Smaller UK shares often don’t get hit by the spotlight. However, by investing early in these enterprises, investors can potentially reap enormous rewards if they evolve into successful businesses. With that in mind, let’s explore three such companies investors may want to dig into a bit deeper.
A rising star in gene therapy?
OXB (LSE:OXB) isn’t a commonly discussed company in the world of pharmaceuticals. Yet it lists many of today’s industry titans as its customers, including AstraZeneca, Bristol Myers Squibb, Novartis and Sanofi, among others.
The business has undergone a bit of restructuring in recent years, refocusing its operation on becoming a contract development and manufacturing organisation (CDMO). And looking at its latest results, this shift in strategy’s seemingly yielding terrific results.
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Revenue in 2024 surged by 44% to £128.8m, with operations even becoming profitable in the second half of last year (on an EBITDA basis) for the first time since the post-pandemic boom in 2021. Demand for its services remains strong, with contracted client orders reaching £186m, and management expects the bottom line to reach the black later this year with 20% EBITDA margins.
Of course, this isn’t a risk-free enterprise. OXB’s highly dependent on a few key customers (Novartis, AstraZeneca, and Boehringer Ingelheim), which could compromise cash flows if one of these decides to cut ties. Similarly, operating in the biotech sector comes with its own set of regulatory threats and hurdles that can jeopardise long-term growth.
Nevertheless, with the progress made so far, OXB’s a UK share investors may want to mull.
Opportunities in electronics
Two other businesses with promising potential, in my opinion, are Filtronic (LSE:FTC) and Solid State (LSE:SOLI). Both specialise in electronic components used in a variety of applications.
Filtronic specialises in RF telecommunications, which is essential to the aerospace, defence, and space exploration industry. Solid State also has a portfolio of electronic telecommunications components that serve the defence sector. However, it also has more diversified offerings for the industrial sector through numerous industry-recognised brands such as Custom Power, Solsta, Active Silicon and Durakool, among others.
There’s some overlap between these businesses. Yet the electronics sector’s sufficiently large enough for multiple winners. And with European defence spending on the rise, both companies have enjoyed a sudden uptick in customer orders.
Of course, there are always risks to consider. Just like OXB, Filtronic’s revenue is largely dependent on SpaceX as a key customer. Meanwhile, with notable defence contracts driving its sales, Solid State’s somewhat at the mercy of political cycles as well as industrial and defence budgets.
Having said that, both firms still have promising long-term potential, which makes them worthy of further research, in my opinion.
