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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