BREWIN DOLPHIN : John Moore, senior investment manager at wealth manager RBC Brewin Dolphin Rising interest rates and soaring inflation may have sent the FTSE 250 index of mid-cap companies down...

John Moore, senior investment manager at wealth manager RBC Brewin Dolphin

Rising interest rates and soaring inflation may have sent the FTSE 250 index of mid-cap companies down nearly -20% during 2022, but some smaller UK companies are in a better position than others to weather a recession.

While the rising cost of debt has hit unprofitable companies hard, others used the pandemic period to hold onto cash and bolster their balance sheets for the challenges that were ahead. They find themselves in a very strong position vis-à-vis their peers, which could see them make big moves over the course of 2023.

This is particularly true of companies in sectors facing structural change - for instance, retail and leisure. But, businesses that have maintained financial discipline could prove to be the big winners in their respective industries as competitors struggle in an increasingly difficult trading environment.

Greggs - £191 million² net cash

Greggs' shares had a tumultuous 2022, nearly halving before making a partial recovery. The FTSE 250 baker recently demonstrated its resilience by reporting a rise in sales of 23% in its financial year up to December 31 compared to the same period the year before. The threats of rising energy prices, the increasing costs of ingredients, higher wages, and an uncertain retail environment which originally sent Greggs' share price into a tailspin persist, but the company has shown it can take the necessary steps to sidestep them. While a healthy cash balance will likely still be required to mitigate those issues, Greggs also has a great track record of investing in product innovation.

Kainos - £97m³ net cash

Kainos is a fast-growing global digital services and product provider headquartered in Belfast. The company is a beneficiary of businesses and public sector bodies looking for efficiency, whether that is through technology-driven improvements, outsourcing HR processing, or the need to implement change. In addition to benefitting from long-term industry tailwinds, Kainos can accelerate new business opportunities that will come from tougher economic conditions and, in particular, further push into the attractive markets of North America and Europe.

Games Workshop - £71 million⁴ net cash

Games Workshop is owner of the Warhammer fantasy figurine game and has branched out into media through video games and a recent agreement with Amazon to develop a TV series based on its games. The company has been a long-time City favourite, leading to questions over whether it could continue to deliver. However, it has managed to pleasantly surprise over and over again, and currently sits on a cash pile of around £71 million according to its last annual report.

AG Barr - £61.3 million⁵ net cash

Irn-Bru maker AG Barr has always been a cautiously managed company, supported by a strong balance sheet. Despite the challenges of the past few years, particularly two years of lockdowns, it has navigated its way through and found itself with a cash position of more than £61 million. The company has flexed its financial muscles recently with the acquisition of Boost Drinks for £20 million and taking full ownership of Moma Foods, the oat milk and porridge maker in which it already held a stake. More moves could be on the horizon as weaker peers struggle in the months ahead.

Hollywood Bowl - £56.1 million⁶ net cash

Hollywood Bowl's last set of results knocked over just about everyone in the City, delivering a +28% increase in like-for-like revenue growth and a spike in the share price during early December 2022. The company also revealed some smart moves, including the fact that it had hedged its energy costs out till the end of its financial year in 2024, investment in solar panels, and incremental price increases. Add to this a cash pile of just over £56 million and there could be some big moves ahead for Hollywood Bowl, particularly with many smaller operators in its market unlikely to be in the same position.

- ENDS -

John Moore and his fellow investment managers, at RBC Brewin Dolphin put together bespoke investment portfolios for clients based on their long-term objectives and their attitude to risk. The portfolios will have a mixture of hand-picked holdings in them including third party funds and individual stocks that are researched and recommended by RBC Brewin Dolphin's in-house research team.

Disclaimers
The value of investments can fall and you may get back less than you invested. Neither simulated nor actual past performance are reliable indicators of future performance. Performance is quoted before charges which will reduce illustrated performance. Investment values may increase or decrease as a result of currency fluctuations. Information is provided only as an example and is not a recommendation to pursue a particular strategy. We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchase or sale of such securities from time to time. For further information, please refer to our conflicts policy which is available on request or can be accessed via our website at www.brewin.co.uk. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. RBC Brewin Dolphin is a trading name of Brewin Dolphin Limited. Brewin Dolphin Limited is authorised and regulated by the Financial Conduct Authority (Financial Services Register reference number 124444).

PRESS INFORMATION
For further information, please contact:
Peter McFarlane peter.mcfarlane@framecreates.co.uk / Tel: 07412 739 093
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NOTES TO EDITORS
About RBC Brewin Dolphin
RBC Brewin Dolphin is one of the UK and Ireland's leading wealth managers and traces its origins back to 1762. With £51.7* billion in assets under management, we offer award-winning, personalised wealth management services from bespoke, discretionary investment management to retirement planning and tax-efficient investing.

Our qualified investment managers and financial planners are based in 33 offices across the UK, Jersey and Republic of Ireland. They are committed to the most exacting standards of client service, with long-term thinking and absolute focus on our clients' needs at the core.
As part of Royal Bank of Canada (RBC), we are now able to draw on the strength of a global financial institution to continue to improve the service we provide to our clients and drive further innovation across our business.

*as at 30th June 2022.

Disclaimers
The value of investments can fall and you may get back less than you invested. RBC Brewin Dolphin is a trading name of Brewin Dolphin Limited. Brewin Dolphin Limited is authorised and regulated by the Financial Conduct Authority (Financial Services Register reference number 124444).