Core Viewpoint - Rheinmetall's strong revenue growth and record operating profit for 2025 were overshadowed by an earnings miss, leading to a decline in share price despite a positive sales outlook driven by geopolitical tensions [1] Financial Performance - Rheinmetall reported a 29% year-on-year increase in sales, reaching 9.935 billion euros, but fell short of market expectations of approximately 10.12 billion euros [1][1] - Operating profit rose to 1.84 billion euros from 1.4 billion euros the previous year, with an operating margin improvement to 18.5%, yet it did not meet the forecast of 1.92 billion euros [1][1] - Net profit decreased slightly to 696 million euros from 717 million euros, significantly below the expected 1.15 billion euros [1][1] Order Backlog - The order backlog reached a record 63.8 billion euros, a 36% increase from the previous year, indicating strong demand for defense equipment [1][1] - Rheinmetall proposed a dividend of 11.50 euros per share for 2025, up from 8.10 euros the prior year, reflecting confidence in future earnings [1][1] Strategic Shift - The company is restructuring to focus entirely on defense, putting its civilian automotive operations up for sale to capitalize on increased defense spending [1][1] - Rheinmetall aims to provide systems across land, air, space, and naval domains, positioning itself as a key supplier to Western militaries [1][1] Sales Outlook - For 2026, Rheinmetall forecasts sales growth of 40% to 45%, projecting revenue between 14 billion and 14.5 billion euros, with an expected operating profit margin increase to around 19% [1][1] - The ongoing conflicts in Ukraine and Iran are driving demand for military equipment, particularly drones and air-defense systems [1][1] Analyst Sentiment - Analysts express optimism regarding Rheinmetall's guidance for 2026, indicating that the company's growth trajectory remains intact [1][1] - Bernstein analysts noted that reaching the upper end of the 2026 revenue forecast would imply a compound annual growth rate of around 34% to 2030, outpacing other major European defense contractors [1][1] - Berenberg analysts highlighted strong demand for air defense systems, supporting the medium-term outlook despite slightly weaker operating profit guidance [1][1]

Market Overview - US stock indices opened higher, with Nasdaq leading the gains at 0.8%, followed by S&P 500 at 0.4% and Dow at 0.2% [2] - Coinbase was the top riser on the S&P, increasing by 11.4% as bitcoin rebounded [2] Company Movements - Robinhood Markets saw an increase of 8%, along with other companies like Applovin, Arista, Datadog, Western Digital, and Seagate Technology experiencing gains [3] - Executives from US defense groups, including Lockheed Martin and RTX, were summoned to the White House to discuss increasing production of missiles and weaponry [4] Economic Context - US Treasury Secretary Scott Bessent reiterated the commitment to assist oil shipments in the Gulf region amid ongoing conflicts [3] - President Trump announced that the US would provide risk insurance and potential naval escorts for tankers in the Persian Gulf to restore crude oil flows [8]

Core Viewpoint - The interim management statement for Hargreave Hale AIM VCT PLC highlights contrasting economic conditions in the US and UK, with the US showing strong growth while the UK faces challenges including weak economic growth and rising unemployment [3][5]. Economic Overview - The US economy reported a robust growth rate of 4.3% in Q3 2025, despite political pressures [3]. - The UK is projected to have a growth rate of 1.5% for 2025 and 1.4% for 2026, with an unemployment rate rising to 5.1% [5]. - Consumer sentiment in the UK has improved post-Autumn Budget, although business confidence remains fragile [4]. Inflation and Monetary Policy - UK inflation, as measured by CPI, increased by 3.4% year-on-year as of December 2025, down from 3.8% in September 2025 [6]. - The Bank of England reduced interest rates to 3.75% during the quarter, with expectations for further cuts in 2026 [6]. Investment Performance - The unaudited NAV per share decreased by 1.25 pence to 35.21 pence, resulting in a total return of -3.43% for shareholders [9]. - The AIM index returned -0.97% in the three months to December 31, 2025, reflecting a challenging market environment [8]. Qualifying Investments - Hardide saw a significant increase of 157.1% in value, returning to profitability and reporting a 40% year-on-year revenue increase [10]. - Skillcast and Tortilla Mexican Grill also reported positive performance, with increases of 11.7% and 34.3% respectively [11]. - Negative contributors included Cohort, which declined by 36.7% despite solid revenue growth, and Diaceutics, which fell by 23.3% without specific news [12][13]. Portfolio Structure - The company maintained a strong investment position, ending the period with 84.11% invested according to HMRC VCT investment tests [16]. - The weighting to qualifying investments increased from 54.0% to 54.9% by market value [16]. Share Buybacks and Market Activity - The company repurchased 2.6 million shares at an average price of 34.14 pence, with the share price trading at a discount of 4.30% to the last published NAV [21]. - Post-period, the NAV per share increased to 36.33 pence, reflecting a 3.18% rise, while AIM increased by 6.54% [22].

Group 1 - CSG Group, through its subsidiary Excalibur Army, has secured contracts in Southeast Asia for the delivery of over 100 Patriot armored vehicles, with a total contract value exceeding USD 300 million, scheduled for completion within three years [1] - The order includes various configurations of the Patriot platform, such as mortar carrier vehicles, command vehicles, armored personnel carriers, wheeled infantry fighting vehicles, and armored medical evacuation versions [1] - Excalibur Army specializes in developing and producing advanced land systems, confirming the trust of partners in Southeast Asia and building on a successful track record of previous exports in the region [2] Group 2 - The Patriot armored vehicle is built on a Tatra chassis, featuring a unique central backbone tube design that ensures high mobility in demanding conditions, representing the largest export order for the Patriot platform to date [3] - CSG N.V. is a leading European defense group based in Prague, Czech Republic, focusing on the development and production of strategically important defense and industrial technologies [4] - CSG operates key manufacturing facilities across multiple countries and employs over 14,000 people, with reported annual revenues of EUR 4.0 billion in 2024 [4]

Group 1 - Iveco Group has received an 'A' rating in the climate change category of the 2025 CDP assessment, recognizing its leadership in corporate transparency and action on climate change [1] - The company also achieved an 'A-' rating in water security for 2025, both ratings showing improvement over the previous year [2] - Michele Ziosi, Chief Global Affairs & Sustainability Officer, emphasized that the 'A' rating validates the company's climate governance and transparency in disclosures [3] Group 2 - Iveco Group is committed to sustainable business practices and has set bold ESG targets in four areas: net zero carbon emissions, workplace and product safety, life cycle thinking, and inclusion and engagement [3] - The company operates seven major brands, including IVECO, FPT Industrial, IVECO BUS, HEULIEZ, IDV, ASTRA, and IVECO CAPITAL, employing 36,000 people globally [4]

Market Overview - The year was characterized by high-conviction bets and rapid reversals across various markets, including bonds, currencies, and stocks [1] - Investors engaged in significant bets on political shifts, inflated balance sheets, and speculative narratives, leading to both substantial gains and losses [2][3] Cryptocurrency Trends - The Trump brand initially drove momentum in the cryptocurrency market, with various tokens launched by Trump family members experiencing significant but short-lived rallies [4][5] - By December 23, Trump's memecoin had dropped over 80% from its January high, while Melania Trump's token fell nearly 99% [6] - The volatility in crypto assets highlighted the speculative nature of the market, where political momentum could not shield investments from core market patterns [7] Defence Stocks Surge - A geopolitical shift led to a significant rise in European defence stocks, with companies like Rheinmetall AG and Leonardo SpA seeing year-to-date gains of approximately 150% and over 90%, respectively [10] - Asset managers, previously hesitant to invest in defence due to ESG concerns, began to redefine their mandates and invest heavily in the sector [11][12] - A Bloomberg basket of European defence stocks rose over 70% for the year, indicating a major shift in capital allocation towards defence as a public good [12] Debasement Trade Narrative - Heavy debt loads in major economies prompted investors to seek refuge in gold and alternative assets, leading to the emergence of the "debasement trade" narrative [13] - In October, both gold and Bitcoin reached record highs amid concerns over the US fiscal outlook and a prolonged government shutdown [14] - Despite the initial rise, Bitcoin later slumped, and the dollar stabilized, illustrating the complexities of the debasement trade [15][16] South Korean Stock Market - South Korea's benchmark equity index surged over 70% in 2025, driven by President Lee Jae Myung's efforts to enhance capital markets [18] - Foreign investment increased significantly, while local retail investors remained net sellers, indicating a disconnect between domestic sentiment and foreign capital inflows [20] Japanese Bonds - The "widowmaker" trade against Japanese bonds turned profitable in 2025 as yields surged, driven by interest rate hikes and increased government spending [26][27] - The benchmark 10-year JGB yields surpassed 2%, marking levels not seen in decades, while the overall bond market faced significant declines [28][29] Credit Market Dynamics - The credit market in 2025 experienced a series of smaller collapses, exposing poor lending practices and leading to significant losses for investors [40][41] - Companies like Saks Global and New Fortress Energy faced severe financial difficulties, prompting a reevaluation of credit risk and lending standards [41][42] Fannie Mae and Freddie Mac - Following Donald Trump's re-election, shares of Fannie Mae and Freddie Mac surged by 367% from the start of the year to their September high, driven by optimism regarding potential privatization [34][35] - The possibility of an IPO valuing the companies at around $500 billion further fueled investor interest, despite ongoing skepticism about the timeline for such a move [35][36] Turkish Carry Trade Collapse - The Turkish carry trade, initially favored by investors, collapsed following political unrest, leading to significant outflows from Turkish lira-denominated assets [37][39] - By December 23, the lira had weakened by 17% against the dollar, highlighting the risks associated with high-yield investments in politically unstable environments [39]

Core Insights - Critical Infrastructure Technologies Ltd. (CiTech) has expanded its collaboration with Babcock International Group to co-develop a platform integrating 5G communications and ISR capabilities for European and Southeast Asian markets [1][2] - The original MOU focused on supplying 50 Nexus 20 platforms to the Ukrainian Ministry of Defence, but the new agreement broadens the scope to include all of Europe and Southeast Asia [2] - The first Nexus 20 platform is expected to arrive in the EU in April 2026 for regional demonstrations, indicating a strong outlook for 2026 [3] Company Overview - CiTech specializes in autonomous, high-capacity mobile communications platforms, targeting sectors such as mining, defense, border security, and emergency services [5] - The company's first product, the Nexus 16, aims to provide critical mobile telecommunications using patented self-deploying technology [5] - CiTech has completed its research and development phase and is currently in the commercialization stage for its products [5] Partner Overview - Babcock International Group is a FTSE 100 defense company operating in multiple regions, including the UK, Australasia, Canada, France, and South Africa [3] - The company focuses on delivering complex support and product solutions to enhance defense capabilities and critical assets [3]

Economic Overview - The UK economy has contracted by 0.1% in October, following a similar decline in September and no growth in August [1][2] - Unemployment has risen to 5.1%, marking the highest level in nearly five years [3][104] - Public sector wage growth has reached a record high of 7.6%, nearly double the 3.9% increase in the private sector [51][93] Debt and Fiscal Concerns - The Chancellor has borrowed £116.8 billion this financial year to cover the gap between tax receipts and public spending [1] - The Office for Budget Responsibility (OBR) warns that the UK's debt-to-GDP ratio could exceed 270% by 2073-74 if current trends continue, with a forecast of 96% by the end of the decade [4][7] - Debt interest payments are expected to remain above £100 billion annually for the rest of the decade [9] Job Market Dynamics - The job market is showing signs of cooling, with public sector wage growth outpacing the private sector [2][51] - The number of redundancies has increased significantly, with 156,000 reported in the three months to October, the highest since the pandemic [94] - Private sector employment has declined for the 15th consecutive month, indicating a persistent downturn in hiring [62][68] Monetary Policy Implications - The Bank of England is anticipated to cut interest rates for the first time since August, with expectations of a reduction from 4% to 3.75% [96][105] - Analysts suggest that the Bank will adopt a cautious approach to future rate cuts due to strong public sector wage growth [50][54] Market Reactions - UK stocks have experienced declines in response to rising unemployment and a weakening jobs market [20][86] - The FTSE 100 index fell by 0.8% as investors reacted to the latest employment data [20][86]

Core Viewpoint - BAE Systems, the largest defense company in Britain, has been awarded a significant contract by the U.S. Navy, valued at up to $1.7 billion over five years for the supply of laser-guidance kits [1] Group 1: Company Overview - BAE Systems is recognized as Britain's biggest defense contractor [1] - The awarded contract is part of the company's ongoing relationship with the U.S. Navy [1] Group 2: Contract Details - The contract spans five years and is worth up to $1.7 billion [1] - The purpose of the contract is to supply laser-guidance kits that convert unguided rockets into precision-guided munitions [1]

Core Viewpoint - Rheinmetall CEO Armin Papperger stated that the company is not currently in negotiations with Volkswagen regarding its factory in Osnabrueck [1] Company Summary - Rheinmetall is a German defense company [1] - The CEO's comments indicate a clear stance on the lack of ongoing discussions with Volkswagen [1] Industry Summary - The statement reflects the current state of negotiations within the defense and automotive sectors in Germany [1]