Factsheet Commentary : April 2021

As investors in our fund will know, we like to back our best ideas with conviction, so, this month, let’s explore our current top four holdings and why we are bullish on their prospects going forward. 

When we first invested in Open Orphan at 11p, we liked the fact that it was a rapidly developing Contract Research Organisation with a turnaround story spurred by ownermanager Cathal Friel, whose passion and effervescence is seriously contagious. The company has emerged as one of the world leaders in human challenge study trials for the testing of vaccines and antivirals. One contract win follows another; the latest being a £3m deal with Imperial College London, as part of a Wellcome Trust initiative to manufacture a SARS-CoV-2 challenge virus. We expect further contract wins and spin-offs in the coming months, which should lead to continued value creation for shareholders. 

Bilby is a gas central heating, electrical and building services provider and, despite lockdowns, has been delivering essential work for its largely local authority clients. In a recent trading update, it confirmed that revenues for the year to 31st March 2021 should be in the region of £60m, with EBITDA of approximately £3m. CEO David Bullen has completely transformed the company in under two years by shedding non-core loss making contracts, streamlining operations and reducing net debt to £2.7m (from £11m 15 months ago). Had it not been for him, this company could have closed down and 400 people might have lost their jobs. We expect a further re-rating as the company demonstrates its cash generation capacity and asset light model.

Shield Therapeutics is a commercial stage pharmaceuticals specialist with a focus on addressing iron deficiency. Its lead product, Feraccru/Accrufer, has been approved by the US FDA and also by other regulators covering the EU, UK and Swiss markets. We expect this treatment to be a game changer, with a US launch planned for next month and patents ensuring exclusivity until 2035. We were proud to back their recent £28m fundraising led by CEO Tim Watts, who is a safe pair of hands. As investors, we can rest assured that we have a first-class captain in command.

As something of a polymath, CEO Carlo Centonze is the driving force behind HeiQ, a leader in textile innovation. Conceived during a hike in the Swiss Alps in 2005, today the business has established 10 patent families and over 600 brand partnerships worldwide. Recent results confirmed a record performance, with sales in the year to 31st December 2020 up 80%, to $50.4m, and adjusted EBITDA up 384%, to $14m. HeiQ has also been making some sensible acquisitions, with recent examples being sustainable products specialist, RAS AG and probiotics specialist, Chrisal. This company has a long runway. 

One common theme that readers will observe in our top four holdings – and in all our holdings for that matter – is our focus on three things: management, management and management. In each case, these leaders run their businesses with a true ownership mindset and they love what they do. In our opinion, they are not principally driven by financial gain. They care for company culture and play to win, while delivering value to customers and all stakeholders.

Sterling Investments Management Ltd
Lynwood House 2-4 Crofton Road,
Orpington, England, BR6 8QE
info@sterlingim.co.uk

Write us a direct message using our