We have spent the past few months writing and presenting on the UK and ‘bouncebackability’.
As we have been saying for a while, we believe that the domestic UK market has become too depressed and is ready to bounce back and be a global leader this year. We are now starting to see the green shoots of this bounce-back in the UK, with the FTSE Small-Cap, +2% in May and +16.9% year to date.
We had an active month in the portfolio. We topped up our positions in TrustPilot and Beazley, and welcomed two new holdings to the portfolio.
Simulations Plus, is our first US-listed business to enter the portfolio. They develop software used in modelling and simulation of pharma/biotech trials and provide consulting services ranging from early drug discovery through preclinical and clinical trial development to regulatory submissions in support of product approval. Their most successful software re-enacts the human gastric system, meaning that a virtual version of a drug can be input and the affects seen in digital form. This increases time efficiency and reduces the cost of R&D without need for expensive human trials. Fundamentally, their software uses simulations to determine the safety and efficacy of drugs.
The second new addition to the portfolio is Kainos, the Northern Irish based IT services business. We had an impressive call with their management team and like the business’s high barriers to entry in both their government and Workday contracts, which are growing at a high rate. They are the power behind many UK government and NHS websites, including the new NHS app which will soon hold your vaccine passport. They are also an integral part of the global human resources provider, Workday. Their revenue in 2020 was +31% and have high cash generation. Overall, we believe this to be a quality business with strong growth prospects.
These new purchases were funded by sales in Clinigen and reducing positions in Brewin Dolphin and Redrow, who have both performed strongly over the year to date. Clinigen has performed well for us in the portfolio, but we felt that it was pretty well-priced and preferred the growth opportunity in Simulations Plus.