Rockwood Strategic (RKW) has published a short trading update ahead of full-year results for the 12 months to 31 March 2025, with the small-cap specialist continuing its strong run of outperformance. During the period, RKW delivered a NAV total return of 21.1% to 248.79p per share, significantly outpacing its AIM All-Share benchmark, which it says fell 8.2%, and the Small Cap (ex-ITs) Index, which it says was up just 3.4%. RKW’s share price total return was 20.8%, supported by a 2.9% average premium to NAV, closing the period at a 1.7% premium. Over three years, RKW’s NAV total return stands at 54.5%, versus a 6.6% decline for the Small Cap (ex-ITs) and a 34.6% drop for the AIM All-Share. Share price total return over three years was 78.6%. RKW’s differentiated approach to UK small caps continues to attract investor attention, leading to strong share issuance during the year.
Share issuance see share count rise by 25%
Sustained investor interest led to the issuance of 7.63m new shares, increasing the share count by 25% and boosting NAV to £96.6m – a 137% rise in three years. Net cash stood at around £1m at period-end, and the manager now has greater flexibility to consider a broader opportunity set among companies with sub-£250m market caps.
Portfolio activity and performance
The portfolio consisted of 24 holdings at year-end, with the top 10 representing 62.9% of NAV. Seven new investments were added, and four exited during the year.
Key performance drivers included:
- Funding Circle – share buybacks and cost-cutting following engagement;
- Filtronic – contract wins and strategic deal with SpaceX prompted upgrades;
- RM Group – continued turnaround under new management;
- National World – subject to a takeover approach.
New positions included Capita, Mercia Asset Management, Kooth, and Vanquis Banking, each viewed as undervalued turnaround or growth stories with capable new leadership.
Richard Staveley, manager at Harwood Capital, noted: “With markets undervaluing many of our holdings, we believe either the market will catch up or corporate activity will unlock value. Post-period market weakness offers a compelling opportunity for long-term investors.”
[QD comment MR: Rockwood Strategic has delivered another impressive year of outperformance, not just against a weak AIM backdrop, but also versus the broader small cap index. Its three-year performance numbers illustrate the effectiveness of its turnaround-focused strategy and it is not surprising that it is attracting investor interest and growing strongly, although this is no small achievement in a space that has been and continues to be strongly out of favour.
With continued corporate engagement, rising takeover interest, and a well-timed deployment of capital into market weakness, RKW looks to be in a strong position for the next leg of its journey. However, we would remind readers that funds such as this (those focused on particularly small holdings that operate with highly concentrated portfolios) can have quite lumpy returns and there is a strong case for having a spread of holdings.]
