Monthly Report June 2025

Performance

Adrigo Small & Midcap L/S Class A and Class C increase by 1.9% in June after fees. The Carnegie Small Cap Return Index Nordic rose by 2.5% over the month.

Among the fund’s larger holdings, Initiator Pharma (pharmaceuticals) contributed positively. Among the fund’s smaller and mid-sized positions, we noted strong contributions from Hansa Biopharma (pharmaceuticals) and Maven Wireless (technology). The fund’s short positions, as a group, had a negative impact on returns.

Since inception, Adrigo Small & Midcap L/S Class A, has returned 49.1% after fees. Over the same period, the benchmark interest rate STIBOR 1M returned 8.5%, and the Carnegie Small Cap Return Index Nordic (not a benchmark index) returned 105.2%.

Market Overview

Global equity markets were broadly positive in June. While the EURO STOXX 50 declined by 1.1%, the MSCI World and S&P 500 rose by 3.8% and 5.1%, respectively. Among emerging markets, Korea stood out with a strong gain of 15.1%, followed by Taiwan (+5.2%) and the Hang Seng Index (+4.1%).

In the Nordic region, the Norwegian market performed strongly with a 3.8% increase. Finland and Sweden also rose, by 1.1% and 0.3% respectively, while Denmark, weighed down by Novo Nordisk, fell by 2.8%. Small caps generally outperformed large caps during the period.

Companies and Performance Highlights

During the first quarter, we made an investment in Nobia. The share price development over the past four years has been catastrophic, and the market capitalisation has dropped from just over SEK 12 billion to the current SEK 3.3 billion - despite a rights issue that brought in approximately SEK 1.1 billion. The rights issue strengthened the balance sheet, but leverage remains high. Nobia also renegotiated its bank loans, extending their maturity.

The kitchen market has been, to say the least, challenging in recent years. For example, current volumes in the project segment, which today accounts for 25% of revenue, are approximately 40% below normal levels. We assess that the segment has bottomed out, but we do not foresee a rapid recovery. By contrast, the consumer segment, which represents just over half of the company’s revenue, started to rebound last year. With tax relief measures in Sweden and falling interest rates, we expect continued improvement in 2025. In the first quarter, organic growth in the Nordics was flat, but the operating margin improved significantly, from 1.6% to 7.5%. The company’s target is to achieve an operating margin of over 15% in the Nordics (and 10% for the group across an economic cycle).

The UK market (which accounts for just over 40% of sales) remains weak. Nobia is continuing with an extensive transformation programme aimed at reducing costs and adopting a more asset-light business model. Sales in this segment declined by 12% during the first quarter, impacted by fewer own stores and lower volumes in the project segment.

The company has undergone a period of very high investment, particularly in a new automated factory in Jönköping. Investments in the plant total SEK 3.7 billion, and production, which commenced in January, is now being gradually ramped up. Production costs in the new facility are around 30% lower than before, while quality has improved. As capacity utilisation increases, we expect significant improvements in both margins and profits. Furthermore, the new factory enables Nobia to increase production volumes.

Cash flows are expected to be strong in the coming years, driven by improved earnings and low actual tax payments. If the company achieves its 10% operating margin target, earnings based on current rolling revenue could exceed SEK 1.25 per share before tax. This would lead to a rapid reduction in net debt, which should in turn reduce the market's risk premium on the share.

This month, we would also like to highlight Ossdsign (medtech). The company published the first twelve-month readout from the Propel registry for spinal fusions. The results exceeded expectations significantly, as the patient population was highly challenging, comprising a large number of patients with multiple conditions, smokers, and overweight individuals. In our view, these results will support the company’s ambitious marketing plans, which aim for annual sales growth of over 30% through to 2028.

Finally, as always, we wish to thank our co-investors for your continued trust. Please don’t hesitate to reach out with any comments or questions.