Rockwood Strategic (RKW) has reported another impressive set of results for the year to 31 March 2025, delivering a NAV total return of 21.0%, materially outperforming both the AIM All-Share (down 8.2%) and the FTSE Small Cap ex-IT index (up 3.4%). The company’s share price total return for the period was 20.8%, as shares continued to trade at a premium to NAV – averaging 2.9% – which has allowed RKW to continue to issue shares and grow.
Over a three-year period, the trust has now delivered a NAV total return of 54.5%, which it says compares with a decline of 6.6% in the FTSE Small Cap ex-ITs and a 34.6% fall in the AIM All-Share. RKW’s share price total return over the same period stands weighs in at 78.6%.
Scaling up and gaining recognition
In response to strong investor demand, the company issued 7.6m new shares during the year, expanding its NAV from £64.3m to £96.6m – a rise of 135.6% over three years. Since the year end, a further 3.8m shares have been issued, taking NAV to £116.7m as of 13 June 2025. This growth saw RKW added to the FTSE All-Share and FTSE Small Cap indices post period-end, which will help lift its profile further.
Active value strategy continues to deliver
RKW’s focused, high-conviction approach continues to centre on deeply undervalued UK small caps with visible catalysts. The manager sees ongoing opportunity amid pricing inefficiencies caused by professional investor outflows and market disinterest in smaller UK names.
Seven new holdings were added to the portfolio over the year, and the top ten holdings – accounting for 63.1% of NAV – saw significant turnover. The top performers included Filtronic and Funding Circle, with the fund also realising a 73.2% IRR from its investment in National World following a successful takeover bid.
Portfolio maturity driving confidence
RKW’s investment process follows a structured framework, progressing holdings through stabilisation, delivery, and realisation phases. Management notes that most of the portfolio is now in the latter two stages, increasing confidence in future NAV growth. The manager continues to target a 15% IRR and sees ongoing opportunities for public-to-private deals or strategic acquisitions in the current environment. Post year-end, NAV total return rose another 10% (to 13 June), bringing the YTD figure to 5.8%.
The board reaffirmed its intention to retain capital for reinvestment while the trust is still growing, and no dividend was declared given portfolio income did not exceed expenses.
[QD comment MR: These results show Rockwood Strategic continuing to deliver on its strategy of compounding value through high-conviction investing in overlooked UK small caps. Given the challenging backdrop for the UK market, its performance is compelling and its growing scale, index inclusion, and regular new issuance are all helpful to shareholders.
The portfolio’s maturity gives weight to the manager’s confidence in future returns, and with the trust still trading at a premium, investor and the potential for further growth in support remains strong. However, while there is likely a decent amount of headroom for now, RKW’s success does raise a broader question of how large can this strategy get while staying nimble and delivering the same level of outperformance?]
