30 September


Compounding wealth long-term


Interim results for the six months to 30 September 2023


02 Chairman's Statement

03 Investment Manager's Report

08 Directors' Responsibility Statement

Financial Statements

  1. Statement of Comprehensive Income
  2. Statement of Financial Position
  3. Statement of Cash Flows
  4. Statement of Changes in Equity
  5. Notes to the Financial Statements

Other Information

  1. Alternative Performance Measures
  2. Glossary
  3. Corporate Information

Throughout this report we use the more concise terms RKW or the Company.

About Rockwood Strategic Plc Rockwood Strategic plc ("RKW") is an Investment Trust managed by Harwood Capital LLP and listed on the premium segment of the Main Market of the London Stock Exchange that invests in a focused portfolio of smaller UK public companies. The strategy identifies undervalued investment opportunities, 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 value for investors.

About Harwood

Harwood Capital LLP ("HC LLP") was incorporated in 2003 and is the investment manager for RKW and of Harwood Private Clients. It is an investment adviser to North Atlantic Smaller Companies Investment Trust Plc. 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. Led by Christopher Mills, the funds managed and advised by HC LLP follow an active value approach towards the businesses in which they invest.




Highlights for the period include:

  • Net Asset Value (NAV) Total Return in the period of -5.5% to 1,851.62p/share which compares to a decline in the FTSE AIM All Share Index of -10.3% and an increase in the FTSE Small Cap (ex-ITs) Index of 2.9%. Total Shareholder Return in the Period was -2.5%.
  • NAV Total Return performance in the year to 30 September 2023 of 28% which compares to the FTSE AIM All Share Index of -9.9% and the FTSE Small Cap (ex-ITs) of 8.8%. The Total Shareholder Return in the same one year period was 25.4%.
  • NAV Total Return performance in the three years to 30 September 2023 of 80.3% which compares to the FTSE AIM All Share return of -24.3% and the FTSE Small Cap (ex-ITs) of 35%. The Total Shareholder Return in the same three-year period was 114%.
  • No. 1 ranked fund over the last 1, 3 and 5 years by Net Asset Value Total Return in the AIC UK Small Companies sector. Ranked No.2 over 1 year and No.1 over 3 and 5 years by Total Shareholder Return (`TSR').
  • New shares issued via our block listing programme at a small premium to Net Asset Value, growing the shareholder base by 5.7%.
  • Net cash of £3.5m at the end of the Period (representing 7% of NAV)
  • Four new investments were made across a range of industry sectors and our investment in Trifast Plc was increased with the holding re-categorised as 'Core'. Post period end Nick Mills from the Rockwood Investment Team was appointed as a Non-Executive Director of Trifast Plc.
  • Takeover approach for Finsbury Food Plc generating an unrealised IRR of 38.5% at period end.
  • Post period end takeover offers were received for Smoove Plc (69% premium to previous day's close) and Onthemarket.com (56% premium to previous day's close).

Rockwood Strategic Plc




Noel Lamb


Rockwood Strategic Plc

Dear Shareholder,

While the UK stock market conditions have been subdued during the first half of our financial year, the energy at Rockwood Strategic has remained buoyant. Net Asset Value (NAV) Total Return in the period reduced -5.5% to 1,851.62p/share which outperformed a decline in the FTSE AIM All Share Index of -10.3%. However, I am delighted to report that during the period we issued new shares via our block listing programme at a small premium to Net Asset Value, growing the shareholder base for our proven and differentiated strategy by 5.7%. This is a significant achievement, as very few of the 300 or more Investment Trusts across the entire industry are valued at a premium to NAV at the end of this period and few have been capable of issuing shares during it. Furthermore, the average discount to NAV across the market for UK listed Investment Trusts is currently wider than usual. UK equities appear out of favour and, in the open- ended fund sector, have now experienced over two years of monthly withdrawals.

It is against this difficult backdrop that Rockwood Strategic has managed to close its long-standing discount and begin to grow the strategy with new investors who, like the Board, can see the potential for positive medium-term returns and the potential to

continue our sector beating performance. The Board believes that the current environment is ripe for attractive investments to generate our performance objective and pleased to observe the Investment Manager deploying capital. A larger fund will benefit shareholders by allowing the investment team to widen its practical universe for establishing influential stakes in companies under £250m market capitalisation and will of course lead to cost benefits with improved scale. There is also

a range of communication and marketing initiatives that are being under taken by the Investment Manager to reach a wider audience.

Following the successful vote at the AGM, we have also conducted, post period end, a stock split of 10 for 1 which will increase the accessibility of Rockwood Strategic to smaller investors. It is these smaller investors, and indeed larger ones, that the Treasury has begun to consider actively in terms of improving the overall environment for UK equity investing. The health of our market

is clearly challenged. A number of investors have migrated to global equity mandates, with others recently being attracted to emerging alternative asset classes. The lure of higher cash and bond yields has become a further

distraction. The 'Mansion House' reforms are but one step towards encouraging investment in small British businesses; yet more is clearly needed to incentivise further the savings

of domestic investors into small, listed companies which provide so many jobs within the UK, utilise our world-class service sector and create capital investment. Furthermore, the long-term returns from investing in

UK small companies have been excellent. There has been much made of the recent 'de-equitisation', or reduction of number of companies, on the London Stock Exchange and initiatives are seemingly under review to address and reverse this. With well over 750 operating companies in the combined indices of the AIM All-share, FTSE Small and FTSE Fledgling, the board is confident that our concentrated approach is well placed and needs only to identify a small number of the very best opportunities which it is well equipped to do.

Noel Lamb

Chairman RKW

21 November 2023


Rockwood Strategic Plc





Richard Staveley

Lead Fund Manager


  • Net Asset Value (NAV) Total Return in the period of -5.5% to 1,851.62p/share which compares to a decline in the FTSE AIM All Share Index of -10.3% and an increase in the FTSE Small Cap (ex-ITs) Index of 2.9%. Total Shareholder Return in the Period was -2.5%1.
  • NAV Total Return performance in the year to 30 September 2023 of 28% which compares to the FTSE AIM All Share Index of -9.9% and the FTSE Small Cap (ex-ITs) of 8.8%. The Total Shareholder Return in the same one year period was 25.4%1.
  • NAV Total Return performance in the three years to 30 September 2023 of 80.3% which compares to the FTSE AIM All Share return of -24.3% and the FTSE Small Cap (ex-ITs) of 35%. The Total Shareholder Return in the same three-year period was 114%1.
  • No.1 ranked fund over the last 1, 3 and
    5 years by Net Asset Value Total Return in the AIC UK Small Companies sector. Ranked No.2 over 1 year and No.1 over 3 and 5 years by Total Shareholder Return ('TSR').


During the 6 month period to 30 September we increased the number of holdings to twenty-one, alongside adding to a number of existing holdings, as a soft UK stock- market provided the opportunity to purchase investments we believe will at least meet our 15% IRR criteria over the next 3-5 years. Stock specific risk and hence stock specific returns are the primary factors producing the NAV result for the period. We now have 8 'Core' holdings (target 5-10) and 13 'Springboard / Opportunities' (target 10-25) with the top ten holdings accounting for 64.2% of NAV at period end. Cash was £3.5m at the end of the period, representing 7% of NAV having reduced from 21.2% in March 2023.

We continue to identify companies which will benefit from operational, strategic or management initiatives. The stock market valuations for these companies are usually depressed as they have fallen out of favour due to reduced profitability, strategic error or poor management. All of these can be reversed, typically generating significant shareholder value recovery. However, the current market backdrop is providing even greater valuation anomalies; time horizons seem to be shortening and many investment funds are experiencing outflows. Our approach of engaging with stakeholders alongside our own material shareholding is differentiated and proving effective. When the stock market doesn't recognise the improvements subsequently made and the value on offer, increasingly private equity investors and trade buyers are.

Market commentary

The last six months have surprised most market commentators. Economies have proved reasonably resilient, at stagnant levels of growth, whilst monetary policy has continued to tighten. The FTSE Aim All Share Index fell 10.3% and is now down 44.7 % from its peak in September 2021. OPEC coordination alongside resilient US growth and regional geo-political tensions have caused the oil price to rise 18% from $77.9 to $92.2. UK interest rates rose from 4.25% to 5.25%. There are some signs that inflation has peaked but a material reduction has not occurred yet (Core inflation September 2023 6.3%) and Central Banks remain committed to this goal in their public statements. The share-price rises of mega-US technology stocks appears the only consensual positive trend and feels as if its sucking in all spare capital, herd-like, whilst UK equity valuations are at their lowest for a generation. The IPO market is moribund. However, merger and acquisition activity is clearly increasing as savvy trade buyers and private equity firms exploit the liquidity hungry, redemption heavy UK equity market. The 'transmission mechanism' of higher interest rates has clearly had slower effects than in previous rate cycles, albeit insolvencies are picking up, as is unemployment off a very

low base and house prices are falling. We believe the lag is due to a hangover from the COVID related government largesse to both consumers and corporates, which we perceive has nearly fully unwound and the move in recent years by large parts of both groups to extend their interest rate protection on debt at the previously very low levels. This is gradually unwinding.

1 These are considered to be APMs. See Alternative Performance Measures (APMs) on page 17.

Rockwood Strategic Plc


Investment Manager's Report (continued)

The 'Mansion House' reforms hopefully represent the 'starting-gun' for more initiatives to improve the attractiveness of small UK businesses, but it will take time. As we

move into an election year competing policy announcements will emerge, so we urge all parties to take seriously the health of the UK stock market. Its primary purpose is to raise capital and support UK businesses when they reach a certain maturity and whilst many schemes exist for very small private businesses, more is needed to encourage investors to deploy capital to our public market. It is a key source of employment, tax receipts and UK investment. The alternative is everyone buys Nvidia, now valued at c.$1 trillion.

We stated in previous reports that we would anticipate limited sustained market recovery until 'core' inflation is demonstrably falling

and the market can have real confidence to anticipate the commencement of monetary easing. We believe the portfolio holdings are deeply undervalued, almost all are very well financed, all have the potential for operational improvements and strategic improvements too which can drive shareholder value irrespective of the doom and gloom. Takeover interest continues to emerge for a number of our holdings due to their attractive cash flow generation and market positions and we expect realisations to produce material NAV uplifts and cash for re-investment. We do see a high probability of a recession and expect market profit expectations to fall further and have built this backdrop into the margin of safety we expect in our holding valuations and the extent of profit recovery we are expecting from the businesses and their management teams many of which evolved positively during the period.

Portfolio performance

The portfolio is very concentrated and therefore it should be expected that over any shorter period, such as a year, a dominant stock or two will drive performance.


1 Year

3 Year

(all indices are excluding investment trusts)

H1 2023

to 30 Sept

to 30 Sept





RKW NAV Total Return1




FTSE Small Cap Total Return (SMXX)




FTSE AIM All Share Total Return (TAXXG)




FTSE All Share Total Return (ASX)




Source: Bloomberg and Company as at 30 September 2023

The NAV fell due to modest weakness across the portfolio in thinly traded markets dominated by negative investor sentiment and increasing interest rates. Soft economic conditions led to reduced short term profitability expectations at M&C Saatchi and Flowtech Fluidpower whilst the recovery from one part of one division at RM Plc has, to date, been slower than expected. Much more positively, Finsbury Food received a takeover approach (unrealised IRR 38.5% at period end) and Galliford Try announced material special dividends, an enhanced dividend policy and strong further recovery in profitability. Overall, the NAV Total Return outperformed the AIM All Share Index where most of our investments reside.

1 These are considered to be APMs. See Alternative Performance Measures (APMs) on page 17.


Rockwood Strategic Plc



Portfolio highlights & investment activity

The period ended with 21 holdings, of which the top 10 constitute 64.2% of NAV.

Top ten shareholdings



(30 September 2023)


in company


RM Plc




Trifast Plc




M & C Saatchi Plc




Flowtech Fluidpower




Centaur Media Plc




Galliford Try Holdings PLC




Finsbury Food




City Pub Co




Van Elle




Titon Holdings




Other investments (11)




Cash and other working capital items




Total NAV



However, regularly the opportunity to establish such a stake may not be initially available, hence a 'springboard' position is purchased with a view to increase in time. The latter set of 'opportunities' are stocks which meet our investment criteria but are situations where we do not anticipate taking an active lead role as a shareholder, often because another party already is and where the appropriate changes to drive shareholder value are already underway but the valuation is still highly attractive. These tend to have a higher level of stock liquidity than the rest of the portfolio.

James Fisher & Sons

The stock is a classic 'fallen angel' in our view. They provide specialist engineering services to the energy, defence, renewables and marine markets and has a 175-year-old business history, 2367 employees with operations in 18 countries. Previous management misfired on capital allocation through an over-energetic acquisition strategy with the inevitable lack of integration, loss of operational control and distressed balance sheet through a build-up of excessive debt. Operating margins halved. A

Trifast, the distributor and manufacturer of fasteners, has become a 'core' holding. During the period the Chair has been replaced, a new CEO has been appointed and post period end Nick Mills, member of the Investment Management team, has been appointed a Non-Executive Director of the company. In line with all 'core' holdings, the business has the opportunity for significant operational improvements, is materially undervalued relative to our estimates of the company's future cash flow generation and now has the catalysts in place to ensure shareholder value is maximised over the next 3-5 years. Its current operating margins are depressed relative to history, however a new Enterprise Resource Planning system has been deployed which should ultimately lead to improved financial performance. The business is international, and whilst much internal work must be done under the new CEO and relatively recently appointed new CFO and COO, which will drive profitability over the medium-term, industrial end-market conditions are currently 'soft'.

Bonhill, the international B2B media business providing Business Information, Events and Data & Insight propositions to the global Financial Services community, de-listed after returning capital from asset sales via a tender offer. This investment has not met our target returns, however due to the 'margin of safety' we identified at the outset and our subsequent efforts, via taking a Non-Executive

Director position at the company, we were able to almost fully protect our invested capital through the break-up and sale of the business. We remind shareholders that Rockwood Strategic also made a profitable loan to the company during this realisation phase and we await to receive, post the period end, a final payment before the company enters voluntary insolvency.

New Investments

Four new investments were made and a number of existing holdings were increased. We highlight two at the Interim stage.

These were all classified by the manager as either "springboards" or "opportunities" and as such each individual investment did not exceed 4% of NAV at inception. We target eventually 10-25 of these style holdings as Rockwood Strategic builds, we had 13 at period end.

The former are investments which meet our investment criteria of being able to deliver 15% IRRs over a time horizon of five years (thereby doubling in value) which have the opportunity for, or are experiencing, operational, strategic and management or Board changes which should deliver, unlock or create shareholder value. Once identified, we ideally want to invest 5-15% of NAV in order to have material exposure within the strategy and also a stake in the company of similar size, ensuring an influential voice with which we can engage with the company and stakeholders.

set-piece Rockwood opportunity, we believe.

At c. £165m market capitalisation at period end, 2022 sales were £478m, Ebitda £67.5m and PBT £16.2m. The financial recovery opportunity is material with the company targeting a mean reversion back to 10% margin and 15% ROCE. The Defence business was loss-making in 2022 and Marine Services only made 3.5%, so it's clear where critical improvements are needed. Our due diligence has given us confidence the order book can grow, in particular in Defence.

We believe a high quality new Chairman, CEO and CFO have been appointed (in that order) and the highly experienced Jean Vernet (formally divisional MD at Smiths Group Plc) has already re-organised the group into 3 divisions and appointed new Heads of each (2 of which are external). Net Debt remains elevated and thus we expect further portfolio rationalisation to accelerate debt reduction alongside improved cash generation.

The shares have been valued on significantly higher multiples over the years and thus our thesis combines both improved profitability and improved valuation multiples in time.

Rockwood Strategic Plc


Investment Manager's Report (continued)


'Comebacks' in sport often raise mixed emotions, the same is true in business, one only needs to ask Disney shareholders. Restore, however, we believe has been exceptionally lucky to have been able to bring back former CEO Charles Skinner. Charles built the business very successfully between 2009 and 2019 and set the company on the path to a market leadership position in a range of office services, most importantly document storage. This division has 22.4m boxes of records under management, 975 staff, 52 sites and is UK no.2 after Iron Mountain, it makes over 30% profit margins and is 70% of total profit.

At the end of the period the market capitalisation was £240 million having risen since our purchase on both Charles's appointment and a new major HMRC contract win. In 2022 They had sales of £279m and Ebitda of £76m with PBT of £41m. Adjacencies such as shredding, scanning, digital storage, technology recycling and office relocation have all developed over the years, however following the departure of Charles, costs have increased, operational control has slipped, financial management deteriorated and a material de-rating of the company has occurred. Typically for recovery situations it takes a decent period (often up to a year) for new management to really get to grips with the business they are going to be turning around. Seasoned practitioners which populate Rockwood Strategic investments usually hit the ground running. In Charles case he will hit the ground sprinting. We look forward to the results from his leadership and the fruits from this opportunistic investment in the period.

Portfolio Updates

There has been considerable progress across the portfolio, particularly with regard to the appointment of key management and Board members to our investments, all of which we are delighted with and who we expect to make major positive impacts on the companies

in the years ahead leading to the unlocking, growth and realisation of shareholder value. The importance of these individuals should not be under-played as in many cases it de-risks our investment theses as we move past the point of having the right people in place to turnaround our target investments.

  • Mike England has been appointed CEO of Flowtech Fluidpower. Mike was previously COO of FTSE 100 constituent RS Group (previously Electrocomponents). He has already made a series of senior management changes at the business and identified a number of work-streams to improve operational performance. In the first half of the year operating margins were 5.7%. The company is now targeting "mid-teens"medium-term. We see achieving sustainable double-digit margins as a catalyst for a material re-rating alongside balance sheet improvements due to better working capital management.
  • Simon Goodwin and Christopher Humphrey have been respectively appointed CFO and NED of RM Plc. We are particularly pleased about Christopher's appointment as we initially proposed him to the Board. Christopher's deep and relevant corporate experience including in particular his time at Anite Plc will be invaluable to
    RM as they try to recover shareholder value. Since investing in this stressed, turnaround situation there has been 4 newly appointed NEDs, a CEO, a CFO, a Head of Transformation, new Heads of Digital and Real Estate and their disastrous technology project has been brought under control. We believe this represents huge progress in just one year to deliver our medium-term investment thesis, which, once debt has been reduced, should lead to considerable upside for Rockwood Strategics NAV.
  • Zyllah Byng-Thorne has been appointed Executive Chair of M&C Saatchi following the retirement of Moray McClennan. In line with peers, M&C Saatchi's traditional creative advertising division has had weak end-market conditions to contend with. This means that the overdue and identified cost-cutting, streamlining and efficiency opportunities are even more important to be delivered. Zyllah's reputation is not pedestrian and we expect swift progress over the next 18 months alongside an unemotional appraisal of various agencies and activities within the group. Progress on the removal of minority interests should also be achieved.
  • Stephen Welker has been appointed Chair of Hostmore, the owner of the TGI Fridays franchise in the UK. This household name casual dining brand has stood the test of time and has been achieving noticeably improved customer ratings in the last year. With over 80 units, the business has entered a challenging phase for the UK consumer. However, Stephen is no stranger to turnarounds having been part of the Sherbourne team that have successfully identified and led a number in the UK market. The CEO and CFO have now also been replaced, the cash-consumptive store opening programme paused and a series of initiatives to stabilise and improve profitability put in place. Free cash flow generation should ramp up allowing a reduction in elevated debt and eventually material shareholder value creation.
  • Finally, breakthrough contract wins were announced by Filtronic Plc with the European Space Agency and a leading global provider of low earth orbit satellites, in addition to prestigious grant funding with the Ministry of Defence's Technology Exploitation Programme. Filtronic has
    a been a supplier to the MOD for many years and also into telecommunications hardware markets via a key market-leading client. Its IP and technology know-how in the 'Radio frequency' sector is arguably unrivalled and as a result, when a new end-market emerges, the company
    has found itself in an enviable position. That end-market is 'Low earth orbiting' satellites, whose growth prospects appear material due to the advances in rocket technology in particular by SpaceX. Filtronic needs to scale its revenues to grow shareholder value whilst it increases its strategic value in the emerging supply chain for the satellite industry. Progress in the Space sector might just be the solution.


Rockwood Strategic Plc




We believe that the stock market continues to materially undervalue our portfolio holdings. Identified measures to build profitability should offset, and in many cases exceed, negative impacts from a challenging external environment. Robust balance sheets should protect the downside. We have material influence through our large stakes and Board representations to help ensure shareholder value remains a focus and strategies evolve appropriately. 'Engagement' activities added value in the period and we have a number of initiatives underway for the rest of the year. We continue to identify new investments to deliver on our investment objectives which will replace the realisations expected in the second half.

As discussed above, this market down cycle is already quite extended and the effect of higher interest rates is starting to impact economies. Once Central Banks are comfortable inflation is tamed, monetary policy should ease and

a marked improvement in stock-market conditions, if history is anything to go by, is likely. In the first stages of a market recovery, if history does rhyme or repeat then UK small companies should lead and those with value and recovery characteristics will perform even better. We are not overly focused on predicting the immediate market outlook though, but sticking to identifying investments where our target absolute returns can be achieved over the next 3-5 years, irrespective.

Richard Staveley

Investment Manager

21 November 2023

Rockwood Strategic Plc



The Directors are responsible for preparing the interim financial statements in accordance with applicable law and regulations.

In preparing these financial statements, the Directors confirm to the best of their knowledge that:

  • the condensed set of financial statements contained within this half interim financial report have been prepared in accordance with International Accounting Standard ("IAS") 34 'Interim Financial Reporting' in conformity with the requirement of the Companies Act 2006 and gives a true and fair view of the assets, liabilities, financial position and profit of the Company; and
  • the Interim Management Report includes a fair review of the information required by:
  1. DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
  2. DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions that could do so.

The Half Year Report has not been reviewed or audited by the Company's Auditors.

This Half Year 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.

Website publication

The Directors are responsible for ensuring that the Interim Report and Financial Statements are made available on a website. The Interim Financial statements are published on the Company's website in accordance with legislation in the United Kingdom. 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 Interim Financial Statements contained herein.

For and on behalf of the Board.

Noel Lamb

Chairman RKW

21 November 2023


Rockwood Strategic Plc


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