Results analysis from Kepler Trust Intelligence

Rockwood Strategic PLC

20 June 2024

 

Rockwood Strategic (RKW)

20/06/2024

Results analysis from Kepler Trust Intelligence

Rockwood Strategic has released its financial results for the year ending 31/03/2024. Over the year, the trust saw its NAV increase by 5.1% on a total return basis, compared to 7.2% for the AIC UK Smaller Companies sector. The two primary comparators, the FTSE AIM All Share Index and the FTSE Small Cap (ex-Investment Trusts) returned -8.6% and 7.1% respectively.

Performance has been driven by the concentrated portfolio. Whilst the period of the results has seen some challenges for the market, a rally in late 2023 onwards has contributed to the trust delivering positive absolute returns, which has continued post period end.

The trust finished the year at a 1.9% premium, having begun at a 7.1% discount. This has allowed the board to issue shares which, alongside the good performance, meant net assets grew to £64.3m.

The manager sold four holdings, with another delisted with all sales delivering positive total returns. There were five new additions in the year, taking the portfolio to 19 companies.

Post period end, NAV rose by 19.1% which contributed to the trust becoming one of the best long-term performers in the sector over the five years to 14/06/2024.

Chairman Noel Lamb had a positive outlook, stating "the future for this specialist strategy is positive, the outlook for the portfolio is bright and that the opportunity to meet our target returns in this generally over-looked part of the UK stock market is achievable".

Kepler View

Rockwood Strategic (RKW) has delivered admirable returns in a challenging period, in our opinion. Manager Richard Staveley has delivered positive absolute returns in a difficult year which we believe demonstrates the benefits of his highly concentrated, stock selection approach.

We believe the results don't reflect the full journey throughout the year. The market hit a nadir in October before recovering. This momentum has continued, with RKW having returned over 19% from the end of the financial year in March to mid-June 2024. This has supported the trust's long-term numbers, with RKW now the best performing UK smaller companies investment trust over five years.

There have been a number of portfolio changes, with four stocks sold in the year, generating realised IRRs of between 2% and 94% per annum. There were five new holdings from a range of industries, taking the total number of holdings to 19, consisting of 12 'springboard' and seven 'core' positions.

RKW has delivered shareholder total returns of 15.4% with the trust moving from a discount at the beginning of the period, to a premium. The board has looked to manage this by issuing shares though the issuance limit has now been reached. We understand the board will seek to extend this limit.

The share issuance and strong performance has led to asset growth to £79m. This means the NAV has now grown by c. 94% since Richard regained management, which we believe is a clear demonstration of success. This will contribute to lower charges, further reinforcing the attractions of this strategy.

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