Monthly report April 2025

Performance

Adrigo Small & Midcap L/S Class A and Class C declined by 1.8% in April after fees. The Carnegie Small Cap Return Index Nordic fell by 1.6% over the month, while STIBOR 1M returned 0.19%.

Among the fund’s larger holdings, Ossdsign (medical technology) and Pierce Group (e-commerce) contributed positively. Within the fund’s smaller and mid-sized positions, we saw strong contributions from SKF (industrial) and Rugvista (e-commerce). The fund’s short positions, as a group, had a positive impact on performance.

Since inception, Adrigo Small & Midcap L/S Class A has returned 62.8% after fees. Over the same period, the benchmark interest rate STIBOR 1M has returned 8.1%, while the Carnegie Small Cap Return Index Nordic (not benchmark) has returned 94.3%. The fund’s average annual return since inception is 6.7%.

Market Overview

Global equity markets were volatile in April. The EURO STOXX 50 declined by 1.1%, while the MSCI World and S&P 500 fell by 0.3% and 0.7%, respectively. The second half of the month saw a remarkable rebound — for example, the S&P 500 rose by nearly twelve percent from its low on 8 April. Among emerging markets, both Brazil and India gained 3.7%, while China dropped by 4.6%. In the Nordics, the Danish market once again underperformed with a decline of 3.3%. Sweden fell by 0.8%, and Norway was down 1.9%. In contrast, the Finnish market was strong, gaining 1.8%.

Companies and Performance Highlights

The performance of small-cap companies, like that of larger firms, was highly volatile during the month. Sharp declines in the first two weeks were countered with a strong finish. As is often the case during times of uncertainty and market anxiety, the smaller small-caps were the most negatively affected.

Enea (software) was the largest negative contributor to performance during the period. The Q1 report included both positive and negative elements, but the market focused primarily on the downside. Most notably, the company reported flat growth in its Security segment, which accounts for 42% of total revenue. Results were also affected by unrealised foreign exchange movements. The Networks segment, representing 49% of revenue, performed strongly with 12% organic growth. The impact of the major Stratum Data Layer agreement (including support worth USD 21.7 million) began to materialise during the quarter, although growth was also driven by other parts of the business. Although recurring revenues now account for 68% of Enea’s sales, individual quarterly results can be volatile, depending on the timing of booked deals. Given Enea’s margins and growth prospects, we find the market’s low valuation difficult to justify. Enea’s products are complex and can be difficult to understand – making communication an area where the company needs to improve. If the new CEO, Teemu Salmi, succeeds in articulating Enea’s business in a clear and accessible way, we see significant upside potential in the stock. Today’s valuation, with a 14% free cash flow yield and an EV/EBIT multiple of 9x, reflects very modest market expectations.

Ossdsign continued to deliver strong sales growth in the first quarter, with a 60% year-over-year organic increase. The results also highlighted the scalability of the business model, as the company reported its highest adjusted EBIT in history. During the period, Ossdsign published 24-month follow-up data from the TOP FUSION study, showing successful spinal fusion in all patients – a significant milestone for the company. It was also announced that CEO Morten Henneveld will step down at the end of the year. With 100% of sales generated in the US and substantial market potential still ahead, we see the need for an even stronger local presence and expect the next CEO to be US-based.

The BHG Group share dropped sharply on the day of the earnings release. While the stock had performed well in the lead-up to the report, we were still surprised by the market's reaction. Having trimmed our position over the past period, we took the opportunity to add when the share price came under pressure. Sales growth accelerated, driven by strong performance in Sweden and, somewhat unexpectedly, in Germany and Norway. Overall, organic sales growth reached a solid 8.2%, while the operating margin improved significantly, from -1.2% to 2.3%. We believe BHG is approaching its medium-term margin target of 5%, with a good chance of reaching it by year-end.

Finally, we would like to thank our co-investors, as always, for your trust. Please don’t hesitate to get in touch with any questions or comments.