rdcp_2022_annual_letter.pdf1568.4KB
- Triple digit IRR maintained but average IRR slowly starting to drop
- Specific catalyst of bull cycle bubble to burst being the Russian invasion of Ukraine
- Just three years in the last hundred, 1931, 1969 and now 2022, have posted negative returns in both fixed income and equity markets
- Banks lending for RDCP is essentially a blue-chip institution with more capital at stake that DDs the companies RDCP buys, helps to reduce risk
- As of December 2022, we have successfully made 39 investments, consolidated into 8 companies, with a 0% loss ratio
- Strong businesses acquired; the standout for me was “Deep End Pools”, unique construction angle in swimming pools
- We exited Chilango … Chilango is a Mexican restaurant chain and brand with 12 sites. We acquired the business in August 2020 and exited in May 2022, selling to a listed competitor called Tortilla, delivering a 3x return in under two years, equating to a 75% IRR for RDCP
- Exited because of capital requirements over next 5Y would be £25m, but ROIC would be next to nothing / negative… hard to turn profits in restaurant biz
- Uncontrolled levels of inflation were/are hugely impacting raw material costs, specifically protein costs, and energy costs, meant the Chilango investment was quickly becoming a “falling knife” that we had no intention of wanting to catch
- The RDCP portfolio today comprises 8 portfolio companies across 7 sectors, generating a combined £250m in run-rate revenue and £33m in run-rate EBITDA
- “It is evident that cryptocurrencies for institutional investing purposes always was and continues to be a joke of grand proportions”
- According to FT, Mikkel Svenstrup, chief investment officer at ATP, said he was concerned because last year more than 80 per cent of the sales of portfolio companies by the private equity funds that ATP has invested in were either to another buyout group or were “continuation fund” deals, where a private equity group passes it between two different funds that it controls
- I believe that becoming a $10bn business in the UK is feasible. However, then trying to grow to $100bn still exclusively focused on the UK will be incredibly challenging
Reasons behind Success
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