TIDMRKW

RNS Number : 0887C

Rockwood Strategic PLC

07 October 2022

Rockwood Strategic plc

("RKW" or "the Company")

Trading Update

Rockwood Strategic plc (LSE: RKW) today provides an update on current trading ahead of publication of its unaudited results for the six months ended 30 September 2022 (the "Period").

Financial highlights

 
 --   Net Asset Value (NAV) Total Return in the Period of -10.4% to 1446.7p/share which compares 
       to the FTSE Small Cap (ex-ITs) of -20.3% and FTSE AIM All Share of -22.6%. 
 --   Total Shareholder Return in the Period was -0.35%. At Period end the Company traded at a discount 
       of 2.2% to NAV. 
 --   No. 2 ranked fund by Total Shareholder Return in the AIC UK Small Companies sector over the 
       last 6 and 12 months, achieving 0.9% positive performance whilst the FTSE Small Cap Index 
       (ex-ITs) fell 26.6% and the AIM All-share even more, down 35.2% (LTM). 
 --   NAV Total Return performance in the three years to 30 September 2022 of 44.3% which compares 
       to the FTSE Small Cap (ex-ITs) of 6%. The Total Shareholder Return in the same three year 
       period was 65%, No.1 rank in the AIC UK Small Companies sector. 
 --   Investment gains realised in the Lakes Distillery Bond delivered a 21.6% IRR and GBP3.1m cash. 
 --   Net cash of GBP2.4m at the end of the Period (representing 6.6% of NAV). We are anticipating 
       a number of H2 investee dividends alongside an announced return of capital from Smoove. 
 

Portfolio highlights

 
 --   Seven new investments were made across a range of industry sectors such as City Pub Group 
       Plc within consumer, Argentex Group Plc in FX services, Galliford Try Holdings Plc in construction, 
       RM Plc in educational services and Finsbury Food Group Plc in food manufacturing. All trade 
       at a deep discount to our assessment of intrinsic value; all have material upside to historic 
       or industry profit margins; and all are highly cash generative. We have identified catalysts 
       to unlock, create or realise shareholder value in each. 
 --   Significantly positive share price performance from Crestchic Plc (up 63.6% during the Period, 
       finishing at 28.7% of NAV) which, following our engagement in 2020-21 led to the company's 
       'transformation plan', divisional disposal and Board/management evolution. At the end of September 
       the company released another material increase to profit expectations from its record order 
       book. We maintain a positive outlook on the investment. 
 --   Across the portfolio, there were strong results announced from a range of other holdings, 
       despite the challenging macro-economic environment, including Centaur Media, MC Saatchi, Van 
       Elle and Smoove: 
        Centaur Media Plc: Sales up 8%, Ebitda up 55%, net cash GBP14.2m (Interim results) 
        M&C Saatchi Plc: Sales up 10%, PBT up 52%, net cash GBP39.7m (Interim results) 
        Van Elle Holdings Plc: Sales up 48%, Ebitda up 133%, net cash GBP5.9m (Final results) 
        Smoove Plc : Sales up 13%, net cash GBP20m (Final results) 
 --   Pressure Technologies Plc released a disappointing update at the very end of the Period and 
       we are actively engaged with management. 
 --   The Investment Manager is comfortable that overall the portfolio is well financed. In summary 
       9 holdings have a net cash position, 4 are lowly leveraged and 2 have elevated debt. 
 --   The Investment Manager has highlighted that due to the weak market conditions experienced 
       in 2022, the valuation of UK smaller companies have become very depressed. Their pipeline 
       of potential investments has grown as multiple opportunities emerge to deploy capital in the 
       period ahead. 
 

Corporate development

 
 --   Successful migration of the Company from the AIM to a premium listing on the main market of 
       the London Stock Exchange. 
 --   Appointment of Paul Dudley as Non-Executive Director 
 

Richard Staveley, Fund Manager, Harwood Capital LLP said:

"2022 is rapidly becoming a year in financial markets that few will forget, despite their best efforts. Bond and equity markets have struggled with levels of inflation not experienced for decades and the tightening monetary policy stance of the world's central banks. We see challenging market conditions and a difficult economic environment as delivering a "target rich environment" (Lt. Pete Mitchell) for our differentiated approach. We are focused on the future, making highly selective investments that will drive returns for Rockwood Strategic over our investment time horizon and find our pipeline for new potential investments building at pace. The ability of the portfolio companies to improve profitability via 'self-help' should mitigate and, in many cases, more than offset difficult end markets or cost pressures. This dynamic is being demonstrated most clearly at Crestchic. For all holdings we can identify a large 'margin of safety' in their equity undervaluation and catalysts to drive shareholder value"

The latest Investor Presentation and Q3 Factsheet are now available at www.rockwoodstrategic.co.uk.

For further information, please contact:

 
 Rockwood Strategic plc 
  Chairman                                Noel Lamb             020 7264 4444 
 
   Harwood Capital LLP 
   Investment Manager                     Christopher Hart      020 7640 3200 
                                         James Maxwell 
                                          Alex Bond 
 Singer Capital Markets Advisory LLP      James Fischer        020 7496 3000 
 

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October 07, 2022 02:00 ET (06:00 GMT)

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