
1. To be entitled to attend and vote at the Meeting
(and for the purpose of the determination by
the Company of the number of votes they may
cast), shareholders must be registered in the
Register of Members of the Company at close of
trading on Monday, 29 July 2024. Changes to the
Register of Members after the relevant deadline
shall be disregarded in determining the rights of
any person to attend and vote at the Meeting.
2. Shareholders, or their proxies, intending to
attend the Meeting in person are requested, if
possible, to arrive at the Meeting venue at least
20 minutes prior to the commencement of the
Meeting at 9.40am (UK time) on Wednesday,
31 July 2024 so that their shareholding may be
checked against the Company’s Register of
Members and attendances recorded.
3. Shareholders are entitled to appoint another
person as a proxy to exercise all or part of
their rights to attend and to speak and vote on
their behalf at the Meeting. A shareholder may
appoint more than one proxy in relation to the
Meeting provided that each proxy is appointed
to exercise the rights attached to a different
Ordinary Share or Ordinary Shares held by that
shareholder. A proxy need not be a shareholder
of the Company.
4. In the case of joint holders, where more than
one of the joint holders’ purports to appoint a
proxy, only the appointment submitted by the
most senior holder will be accepted. Seniority
is determined by the order in which the names
of the joint holders appear in the Company’s
Register of Members in respect of the joint
holding (the first named being the most senior).
5. A vote withheld is not a vote in law, which
means that the vote will not be counted in the
calculation of votes for or against the resolution.
If no voting indication is given, your proxy
will vote or abstain from voting at his or her
discretion. Your proxy will vote (or abstain from
voting) as he or she thinks fit in relation to any
other matter which is put before the Meeting.
6. You can vote either:
by logging on to www.signalshares.com and
following the instructions; you can also
vote by downloading the new shareholder
app, LinkVote+, on Apple App Store or
Google Play and following the instructions.
You may request a hard copy form of proxy
directly from the registrars, Link Group,
on Tel: 0371 664 0300. Calls are charged
at the standard geographic rate and will
vary by provider. Calls outside the United
Kingdom will be charged at the applicable
international rate. Lines are open between
09:00 – 17:30, Monday to Friday excluding
public holidays in England and Wales.
in the case of CREST members, by utilising
the CREST electronic proxy appointment
service in accordance with the procedures
set out below.
if you are an institutional investor, you may
also be able to appoint a proxy electronically
via the Proxymity platform, a process
which has been agreed by the Company
and approved by the Registrar. For further
information regarding Proxymity, please
go to www.proxymity.io. Your proxy must
be lodged by 10.00am on Monday, 29 July
2024 in order to be considered valid
or, if the meeting is adjourned, by the
time which is 48 hours before the time
of the adjourned meeting. Before you
can appoint a proxy via this process you
will need to have agreed to Proxymity’s
associated terms and conditions. It is
important that you read these carefully
as you will be bound by them and they will
govern the electronic appointment of your
proxy. An electronic proxy appointment
via the Proxymity platform may be revoked
completely by sending an authenticated
message via the platform instructing the
removal of your proxy vote;
In order for a proxy appointment to be
valid a form of proxy must be completed.
In each case the form of proxy must be
received by Link Group, PXS, Central Square,
29 Wellington Street, Leeds LS1 4DL by
10.00am on Monday, 29 July 2024.
7. f you return more than one proxy appointment,
either by paper or electronic communication,
the appointment received last by the Registrar
before the latest time for the receipt of proxies
will take precedence. You are advised to read
the terms and conditions of use carefully.
Electronic communication facilities are open to
all shareholders and those who use them will not
be disadvantaged.
8. The return of a completed form of proxy,
electronic filing or any CREST Proxy Instruction
(as described in note 11 below) will not prevent
a shareholder from attending the Meeting and
voting in person if he/she wishes to do so.
As mentioned above, the Company advises
shareholders to vote electronically, or to appoint
the Chair as their proxy as physical attendance
in person may now be permitted.
9. CREST members who wish to appoint a proxy
or proxies through the CREST electronic proxy
appointment service may do so for the Meeting
(and any adjournment of the Meeting) by using
the procedures described in the CREST Manual
(available from www.euroclear.com)). CREST
Personal Members or other CREST sponsored
members, and those CREST members who
have appointed a service provider(s), should
refer to their CREST sponsor or voting service
provider(s), who will be able to take the
appropriate action on their behalf.
10. In order for a proxy appointment or instruction
made by means of CREST to be valid, the
appropriate CREST message (a ‘CREST Proxy
Instruction’) must be properly authenticated in
accordance with Euroclear UK & International
Limited’s specifications and must contain the
information required for such instructions, as
described in the CREST Manual. The message
must be transmitted so as to be received by
the issuer’s agent (ID RA10) by 10.00am on
Monday 29 July 2024. For this purpose, the
time of receipt will be taken to mean the time
(as determined by the timestamp applied to the
message by the CREST application host) from
which the issuer’s agent is able to retrieve the
message by enquiry to CREST in the manner
prescribed by CREST. After this time, any
change of instructions to proxies appointed
through CREST should be communicated to the
appointee through other means.
11. CREST members and, where applicable, their
CREST sponsors or voting service providers
should note that Euroclear UK & International
Limited does not make available special
procedures in CREST for any particular
message. Normal system timings and
limitations will, therefore, apply in relation to
the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned
to take (or, if the CREST member is a CREST
personal member, or sponsored member, or
has appointed a voting service provider(s),
to procure that his CREST sponsor or voting
service provider(s) take(s)) such action as
shall be necessary to ensure that a message
is transmitted by means of the CREST system
by any particular time. In this connection,
CREST members and, where applicable, their
CREST sponsors or voting system providers are
referred, in particular, to those sections of the
CREST Manual concerning practical limitations
of the CREST system and timings. The Company
may treat as invalid a CREST Proxy Instruction
in the circumstances set out in Regulation 35(5)
(a) of the Uncertificated Securities Regulations
2001.
12. Any corporation which is a shareholder can
appoint one or more corporate representatives
who may exercise on its behalf all of its powers
as a shareholder provided that no more than one
corporate representative exercises powers in
relation to the same shares.
13. As at 18 June 2024 (being the latest practicable
business day prior to the publication of this
Notice), the Company’s ordinary issued share
capital consists of 32,194,886 Ordinary Shares,
carrying one vote each. Therefore, the total
voting rights in the Company as at 18 June 2024
are 32,194,886.
14. Any shareholder attending the Meeting has
the right to ask questions. The Company must
cause to be answered any such question
relating to the business being dealt with at
the Meeting but no such answer need be given
if: (a) to do so would interfere unduly with the
preparation for the Meeting or involve the
disclosure of confidential information; (b) the
answer has already been given on a website in
the form of an answer to a question; or (c) it is
undesirable in the interests of the Company or
the good order of the Meeting that the question
be answered.
15. The following documents are available for
inspection during normal business hours at
the registered office of the Company on any
business day from the date of this Notice
until the time of the Meeting and may also be
inspected at the Meeting venue, as specified
in this Notice, from 10am am on the day of the
Meeting until the conclusion of the Meeting:
copies of the Directors’ letters of appointment
or service contracts.
16. You may not use any electronic address (within
the meaning of Section 333(4) of the Companies
Act 2006) provided in either this Notice or any
related documents (including the form of proxy)
to communicate with the Company for any
purposes other than those expressly stated.
A copy of this Notice, and other information required
by Section 311A of the Companies Act 2006, can be
found on the Company’s website.
Overview Governance
Financial
Statements
Other
Information
55Rockwood Strategic Plc
Corporate
Information
Directors
N Lamb (Chairman)
P Dudley
K Lever
Company Secretary
SGH Company Secretaries Limited
6th Floor
60 Gracechurch Street
London
EC3V 0HR
Registered Office
6th Floor
60 Gracechurch Street
London
EC3V 0HR
Investment Manager
Harwood Capital LLP
6 Stratton St
London
W1J 8LD
Bankers
Caceis Bank
UK Branch
Broadwalk House
5 Appold Street
London
EC2A 2DA
Solicitors
Shoosmiths LLP
1 Bow Churchyard
London
EC4M 9DQ
Auditor
BDO LLP
55 Baker St
London
W1U 7EU
Registrars
Link Group
Central Square
29 Wellington St
Leeds
LS1 4DL
Nominated Advisor and Brokers
Singer Capital Markets
1 Bartholomew Lane
London
EC2N 2AX
Please contact a member of the Rockwood
Strategic team if you wish to discuss your
investment or provide feedback on this
document. Rockwood Strategic is committed
to meeting the needs and expectations
of all stakeholders and welcomes any
suggestions to improve its service delivery.
https://www.rockwoodstrategic.co.uk/
56 Rockwood Strategic Plc
Note sNotes
