Rockwood Strategic PLC Fund Data

It is extremely frustrating to report on a negative quarter for the strategy. Frustrating because of the unrewarded considerable progress demonstrated clearly in many portfolio financial results released during Q1. Frustration further inflamed by the lack of reward for positive changes, mainly as a result of our own constructive engagement with holdings, also announced during the period. The undeniable fact is that Trump's, seemingly poorly thought through, military action against Iran has upturned our cart of juicy, ripe apples. It has had a direct and substantial negative impact on risk appetite, interest rate, inflation and earnings expectations. This is understandable as energy remains a key cost to both consumers and businesses and the resultant hike in prices a shock to the world economy which it can ill afford, if it is sustained. We have opined that falling interest rates were a key requirement for improved small company share performance. These are now on hold. At the time or writing, it seems a lottery as to what happens next or how long energy markets are disrupted. We know what we would like; an immediate end to the conflict, ideally with the Iranians committing to no future nuclear development and support for their 'proxies' causing trouble beyond their borders and a fully functioning Straits of Hormuz. The quid pro quo would be the removal of sanctions. However, that outcome is by no means securable and Trump's approach to diplomacy and negotiations unorthodox. It churns the stomach thinking of the smirks in Moscow and Beijing. Q1 Rockwood investee company updates were, on the whole, excellent. James Fisher & Sons announced margin progress and profit ahead of expectations as the Defence division recovers. Filtronic announced very positive new business momentum and a record orderbook. Eagle Eye Solutions beat H1 expectations with first wins announced from its transformational OEM relationship. Funding Circle smashed market expectations, achieving 2026 revenue forecasts in 2025 and 6x growth in PBT. Capital Ltd released materially improved financial results alongside significant investment gains from its Gold Miner equity stakes. Vanquis Banking Group returned to profitability as their turnaround gains pace. Restore's results highlighted revenue growth of 27% and a beat of its margin target of 20%. It also announced a buyback programme. RM's results boasted 33.2% operating profit growth and 19.9% sales growth in its key Assessment division. On the engagement front we were delighted to see Nick Shott and Vin Murria joining the Board of M&C Saatchi where there is significant value to unlock for shareholders. We helped finance a smart acquisition by Flowtech Fluidpower in Europe. There was a huge positive development, that has seemingly been ignored by the stock market, at Capita. During March (post Iran attack), they released results demonstrating great progress in the business, the Public Sector division growing 4.4% and operating margins up from 3.8% to 5.2%, but cautioned on the Contact Centre activities 2026 outlook. The shares were punished hard in a 'risk-off' market. 16 days later the disposal of those loss-making activities was announced, a critical strategic decision we have engaged management on. The quality businesses which now remain at Capita, we believe, are worth more than £1 billion vs the market capitalisation of £315 million at quarter end. As the dust settles this should become clearer to all. The main investment in the period was our support for the comprehensive Videndum re-financing. This was more dilutive than we anticipated, and raised far more than we felt was needed. However, as a result, the company is now on a very strong financial footing and able to turn its attentions to a full recovery of profitability. Management are targeting 15% margins on £350m of sales and, if achieved, should justify a valuation to deliver our target returns on investment (>100% over 5 years). We increased our stake in STV to 10%, M&C Saatchi to 6%, Kooth to 11% and Videndum to 6%.

It is extremely frustrating to report on a negative quarter for the strategy. Frustrating because of the unrewarded considerable progress demonstrated clearly in many portfolio financial results released during Q1. Frustration further inflamed by the lack of reward for positive changes, mainly as a result of our own constructive engagement with holdings, also announced during the period. The undeniable fact is that Trump's, seemingly poorly thought through, military action against Iran has upturned our cart of juicy, ripe apples. It has had a direct and substantial negative impact on risk appetite, interest rate, inflation and earnings expectations. This is understandable as energy remains a key cost to both consumers and businesses and the resultant hike in prices a shock to the world economy which it can ill afford, if it is sustained. We have opined that falling interest rates were a key requirement for improved small company share performance. These are now on hold. At the time or writing, it seems a lottery as to what happens next or how long energy markets are disrupted. We know what we would like; an immediate end to the conflict, ideally with the Iranians committing to no future nuclear development and support for their 'proxies' causing trouble beyond their borders and a fully functioning Straits of Hormuz. The quid pro quo would be the removal of sanctions. However, that outcome is by no means securable and Trump's approach to diplomacy and negotiations unorthodox. It churns the stomach thinking of the smirks in Moscow and Beijing. Q1 Rockwood investee company updates were, on the whole, excellent. James Fisher & Sons announced margin progress and profit ahead of expectations as the Defence division recovers. Filtronic announced very positive new business momentum and a record orderbook. Eagle Eye Solutions beat H1 expectations with first wins announced from its transformational OEM relationship. Funding Circle smashed market expectations, achieving 2026 revenue forecasts in 2025 and 6x growth in PBT. Capital Ltd released materially improved financial results alongside significant investment gains from its Gold Miner equity stakes. Vanquis Banking Group returned to profitability as their turnaround gains pace. Restore's results highlighted revenue growth of 27% and a beat of its margin target of 20%. It also announced a buyback programme. RM's results boasted 33.2% operating profit growth and 19.9% sales growth in its key Assessment division. On the engagement front we were delighted to see Nick Shott and Vin Murria joining the Board of M&C Saatchi where there is significant value to unlock for shareholders. We helped finance a smart acquisition by Flowtech Fluidpower in Europe. There was a huge positive development, that has seemingly been ignored by the stock market, at Capita. During March (post Iran attack), they released results demonstrating great progress in the business, the Public Sector division growing 4.4% and operating margins up from 3.8% to 5.2%, but cautioned on the Contact Centre activities 2026 outlook. The shares were punished hard in a 'risk-off' market. 16 days later the disposal of those loss-making activities was announced, a critical strategic decision we have engaged management on. The quality businesses which now remain at Capita, we believe, are worth more than £1 billion vs the market capitalisation of £315 million at quarter end. As the dust settles this should become clearer to all. The main investment in the period was our support for the comprehensive Videndum re-financing. This was more dilutive than we anticipated, and raised far more than we felt was needed. However, as a result, the company is now on a very strong financial footing and able to turn its attentions to a full recovery of profitability. Management are targeting 15% margins on £350m of sales and, if achieved, should justify a valuation to deliver our target returns on investment (>100% over 5 years). We increased our stake in STV to 10%, M&C Saatchi to 6%, Kooth to 11% and Videndum to 6%.