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Northland Capital Partners View on the City: Rockwell Diamonds and Quercus Publishing

Northland Capital Partners View on the City: Rockwell Diamonds and Quercus Publishing



  • Revenue from operations managed by Rockwell during H114 was up 5% to US$13.2m from US$12.6m in H113.
  • Revenue for the Q214 was US$6.6m level with Q114 and slightly down (2%) on Q213.

Saxendrift Mine:

  • At the Saxendrift Mine volumes processed in H114 was 923,961m3 slightly down (0.6%) on H113 930,029m3.
  • Grade in H114 was up to 0.50cphm3 from 0.46cphm3 in H113.
  • Diamonds recovered in H114 was up 14% to 4,579cts from 4,003cts in H113.
  • Average diamond values were up 16% to US$2,414/ct in H114 from US$2,081/ct in H113.
  • Revenue from diamond sales at the mine was up 27% to US$9.9m in H114 from US$7.8m in H113.

Saxendrift Hill Mine:

  • At the Saxendrift Hill Mine that began maiden production in Q114, volumes processed were 294,396 in H114.
  • Grade for H114 was 0.37cphm3.
  • Diamonds recovered for H114 was 1,100cts.
  • Average diamond values for H114 were US$3,642/ct.
  • Revenue for H114 was US$2.5m.

Niewejaarskraal Mine:

  • At the Niewejaarskraal Mine commissioning began in July and only 48,512m3 was processed and a total of 175cts was recovered.
  • Average diamond prices were US$1,666/ct.
  • Revenue for H114 was US$0.2m.

Royalty Mines:

  • Royalty mining generated US$0.2m for Rockwell Diamonds.

  • Forecasts and price target under review.

NORTHLAND UK VIEW: The Q214 results highlight the improvement in diamond values obtained by Rockwell Diamonds during H114 with revenue up 5% year-on-year. Diamond values at both the Saxendrift and Saxendrift Hill Mine were well ahead of our expectations but details on the operational costs at the mines during Q214, expected in the interims, remain the yardstick that we look to measure H114’s success of the first half of the year by. At the Saxendrift Mine costs during Q114 were ahead of expectations due to one-off maintenance costs and we would expect to see these reduced during Q214. High operational costs at the Saxendrift Hill Mine in Q114 led the mine to operate at a loss during the quarter, however, this was during the ramp up phase where higher costs are expected and we expect to see an improvement in Q214. As the Niewejaarskraal Mine is still in the ramp up phase we do not expect the costs incurred during Q214 to be representative for the FY14, and will look to Q314 to judge the mines operational performance. The commissioning process at Niewejaarskraal did take longer than expected to ramp up and as a result planned volumes for the year are behind schedule. Increased diamond prices are a welcome development but we await news on the Q214 costs before re-examining our forecasts and price target. We maintain our BUY rating.




  • Revenue +10.9% to £10.2m with Digital revenue +46% to £3.5m (34.3% of the total: H1 FY12: 25.6%). Larsson-related sales continued to tail off and non-Larsson revenue increased 53% to £9.5m.
  • Operating profit down 7% to £0.5m following a higher level of return of UK physical titles and cash at bank of £0.3m (FY12: £1.8m). Higher cost base also reflected the 2012 investment programme. H1 bestsellers included The Lewis Trilogy (Peter May); Thursdays in the Park (Hilary Boyd) and Dark Winter (David Mark). Continued to secure prizes with the George Washington Book Prize and the CWA International Dagger.
  • Preparation for the launch of inaugural US publishing programme in H1 with the first release at the start of September. Small team of four in New York - £0.2m exceptional charge associated with the set-up.
  • UK book trade has proved challenging with the ongoing shift to e-books hitting physical orders. Quercus has set up its own sales teams and withdrawn from the Independent Alliance to get better control of sales into its distribution channels.
  • Substantial H2 programme including That Close (Suggs), The Great British Year, The Higgidy Cookbook and titles from Hilary Boyd, William Nicholson, Philip Kerr and Dorothy Koomson.
  • Outlook: Q1 was good, Q2 softened, Q3 has seen signs of improvement and the year hinges on Q4 trading. As such, management is unable to provide FY guidance at this stage. We leave our forecasts unchanged at this point but there is much to do.

NORTHLAND UK VIEW: Performance in the seasonally weaker first half was OK with growth of the non-Larsson revenue encouraging and the ongoing shift to digital. The investment ahead of the US launch, the full cost of the 2012 UK investment programme and the higher level of returns depressed profitability, however, and the cash position looks light though there is a facility in place. The publishing industry is typically Q4 weighted but with the US launch the distortion will be more extreme for Quercus this year. Management has built a considerable publishing list and the company has proven ability to pick bestsellers. The rating remains undemanding and we maintain our BUY rating and 94p price target.


1. Northland Capital Partners Limited (“Northland”) acts as Nominated Advisor and/or Broker to the company.

2. Northland) and/or its affiliates companies do beneficially own 1% or more of any class of the issuer’s equity securities, as of the end of the month immediately preceding the date of issuance of the research report or the end of the second most recent month if the issue date is less than 10 calendar days after the end of the most recent month. 

3. The authoring analyst or any associate of the authoring analyst does maintain a long or short position in any of the issuer’s securities directly or through derivatives, including options or futures positions.

4. Northland, its affiliated companies, partners, officers, directors or any authoring analyst of Northland has provided services to the issuer for remuneration during the preceding 12 months other than investment advisory or trading services.

5. Northland or any of its affiliated companies has performed investment banking services for the issuer during the 12 months preceding the date of issuance of the report.  

6. A partner, director, officer, employee or agent of Northland or any of its affiliated companies is an officer, director, employee or advisor of the issuer.  Disclosures are applicable for all companies

7. The authoring analyst, or any associate of the authoring analyst, has viewed the material operations of the issuer. 

8. The authoring analyst, or any associate of the authoring analyst, received reimbursement for travel expenses.

9. Northland makes a market in the securities of this company.




This document is provided solely to enable clients to make their own investment decisions. It may therefore not be suitable for all recipients and does not constitute a personal recommendation to invest. It does not constitute an offer or solicitation to buy or sell securities or instruments of any kind. If you have any doubts about the suitability of this service, you should seek advice from your investment adviser. This document is produced in accordance with UK laws and regulations. It is not intended for any person whose nationality or residential circumstances may render its receipt unlawful.

The past is not necessarily a guide to future performance. The value of shares and the income arising from them can fall as well as rise and investors may get back less than they originally invested. The information contained in this document has been obtained from sources which Northland Capital Partners Limited believes to be re¬li¬able. The Com¬pany does not warrant that such information is accurate or complete. All estimates and prospective figures quoted in this report are forecasts and not guaranteed. Opinions included in this report reflect the Company’s judgement at the date of publication and are subject to change without notice. If the investment(s) mentioned in this report are denominated in a currency different from the currency of the country in which the recipient is a resident, the recipient should be aware that fluctuations in exchange rates may have an adverse effect on the value of the investment(s). The listing requirements for securities listed on AIM or PLUS markets are less demanding, also trading in them may be less liquid than main markets.

Northland Capital Partners Limited and/or its officers, as¬sociated entities or clients may have a position, or other material interest, in any securities men¬tioned in this report. Northland Capital Partners Limited does not provide recommendations on securities of firms with which it has a corporate relationship. More information about our management of Conflicts of Interest, Investment Research Methodology & Definition of Recommendations can be found at 

Northland Capital Partners Limited is authorised and regulated by the Financial Conduct Authority and a Member of the London Stock Exchange.

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