AJ Bell Shares magazine 27 February 2025

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German election result promises continuity as the centre holds

Buffett keeps his powder dry as Berkshire Hathaway’s cash pile tops record $134 billion

No easy way back for embattled B&M

Centrica shares hit fresh 12-month high despite normalised trading

Glencore slips to multi-year lows on weak coal price as it mulls London exit

Rentokil has a long way to go to catch up with US peer

12 Why Brown-Forman investors are in need of a stiff drink

Nexus Infrastructure for its big recovery potential

Industry M&A highlights the potential on offer at Intertek

18 Plans for a state-backed rival continue to rattle Trainline investors and analysts

Why I am also saying no to KKR’s £1.6 billion bid for Assura

Three important things in this week’s magazine

The first ‘Spot The Dog’ report of 2025 makes grim reading for a number of

Find

Why building your second million-pound ISA is easier than you might have thought Through the magic of compounding, building your ISA pot to £2 million takes less time and money than making your first million.

Visit our website for more articles

Did you know that we publish daily news stories on our website as bonus content? These articles do not appear in the magazine so make sure you keep abreast of market activities by visiting our website on a regular basis.

Over the past week we’ve written a variety of news stories online that do not appear in this magazine, including:

Why management change matters and the importance of compounding

The surprise exit of Unilever and Entain CEOs has put the market on edge

Always quoteworthy, Warren Buffett once said: ‘I try to invest in businesses that are so wonderful that an idiot can run them.

Because sooner or later, one will.’

While the maxim has merit, management does make a difference and management changes can have a major impact – for good or bad – on even the best businesses.

The surprise departure of Unilever (ULVR) chief executive Hein Schumacher on 25 February after a little more than 18 months in charge certainly shook market confidence in the consumer goods giant.

Which is not to say his successor, Fernando Fernandez, who is stepping up from his role as finance director, won’t do a good job, but it injects a dose of uncertainty into the company’s future strategy, particularly given Schumacher’s departure was completely out of the blue and with immediate effect.

Wholesale changes seem unlikely: the spin-off of the ice cream unit is well advanced, but Fernandez may have his own views on how to proceed, and as an internal candidate he probably has less leeway to follow the regular playbook of taking a kitchen sink to the numbers and attempting to reset expectations.

The recent departure of chief executive Gavin Isaacs after just five months in charge prompted an even more dramatic fall in the share price of Ladbrokes-owner Entain (ENT).

The subsequent departure of other key executives, as clouds loom over the company thanks to legal action against it by Australia’s financial intelligence agency, has only added to the sense of unease.

A change at the top is often the first step in a company’s recovery, but an incumbent boss can also respond to external pressure, which may come in the form of a downturn in trading caused by the waxing and waning of the economy, some significant external event or the arrival on the share register of an activist investor.

The role of activists is often to shake management teams out of their complacency. For example, Deepak Nath, the boss of medical devices group Smith & Nephew (SN.), was up against it heading into 2025.

Swedish activist Cevian Capital was in the wings calling for change to address several years of share price and financial underperformance, but a strong set of 2024 results (25 February) accompanied by a robust outlook for the current year could convince investors to stick with Nath’s recovery plan for now.

Two articles in this week’s magazine explore the power of compounding –one in a very specific example at Assura (AGR) and the other looking at the wider benefits within an ISA.

In our view, investors cannot be reminded enough of the benefits of something Albert Einstein once described as the ‘eighth wonder of the world’ such is the impact it can have on your overall returns.

Where Infrastructure Meets AI Innovation

German election result promises continuity as the centre holds

Merz says his top priority is to make Europe ‘independent’ of the US

The outcome of last weekend’s German elections wasn’t just a matter for Germans – as the largest economy in Europe, and the third-largest in the world, the result will ‘set the tone for the whole continent from security and defence to technology policy to relations with China,’ as Bloomberg’s Alan Crawford put it.

In the event, the centrist CDU/CSU gathered enough votes to form a slim parliamentary majority in coalition with the much-weakened socialdemocrat SPD, meaning the country will be run by same parties which have dominated politics more or less for the last 25 years, albeit with a slight twist.

Although the far-right AfD doubled its vote from the 2021 elections, it fell short of expectations, as did the far-left parties, some of whom failed to meet the 5% threshold needed to take a seat in parliament, suggesting voters weren’t looking for radical change but more of a return to the past.

The CDU’s Friedrich Merz, who will take over from the SPD’s Olaf Scholz as chancellor, undoubtedly has a difficult job ahead of him, not just in terms of the struggling economy but in terms of Germany’s relationship with the US.

President Donald Trump has repeatedly criticised Europe for its trade surplus with the US, including imports of German cars, and recent developments mean the calculus in terms of European security has shifted too.

As the biggest NATO spender after the US in dollar terms, Germany’s approach will determine how Europe deals with any potential Russian threat.

Merz is already on the front foot, though, saying within hours of the polls closing he would have a coalition government in place by Easter – which is later than usual this year – and his priority is to achieve European ‘independence’ from the US.

The news sent shares in Germany and the rest of Europe higher, as well as lifting the euro which has been on a small run against the dollar since the start of the year.

German election news

The CDU leader also promised economic reforms to revitalise growth, and analysts have predicted a significant increase in government spending, but given AfD and Die Linke (The Left) will control almost 30% of the seats in the new Bundestag –enough to form a blocking minority – there is little chance of Merz being able to engineer changes to the ‘debt brake’ which limits government spending. Berenberg economist Holger Schmieding observed: ‘Merz could be a chancellor with little fiscal space.’ [IC]

Buffett keeps his powder dry as Berkshire Hathaway’s cash pile tops record $134 billion

Legendary investor cites lack of opportunities to deploy cash in quoted or unquoted stocks

US investment giant Berkshire Hathaway (BRK-B:NYSE) continued to raise cash from its marketable equites portfolio in the final quarter of 2024, pushing its cash hoard to a record $334 billion by yearend and making it a net seller of equities for nine consecutive quarters.

Overall, Berkshire sold $134 billion worth of shares in 2024, mainly through reducing its stakes in Apple (AAPL:NASDAQ) and Bank of America (BAC:NYSE).

The value of Berkshire’s partial-ownership holdings has consequently reduced to $272 billion yet in his eagerly-anticipated annual letter to shareholders on Saturday (22 Feb) 94-yearold Buffett insisted he had not lost his enthusiasm for holding stocks.

‘Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities. That preference will not change,’ said Buffett.

‘Berkshire will never prefer ownership of cashequivalent assets over the ownership of good businesses, whether controlled or only partially owned,’ emphasised Buffett.

All that was offered by way of explanation for the cash pile was that ‘often, nothing looks compelling; very infrequently, we find ourselves knee-deep in opportunities.’

It was also noteworthy that Berkshire again halted share buybacks in the final quarter, suggesting Buffett doesn’t believe the stock is undervalued, and there was no hint the firm would pay a dividend.

The shares have gained 25% and 16% respectively in the last two years and are already up by

a tenth so far in 2025, taking Berkshire’s market capitalisation to slightly north of a trillion dollars, yet despite this strong run gains have undershot the S&P 500’s two-year total return of almost 58%.

Outside of the quoted equities portfolio, Berkshire owns 189 businesses operating across a diverse range of industries. Just over half of these companies reported an annual decline in earnings in 2024.

What really drives earnings at Berkshire is its collection of insurance operations, which delivered a 66% increase in operating earnings to $9 billion driven by improvements at car insurer Geico and strong pricing in property and casualty.

Over the last 20 years, the insurance business has generated $32 billion of after-tax profit from underwriting and the float has grown from $46 billion to $171 billion.

Float is the money Berkshire receives in annual premiums that does not need to be paid out immediately. One interesting recent development highlighted by Buffett is that auto insurers have generally abandoned one-year policies and switched to six-month policies, reducing float.

Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned”

Berkshire’s railroad and utility operations are its next largest businesses and in aggregate these increased operating earnings by 18% to $8.76 billion. Group operating earnings for 2024 were up 27% to $47.44 billion. [MG]

No easy way back for embattled B&M

CEO Russo exits after latest warning sends discounter’s share price to five-year low

Struggling discounter B&M European Value Retail’s (BME) stock plunged to a five-year low after the variety retailer delivered its latest profit downgrade (24 February) and announced chief executive Alex Russo would step down at the end of April.

Profit warnings almost always put a dent in a company’s stock price, but the sheer magnitude of B&M’s value destruction over the past year and a bit is alarming and signals investors are braced for more bad news.

The cut-price groceries-to-general merchandise seller carries a significant debt load, so could an ordinary dividend cut be on the way?

Panmure Liberum believes debt levels ‘remain fine’ at one times EBITDA (earnings before interest, tax, depreciation and amortisation) and does not see a risk of a cut despite recent negative trading.

That said, the broker concedes the departure of the chief executive and long-standing trading director Bobby Arora, who has masterminded B&M’s stock buying, in the same year ‘may be a concern for some’.

Russo, who succeeded Bobby’s brother Simon Arora in the second half of 2022, was meant to steer the discounter to greater things, but the market has lost faith in his leadership amid a puzzling slowdown in growth.

Consumers are feeling the pinch from inflation and higher interest rates, which should play to

B&M’s strengths, but like-for-like sales have been negative for three consecutive quarters, a trend which is clearly worrying the market.

Full year 2025 adjusted EBITDA is now expected to be in the £605 million to £625 million range, warned B&M.

That’s down from the £620 million to £650 million guidance given with its Christmas update on 9 January and the £620 million to £660 million range provided at the half-year results on 14 November.

The variety retailer blamed the latest downgrade on weak current trading, an ‘uncertain economic outlook’ and the potential impact of currency volatility on the valuation of its stock and creditor balances.

However, Shore Capital scribe David Hughes believes like-for-like declines are ‘at the core’ of the FTSE 250 retailer’s challenges.

The dispiriting news is that ‘with the grocery market remaining highly price-competitive (see the recent re-launch of Asda’s rollback scheme and Tesco and Sainsbury’s successful loyalty price schemes) we expect it to remain challenging for B&M to maintain its price differential while returning to like-for-like growth,’ warns Hughes.

Analysts at Jefferies suggest B&M’s disappointing update ‘must infer the improved December/ January like-for-like trend that was repeatedly highlighted last month has not been sustained’.

‘The change in CEO is of limited surprise,’ they add, given the group’s ‘consistent over-promising on profit delivery and a like-for-like trend which was both weak and unexplained.’ [JC]

Centrica shares hit fresh 12-month high despite normalised trading

Shares in Centrica (CNA) hit a new 12-month of 151p (24 February) not long after the British Gas owner announced better-than-expected results and a £500 million share buyback.

Although the FTSE 100 company’s EBITDA (earnings before interest taxation depreciation amortisation) for the full year ending 31 December 2024 were lower than 2023, a bumper year for the company, shareholders were rewarded with a 13% increase in the full-year dividend to 4.5p per

share as a sign of confidence in the business.

Centrica said its latest set of figures reflected ‘a more normalised backdrop’ with energy prices having come down from their highs at the start of the RussiaUkraine war in 2022. The company also announced the completion of the triennial review of its UK defined benefit pension schemes ahead of its 30 June deadline, and continued investment in the Irish power market.

Glencore slips to multi-year lows on weak coal price as it mulls London exit

FTSE 100 commodity trader and mining outfit Glencore (GLEN) is languishing close to multi-year lows in the wake of its latest disappointing results (19 February).

Management’s frustration at the company’s current valuation – which stands at 11.7 times 2025 consensus

forecast EPS (earnings per share) –led it to speculate in the wake of the numbers that it might seek to shift its primary listing away from London to New York.

Whether this would resolve all its problems is open to question: having controversially opted to retain its thermal coal operations last year, weak prices in this space have helped put earnings under pressure.

As Jefferies analyst Chris LaFemina notes: ‘Glencore’s exposure to thermal coal is a key point of differentiation, and that exposure has been a problem recently.’

LaFemina adds: ‘Moving its primary listing to the US could help Glencore

The outlook for 2025 EBITDA remains unchanged consistent with its December trading statement, leading analysts to suggest a further buyback of up to £200 million in 2026.

Analysts at US investment bank Citi were upbeat about the stock, saying the FTSE 100 company showed balance sheet efficiency, earnings visibility and stability alongside clarity and growth. [SG]

as this could open the company up to a new broader shareholder base and improve the liquidity in its shares.

‘Management and the board are considering this, but we believe this process would take 12 to 18 months to complete due to accounting and legal factors meaning the benefits of moving to the US would take time to be realised.’ [TS]

UK UPDATES

OVER T HE NEXT 7 DAYS

FULL-YEAR RESULTS

28 Feb: Rightmove, Spectris, Tritax Big Box Reit, Primary Health Properties, St James’s Place, IMI, Pearson, Morgan Advanced Materials, International Consolidated Airlines

3 March: Quartix Technologies, Senior, Bunzl

4 March: International Workplace Group, Oxford Nanopore Technologies, Greggs, Flutter Entertainment, Keller, Spirent Communications, TT Electronics, Fresnillo, Abrdn, Inchcape, Weir, Bakkavor, Beazley, Reach, Intertek, Johnson Service Group

5 March: Breedon, Dowlais, Foxtons, Ibstock

6 March: Vesuvius, Hunting, Endeavour Mining, Reckitt Benckiser, Schroder Oriental Income, Funding Circle Holdings, Melrose Industries, Vistry, Entain, Grafton, Coats, Dalata Hotel Group, Harbour Energy, Admiral, Greencoat Renewables, ITV, Elementis, Spire Healthcare, Rentokil

Initial

FIRST-HALF RESULTS

5 March: Netcall, Ricardo TRADING ANNOUNCEMENTS

28 Feb: Revolution Beauty Group

3 March: Ashtead

Rentokil has a long way to go to catch up with US peer Rollins

Long-suffering shareholders in pest control and hygiene business Rentokil Initial (RTO) will be hoping the firm has good news when it reports its full-year results on 6 March.

Over the past year, the shares have drifted sideways, in contrast to those of US peer Rollins (ROL:NYSE) which have chalked up a 24% gain.

The gulf between the two is even wider over five years, with Rentokil shares having lost 20% while Rollins has gained more than 90% and now boasts a market cap 50% bigger than its UK rival.

Rentokil delivered revenue growth of 3.6% in the third quarter, although that dropped to 2.6% on an organic basis and in US pest control like-forlike sales were just 1.4% higher than the previous year.

The firm said the integration of US business Terminix ‘continues to go well’, but synergy deliveries would be delayed while it carried out a review to assess the effectiveness of its new pay plans and satellite branch strategy.

Analysts at US broker Jefferies, who recently hosted a round table on the US pest control market, described fourth-quarter activity for the industry as ‘certainly above the seasonal average’ for what is usually a quieter period, with October and November

seeing ‘particularly strong’ trading. For 2025, price increases are expected to ‘moderate’ following two years of high single-digit to low double-digit inflation being passed on to customers, but labour costs and finding and retaining staff remains an issue for all the players. Wage inflation per se was not seen as an issue, but combined with employee churn, the cost of training and the cost of insurance, maintaining operating margins was seen as ‘a challenge’ for the industry this year. [IC]

Why Brown-Forman investors are in need of a stiff drink

The spirits brand builder behind Jack Daniels has encountered a cocktail of headwinds

A sluggish US spirits market, Gen Z cutting back on drinking and concerns over the impact of weightloss drugs on alcohol consumption have left shares in Jack Daniel’s distiller Brown-Forman (BF.B:NYSE) down 45% over one year.

Throw tariff worries and the US surgeon-general’s Vivek Murthy’s call (3 January) for more prominent cancer warning labels on alcoholic drinks into the mix, and it’s no wonder sentiment towards this dividend aristocrat, which has increased its payout for more than four decades, is depressed.

Brown-Forman previously forecast a return to organic sales and profit growth for the year to April 2025 with performance to accelerate through the second half of the year.

Therefore, investors will be looking for signs of organic growth improvement when the Louisvillebased group serves up third quarter

US UPDATES OVER THE NEXT 7 DAYS

QUARTERLY RESULTS

4 March: Crowdstrike Holdings, AutoZone, Ross Stores, Best Buy

5 March: Marvell, Zscaler, Brown Forman, Campbell Soup

6 March: Broadcom, Costco, Kroger, Hewlett Packard, Cooper

earnings (5 March), with Wall Street calling for earnings of 55 cents on revenue of $1.09 billion.

On 14 January, the $15.2 billion cap, whose other brands include Woodford Reserve, Diplomatico Rum and Fords Gin, announced a series of strategic initiatives to position the company for growth. These included restructuring the executive leadership team, a significant reduction in its global workforce and the closure of its Louisville-based barrel-making operation.

This followed mixed second-quarter results (5 December 2024) which revealed a 1% net sales decrease to $1.1 billion, although organic sales edged up 3% and BrownForman reiterated full-year 2025 guidance for organic sales growth in the 2% to 4% range. [JC]

Can multinationals navigate trade turmoil?

Investors are asking about the impact of trade barriers. Under the rising threat of tariffs, aren’t multinational companies the most vulnerable of all?

Jody Jonsson, portfolio manager in Capital Group UK – New Perspective Fund, believes the opposite is true. Multinationals are in many ways best positioned to navigate uncertainty by developing effective solutions to disruptions.

MULTINATIONALS CAN ADAPT TO TRADE TENSIONS

There have been many twists and turns since the US-China trade war began several years ago, including onerous tariffs and other trade restrictions.

In that time, however, multinational companies have continued doing what they do best: finding ways to adapt regardless of headwinds. Some companies in the semiconductor industry, like TSMC and ASML, are expanding operations in different regions and streamlining supply chains.

EXPERIENCED MANAGEMENT TEAMS CAN HANDLE CHALLENGES

Multinational companies have risen to the global stage because, for the most part, they are run by managers who are smart, tough and experienced.

For example, pharmaceutical giant Novo Nordisk faced supply issues due to the overwhelming success of its diabetes and weight loss treatments. Its management team acted quickly to identify issues and manage resources, which shows a skill set that applies whether challenges arise from a company’s own success or external forces like regulatory change or geopolitical tension.

RESHORING SUPPLY CHAINS IS LIKELY TO BENEFIT SOME COMPANIES

Many global companies are moving away from singlesource supply chains, prioritising reliability and robustness over cost and efficiency. This has led to a rise in the construction of new manufacturing plants, logistic hubs as well as digital infrastructure closer to home or in new markets.

Multinationals like Caterpillar are well-placed to benefit from the broader build-out of infrastructure. In particular, its diesel and gas generators play a crucial role in data centre facilities, which require a constant and reliable power supply.

Capital Group UK – New Perspective Fund is an openended investment company (OEIC), structured as a company in order to invest in stocks and other securities. It focuses on identifying multinational companies we believe are best-placed to thrive in a fast-evolving world.

With strong management teams and access to resources to overcome complex problems, multinationals are often well equipped to navigate changing, even hostile, environments.

Capital Group UK – New Perspective Fund

Buy Nexus Infrastructure for its big recovery potential

Orders grew 12% last year despite weakness in the housing market

Nexus Infrastructure (NEXS:AIM) 134p

Market cap: £12.9 million

Micro-caps rarely feature as Great Ideas in Shares, but we have made an exception for civil engineering and infrastructure specialist Nexus Infrastructure (NEXS:AIM) which looks to be on the cusp of a change in fortunes.

It is only fair to point out that micro-caps tend to be more volatile, are less liquid to trade and have a

wider spread between the buying and selling price than larger stocks.

Nexus trades an average of around 27,000 shares per day, equivalent to roughly £36,000, and has a dealing spread of some 7% between the bid and the offer price.

WHAT IS THE INVESTMENT CASE FOR NEXUS?

In a nutshell, the business is on its back, trading around breakeven on a cash flow basis, which makes it highly-geared to the first signs of an uptick in housebuilding activity.

Nexus is the equivalent of the canary in the coalmine for housebuilders, given it provides all the essential planning and preparatory works for new projects.

It’s main division Tamdown is currently carrying out infrastructure and ground works for longstanding customer Vistry (VTY) in Thanet, Kent.

In ‘normal’ times, the Tamdown business generates around £100 million of revenue with a 5% operating margin, whereas in 2024 it generated £56.7 million of revenue and operating cash flow of £0.5 million, reflecting weakness in the new-build market over the last two years.

In short, we believe there is potential for a sharp turnaround in its fortunes.

Nexus Infrastucture

In its 2024 results (released 23 January), the company said it had seen a notable pick up in client enquiries in October

Historically, enquiries tend to lead to engagement of new planning work with a delay of around three months according to the firm.

This was corroborated to some extent by the listed housebuilders, several of whom noted a ‘marked’ improvement in customer enquiries in their January trading updates.

This could lead to new developments opening more quickly than expected. Progressive equity analyst Alastair Stewart notes Tamdown has an ‘extremely short lead-in time’ to any uptick in new site openings by housebuilders.

Given the government’s aim to streamline the planning process and get more new homes built

during the current parliament, and with interest rates heading lower, we believe former headwinds could easily turn into tailwinds.

A LEADER IN CIVIL ENGINEERING

Nexus has been operating for more than 48 years and serves the top five listed housebuilders, Barratt Redrow (BTRW), Vistry, Taylor Wimpey (TW.), Persimmon (PSN) and Bellway (BWY)

The group also serves many leading private groups and housing associations, providing services including earthworks, roads, drainage and foundations.

The company specialises in complex, multi-phase developments, which means it is particularly well-placed to benefit should the Labour government’s long-term plans to build ‘new towns’ come to fruition.

Key competitive strengths include a broad range of technical expertise and strong relationships with leading housebuilders.

Beyond housebuilding, the company is looking to diversify its revenue stream and in early 2025 it purchased water and rail infrastructure specialist Coleman Construction & Utilities Group which benefits from structural growth drivers.

Over the next five years water companies are expected to spend £104 billion to improve the environment and the resilience of the UK’s water supply and infrastructure.

NET CASH ALMOST EQUALS MARKET CAP

It is worth noting that in February 2023 Nexus completed the disposal of TriConnex, which provides utility connections for housebuilders, and eSmart Networks which provides power connections to industrial customers.

Both businesses were sold to private investment group FitzWalter Capital for £78 million in cash. Nexus subsequently returned circa £61 million to shareholders via a tender offer.

The company still has net cash of £12.8 million on the balance sheet, almost equal to its current market cap, the shares trade at less than half their 332p book value and they pay an ordinary dividend of 3p per share.

With all this going for it, we aren’t the least bit surprised to see legendary value investor Peter Gyllenhammar and Nat Rothschild listed as two of the top 10 shareholders. [MG]

Industry M&A highlights the potential on offer at Intertek

Testing and certification play trades at a substantial discount to historic average valuation

Intertek (ITRK) £52.30

Market cap: £8.5 billion

Apparently, prior to its ultimately unconsummated tie-up talks with SGS (SGSN:SWX), France’s Bureau

Veritas’(BVI:EPA) first choice was to look at UK-listed peer Intertek (ITRK). In our view investors should take heed of this signal from an industry player and snap up shares in the FTSE 100 constituent.

Like its Swiss and French counterparts, Intertek is a leading player in the assurance and testing, inspection and certification (TIC) industry. Upcoming full-year results on 4 March are an opportunity for the group to remind the market of its many strengths and help drive the shares higher.

DIVERSIFIED APPROACH

Intertek operates in a wide range of industries including food, chemicals, transport and retail, and benefits from significant regulatory drivers which help provide good visibility on future earnings. Its activities can range from inspecting power stations and certifying vaccines to testing toys.

A fair amount of testing is still done inhouse but firms are increasingly choosing or being

Consensus forecasts

Table: Shares magazine • Source: Intertek

pushed by regulation to outsource this activity which provides Intertek with an avenue for meaningful growth.

In its 2023 annual report, Bureau Veritas estimated the size of the annual TIC market was “close to €300 billion”, of which 45% is outsourced while the other 55% is government-contracted or carried out internally.

The shares may not look all that cheap at face value, on around 20 times 2025 earnings, but businesses like Intertek are

Chart: Shares magazine • Source: LSEG

worth paying up for and that rating represents a material discount to the historic average. The company was last at these valuation levels during the financial crisis.

PROVIDING ASSURANCE

An increasing push into assurance, which goes beyond testing to identify and mitigate risks in a company’s operations or supply chain, could be a significant development for the business as it becomes more embedded into its clients’ day-today activities.

Fund manager Nick Train, who recently added Intertek to his list of holdings in Finsbury Growth & Income Trust (FGT), says: ‘Intertek’s 20% of revenues from assurance puts it ahead of other testing companies, and we believe its expertise here will only become more valuable over time as this IP (intellectual property) becomes standard across industries and ultimately drives wider uptake.’

The company has five divisions: Consumer Products (which focuses on helping clients develop and sell better, safer and more sustainable products); Corporate Assurance; Health and Safety; Industry and Infrastructure; and World of Energy.

The latter unit has a lot of experience serving traditional energy sectors like oil and gas and petrochemicals but also has expertise in renewables so is well positioned regardless of the pace of the energy transition.

INTERTEK IS INCREASINGLY PROFITABLE

Intertek has become increasingly profitable over recent years, following material investment in its capacity, and investment bank Berenberg thinks the firm will beat its 17.5% medium-term EBITDA

Intertek

revenue by divisionH1 2024

(earnings before interest, tax, depreciation and amortisation) margin target in 2025.

Analyst Carl Raynsford adds: ‘We think this margin accretion will translate to strong EPS (earnings per share) growth over the medium term, and likely the most predictable growth in the peer group.’

Some of the pressure on Intertek’s shares has been linked to the company’s Chinese business –which accounts for 18% of its revenue – and the fear a more aggressive US trade policy towards China will prove damaging.

We have to acknowledge this is a risk, but one which we believe is probably largely priced in by the market at this stage.

In turn, Berenberg estimates the US comprises just 12% of Intertek’s consumer testing export business revenue which is just 2.5% of overall group revenue.

The company has a robust balance sheet –company guidance and consensus forecasts suggest year-end borrowings will come in below the firm’s targeted leverage range of 1.3 to 1.8 times earnings.

It also generates plenty of cash, given which it has scope to look at acquisitions, but we are reassured the company is largely focused on investing in the business for organic growth, and any deals are likely to be easily digestible.

It can also continue to reward shareholders with a steady stream of dividends. After a period when it was held steady during the pandemic, the payout has started to rise again and the stock offers a meaningful dividend yield of 3.1% based on 2025 forecasts. [TS]

Plans for a state-backed rival continue to rattle Trainline investors and analysts

The shares have taken a round trip in the last year so it’s time to disembark

Trainline (TRN) 320p

Loss to date: 1.6%

Since we flagged the stock’s appeal in February last year, shares in online ticketing platform Trainline (TRN) have been up the mountain, peaking at 435p for a paper gain of 36%, and come all the way back down again, leaving us marginally out of pocket.

This is despite the firm raising its guidance twice, in September and October, thanks to strong growth in the first half and a positive start to the second half. The company also said it was increasingly benefiting from operating leverage as it scaled up operations.

WHAT HAS HAPPENEND SINCE WE LAST SAID BUY?

There were persitent rumours last year the government might bring in its own online retail site for rail tickets, and in January this year the DFT (Department for Transport) outlined its plans

to bring together all the individual train operators on one website under the yet-to-be-formed Great British Railways.

GBR will have the power to reform fares and the ticketing system without an operators’ agreement, as well as ‘simplifying fares and modernising ticketing’ including the rollout of Pay As You Go allowing passengers to travel more flexibly.

The new state-backed system, which in theory is non-profit, will work alongside but in direct competition with Trainline when it comes to fruition.

WHAT SHOULD INVESTORS DO NOW?

While Trainline has a dominant market share in the UK, and we thought it would be able to ride out future competition, it looks like the market disagrees and several analysts have cut their view on the stock.

The government insists there is room for thirdparty ticket retailers, but competition is never good for profits.

The only saving grace is that getting GBR up and running will take time, but for us this is the end of the line and we would sell the shares. [SG]

Fidelity European Trust PLC

Chosen by AJ Bell for its Select List

Fidelity European Trust PLC aims to be the cornerstone long-term investment of choice for those seeking European exposure across market cycles.

Aiming to capture the diversity of Europe across a range of countries and sectors, this Trust looks beyond the noise of market sentiment and concentrates on the real-life progress of European businesses. It researches and selects stocks that can grow their dividends consistently, irrespective of the economic environment.

Holding a steady course throughout market cycles

It is an uncertain time for the world and Europe is no exception. It is however vitally important for investors not to be blown off course. Good companies are still good companies and finding them remains the ‘secret sauce’ of any effective investment strategy.

We will remain focused on the companies in which we have invested and, in particular, on their ability to continue to grow their dividends. As always, we will ask ourselves if that rate of dividend growth is already discounted in the share price.

Performance over five years

We continue to seek new opportunities to add to the portfolio at the right price and remain confident in those names we currently hold. This approach has historically served the portfolio well - including through the recent volatility of the last few months - and we see no reason to change course.

Past performance is not a reliable indicator of future returns.

Source: Morningstar as at 31.01.2025, bid-bid, net income reinvested. ©2025 Morningstar Inc. All rights reserved. The FTSE World Europe ex-UK Total Return Index is a comparative index of the investment trust.

Important information

The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Changes in currency exchange rates may affect the value of an investment in overseas markets. This trust can use financial derivative instruments for investment purposes, which may expose them to a higher degree of risk and can cause investments to experience larger than average price fluctuations. The shares in the investment trust are listed on the London Stock Exchange and their price is affected by supply and demand. The investment trust can gain additional exposure to the market, known as gearing, potentially increasing volatility. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

The latest annual reports, key information documents (KID) and factsheets can be obtained from our website at www.fidelity.co.uk/its or by calling 0800 41 41 10. The full prospectus may also be obtained from Fidelity. The Alternative Investment Fund Manager (AIFM) of Fidelity Investment Trusts is FIL Investment

(UK) Limited. Issued by FIL Investment Services (UK) Ltd, authorised and regulated by the Financial Conduct Authority. Fidelity, Fidelity International, the Fidelity International logo and

UKM0225/399910/SSO/0525

TRUST CHAMPIONS TOTAL RETURN

THE NAMES WHICH HAVE DELIVERED THE MOST TO INVESTORS

By James Crux Funds and Investment Trusts Editor

Hotter-than expected UK inflation for January, with headline CPI up 3% yearon-year versus the 2.8% expected, combined with a volatile geopolitical backdrop, means investors should be seeking ways to protect their income.

Shares has long championed the unique advantage investment trusts have when it comes to paying regular and progressive dividends, since these funds are able to hold back up to 15% of the income they receive from their investments in their revenue reserves.

They can use these reserves to boost dividends during lean spells when businesses may be cutting their payouts. This structural benefit has enabled

many investment companies to pay consistently rising dividends through both good and bad years for many decades, a record unrivaled by other funds such as unit trusts.

You may have heard of the AIC’s (Association of Investment Companies) ‘Dividend Heroes’, classified as trusts which have increased their dividends for 20 or more years in a rowimpressively, 10 of these dividend heroes have over half a century of unbroken annual increases under their belts.

The AIC’s well-followed list helps you spot products with lengthy dividend growth streaks, but you’ll need to do some digging to discover which ‘heroes’ have consistently delivered the best total

Fear not, however, as care of our friends at the AIC, Shares has crunched the numbers going back 20 years to see which dividend heroes have made the most money for shareholders.

Read on for a run-through of the heroes which have consistently delivered for shareholders and for detailed profiles of the top three performers, who take their place on our winners’ podium adorned with gold, silver and bronze medals.

HOLDING OUT FOR SOME HEROES

In

index. After all, dividend hero status is a valuable marketing tool.

At the time of writing, there are 19 investment trusts qualifying for dividend hero status, with City of London (CTY), Bankers (BNKR) and Alliance Witan (ALW) sporting 58 consecutive years of dividend hikes apiece; these three trusts started paying their shareholders higher dividends in the same year England won the World Cup, and they’ve not stopped since!

Hot on their heels is the Cayzer family-controlled Caledonia Investments (CLDN) with 57 years of consecutive payout growth to crow about, followed by The Global Smaller Companies Trust (GSCT) on 54 years, with F&C (FCIT) and Brunner (BUT) tied on 53 years apiece.

The AIC also keeps a list of the next generation of dividend heroes, which are those trusts with more returns, or for that matter, whether those returns have predominantly come from capital growth or income.

Dividend heroes performance over 20 years

DIVIDEND HEROES PERFORMANCE OVER 20 YEARS

Dividend heroes performance over

than 10 years of consistently rising dividends but less than 20 years.

DELIVERING DOWN THE DECADES

Over the last 20 years, the best share price total return performer by far with a 1,978.37% haul is Scottish Mortgage (SMT), Baillie Gifford’s flagship trust which aims to identify and back the world’s most exceptional growth companies, followed by the Paul Niven-steered one-stop-shop fund F&C with a 775.23% gain, then BlackRock Smaller Companies (BRSC) with a princely return of 735.59%.

One observation is both Scottish Mortgage and F&C offer fairly skinny yields of 0.38% and 1.23% respectively, while the bulk of their two-decade returns – 76% and 62% respectively – has come from capital growth rather than income, but they have still rather cannily edged their payouts higher down the decades to retain their prized dividend hero status.

In the case of our bronze medal winner, BlackRock Smaller Companies, over 60% of its 20-year total return has come from capital growth, which is unsurprising given the trust’s bread and butter is backing fast-growing, innovative UKlisted firms.

Skinning the performance cat in a different way are some of the other ‘heroes’ with robust 20-year performance records, for whom dividends have been the predominant driver of total returns.

Take the popular City of London, the UK Equity Income sector stalwart managed by Job Curtis

which has delivered a 20-year share price total return of 373.43%.

Three-quarters of that return was derived from the income component with the balance from capital growth, demonstrating the importance of persistently rising payouts to shareholders over time.

Meanwhile, 87% of high-yielding Merchants’ (MRCH) two-decade total return has been generated by income.

Over 10 and five years, the income component has driven 87% and 98% of Merchants’ total return respectively, with dividends delivering 86% and 94% of City of London’s return.

Another name which leaps out of the 20-year performance table is Value and Indexed Property Income (VIP), which currently trades on a plump 7.45% yield and boasts a dividend growth record stretching back 37 years. A whopping 99% of the UK commercial property investor’s total return has emanated from income.

CAPITAL IDEAS

On a three-year view, the capital component has driven more than three-quarters of the positive total returns from global trusts Alliance Witan, Brunner (BUT), and F&C.

This makes sense, since these funds have exposure to market-dominating mega-cap US tech names including Microsoft (MSFT:NASDAQ) and Alphabet (GOOG:NASDAQ), with all three invested in another AI beneficiary, Taiwanese chip maker TSMC (2330:TPE).

Conversely, some 90% of the three-year return generated by The Global Smaller Companies Trust (GSCT) has come from income during a period when small-caps have been firmly out of favour with investors.

Shares highlighted the bull case for this smalland mid-cap one-stop-shop, which offers portfolio builders a simple way to access the growth potential of exciting growth companies around the globe, in August last year.

It is a similar theme at CT Capital & Income (CTUK), the quarterly dividend-paying hero with three decades-plus of uninterrupted dividend growth to boast about, where distributions have spoken for 89% of the return.

Managed by veteran stock picker Julian Cane, CT Capital & Income’s dividend has increased every year since launch in 1992 and grown at almost twice the rate of inflation over that period to boot.

most exceptional growth companies’. These types of companies tend to be leaders in their fields and at the cutting edge of new industries, meaning they prioritise investing in growth over paying out dividends.

Fund managers Tom Slater and Lawrence Burns believe share prices follow business fundamentals over the long-term, while shortterm price movements are overwhelmingly driven by other factors.

During 2022, rising interest rates impacted growth companies disproportionately, leading to underperformance of the trust, but the managers believe part of their edge is the ability to look through such ‘noise’ and focus on long-term business performance.

The UK’s biggest investment trust, Baillie Giffordmanaged Scottish Mortgage, is the clear winner over 20 years, generating a total share price return of 1,978%, equivalent to an annualised return of 16.4% a year.

The bulk of the gains (76%) have come from capital gains, with just 24% coming from reinvested dividends, whereas the average split across the illustrious group of dividend heroes is 60% from income and 40% from capital.

This split isn’t too surprising given SMT’s investment philosophy, which is to own ‘the world’s

Arguably, the trust’s long-term success reflects the managers’ good judgement in backing the best growth companies which is then reflected in higher share prices.

Looking outside the publicly-quoted holdings, around a quarter of the fund is invested in private companies.

Scottish Mortgage owns stakes in half the world’s top 10 unicorns (private companies valued at more than $1 billion), including SpaceX, the fund’s largest position, Chinese social media group and Tik-Tok owner ByteDance, online payment processing group Stripe and video games maker Epic Games.

Some of the private companies the trust originally invested in have become publicly traded and still remain in the fund, such as music streaming firm Spotify (SPOT:NYSE) and Chinese shopping platform Meituan (3690:HKG).

The top 30 positions in the fund represent 79% of the portfolio and three have been held for more than a decade, including Amazon (AMZN:NASDAQ), Tesla (TLSA:NASDAQ) and Dutch semiconductor equipment maker ASML (ASML:AMS).

Over the last decade, the trust’s top five performing holdings have contributed nearly 60% of the fund’s total returns, with Amazon contributing the most in terms of absolute percentage points, while AI darling Nvidia (NVDA:NASDAQ) is the fund’s best performing holding, rising an incredible 10,188% over that timeframe.

Looking forward, it seems a fair bet the proven investment skills of Slater and Burns should continue to deliver strong investment returns, although, as they themselves acknowledge, returns are often accompanied by high volatility. [MG]

premium levels of growth which are expected from this area look set to diminish, their earnings delivery should still comfortably outstrip that of the wider market. While numerous other areas and markets are trading at lower levels of valuation, growth prospects in these areas typically still appear far more fragile or anaemic.’

However, it would be wrong to assume US tech stocks have driven the trust’s performance –if we rewind to 2014, the 10-year total return was 173%, yet there was just one tech stock in the top 10 holdings, Alphabet (GOOG:NASDAQ), or Google as it was called back then, while the rest were mainly US and European health care companies plus BP (BP.A) and HSBC (HSBA)

Launched back in 1868, F&C (FCIT) has the distinction of being the world’s oldest collective investment trust.

Although it is a Dividend Hero, with more than 50 years of consecutive increases, it has always focused more on growth investing than income.

In the late 19th century, it owned government bonds in countries which today we might think of as emerging markets like Brazil, Egypt and Turkey, as well as US railroad company bonds just as investment in the railways boomed.

There are a number of stocks in the portfolio today which were in the portfolio 20 years ago, including Shell (SHEL), which was one of the trust’s first ever equity purchases in 1925, and has returned around 300% over the past 20 years.

Other names which the trust owned 20 years ago, and which are still in the portfolio today, include AstraZeneca (AZN) (total return 1,110%), Elevance Health (ELV:NYSE) (1,080%), RELX (REL) (1,200%), SAP (SAP:ETR) (1,370%) and TSMC (2330:TPE) (7,000%). [IC]

In the 1920s, the trust diversified into stocks, and since the early 2000s it has invested in private equity, both as a way of diversifying risk and creating potential for large capital gains.

Until 2013, much of the trust’s equity holdings were in UK-listed companies, but since then it has renewed its original focus of investing overseas and today less than 10% of its assets are in UKlisted stocks.

A look at the top holdings shows the focus on growth and foreign markets, with the six of the ‘Magnificent Seven’ in the top six positions by weight.

Speaking to the AIC (Association of Investment Companies) in December on the outlook for markets in 2025, manager Paul Niven said he was ‘relatively constructive on equities,’ in particular US tech stocks, where he argued earnings growth outweighed any valuation concerns.

‘Valuations are high, though this tends to be concentrated in the US and in the obvious names such as the Magnificent Seven. Although the

BRONZE MEDAL

BlackRock Smaller Companies

To identify these opportunities, BlackRock team spends a considerable amount of time with company management teams, often attending over 700 company meetings a year.

As Shore notes, the focus is on capital appreciation but it is the bias towards cashgenerative companies which has supported the trust’s ability to keep raising the dividend for 21 years and counting.

The financial discipline required to pay a regular dividend can be a good marker of quality in a universe where corporate failures are more commonplace.

In his most recent commentary on the trust’s performance, manager Arnold notes the valuation of UK small- and mid-cap companies is ‘attractive on an historic basis’.

Less well-known than the other podium-placed names in our list of dividend heroes measured by 20-year total return, BlackRock Smaller Companies has found the going a little more tough in recent times.

This, and the trust’s near 13% discount to net asset value, is a reflection of the relatively weak sentiment towards the small-cap space.

Nonetheless, it’s not a huge surprise to see a smaller companies trust score well over the long term given small-caps have more scope to grow than their larger listed counterparts.

Run by Roland Arnold for nearly seven of the past 20 years, the trust is almost exclusively UKfocused and as its strong total return record would imply it has consistently beaten the benchmark.

These are ‘smaller’ rather than small companies – the top 10 holdings have an average market cap of roughly £950 million.

Some names have been in the portfolio for some time: flexible office space provider Workspace (WKP), for example, was a holding 10 years ago.

Other names in the top 10 are publishing outfit Bloomsbury (BMY), engineering and infrastructure firm Hill & Smith (HILS) and mobile payments company Boku (BOKU:AIM).

House broker Shore Capital outlines the trust’s investment process: ‘Through bottom-up stock selection, the manager seeks quality companies with the potential to grow significantly. Typical attributes include competent management teams, attractive growth prospects irrespective of market conditions, good cash generation and strong balance sheets.

‘As we move through this near-term noise, the opportunity presented by UK small- and mid-caps will present itself, and maybe we will finally see investors looking to allocate back to what has historically been a profitable asset class,’ adds Arnold.

The ongoing charge is 0.8%, which is fairly competitive compared with other trusts in the Association of Investment Companies UK Smaller Companies sector. [TS]

Temple Bar Investment Trust is managed by Redwheel’s Ian Lance and Nick Purves, who have more than fifty years of investing experience between them.

Experts in the UK stock market, Ian and Nick are classic value investors, looking to build a diversified portfolio of the most compelling undervalued companies they can find.

With the UK stock market currently among the most attractively valued assets that investors can buy anywhere in the world, they are currently very excited about the potential opportunity that lies ahead for the Trust.

Think value investing Think Temple Bar

“UK stocks look very attractively valued in a global context and when compared to history. Overseas businesses are already recognising this potential through acquisitions, and management teams are buying back shares at a record pace. These could represent meaningful catalysts for unlocking the inherent value in UK stocks. The long-term opportunity for UK value investors is significant.”

Ian

Lance,

Portfolio Manager

Temple Bar Investment Trust

For further information, please visit templebarinvestments.co.uk

Have any of your fund holdings entered the dog house?

The combined value of funds managing over £1 billion in the doghouse has surged by 53% to £40.1 billion

Investors naturally put a lot of effort into identifying winning investments to stay ahead of the game, but less appreciated is the idea of steering clear of laggards.

For fund investors this is where the Evelyn Partners Investment Management Spot the Dog biannual report comes in.

The report’s aim is to compare fund performance on an apples-to-apples basis against an appropriate benchmark to identify serial underperformers across different regions and investment styles. Performance is measured over three years, which should be sufficient time to remove the role of chance.

Funds in the doghouse must have underperformed for three consecutive 12-month periods, and by 5% or more over the entire period. It is worth noting the analysis only looks at open-ended funds which are available to UK retail investors. Funds are compared against an appropriate market benchmark rather than the average performance in a sector. It is also worth reminding readers past

performance is just one factor among several qualitative and quantitative factors which should be considered when making an investment decision.

WE’RE GOING TO NEED A BIGGER KENNEL

There are 137 funds which have earned their place in the doghouse, with a combined £67.4 billion of assets up 26% from the last report.

Funds badged ESG (environmental, social and governance) continue to be highly represented,

Liontrust Special Situations Fund

Artemis Positive Future

comprising a quarter of the total litter. The dogs are getting bigger, too, with 15 funds topping £1 billion of AUM (assets under management), up 50% from 10 funds last time.

It is noteworthy that some prominent names which have historically done well for investors have qualified for the list, including the flagship Liontrust (LIO) Special Situations Fund (FUND:B57H4F1) and Lindsell Train UK Equity (FUND:B18B9X7), which makes its second appearance.

Liontrust has seen more of its funds enter the doghouse this time around, including the Sustainable Future Global Growth Fund (FUND:3003006) and the Liontrust Sustainable Future European Growth Fund (FUND:3002939).

Wealth advisor St. James’s Place (SJP), which selects external managers to manage its funds, has two of the biggest funds in the doghouse worth a combined £14 billion.

The global quality fund with £9.4 billion of AUM makes its second consecutive appearance, while the £5.27 billion sustainable and responsible fund also makes the ‘dogs’ list.

Smaller

companies, especially those trading on AIM, have had a tough time attracting investors in recent years and have not been helped by the reduction in inheritance tax breaks announced in the Autumn budget”

Fidelity International’s Global Special Situations fund (FUND:B8HT715) with £3.3 billion of AUM is the third largest mutt to enter the kennel.

RUNTS OF THE LITTER

The largest number of serial laggards can be found in the global equity sector which contains 44 funds managing a combined £35.2 billion of assets, up in value by a third over the last six months.

Notably all the funds underperformed the benchmark by more than a tenth with the worst, the inaptly named Artemis Positive Future (FUND:BMVH597), underperforming the MSCI World index by 63%.

It was closely followed by Baillie Gifford Global Discovery (FUND:0605933) which has lagged the MSCI World Small Cap index by 56% over the last three years.

In terms of percentage rather than absolute numbers, almost a third of funds in the UK smaller companies’ sector have entered the doghouse, a big contrast to a few years ago, when the breed barely made an appearance.

Smaller companies, especially those trading on AIM, have had a tough time attracting investors in recent years and have not been helped by the reduction in inheritance tax breaks announced in the Autumn budget.

Moving in the other direction is the UK allcompanies sector which has seen the number of hounds drop by a third to 30 funds in the latest report. The list is dominated by funds which have historically had a larger allocation to the medium and smaller end of the UK market.

The last few years have seen large-cap, blue-chip companies with exposure to overseas earnings perform better than their smaller brethren.

Lastly, the top prize for magnitude of underperformance goes to the Japan sector where the median fund lagged by 25% over the last three years.

The Baillie Gifford Japanese Smaller Companies fund (FUND:0601492) took podium position, underperforming the MSCI Japan Small Cap index by 49%.

Martin Gamble Education Editor

UK smaller companies: keeping calm and carrying on

Amanda Yeaman

Co-Manager, abrdn UK Smaller Companies Growth Trust

• There has been a raft of difficult news on the UK economy

• There remain pockets of real opportunity in the UK stock market

• A focus on quality characteristics – including low debt and strong management – is essential

2025 has started with a barrage of bad news on the UK: economic growth is elusive, government debt is rising, consumers are nervous. The temptation is to draw similar conclusions on the outlook for the UK stock market, and its smaller companies in particular. We believe the reality is more nuanced.

This environment isn’t new. The UK has operated with structurally low growth rates for more than a decade. The UK’s smaller companies are wellversed in navigating difficult periods and they have been through worse than this – the financial crisis, Brexit, the mini budget – and emerged thriving. Neither is this environment new to us. The abrdn UK Smaller Companies Growth Trust’s quality, growth, momentum process has been in place since the launch of the smaller companies team in 1993 and has seen multiple cycles.

GROWTH OPPORTUNITIES

Now, as always, there are pockets of real opportunity in the UK and as

investors, we need to look beyond the label. For the consumer, for example, it has unquestionably been a tough period for some parts of the market. Food retailers saw sales volume drop 0.3% month on month in December, with the usual Christmas bounce proving elusive. While household saving rates remain at post-pandemic highs, consumers are being careful.

However, there are areas where they are willing to spend – on holidays, for example. We have a holding in Jet2, and the company has continued strong trading momentum. It has given its customers exactly what they want – compelling prices, good service, and value for money. It has continued to grow and invest, expanding its presence at Luton Airport. Its strong management team has managed to avoid many of the pitfalls of its competitors.

Cranswick and Premier Foods are other examples. Although the food sector has been tough, these

businesses have leveraged their strong relationship with retailers and have shown they can manage inflationary pressures as they arise. Both groups had strong trading through the Christmas period, in contrast to some of their competitors. They are focusing on range, premiumisation at good value for the consumer, and are alert to changing consumer habits. In Cranswick’s case, the ability to supply from farm to fork means they are in charge of their own destiny.

While Cranswick, Premier Foods and Jet2 are all nominally consumer businesses, and it is natural to assume that they would be vulnerable to a downturn in fortunes for the UK economy, they have shown real resilience in earnings whatever the economic weather.

On the Trust, we are trying to lean into the realities of the UK economy, rather than fight against them. For example, XPS Pensions was one of our strongest holdings

in 2024. It is a leading UK consulting and administration business specialising in the pensions sector and is a beneficiary of the UK’s ageing population, which is driving a greater emphasis on later life financial provision.

FOCUSING ON QUALITY

As with previous periods when sentiment has been poor and growth hard to come by, avoiding problems is vitally important. Where companies have issued profit warnings – and there have been plenty around in the UK market – they have been dealt with harshly by investors.

Certain quality characteristics become more important in less forgiving environments. At a time when bond yields are volatile, for example, companies with high debt are vulnerable. Companies need good management teams to steer their businesses at a time when demand may be slower, to invest strategically, and make sensible long-term decisions amid all the noise. In the longer term, they can help a business capitalise on difficult environments and emerge stronger. Companies need to be in charge of their own destiny and to find efficiencies where they can. As an example, we would highlight Games Workshop. It is a manufacturer of fantasy and futuristic miniatures, games, and hobby supplies, including the Warhammer brand. It has a

Important information

loyal client base, and no-one else does what it does. It has significant intellectual property and a sensible management team used to managing through tough markets.

It is also worth noting that when sentiment is brittle, it can provide opportunities. Over the past few months, we have added a range of new names: Bloomsbury Publishing, Avon Technologies and Breedon, for example. These fulfil our high quality criteria, and are forecast to deliver resilient earnings, whatever the economic climate.

BETTER TIMES AHEAD?

A final question is whether the economic backdrop can change. While our holdings can navigate the current environment, a more buoyant growth outlook would be welcome. There are signs that the UK Government is now turning its attention to growth. There are levers it can pull, on tax, on deregulation,

Risk factors you should consider prior to investing:

• The value of investments and the income from them can fall and investors may get back less than the amount invested.

• Past performance is not a guide to future results.

• Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.

on reform. For the time being, it is all warm words and little action, so we maintain a watching brief.

One factor that might make a difference is changes to the defined benefit pension rules. The Government has proposed new rules to make it easier for companies to access the surpluses from defined benefit schemes. While the mechanism is complicated, it should increase the options available for pension schemes, and this additional choice could influence the way schemes invest. High-growth UK assets such as smaller companies could be a beneficiary.

Other supportive measures could include the introduction of a tax incentive for UK savers to support home grown companies. This would help to create an ecosystem of funding for smaller businesses. Equally, it would be helpful to simplify disclosure and reporting obligations. We would also welcome any plan to cut or remove stamp duty on shares.

In the meantime, we continue to focus on resilient companies that can thrive in a range of conditions.

Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.

Other important information:

Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG.

Authorised and regulated by the Financial Conduct Authority in the UK.

Find out more at www.abrdn.com/ausc or by registering for updates

You can also follow us on social media: Facebook, X and LinkedIn

Why I am also saying no to KKR’s £1.6 billion bid for Assura

Like every investor who turns on their computer in the morning to find one of their stocks has been bid for, my initial reaction to the news US buyout giant KKR (KKR:NYSE) had offered a premium for my shares in healthcare facilities provider Assura (AGR) was ‘happy days’.

The joy was momentary, however, as I then contemplated what it would mean for my portfolio if I no longer owned Assura and the work involved in finding a stock to replace it.

A ROLE STILL TO PLAY

As I see it, every stock in my portfolio has a job to do – it is either there to provide long-term capital gains, or it is there to provide income, there is no in-between.

My income stocks – which are mainly investment trusts together with a few high-yielding FTSE 100 stocks – have one job to do, which is to compound away in the background and build wealth.

I wouldn’t quite put myself in the same category as John D. Rockefeller, who claimed seeing his dividends come in was the only thing in life which gave him pleasure, but ‘making money while you sleep’ is a great feeling.

Capital gains are obviously nice, and a great many friends and colleagues swear by them, but they aren’t guaranteed, and picking stocks for capital appreciation is as much an art as a science.

Luckily, most of my capital gains stocks – which include one or two non-dividend-paying funds –are doing very nicely, and I have no intention of selling them.

Like Warren Buffett, my ideal holding period is forever, but if KKR or another bidder wants to pay a big premium for one of my capital gains stocks I have no objection, all it means is my gains are brought forward.

If one of my income stocks is bid for, however, that means I have to forgo my forever dividend stream and the benefits of compounding, which I’m afraid is a no-no.

In the case of Assura, KKR’s cash offer of 48p per share represented a 28.3% premium to the undisturbed share price of 37.4p, but thankfully the board rejected the proposal.

I say thankfully because, as the table shows, without the bid, in less than three years my shares would be worth more than the 48p KKR was

The effect of compounding on Assura, in an ideal world...

offering anyway.

Purely for the purposes of illustration, let’s say I had 20,000 shares at the end of last year, which means after reinvesting the January dividend I would have 20,449 shares and my holding would be worth £7,648 – based on the undisturbed share price of 37.4p and an unchanged dividend of 0.84p per share.

If I were to sell my 20,449 shares at 48p, I would net roughly £9,815, which looks like a decent return, but, if I just kept using my dividend to buy more shares every quarter, theoretically at an undisturbed 37.4p, and kept compounding my returns, by the end of January 2028 I would own 26,695 shares with a value of £9,984, which is more than the KKR offer.

STAY CALM AND KEEP ON COMPOUNDING

Given my holding period is forever, within another two years I would own 31,886 shares with a value of £11,925, substantially more than KKR was offering, and two years after that – assuming the odds of

Earth getting hit by an asteroid haven’t shortened dramatically in the meantime – my holding would be 37,250 shares, worth a cool £14,244 or just under double what I started with.

This is all hypothetical, of course, as the price is now above 40p per share, but I would hope as the business continues to grow the dividend also grows and what I lose on the swings I can make up on the roundabouts.

So, the next time someone makes an offer for one of my income stocks, the answer will be No again, because it’s not in my interest to give up my interest – I’ll stay calm and keep on compounding instead.

By Ian Conway Deputy Editor

Germany is the surprise winner on the stock market so far in 2025

Investors who have written the market off as dull need to think again

The US market has naturally been the centre of attention for investors in recent years due to its strong returns, but the tide is turning. The best gains so far in 2025 have come from a region that’s been royally unloved.

Germany generated a 13.1% total return between 1 January and 14 February 2025, more than three times that of the S&P 500 (4.1%) or the Nasdaq (3.7%) in the US.

Admittedly, that’s a brief period in which to assess performance, but it’s unusual for Germany to outperform in such a way.

In contrast, big names on the DAX are having their moment in the sun because they are cheap and the news flow has been positive.

Investors looking to diversify their risk and potentially allocate money away from the US will naturally look for value opportunities and upbeat narratives, and Germany has much to offer – the DAX is trading on 13.9 times forward earnings versus 19.5 times for the S&P 500.

Table: Shares magazine • Source: AJ Bell, ShareScope. Total return. *to 14 Feb 2025

The country’s main index, the DAX, has enjoyed an impressive run so far this year, with 34 of its 40 constituents delivering positive returns.

Importantly, the top gains have been broadbased and not concentrated on one sector – for example, companies in the banking, building materials, retail, chemical and tech sectors have all done well.

The US market is undoubtedly looking expensive, and investors have been giving the thumbs-down to big names reporting in recent weeks including negative reactions to results from big tech companies which have previously generated supersized returns for shareholders.

In Bank of America’s latest monthly poll of fund managers across Europe, Germany was singled out as the most preferred region from an investment perspective, which may explain the market’s year-to-date gain of 13.1%, twice the average 7.7% annual return achieved between 2014 and 2024.

That’s a blockbuster performance across a mere six weeks – only twice in the last decade has the index made double-digit gains between the start of January and mid-February, in 2023 (10.5%) and 2015 (11.8%).

The MDAX mid-cap index has also had its best start to the year since 2023 with an 8.1% return and its second-best start since 2019.

Star performers include chemicals group Lanxess (LXS:ETR), infrastructure services expert Hochtief (HOT:ETR), construction software

Dan Coatsworth: Germany’s surprising stock market

provider Nemetschek (NEM:ETR) and engineer ThyssenKrupp (TKA:ETR).

GERMANY VERSUS THE UK

There are similarities between Germany and the UK from an investment perspective. The UK saw a new government last year and Germany has now followed suit, while both countries have a considerable challenge to accelerate economic growth and the journey won’t be easy.

Germany and the UK also share a common trait with regard to the make-up of their main stock market index, namely that constituents of the DAX and FTSE 100 generate the bulk of their earnings in foreign countries.

That suggests anticipation around the outcome of the German general election has not been the key driver for the index’s performance this year.

In fact, one stock has led the DAX over the past year and a bit, and that’s SAP (SAP:ETR), whose share price has doubled since January 2024 thanks to the AI boom.

companies big money by boosting productivity. Last October, SAP became Europe’s most valuable tech stock, leapfrogging past chip equipment maker ASML as upbeat forward guidance for earnings fuelled its share-price rally.

KEY RISK FOR SAP

SAP trades on 42.7 times 12-months forward forecast earnings, a premium rating versus the relative cheapness of the DAX.

SAP is the world’s largest vendor of ERP (enterprise resource planning) software and the company believes its AI systems can save

Shares magazine • Source: AJ Bell, Market Screener, 18 Feb 2025

That poses a slight issue, as stocks on premium ratings have to keep beating estimates to justify trading on a high multiple of earnings. Simply meeting expectations may not be enough to sustain the share price momentum and should the news flow fail to impress SAP shares could suffer a setback.

Given SAP plays such a dominant role in the make-up of the index, its success has made the market hostage its fortune.

The DAX only contains 40 stocks, making it more than twice as concentrated as the FTSE 100, but at least it has a diverse range of sectors, unlike the Nasdaq in the US where technology dominates.

Any setback by one of the Nasdaq’s biggest tech constituents could cause a negative read-across to the whole index, whereas if SAP has a bad day, it shouldn’t drag down the telecom, automobile and financial stocks which also populate the top end of the index.

DOMESTIC CATALYSTS

Despite the DAX having more of an international flavour than you might expect, what’s going on domestically can still influence sentiment towards the index. The potential for fiscal stimulus in Germany and the ECB cutting interest rates could be positive share price catalysts.

There is always the potential for near-term volatility when there is a change in government, and the results of Germany’s general election and what it means for the country was still a live issue at the time of writing.

However, Germany’s stock market performance over the past two years has been impressive and investors who had written off the country as a source of positive returns should think again.

The biggest companies in the Dax index by market value Table:

Emerging markets outlook

Sponsored by Templeton Emerging Markets Investment Trust

Can China stoke domestic consumption?

The country is looking to increase consumer spending as a way of sustaining economic growth

According to figures quoted by the Carnegie Endowment for International Peace China lags way behind the global average when it comes to the proportion of its GDP which is accounted for by domestic consumption.

The Washington-based thinktank notes that, globally, based on World Bank figures, consumption accounts for 75% of GDP with the remainder largely accounted for by investment.

In China consumption accounts for 53–54% of GDP, investment accounts for 42–43% of GDP with the rest accounted for by the companies trade surplus.

Yet are there are signs domestic consumption is starting to play an increasing role as Beijing looks to boost consumer spending among its citizens. China’s electric vehicle industry has been a notable success story with sales reaching 11 million in 2024 according to UK research outfit Rho Motion –a nearly 40% increase on 2023 levels. As such it accounted for more than 60% of all EV sales globally last year.

It is also striking that half of the names in the top 10 constituent list for the MSCI China index hail from the Consumer Discretionary sector and as the chart shows, this sector has comfortably the largest weighting in the wider index. Many of these companies have substantial exposure to the domestic market.

Emerging markets: Trump, Chinese consumption and DeepSeek

Three things the Templeton Emerging Markets Investment Trust team are thinking about today

1.

President Trump follows through on tariffs: US imports from China, Canada and Mexico, which account for 40% of US trade, will be subject to tariffs ranging from 10%–25%. Mexico and Canada have already negotiated a temporary pause in implementation and talks are continuing with China, although their response has been more muted. They will challenge the legality of the tariffs at the World Trade Organization and have created a list of US agricultural imports which could potentially be subject to tariffs. It remains to be seen whether president Trump’s tariffs are a negotiating tactic, similar to the recent immigration spat with Colombia. We note that immigration across the US-Mexico and US-Canada borders declined sharply in the second half of 2024, and China resumed cooperating with the United States on blocking precursor chemicals used to make fentanyl in 2023. While the loss of life from fentanyl remains unacceptably high, it has been declining.

2.

Lunar New Year consumption: The 2025 Lunar New Year in China lasted for eight days, raising optimism that the longer holiday could boost consumer spending. Our on-the-ground team will be watching the highfrequency and social media data for indications of the turnout. We note that consumption patterns in China are changing with, in particular, the rise of emotional consumption, which many companies are pivoting to focus on. This trend includes increased consumer demand for experiences as well as for low-priced goods.

3.

DeepSeek sends tremors: The Chinese artificial intelligence (AI) reasoning model DeepSeek is cheaper and more efficient than comparable opensource US models.

Compared to peers, it ranks seventh on test criteria in the Large Model Systems (LMSYS) evaluation of chatbots. The model’s efficiency is evident in the smaller number of chips used to train the model – 2,000, compared to the 16,000 chips that Meta’s Liama model uses – and its use of rounding to reduce the number of calculations required. The near-term impact of the model’s availability is likely to focus on increased innovation globally as companies utilise its open source code.

Portfolio Managers

TEMIT is the UK’s largest and oldest emerging markets investment trust seeking long-term capital appreciation.

Chetan Sehgal Singapore

TEMPLETON EMERGING MARKETS INVESTMENT TRUST (TEMIT)

Andrew Ness Edinburgh

WATCH RECENT PRESENTATIONS

Pristine Capital PLC (PRIS)

Neil Sinclair, Executive Chairman

Pristine Capital PLC (PRIS) is a Main Market cash shell. The company create value for shareholders through active management. They are looking to make a significant and opportunistic acquisition in the Real Estate Sector. Through an investment in new shares in 2024, Neil Sinclair, Stanley Davis & Andrew Perloff, who co-founded the REIT, Palace Capital plc in 2010, believe that now is the right time in the cycle, to create value.

Temple Bar Investment Trust (TMPL)

Nick Purves, Portfolio Manager

The strategy employed by Temple Bar is known as value investing. This is the process of buying a company’s stock for less than its true worth (sometimes known as its intrinsic value). By buying at a discount, this strategy builds in a ‘margin of safety’ and whilst in the short term an undervalued company’s share price might fall further, in the long run the built-in value should ultimately be recognised by other investors, prompting the share price to rise to reflect the stock’s intrinsic value.

Henderson International Income Trust (HINT)

Ben Lofthouse, Portfolio Manager

Henderson International Income Trust (LON:HINT) scours global markets to look for reliable and growing income. By investing in established and enduring companies outside of the UK, we aim to offer a truly diversified source of income and potential for capital growth that is not bound by borders.

Why making your second ISA million is 2.5 times easier than your first

It could take less time than you think, too, thanks to the marvel of compound growth

Have you ever idly wondered how much you need to save to build up a million pounds in an ISA over 25 years? In case you have, the answer is £1,433 per month, assuming you get 6% growth on your investments.

That’s clearly a pretty punchy amount to be able to stash away from your monthly income, but before you decide to give up and start trading crypto or robbing banks, consider this: if you get to the million pound mark, getting to your second million is much easier, and whether you’re building towards a savings pot of £1 million, £100,000 or £10,000, the same dynamic applies.

After you’ve built up £1 million in 25 years, if you continue to save the same £1,433 each month in an ISA, it would take less than 10 more years to get to your second million because as well as the money you’re saving each month, you’re also getting growth on the first million pounds you’ve built up.

Compound growth is a quite wonderful thing when you break it down – even to reach your first million pounds in 25 years, you would only need to save less than half of this sum, or £429,900, because the remainder would

be made up by growth on the savings you make, assuming 6% net fund growth.

Indeed, after 12 years of saving £1,433 per month, your annual fund growth is already exceeding the £17,196 you’re putting away each year. This effect gets turbocharged the more you save, thanks to the growth on the money you’ve already built up.

This explains why it only takes 10 years, rather than 25 years, to save your second million. In other words, it’s 2.5 times easier to save your second ISA million than your first.

After you’ve built up £1 million in 25 years, if you continue to save the same £1,433 a month in an ISA, it would take less than 10 more years to get to your second million”

This is reflected in the amount you need to save as well. To get from £0 to £1 million in 25 years you need to stump up £429,900. But to get from £1 million to £2 million by saving £1,433 each month, you would only need to stash away £171,960 yourself. Over that decade of saving, you would receive £859,189 in growth, because not only are your new savings growing, but so is the million pounds you’ve already built up in your ISA. Numbers do not add to round millions as they have been calculated based on whole years of saving.

Numbers do not add to round millions as they have been calculated based on whole years of saving

Source: AJ Bell, based on 6% net fund growth per annum

Feeling a bit greedy all of a sudden? Well, to get to your third million would only take a further six years of saving £1,433 per month, during which time you would need to stump up £103,176 in savings, with £874,067 accruing in fund growth. In total that means 41 years of saving £1,433 each month to get to £3 million. But if you are in the fortunate position of being able to do that, over the course of those 41 years you would have stashed away £705,036, with the remaining £2,303,414 coming from fund growth (the total slightly exceeds £3 million as we are working in whole years of saving).

Obviously £1,433 is a chunky amount of monthly savings to be able to set aside, but the magic of compound growth applies whatever your target nest egg is. For instance, to build up your first £100,000 over 25 years would require monthly savings of £143, and if you carried on at this pace

of contributions you’d hit the £200,000 mark within 10 further years, and £300,000 within an additional six years.

In total, over 41 years you would have saved £70,504 yourself with a further £230,341 coming from fund growth (again figures add to just over £300,000 as we have calculated them using whole years of saving).

The level of growth you get does matter to the time it takes to build up your nest egg. Our example assumes 6% growth, but if you only get 4% growth, a level more in line with long run cash rates, then it would take you 30 years to build up £1 million from a monthly saving of £1,433 rather than 25 years.

It would then take another 14 years to hit the £2 million mark, meaning 44 years in total to hit the £2 million mark with 4% growth compared to 35 years at 6% growth. Conversely, if you received 8% growth on your investments, then you would hit the £1 million mark after 22 years and the £2 million mark after a further eight years (30 years in total).

We’ve also assumed in these examples there is no tax to pay on investment returns, which is the case within an ISA wrapper. Hitting the same goals outside an ISA would require more time, greater monthly savings, or higher gross returns.

However, a £1,433 monthly saving equates to £17,196 a year, which falls neatly within the annual ISA allowance of £20,000, so any tax to be paid on this amount of saving is ultimately voluntary.

By Laith Khalaf AJ Bell Head of Investment Analysis

Which? rate no other investment platform higher than us for ease of use. Explore our ISA account today.

Learn more

Feel good, investing.

Capital at risk. ISA rules apply.

Ask Rachel: Your retirement questions answered

What should I do about changes to inheritance tax on pensions?

Geoff is increasingly concerned about what the new set-up might mean for him and his family

I am getting concerned about the changes to inheritance tax on pensions.

I am 78 years old, and my wife is 68. We have two grown up children with families of their own. My wife is in good health, whereas I have the usual sort of challenges befitting my age.

Our total estate is worth about £900,000, including the house. I get a company pension payment every month, that should pass onto my wife when I die. I also have a SIPP which my wife will inherit.

Is there anything I should be doing now?

Geoff

Rachel Vahey, AJ Bell Head of Public Policy, says:

With such a potentially monumental change to pensions on the horizon, it’s natural to want to take action to mitigate any downside.

However, before you rush to act, a reminder that although the chancellor announced this measure in her Budget speech last October, we don’t yet have the final detail of how this will work in practice. HMRC recently consulted on the technical detail, but most respondents came back saying it would be difficult to implement the proposals as outlined, and changes should be made.

We very much hope the Treasury is in listening mode and finds a better way of applying tax on pensions when someone dies; a way that would result in fewer costs, delays and financial distress for the loved ones left behind.

CONSIDER YOUR NOMINATION FORM

In the meantime, you could

consider your nomination form. If you die with a surviving spouse or civil partner, any of your estate passed to them will be exempt from inheritance tax. Your unused nil rate band and residence nil rate band will also pass to them. A married couple could therefore have up to £1 million of nil rate band (assuming they pass the house to children or grandchildren).

At the moment, pensions are usually exempt from inheritance tax. But from April 2027, that is proposed to change, and pensions will be brought into the scope of inheritance tax. The proposals are that any nil rate band will be proportioned across the pension as well. Anything in excess should be subject to 40% inheritance tax, but with the same exemption if passed to a spouse.

At the moment, pensions are usually exempt from inheritance tax. But from April 2027, that is proposed to change”

If your total estate, including your pension, is likely to exceed the nil rate band, then one area you may want to consider now is your expression of wishes nomination. Under the current rules, the trustees of a pension scheme normally decide who should inherit any unused pension funds. A pension saver can complete

Ask Rachel: Your retirement questions answered

an expression of wishes (or nomination) form nominating someone to inherit the fund. Trustees will take into account the form when they are making the decision, along with other evidence, for example any Will, or representations from people wanting to inherit. However, trustees aren’t usually bound by the nomination. Instead, they are free to make their own choice.

If the person the trustees decide should inherit is either a dependant of the pension saver or someone nominated by them, then that person can choose to take the inherited pension fund as an income through drawdown or as a lump sum. Otherwise, generally, the person can only take a lump sum.

A couple may have set up their arrangements so the pension is inherited by the other when they die, with the intention it will then be passed onto children on the second death.

MIGHT BE WORTH CONSIDERING A CHANGE

However, pension savers don’t have to nominate

Resilience. Longevity. Growth.

a dependant. Considering the potential changes to inheritance tax on pensions, those with large funds may now want to change their expression of wishes form to nominate adult children.

That way, if they die before April 2027, the children will inherit the pension fund without paying inheritance tax on any excess above the nil rate band. Instead, if it passes to the spouse, if they die after April 2027, the children will face inheritance tax on the pension funds.

If the pension saver is still alive in April 2027, then they can change their nomination form back to their spouse, who can inherit the fund without paying inheritance tax.

This approach only works if the spouse has enough money to live on from other assets in the estate and doesn’t need the pension for an income. But if they don’t, then it may be a neat way of passing the pension to children (as always intended) without paying inheritance tax, especially if the spouse is significantly younger or in better health than the pension saver.

12

MARCH 2025

NOVOTEL TOWER BRIDGE

LONDON EC3N 2NR

Registration and coffee: 17.15

Presentations: 18.00

During the event and afterwards over drinks, investors will have the chance to:

• Discover new investment opportunities

• Get to know the companies better

• Talk with the company directors and other investors

COMPANIES PRESENTING

BARINGS EMERGING EMEA OPPORTUNITIES

Barings Emerging EMEA Opportunities (BEMO) investment objective is to achieve capital growth, principally through investment in emerging and frontier equity securities listed or traded on Eastern European, Middle Eastern and African (EMEA) securities markets.

INTERNATIONAL BIOTECHNOLOGY TRUST PLC

Targeting high growth, International Biotechnology Trust plc (IBT) backs innovative companies addressing high unmet medical needs with the aim of offering investors the opportunity for good returns while making a positive social impact.

NUTSHELL GROWTH FUND

Nutshell Growth Fund is a London-based, FCAregulated Global Equity boutique, seeded & supported by the Family Office of Lord Michael Spencer, who has recently been appointed Chairman of the firm. Nutshell’s flagship strategy, the Nutshell Growth Fund, is a concentrated strategy investing globally in rare, exceptional & ethically-sound Quality/Growth companies. Since the strategy’s inception in January 2019, it has consistently outperformed global Quality/ Growth peers and returned 29.7% in 2024.

WHO WE ARE

EDITOR: Tom Sieber @SharesMagTom

DEPUTY EDITOR: Ian Conway @SharesMagIan

NEWS EDITOR: Steven Frazer @SharesMagSteve

FUNDS AND INVESTMENT

TRUSTS EDITOR: James Crux @SharesMagJames

EDUCATION EDITOR: Martin Gamble @Chilligg

INVESTMENT WRITER: Sabuhi Gard @sharesmagsabuhi

CONTRIBUTORS:

Dan Coatsworth

Danni Hewson

Laith Khalaf

Laura Suter

Rachel Vahey

Russ Mould

Shares magazine is published weekly every Thursday (50 times per year) by AJ Bell Media Limited, 49 Southwark Bridge Road, London, SE1 9HH. Company Registration No: 3733852.

All Shares material is copyright. Reproduction in whole or part is not permitted without written permission from the editor.

Shares publishes information and ideas which are of interest to investors. It does not provide advice in relation to investments or any other financial matters. Comments published in Shares must not be relied upon by readers when they make their investment decisions. Investors who require advice should consult a properly qualified independent adviser. Shares, its staff and AJ Bell Media Limited do not, under any circumstances, accept liability for losses suffered by readers as a result of their investment decisions.

Members of staff of Shares may hold shares in companies mentioned in the magazine. This could create a conflict of interests. Where such a conflict exists it will be disclosed. Shares adheres to a strict code of conduct for reporters, as set out below.

1. In keeping with the existing practice, reporters who intend to write about any securities, derivatives or positions with spread betting organisations that they have an interest in should first clear their writing with the editor. If the editor agrees that the

reporter can write about the interest, it should be disclosed to readers at the end of the story. Holdings by third parties including families, trusts, selfselect pension funds, self select ISAs and PEPs and nominee accounts are included in such interests.

2. Reporters will inform the editor on any occasion that they transact shares, derivatives or spread betting positions. This will overcome situations when the interests they are considering might conflict with reports by other writers in the magazine. This notification should be confirmed by e-mail.

3. Reporters are required to hold a full personal interest register. The whereabouts of this register should be revealed to the editor.

4. A reporter should not have made a transaction of shares, derivatives or spread betting positions for 30 days before the publication of an article that mentions such interest. Reporters who have an interest in a company they have written about should not transact the shares within 30 days after the on-sale date of the magazine.

Growth & Innovation

the companies in question and reproduced in good faith.

Members of staff may hold shares in some of the securities written about in this publication. This could create a conflict of interest.

Introduction

Welcome to Spotlight, a bonus report which is distributed eight times a year alongside your digital copy of Shares.

It provides small caps with a platform to tell their stories in their own words.

The company profiles are written by the businesses themselves rather than by Shares journalists.

They pay a fee to get their message across to both existing shareholders and prospective investors.

These profiles are paidfor promotions and are not independent comment. As such,

they cannot be considered unbiased. Equally, you are getting the inside track from the people who should best know the company and its strategy.

Some of the firms profiled in Spotlight will appear at our webinars and in-person events where you get to hear from management first hand.

Click here for details of upcoming events and how to register for free tickets.

Previous issues of Spotlight are available on our website

Where such a conflict exists, it will be disclosed.

This publication contains information and ideas which are of interest to investors.

It does not provide advice in relation to investments or any other financial matters.

Comments in this publication must not be relied upon by readers when they make their investment decisions.

Investors who require advice should consult a properly qualified independent adviser.

This publication, its staff and AJ Bell Media do not, under any circumstances, accept liability for losses suffered by readers as a result of their investment decisions.

REVEALED: THE AIM STOCKS WHICH HAVE GOT OFF TO A SUPERCHARGED START IN 2025

A large number of junior market names have flown out of the blocks so far this year

Serabi Gold is a top performing stock

We may only be two months in to 2025 but some AIM-quoted businesses have already chalked up big returns. In this article we discuss the best-performing AIM-quoted stocks year-to-date. The data shows that small cap gold miners, oil exploration and technology companies are among those to shine.

UK-based palladium, platinum, rhodium, iridium and gold mining company Eurasia Mining (EUA:AIM) has seen shares gain a staggering 97.8%. Along with other gold miners Serabi Gold (SRB:AIM) up 42.6% and Empire Metals (EEE:AIM) up 38.7% as investors look to gold’s ‘safe haven’ status amid stock market volatility at the start of the year with the inauguration of US President Donald Trump and the DeepSeek related sell-off at the end

of January.

Falklands-based oil outfit Rockhopper Exploration (RKH:AIM) has gained 66.7% yearto-date fuelled by developments in its flagship Sea Lion oil field project. Last November the company said it now expects the Sea Lion project to yield (at a peak) 55,000 bpd (barrels per day). In October, Rockhopper also secured an extension of its petroleum production license in both the North and South Falkland basins (until December 2026).

Peruvian-based hydrocarbons producer PetroTal Corp (PTAL:AIM) and its Asia-Pacific sector peer focused Jadestone Energy (JSE:AIM) have seen shares rise 27% and 26% respectively. PetroTal recently reported a strong first-quarter performance and

declared a welcome cash dividend of $0.015 per common share to shareholders.

Jadestone Energy has been making waves recently with its commitment to global energy transition goals and diversifying its portfolio of production and development assets in countries such as Australia, Malaysia, Indonesia, Thailand and Vietnam.

Moving away from oil, offshore drilling firms, is household furnishings company Victoria (VCP:AIM). Victoria shares have gained 72.9% year-to-date despite reporting disappointing first-half results for the 26 weeks to 28 September 2024. The floorings maker, which dates back to 1895, remains upbeat for the long term with ‘cost initiatives management’ in place. Geoff Wilding, Victoria’s

executive chair said: ‘We anticipate earnings increasing sharply with mid-high teen margins achievable.’

Shares in Filtronic (FTC:AIM) hit an all-time high on 13 February as the communications kit designer continues to benefit from successive contract wins from Elon Musk backed space venture SpaceX. On 10 February, the company signed a £16.8 million contract to be fulfilled between now and the end of 2026.

Filtronic has also secured business with QinetiQ (QQ), BAE Systems (BA.) and the European Space Agency.

Podcast platform Audioboom (BOOM:AIM) has gained an impressive 51.5% so far this year, but the shares are still some way from 2022 highs. In 2023, it issued a profit warning following challenging conditions in the advertising markets, but since then it has made progress.

In its trading update (15 January) for the year ending 31 December, the company reported a 13% increase in revenue to $73.4 million ahead of the IAB’s (Interactive Advertising Bureau) industry growth forecast.

Audioboom also announced several multi-year partnerships with Triton Digital and renewals with ‘key creators’ including Tim Dillon, The Bulwark Network, Cryptic County, No Such Thing As A Fish and Kendall Rae. These shows contribute more than 11 million downloads per month to the Audioboom Creator Network.

Finally Concurrent Technologies (CNC:AIM) has gained 33.5% yearto-date which comes as no surprise considering its most recent trading update (16 January) for the year ending 31 December.

The designer and manufacturer of leading-edge computer products expects to report both revenues and pre-tax profit ahead of market expectations driven by the group’s strategy to invest more assertively in talent and product development. The firm added ‘full year 2024 is set to be a record year, with revenue expected to be approximately 25% ahead of full year 2023’.

Disclaimer: The author (Sabuhi Gard) owns shares in Audioboom.

Top performing AIM stocks year-to-date

Understanding the Growing Space Industry: From Science Fiction to Science Fact

The space industry is on the verge of becoming one of the most lucrative sectors in the global economy.

With the space economy currently valued at $600 billion and projected to reach $1.8 trillion by 2035, the opportunity for growth is immense.1

The space sector is not just about exploration, it’s becoming a multifaceted industry poised to revolutionise industries and provide exceptional opportunities across the global market.

SPACE IN OUR EVERYDAY LIVES

Space technology is more integrated into our daily lives than most realise.

From weather forecasting to satellite-enabled communication, space systems power much of the modern world.

As access to space becomes more affordable, the potential applications of space technology are expanding across a range of industries including agriculture, emergency management, communications, sustainability and global security.

For example, satellites are essential for global supply chain management, disaster

response, and broadband connectivity.

One key driver of this growth is the reduction in costs associated with launching and maintaining satellites.

The decline in prices has lowered the barriers to entry for new companies, resulting in an explosion of space-based startups.

These companies are at the forefront of groundbreaking technologies that are revolutionising nearly every industry on Earth, creating transformative solutions with real-world applications that will reshape our world for decades to come.

A GROWING OPPORTUNITY FOR INVESTORS

As the cost of accessing space continues to decrease, the space sector is rapidly emerging as a dominant industry with immense investment potential.

Already outperforming other tech markets, space startups saw $8.6 billion in venture capital investment in 2024, marking a 25% year-on-year increase from 2023.2

This growth has occurred despite broader market downturns, underscoring the resilience of the space economy.

One key driver of this growth is the dramatic expansion

of satellite constellations, groups of interconnected satellites, that enable global data collection and real-time monitoring.

These constellations are transforming industries like transportation, agriculture, and telecommunications.

Much like the early days of personal computers, the internet, and smartphones, the space sector is riding a wave of innovation, unlocking new opportunities for both businesses and investors.

SPACE’S ROLE IN SOLVING GLOBAL CHALLENGES

The potential for space technologies to help address some of the world’s biggest challenges, from climate change and sustainability to global security, is vast.

Space is central to achieving the SDGs (United Nations Sustainable Development Goals), including supporting

ICEYE SAR image of San-Francisco

Shares Spotlight

Seraphim

efforts to achieve net zero. It offers the tools to measure, model, and predict the Earth’s vital signs, providing insights that are critical for making informed decisions about resource use and conservation.

These technologies are already making a tangible impact, playing an ever more crucial role in gathering environmental data, monitoring greenhouse gas emissions, and improving weather forecasting. They continue to evolve, their potential to drive sustainable development will grow.

For example, as extreme weather events become increasingly regular, the use of satellites for food security, through tracking deforestation, assessing soil health, and improving crop yields, will become essential.

Space technologies are essential to global security and defence agendas.

Satellites provide realtime global communication, intelligence through earth observation, and precise navigation via GPS, supporting military operations and crisis response.

They also aid in early warning systems for missile threats and natural disasters, enhancing national security and global stability.

SPACE INVESTMENT OPPORTUNITIES

The space economy is expanding at an exponential rate, and the investment opportunities are diverse.

Nearly 50% of the 18,000 satellites ever launched have been in the past five years, and that number is expected to increase tenfold over the

next decade.

As demand for satellite-based services grows, so too does the market for space infrastructure.

New startups are emerging in areas like direct to cell communications, space-based pharmaceutical research, and in-space servicing.

Some of the world’s most valuable private companies, like SpaceX and Blue Origin, are in the space sector, and many startups have already achieved valuations of over $1 billion.

As the space sector continues to mature, it offers an expanding pool of investment opportunities, with new companies focused on innovative technologies that promise to revolutionise a range of industries.

FUTURE OF SPACE INVESTMENT

With increasing investment from both private companies and governments, space will continue to transform industries and open up new opportunities for investors.

The intersection of space technology with other megatrends, such as AI (artificial intelligence), autonomous transportation, and renewable energy, will only increase the value of spacerelated investments.

Whether it’s through satellite-based data collection, infrastructure development,

or in-space servicing, the opportunities in space are bound to expand across industries.

The space economy represents a truly unique opportunity for forward-thinking investors.

As new technologies emerge and new applications are realised, the growth potential is exponential. For those looking to participate in one of the most exciting growth sectors of the 21st century, the space industry offers unparalleled opportunities.

Seraphim Space Investment Trust PLC (SSIT) is the world’s first listed SpaceTech fund. It is an externally managed closed ended investment company that was launched in July 2021. SSIT seeks to generate capital growth over the long term through investment in a diversified, international portfolio of predominantly growth stage privately financed SpaceTech businesses that have the potential to dominate globally and are category leaders with first mover advantages in areas such as global security, cybersecurity, food security, climate change and sustainability.

Capital at risk. The value of an investment and the income from it can go down as well as up and investors may not get back the amount invested.

Valereum looks to unlock the future of finance

Aquis-listed Valereum (VLRM:AQUIS) is sitting at the forefront of the financial technology revolution, pioneering tokenisation and digital markets to reshape how capital and assets are settled and traded. With a mission to ‘unlock capital and create value’, Valereum aims to become the global market leader in the burgeoning tokenised markets sector.

WHAT IS VALEREUM?

Valereum is a fintech company that specialises in tokenisation technology and DFMI (digital financial market infrastructure). Its flagship solution, The Bridge, exemplifies its innovative approach. This full-stack DFMI integrates asset issuance, trading, settlement, registry, and custody of tokenised assets across multiple blockchain protocols.

By delivering ‘T-Instant’ settlement at the point of trade, The Bridge eliminates inefficiencies inherent in traditional financial systems, enabling seamless and secure transactions. Valereum’s technology is showcased through VLRM Markets, a growing ecosystem of tokenised marketplaces.

BOLD VISION AND TWOPRONGED STRATEGY

Valereum envisions a world

where financial markets operate with unparalleled efficiency, transparency, and accessibility. By leveraging its deep expertise in capital markets and partnerships with leading technology providers, it has designed solutions that go right to the heart of the challenges of legacy systems, such as high costs, complexity, and counterparty risk.

The company‘s strategy is two-fold:

• Technology Provision: Licensing The Bridge DFMI to exchanges, brokers, and custodians worldwide. This solution revolutionises settlement processes by integrating the CSD (Central Securities Depository) with the trading engine, enabling instant settlement.

• Marketplace Operation: Establishing and managing tokenised marketplaces for public securities, digital assets, and RWA (real

world assets). These marketplaces unlock value in previously illiquid assets and offer investors diverse investment opportunities.

WHY TOKENISATION MATTERS

Tokenisation is the process of converting assets into digital tokens that can be traded on a blockchain. This technology is gaining recognition from financial giants like JPMorgan (JPM:NYSE) and Mastercard (MA:NYSE) for its ability to boost efficiency, reduce costs, and unlock capital. By 2030, the tokenised RWA market is projected to be worth between $16-$64 trillion, while traditional public markets currently exceed $100 trillion in capitalisation.

Valereum’s solutions exploit these opportunities by targeting critical pain points:

• Cost Reduction: Activitybased pricing models lower the cost of adoption for market participants.

• Efficiency Gains: The Bridge eliminates settlement delays and reduces the need for intermediaries.

• Liquidity Creation: Tokenisation facilitates the trading of previously illiquid assets, attracting a broader investor base.

• Risk Mitigation: By ensuring T-Instant settlement, Valereum eliminates counterparty and replacement cost risks.

THE BRIDGE – A TECHNOLOGICAL REVOLUTION

At the heart of Valereum’s offerings is The Bridge DFMI, a turnkey solution that combines state-of-the-art technologies. These include high-performance trading engines, on-chain registry systems, and multi-asset wallet and custody solutions.

Notable features include:

• Final Irrevocable Settlement: Trades are settled instantly at the point of execution, eliminating failed trades and reducing systemic risk.

• Cost and Capital Efficiency: Unlocks capital tied up in central counterparties and minimises operational expenses.

• Global Interoperability: Opens access to panjurisdictional liquidity pools, fostering price discovery and market integration.

VALEREUM’S MARKETS

Valereum’s solutions cater to diverse market segments:

• Private Markets:

Tokenisation of real-world assets such as real estate, artwork, and royalties, unlocking trillions in untapped value.

• Public Markets: Creating regulated exchanges for tokenised securities, enabling 24/7 trading and seamless integration with traditional systems.

• Institutional Clients: Providing tools for brokers, fund managers, and banks to streamline operations and expand product offerings.

THE VALEREUM ADVANTAGE

Valereum’s unique value proposition lies in its ability to merge innovative technology with practical market applications.

The company’s offerings include:

• Cost-Effective: An activitybased pricing model ensures affordability and scalability.

• Agile: Designed for swift deployment, free from the constraints of legacy systems.

• Comprehensive: Integrates multiple functions into a single infrastructure, addressing the entire asset lifecycle.

RECENT MILESTONES

Valereum’s journey has been marked by a series of significant achievements.

The company recently secured a £19 million investment, plus £1 million from a UK institutional investor. The funding supports four acquisitions and Valereum’s expansion in tokenisation and digital assets, strengthening its position as a bridge between traditional finance and blockchain innovation.

Strategic partnerships have been established through collaborations with technology leaders such as Tokeny and Fireblocks to enhance security and functionality.

An RWA Marketplace has been established as a licensed marketplace in El Salvador, showcasing the practical application of the technology.

Technological advancements include the near-completion of The Bridge V1, and ongoing enhancements to support additional asset classes and blockchain protocols.

A PROMISING FUTURE

As tokenisation becomes increasingly important in modern finance, Valereum stands poised to participate in this transformation. By removing inefficiencies in existing markets and creating platforms for new opportunities, the company is not only redefining how assets are traded but also expanding access to global capital pools.

It is a compelling story of innovation, growth, and the rewards of challenging the status quo. Whether through its cutting-edge technology or its vision of inclusive and efficient markets, Valereum is looking to play its part in the future of finance.

To discover more head to our interactive investor hub. Here you will find company news and additional content to further explain Valereum’s vision.

US expansion on the cards for bitcoin miner Vinanz

Vinanz (BTC) listed on the LSE (London Stock Exchange) main market on 13 January 2025.

Securing this BTC ticker makes Vinanz very uniquely positioned from a global brand perspective.

This LSE listing marks a significant milestone in the company’s journey as a rapidly growing player in North America’s bitcoin mining industry and makes Vinanz a unique investment opportunity in the UK. Vinanz is debt free and offers exposure to the bitcoin sector.

With global interest in cryptocurrencies reaching new heights, bitcoin is increasingly recognised as a mainstream asset class.

Over the past year, the approval of multiple spot bitcoin ETFs (exchange traded funds) in the US and other markets has further legitimised digital assets.

These ETFs are attracting institutional investors and reinforcing bitcoin’s position as a credible alternative to traditional fiat currencies.

Today, bitcoin’s total market value stands at around $2 trillion, with predicted robust growth ahead.

Since its initial listing on the Aquis Exchange in April 2023, Vinanz has achieved remarkable success.

The transition to the

main market represents a transformational step, providing access to a broader and more diverse investor base, both in the UK and internationally.

As part of the ongoing digital currency revolution, Vinanz is committed to expanding its role in the bitcoin ecosystem and being a part of the adoption of digital assets worldwide.

FUTURE OF BITCOIN

Significantly for the future of bitcoin, President Trump signed an executive order on 23 January 2025, titled: ‘Strengthening American Leadership in Digital Financial

Technology.’

The order aims to establish the US as a global leader in blockchain innovation while reducing regulatory uncertainty for the crypto industry.

Should the US government adopt the policy of holding a strategic bitcoin reserve as part of its US dollar currency, backing bitcoin prices could benefit substantially.

When Satoshi Nakamoto mined the first bitcoin in 2009, the ultimate number of bitcoins was determined to only ever reach 21 million.

Right now, there are 19.81 million bitcoins mined, and it is estimated that it will take another 140 years to mine to the very

last one.

Vinanz is building up a strategic bitcoin holding by installing miners within third-party hosting facilities throughout the US and Canada.

Currently, Vinanz operates bitcoin miners in Indiana, Iowa, Nebraska, and Texas in the US and in Labrador (Canada) and this footprint is set to expand in 2025.

Vinanz ultimately plans to have 500 miners hashing to Vinanz’s wallet in each North American state, providing a diverse and de-risked platform for revenue generation.

With each new expansion, it aims to install new miners that have a healthy and attractive operating margin of the prevailing bitcoin price on installation, thereby always modernising the fleet and keeping up to date with the latest and most competitive technology.

Vinanz’s financial model is now tried and tested, and provides a linearly expandible model, limited only by the amount of capital deployed.

VINANZ STRATEGY

Vinanz remains at the forefront of the bitcoin mining industry by adopting stateof-the-art ASIC (ApplicationSpecific Integrated Circuit) miners, ensuring continuous upgrades with each new model to maximize efficiency and output. As the cryptocurrency landscape rapidly evolves, Vinanz is committed to maintaining its competitive edge through technological innovation and operational excellence.

This forward-thinking approach aligns with the risk-reward appetite of investors seeking exposure to innovative, high-growth firms in the digital asset sector.

By consistently optimising its mining infrastructure, Vinanz reinforces its position as a leading player in the European-listed bitcoin mining industry, while delivering long-term value to shareholders.

REGULATORY LANDSCAPE AND ADOPTION

With bitcoin and other digital assets garnering mainstream acceptance, regulatory clarity is becoming more pronounced.

Various governments and financial institutions

worldwide are reassessing their stance on cryptocurrency, with some considering regulatory frameworks that promote growth.

The UK is steadily moving toward creating a comprehensive regulatory landscape for digital assets, which could further legitimise companies like Vinanz in the eyes of investors.

LONG-TERM GROWTH IN THE BITCOIN MARKET

Vinanz sees the long-term growth prospects of bitcoin market as significant.

Many analysts predict that bitcoin will continue to appreciate over the next decade as government policy changes, mainstream adoption increases, and supply diminishes due to the halving events that occur about every four years.

By establishing a stake in Vinanz, readers can potentially capitalise on the long-term price appreciation of bitcoin while benefiting from the company’s operational expansion and market share growth. For those looking to diversify their portfolios and explore new avenues of growth, Vinanz presents a prospect worth serious consideration.