Monthly report February 2025

Performance

Adrigo Small & Midcap L/S Class A and Class C declined by 0.05% in February after fees. The Carnegie Small Cap Return Index Nordic fell by 1.5% over the month, while STIBOR 1M returned 0.19%.

Among the fund’s larger holdings, Braincool (medical technology), Ossdsign (medical technology) and Pierce Group (e-commerce). made strong positive contributions. Among the smaller and mid-sized positions, SKF (machinery) and Wärtsilä (machinery) delivered good gains. However, the fund’s short positions had a negative impact on returns as a group.

Since inception, Adrigo Small & Midcap L/S Class A has delivered a net return of 78.9%. Over the same period, the benchmark STIBOR 1M has returned 7.7%, while the Carnegie Small Cap Return Index Nordic has gained 104.0%. The fund’s average annual return since launch stands at 8.2%.

Market Overview

Global equity markets had a mixed performance in February. Europe continued its strong momentum, with the EURO STOXX 50 rising by 3.5%. Meanwhile, the MSCI World declined by 0.9%, and the S&P 500 ended the month down 1.3%.

Among emerging markets, the Hang Seng Index surged with 13.4%, while China’s broader market gained 11.6%. In the Nordic region, Denmark’s stock market led with a 5.2% rise, followed by Finland, which a 3.2% increase. Sweden’s market posted a modest gain of 1.0%, while Norway saw a decline of 1.7%.

Companies and Performance Highlights

Several of our portfolio companies reported earnings during the month. The market responded most positively to reports from Ossdsign, Pierce Group, Braincool, and Bonesupport. However, reports from Maven Wireless and Paxman were perceived negatively, leading to sharp declines in their share prices.

Ossdsign, in which we made our initial investment in November 2022, continued to demonstrate very strong growth. Adjusted for a large one-off order in 2023, sales increased by 84% year-on-year and 16% quarter-on-quarter. Cash flow also improved, and by year-end, the company, with a market capitalisation of SEK 1.3 billion, had a net cash position of SEK 101 million. Ossdsign is also strengthening its clinical documentation, a crucial factor for future growth. Additionally, the company has begun expanding its product range, a development we expect to be reflected in sales by 2027.

Pierce Group has been in our portfolio for some time, with our first investment made in August 2022. At that time, we saw a company in need of transformation but with limited financial risk, as it had conducted a significant capital raise during the summer of 2022. However, the transformation journey has been both longer and more extensive than we initially anticipated. Today, we see clear signs that most of the restructuring is now complete. Pierce’s sales grew by 19% in Q4. Having experienced a declining customer base in recent years, the company took a more aggressive marketing approach and prioritised maximising gross profit. As a result, the share of own brands fell slightly to 39%, leading to a 1.5 percentage point drop in the gross margin to 43.2%. Looking ahead to the 2025 season, Pierce has strengthened and refreshed its own-brand product range, which we believe will positively impact both sales and margins.

We would also like to highlight Online Brands, which ended the year on a very strong note. Organic sales grew by 24.3%, and the adjusted EBITA margin increased from 9.3% to 12.8%. For the full year, the company reported sales growth of 16.4% and an adjusted EBITA margin of 9.5%. Trendcarpet, the group’s largest subsidiary, grew by 45% during the quarter, while other brands also posted strong results. For instance, Kitchen Labs recorded a 30% increase in sales and moved from a loss to a profit. The company’s own e-commerce sales rose by 42%. Currently, the stock is trading at an EV/EBITDA multiple of 9.6x (with depreciation primarily consisting of goodwill amortisation). With continued strong sales growth and improving margins, we see significant potential in this stock, which remains largely overlooked by the market.

As always, we would like to thank our co-investors for your trust. We are fully aware of the fund’s weak performance in the second half of 2024 but remain highly confident in our current portfolio. Please do not hesitate to reach out with any comments or questions.