Richard Staveley, the Citywire AAA-rated fund manager of Rockwood Strategic (RKW ) has revealed four new positions in companies whose turnarounds he believes in. 

Half-year results from the UK smaller companies investment trust, which won a Citywire award this month for best performance in its sector over three years, show the manager is moving on to new targets after his engagement at Funding Circle (FCH) helped deliver a 22.9% growth in net asset value (NAV), ahead of the 13.2% gain in the FTSE Small Cap index.

Capita (CPI), the outsourcing group that once graced the FTSE 100 before plunging from a 785p peak in 2015, had already contributed to performance, Staveley said, after announcing a ‘very positive’ £180m sale of software arm Capita One, which almost eradicated its debt.

Staveley said a ‘range of catalysts’ was improving free cashflow at the group, now trading at 17p and valued at £295m. He expected a ‘material rerating of the shares if financial targets are achieved’.

The manager added another ‘fallen angel’ in Vanquis Bank (VANQ), which emerged from the collapse of Provident Financial, and, though engulfed in complaints from borrowers orchestrated by claims management companies, had the potential to recover.

‘This has caused considerable cost to administer and distraction to the business despite a very low uphold rate,’ he said. ‘The company is engaged with the regulators to create a fairer playing ground and is suing the worst-offending claims company.’

Overall, Vanquis is ‘well capitalised and undergoing a technology improvement plan’.

The third new holding is TV and film location provider Facilities by ADF (ADF). Although hit by last year’s writers’ strike, it offers structural growth due to the demand for content from multiple streamlining services.

‘We supported a key strategic acquisition to diversify the business, drive scale and unlock revenue synergies,’ Staveley said.

‘High barriers to entry abound, supported by strong margins, which does not justify a single-digit price/earnings ratio. We expect a recovery in trading, further accretive bolt-on acquisitions and a justified rerating of the shares, which we purchased at 50p.’

In an unusual move, Staveley also bought back a stake in National World (NWOR) from a liquidating small-cap fund after selling the multimedia company two years ago at 28.9p a share, having originally invested at 10p. Since then, the company has made acquisitions and was forecast to report £100m of sales and £11m of profit for this year.

‘Due to a small company fund wind-up process, we were able to repurchase shares for 13.5p and have subsequently increased our equity stake to more than 5% of the company, which was capitalised by the market at £40m at period end,’ he said.

The forced sale of the stake alludes to the problems faced by open-ended funds challenged by three years of redemptions as investors have swung from domestic to US and global stocks.

Overall, Staveley believes the market continues to ‘materially undervalue’ the companies in the trust, which have identified ways to build profitability that should ‘offset and, in many cases, exceed negative impacts from a challenging external environment’.

The manager said he and the team at Harwood Capital would continue to help companies achieve their turnarounds.

‘We have material influence through our large stakes and have successfully proposed eight directors to the boards of our investments, helping ensure shareholder value remains a focus and strategies evolve effectively.’

Rockwood, formerly Gresham House Strategic, has grown swiftly in the past three years, with a 58% rise in NAV underpinning a total shareholder return of 90%. As the stock has rerated to trade just above NAV, steady share issuance has beefed up the company’s market value to £91m, raising its profile but still leaving it off the radar of institutional investors.