Rockwood Strategic chair Noel Lamb said there is a “positive energy” around the investment trust as it enters a “phase of rejuvenation”, following its first set of half year results since it restarted actively investing under Harwood Capital.
The trust endured a turbulent 12 months after it removed previous investment manager Gresham House in October 2021. It was then put into wind down in December, before returning to an active investment strategy in April 2022.
During the six months to 30 September, the trust also migrated from an AIM to a premium listing on the main section of the London Stock Exchange.
In what was a dismal period for FTSE small cap companies, Rockwood Strategic posted a -10.4% total return on its net asset value for the six months to 30 September. This compared favourably to the FTSE Small Cap index (excluding investment trusts) which was down 20.3%.
Lamb said: “Remaining entirely immune to the tumultuous conditions in markets is an impossible task for an active small companies investment strategy. The board is therefore pleased that the portfolio is demonstrating relative resilience when compared to peers and small company indices. We are reassured the multi-cycle experience of the investment manager is clearly supporting a proactive approach to identify opportunities to deliver future NAV growth.”
He added that despite the market challenges the period was one of “significant progress and change for the company”. During the half year, the trust was renamed to Rockwood Strategic from Rockwood Realisation, while a number of service providers were transitioned to lower cost solutions.
Total shareholder return for the period was -0.35%, with the trust trading at a 2.2% NAV discount at the end of September.
It also reported net cash of £2.4m, representing 6.6% of NAV.
Ranked by total shareholder return, the fund was the second best performer in the AIC Small Companies Sector over the last year, posting 0.9% against the AIC index which was down 35.2%.
Richard Staveley (pictured), Harwood Capital fund manager, commented: “We are excited about the upside potential in the portfolio, a lot of which, in our view, could be realised through corporate activity in due course as trade buyers and private equity appraise the significant undervaluation and profit potential of our holdings. Our ‘value’ bias is serving shareholders well, providing a ‘margin of safety’ and we are re-building the portfolio with outstanding investment opportunities to drive NAV over the medium term.
“There is no doubt the economic environment will remain challenging, but we observe highly depressed valuations, deeply pessimistic assumptions and even greater inefficiency in our broadly ignored target universe. We are comfortable our investments in the overall portfolio remain well financed. This is an attractive backdrop for investors with capital, patience and value discipline. We have all three and are clearly aligned with shareholders.”