Equity income: the UK is now once again the most attractive market for the income investor

Aberdeen Investment Trusts
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Equity income: the UK is now once again the most attractive market for the income investor

Charles Luke, Investment Manager, Murray Income Trust PLC

  • The UK is a very international market with around half the revenues of UK-listed companies generated in the United States and Asia Pacific, with Europe also holding a major share.
  • The UK market trades at an approximate 20% discount to global equities.
  • The yield premium for the UK market is now at its highest point for the last 15 years.

It is some years since UK equity income portfolios were the toast of the town for the core of an investment portfolio. Investors have been seduced by the charms of global income portfolios. After all, why not have the whole world at your fingertips rather than just a single market? The reality is more nuanced.

The UK is an international market. Many companies listed on the UK market draw their sales from around the world, which means they are not dependent on the UK’s – admittedly sluggish – domestic economy. The United States and Asia form around half the revenues of UK companies, with Europe another significant chunk. Investors are already getting global income from their UK portfolios.

But why not just buy a global income portfolio and get the broadest possible opportunity set? The answer lies in the valuations of UK companies, which have been pushed lower by weaker confidence in the UK economy and political system. This has left UK share prices cheap relative to their global peers.

The absolute discount to global markets sits at around 35%. However, the UK market has lighter representation in areas such as technology, which tend to trade on higher valuations. Adjusted for these sector differences, our estimates suggest the UK market is at an approximate 20% discount to global equities.

We see this in the rating of UK companies relative to their international peers. A variety of companies in the Murray Income portfolio helps to highlight this: BP trades at a price to earnings ratio around 40% below US-listed Exxon; Diageo’s valuation is around two-thirds that of US distiller Brown Forman as is Rentokil compared to US peer Rollins; Smith & Nephew trades at around 16x its annual earnings, compared to 25x for US-listed competitor Stryker. It is difficult to determine differences in the operations and prospects for these businesses yet there is a chasm in terms of their valuations.

Apart from the global financial crisis, the UK’s market multiple is nearing its lowest point for 30 years. It is cheap in absolute terms, relative to history and also relative to global equities. Investors are getting global income at a knock-down price by investing through the UK market.

Premium dividend

The UK has a long-established and well-developed dividend culture. While other countries have improved their payouts to shareholders in recent years, few can match the track record of UK companies. The yield for the FTSE All Share is currently 3.7%, which puts it significantly ahead of most major markets. The S&P 500, for example, yields just 1.7%.

This premium has always existed, but is particularly high today as poor sentiment towards the UK has depressed share prices (yields are expressed as a percentage of the share price). The yield premium is now at its highest point for the last 15 years.

Equally, dividend cover looks healthier than it has for some time. The pandemic allowed many companies to re-set their dividends to more realistic levels. Aggregate dividend cover – the amount of profit a firm makes divided by the dividend it pays out – for the FTSE 100 is now more than 2x, having been below 1.5x as recently as 2016.

It is also worth noting that UK investors in global equity income funds will usually see a drag from withholding tax. This lowers distributable income for overseas-listed investments, but has no bearing for investments in UK-listed companies.

Global trends

The UK market is often seen as old-fashioned, stuffed with yesterday’s companies in mature, low-growth industries such as banking and fossil fuels. This may be true of the UK’s largest companies, but looking beyond the mega-caps, there is an increasing range of companies exposed to exciting global themes, such as digitalisation, the energy transition and emerging global wealth.

Equally, where there are gaps, these are readily plugged. At Murray Income Trust, 20% of the portfolio can be held in overseas-listed companies. This allows us to fill any holes in our exposure or diversify risk in concentrated sectors. At the moment, that exposure includes high quality companies such as Microsoft (Artificial Intelligence), Kone (elevators), Novo Nordisk (diabetes and weight loss), Accton Technology (network equipment), LVMH (luxury goods), VAT Group (semiconductors) and L’Oreal (cosmetics).

In short, if Murray Income Trust were a global income fund focused on high quality businesses, it would look extremely similar to its current make-up. In achieving the aim of a high and growing income (Murray Income Trust is approaching 50years of consecutive dividend growth) combined with capital growth, the UK market serves us very well.

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.

Important information

Risk factors you should consider prior to investing:

  • The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested.
  • Past performance is not a guide to future results.
  • Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
  • The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.
  • The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.
  • The Company may charge expenses to capital which may erode the capital value of the investment.
  • Derivatives may be used, subject to restrictions set out for the Company, in order to manage risk and generate income. The market in derivatives can be volatile and there is a higher than average risk of loss.
  • There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
  • As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen.
  • Certain trusts may seek to invest in higher yielding securities such as bonds, which are subject to credit risk, market price risk and interest rate risk. Unlike income from a single bond, the level of income from an investment trust is not fixed and may fluctuate.
  • Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.

Other important information:

Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG. abrdn Investments Limited, registered in Scotland (No. 108419), 10 Queen’s Terrace, Aberdeen AB10 1XL. Both companies are authorised and regulated by the Financial Conduct Authority in the UK.

Find out more at www.murray-income.co.uk or by registering for updates. You can also follow us on social media: Twitter and LinkedIn.

Consumer switching boosts McBride

Andrew Hore
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Consumer switching boosts McBride

Cleaning and detergent products manufacturer McBride (LON: MCB) is benefiting from consumers saving money and switching from brands to lower priced own brands. The fourth quarter was particularly strong and full year figures will be ahead of expectations. McBride is the best performing fully listed company today with a 19.8% increase to 31.15p.

Peel Hunt has upgraded its forecast from a loss of £2.8m to breakeven. The forecast had already been upgraded in April. The previous year’s underlying loss was £29.6m. Margins are expected to continue to improve.

There was 13% growth in volumes in the fourth quarter and the figure for the year to June 2023 was 5.4%. New contracts and higher demand from existing clients has boosted sales.

Net debt was £166.5m at the end of June 2023, which was also better than expected. Working capital was reduced. Debt should come down steadily. No dividends are likely in the short-term.

The full year results will be reported on 19 September. The 2023-24 pre-tax profit forecast has been upgraded from £9.5m to £12m. The shares are currently trading on less than seven times prospective 2023-24 earnings.

AIM movers: Ilika rebounds and Zoo Digital hit by Hollywood strikes

Andrew Hore
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AIM movers: Ilika rebounds and Zoo Digital hit by Hollywood strikes

Batteries developer Ilika (LON: IKA) bounced back after the share price fall following yesterday’s full year figures. Ilika is near to confirming the details of the sub-contracting of manufacturing of its Stereax batters in the US. The share price recovered 12.3% to 36.5p.

Housebuying digital services provider Smoove (LON: SMV) is continuing bid discussions with Pexa Group. The talks were announced nearly three weeks ago. The share price improved 9.31% to 41.1p. Prior to the bid announcement the share price was 31.9p.

Johnson Service Group (LON: JSG) is going to beat full year expectations. The workwear rental business is starting to win new business and the hotel linen business continues to recover. Capital investment has improved efficiency. The share price is 7.61% ahead at 111.7p. Interim figures will be published on 5 September.

Molecular Energies (LON: MEN) has sold 800,000 shares in green hydrogen projects developer Atome Energy (LON: ATOM) at 100p each to CFT Ventures, which is controlled by the former head of Glencore’s oil trading business Mark Crandall. He is also involved in developing other renewable energy projects. Molecular Energies still owns 20.5% of Atome Energy – the share price improved 2.72% to 94.5p. The Molecular Energies share price is 3.52% higher at 117.5p.

Zoo Digital (LON: ZOO) has been hit by strikes in Hollywood in the first quarter. The screenwriters went on strike during the period and the film actors started a strike yesterday. On top of this, major streaming clients have been reducing spending because of the losses being made by the services. This has cut demand for translation and other services. Zoo did better than expected in 2022-23, but the pre-tax profit forecast for the year to March 2024, has been slashed from $10m to $3.3m. The Zoo Digital share price dived 27.8% to 75.5p. Facilities by ADF (LON: ADF) shares have also fallen 10.8% to 45.5p on the back of the latest strike announcement. It provides facilities for TV and film productions, which were still shooting existing scripts but are likely to stop production now that the actors are on strike.

Graphene technology developer Versarien (LON: VRS) has raised £650,000 at 1p/share to help finance the operations until money is raised from disposals. The share price slumped 31.8% to 1.2225p.

Strategic Minerals (LON: SML) investee company Cornwall Resources has been unsuccessfully applied for funds for the Redmoor tin/tungsten project from the Cornwall and Isle of Scilly Council Shared Prosperity Fund. There are plans for the 50% owned company to resubmit the application. The share price fell 13.3% to 0.15p.

Fund manager Premier Miton (LON: PMI) revealed that assets under management declined by 5% to £10.5bn in the quarter to June 2023. That was mainly down to net outflows from funds, plus some negative performance. There was an inflow to fixed income funds. The share price slipped 4.46% to 75p.

Gulf Marine Services – contract extensions could help shares to rise another 50% and still look undervalued

Mark Watson-Mitchell
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Gulf Marine Services – contract extensions could help shares to rise another 50% and still look undervalued

Following news earlier this week of two important contract wins analyst Daniel Slater at Zeus Capital is rating the shares of Gulf Marine Services (LON:GMS) as a Buy, expecting its shares to treble in value.

The Business

The group is a world leading provider of advanced self-propelled self-elevating support vessels.

Its fleet of 13 SESV’s serves the oil, gas and renewable energy industries from its offices in the United Arab Emirates, Saudi Arabia and Qatar.

GMS’s clients in a broad range of offshore oil and gas platform refurbishment and maintenance activities, well intervention work and offshore wind turbine maintenance work, as well as offshore oil and gas platform installation and decommissioning and offshore wind turbine installation.

The group’s assets serve clients’ requirements across the globe, including those in the Middle East, South-East Asia, West Africa, North America, the Gulf of Mexico and Europe.

Broker’s Opinion

Slater is estimating that the current year to December will see revenues lift from $133.2m to $146.7m, with adjusted pre-tax profits rising from $19.5m to $26.7m, raising its earnings to 1.9c (1.7c) per share.

For the coming year he sees $153.9m sales, $40.6m profits and 3.1c earnings.

He has a value of 20p on the shares, while the group’s NAV is 22.6p per share.

Conclusion – shares are capable of rising another 50% and still looking cheap

Since we lasted commented on this group in mid-January the company’s shares have risen almost 48% to 6.9p.

On the basis of the group extending various of its existing contracts and the potential to win even more, this company’s shares could so easily rise another 50% to 9p each and even then look cheap going forward.

Powering up production without draining the batteries

Andrew Hore
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Powering up production without draining the batteries

AIM-quoted AMTE Power (LON: AMTE) and unquoted British Volt show how difficult it is to finance the production of advanced batteries. Building a plant to satisfy potential demand takes millions of pounds and independent companies do not have the finances to do this – or else shareholders will be significantly diluted.
There are alternatives, though. Companies can stick to what they do well – developing the technology. One company is securing production for its batteries that will provide the flexibility to satisfy demand as it increases.
Manufacturing deal
Battery technology IP developer Ilika...

FTSE 100 gains with global stocks as inflation fears ease

UK Investor Magazine
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FTSE 100 gains with global stocks as inflation fears ease

Yesterday’s US CPI reading continued to put wind into the sails of global equities on Thursday as investors positioned for a potential end to the US rate hike cycle.

US CPI fell to 3% in June, while Core CPI inflation fell to 4.8%. These are close to the Federal Reserve’s 2% target but are still high enough to warrant further rate hikes – even if they are intermittent.

Nonetheless, the trend to the downside in US inflation is nothing but good news for stocks FTSE 100 gained 0.3% on Thursday and S&P 500 jumped 0.5% to the highest level in over a year.

While US inflation dropped sharply last month, some think we may be near the end of the road for the current disinflationary trend.

“We do not think inflation is going to come back down to central bank comfort zones by themselves,” said Bruce Kasman, Chief Global Economist at J.P. Morgan.

“Yes, there’s a decline going on. But no, we do not think you’re going to get [core] inflation back below 3% in the U.S. or the euro area this year in an environment where supply has been damaged in a more lasting way and inflation psychology has shifted.”

JP Morgan Research sees the US economy entering a mild recession towards the end of 2023 due to central bank tightening.

FTSE 100 movers

A string of disappointing China economic data releases is increasing bets China will again move to stimulate their economy. FTSE 100 miners and other China-focused stocks are a beneficiary of this trade.

Prudential was 2.4% higher at the time of writing on Thursday, while miners jumped. Glencore gained 2.6%, and Rio Tinto added 1.5%.

Selling resumed in housebuilders on Thursday after a brief mean-reversion rally. The release of a trading statement by Barratt Developments gave investors reason to be concerned as reservations and completions fell in recent months.

David Thomas, Barratt Developments, Chief Executive, commented:

“Whilst the trading backdrop has become more challenging in recent months, with many of our customers facing significant cost of living pressures, we have responded decisively – increasing our reservations into the private rental sector, using incentives for customers in a disciplined way, and flexing our build activity, land-buying and operating costs to reflect market conditions.”

Barratt’s slipped 2.5%, while Taylor Wimpey shed 1.91%.

Predator Oil & Gas discovers potential gas reservoir in Morocco

Andrew Hore
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Predator Oil & Gas discovers potential gas reservoir in Morocco

Fox-Davies has upgraded its target price for Predator Oil & Gas (LON: PRD) from 25p/share to 35p/share following news of NuTech petrophysical analysis for the MOU-4 well in Morocco. The share price jumped 42.3% to 13.875p, which is still lower than the Friday closing price of 15.5p.

The analysis has identified a potential gas reservoir at the top of the Jurassic carbonate target. NuTech interprets two metres of likely gas reservoir with average porosity of 19.9% and average gas saturation of 56%. There are also two other areas of likely gas sands above that level.

A rigless testing result will help to derisk the larger Jurassic structural closure in respect of reservoir development and migration of gas.

Fox-Davies estimates that at a recovery factor of 80% the recoverable volume of gas is 484bcf. The structure is less than 5km from the Maghreb gas pipeline.

AIM movers: Corero Network Security grows revenues and musicMagpie invests in rental assets

Andrew Hore
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AIM movers: Corero Network Security grows revenues and musicMagpie invests in rental assets

Cyber security provider Corero Network Security (LON: CNS) has returned to growth in the first half. Interim revenues were one-fifth higher at $10.6m. Annual recurring revenues grew 13% to $15.3m. This has helped to claw back some of the share price slump this year and it rose 12% to 7p.  

Drug developer Scancell (LON: SCLP) has extended the exercise period for 3.85 million options held by chief executive Lindy Durrant from 30 July 2023 to 30 July 2026. The exercise price is still 4.5p/share. The share price improved 7.23% to 11.125p.

UK Oil & Gas (LON: UKOG) says production is restarting at Avington with a workover of the field’s best performing well – it accounts for 81% of oil produced at Avington. The share price is 6.36% ahead at 0.0585p. Star Energy (LON: STAR), formerly iGas, is the operator of the field, where UK Oil & Gas has a 5% non-operated interest, and the shares rose 5.31% to 11.9p.  

Trinity Exploration & Production (LON: TRIN) says initial analysis of the deep Jacobin well is positive, with at least three well developed, oil-bearing sand intervals in the Lower Cruse target. Additional net hydrocarbon pay has been identified in shallower secondary targets. The well is being sidetracked and that will be done over the next fortnight. The share price increased 2.76% to 74.5p.

Fiinu (LON: BANK) shares continue to decline on the back of news that it cannot raise the cash it requires to apply for a UK banking licence to enable it to offer its overdraft product. The share price fell a further 26.4% to 1.95p.

Refurbished technology supplier musicMagpie (LON: MMAG) reported a reduction in interim revenues from £61.9m to £71.3m with books and media making a lower percentage of the total. Rental business is growing and helping to improve gross margin. The loss increased to £3.18m, partly due to higher exceptional charges and amortisation. Net debt rose to £13.6m because of investment in rental assets, which will generate £4m over 18 months. That investment will continue. There is a £30m debt facility. The fourth quarter is important for the full year outcome. The share price dipped 17.3% to 15.5p.

Loan notes of Prospex Energy (LON: PXEN) totalling £268,000 have been converted into shares at 4.25p each. The share price dropped 16.1% 5.75p.

Battery technology developer Ilika (LON: IKA) appears near to signing a production deal with US-based Cirtec, which could be producing the Stereax battery by the end of the year. There are already orders from medical devices developers for this battery. Limited production is underway from the UK pilot plant, but large volumes will not be produced yet. Cash of £15.9m should cover requirements over the next two years. The share price declined 12.7% to 31p.

Ex-dividends

Anpario (LON: ANP) is paying a final dividend of 7.35p a share and the share price is 7.5p lower at 217.5p.

Character Group (LON: CCT) is paying an interim dividend of 8p a share and the share price dipped 6p to 295p.

Caledonia Mining Corp (LON: CMCL) is paying a dividend of 14 cents a share and the share price is unchanged at 975p.

Heavitree Brewery (LON: HVT) is paying a dividend of 2p a share and the share price is unchanged at 290p.

Ingenta (LON: ING) is paying a final dividend of 2.25p a share and the share price is unchanged at 107.5p.

Kitwave (LON: KITW) is paying an interim dividend of 3.75p a share and the share price rose 4.5p to 306.5p.

Marks Electrical (LON: MRK) is paying a final dividend of 0.66p a share and the share price is unchanged at 93.5p.

Sanderson Design Group (LON: SDG) is paying a final dividend of 2.75p a share and the share price rose 1p to 107p.

Shoe Zone (LON: SHOE) is paying an interim dividend of 2.5p a share and the share price is unchanged at 252.5p. The Mission Group (LON: TMG) is paying a final dividend of 1.67p a share and the share price fell 0.5p to 46p.

Vargas and its ‘blessing of unicorns’ including Northvolt and Polarium

Mark Watson-Mitchell
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Vargas and its ‘blessing of unicorns’ including Northvolt and Polarium

Following a recent trip to Sweden, Mark Watson-Mitchell reports on an absolute corporate giant that is changing our environment

Thinking big, acting fast and getting things done!

Working quietly in the background, this group is a major player on the European business stage, the Swedish-based Vargas Holding, is a premier force in accelerating decarbonisation.

The group is a founder of ‘unicorns’ Northvolt, Polarium and H2 Green Steel, and has recently launched its fourth company, Aira.

In the business world, a ‘unicorn’ refers to a privately held startup company that has reached a valuation of $1bn or more and is considered to offer significant growth potential.

The new venture, that is targeting one of Europe’s largest emitters, will be at the forefront of pushing boundaries for a more sustainable future, disrupting old business models and making a significant positive impact on our climate.

The group’s Management, led by Harald Mix, Chairman, and Carl-Erik Lagercrantz, CEO, states that:

“Accelerating the transition to a sustainable future is everyone’s responsibility, and at the same time, an enormous opportunity. That is why we push boundaries in areas where it matters the most.

With a firm belief in the power of innovation and technology, we build impact companies that create solutions to today’s challenges – and for those of tomorrow. In this way, we will reach our vision to decarbonise one per cent of global emissions.”

Vargas Holding

Vargas is a long-term investor and an active owner of purpose-led companies, with an ambition to establish regional or global leadership.

Together with bold entrepreneurs, Vargas builds impact companies to realise ideas that push boundaries for a sustainable future.

It identifies, validates, finances, launches and then scales impact companies.

From its extensive experience, the group knows that true disruption requires new approaches and ways of working.

It has developed a greenfield model for building companies from the ground up, based on large-scale projects, vertical integrations and close collaboration.

The group started with green batteries, then went on to green steel, hydrogen and now into home energy-tech.

Northvolt, H2 Green Steel, Polarium and Aira are the group’s first impact companies, which are all aiming for regional or global leadership.

Northvolt

Northvolt is a Swedish company that specialises in the manufacturing of lithium-ion batteries, aiming to make oil history through large-scale production of green batteries.

The company was founded in 2016 by Peter Carlsson and Paolo Cerruti with the aim of building the greenest battery in the world and establishing a large-scale battery factory in Europe.

It focuses on developing sustainable and environmentally friendly battery solutions for various industries, including automotive, renewable energy storage, and industrial applications.

The company aims to contribute to the transition towards a more sustainable energy system by providing high-quality, high-performance batteries with a reduced carbon footprint.

One of Northvolt’s key projects is the construction of a massive battery factory called Northvolt Ett in Skellefteå, Sweden, which I visited recently.

This facility is intended to be one of the largest lithium-ion battery factories in Europe, with a planned production capacity of up to 40 GWh (gigawatt-hours) per year by 2024.

The factory will employ advanced manufacturing processes and utilise renewable energy sources, further aligning with Northvolt’s commitment to sustainability.

To develop and scale up its battery production capabilities Northvolt has also partnered with various companies and organisations in the industry, including Volkswagen, BMW, ABB, Epiroc, Volvo, Fluence, Scania and the European Investment Bank.

Overall, Northvolt is a prominent player in the battery industry, focusing on sustainable battery manufacturing to meet the growing demand for energy storage solutions in a greener and more efficient manner.

Polarium

Polarium is a leading energy storage developer.

It makes energy storage and optimisation solutions built on lithium-ion battery technology for businesses within the telecom, commercial and industrial facilities across the world.

Polarium was founded in 2015 on the conviction that safe, smart and sustainable energy storage solutions will be key to empower the transition to a truly, sustainable energy future.

This company is a fast-growing, entrepreneurial business headquartered in Stockholm, with production in Mexico, South Africa and Vietnam, having customers across the world from Ghana to Svalbard and with over 600 employees.

It is an impact business contributing to the sustainable energy transformation by enabling renewables, electrification and intermittent power supply.

With its cutting-edge and easily adaptable modular battery technology, it is enabled to be in the forefront of developing state-of-the art sustainable energy storage and optimisation solutions for today – and tomorrow.

Climate change is the biggest challenge of our time.

CO2 emissions need to decrease by half every decade until 2050, in order to reach net zero.

We need to move from 80% fossil dependencies to 90% renewables in 30 years.

Storing renewable energy so that it can be used not only when produced, but when it is needed, is one of the greatest barriers to the clean energy transition.

Energy storage is the missing link in the sustainable energy system.

The Polarium mission is to unlock endless energy and maximise value creation for its customers through that cutting-edge technology.

Its energy storage solutions enable customers to: secure reserve power by maintaining uptime and avoiding blackouts; reduce energy costs by avoiding price peaks; create new revenue streams through participation in the frequency regulation market; and establish energy independence by maximising the opportunity of renewable production such as solar panels to go off-grid.

As a front-runner, the group continues to invest in cutting-edge technology out of its newly inaugurated research and development centre, thereby ensuring that it continues to re-shape the role of energy storage and then empower the transition to a sustainable future.

H2 Green Steel

H2 Green Steel is a Swedish company that aims to produce fossil-free, high-quality steel using green hydrogen as a reduction agent and thereby powering a new clean industrial revolution.

The company was founded in 2020 with the goal of revolutionising the steel industry and contributing to the transition to a more sustainable and carbon-neutral future.

The traditional steelmaking process involves the use of coal or natural gas as a reducing agent, which releases significant amounts of carbon dioxide (CO2) emissions.

H2 Green Steel aims to replace these fossil fuels with green hydrogen, which is produced using renewable energy sources like wind or solar power.

By utilising green hydrogen in the steel production process, the company intends to achieve a near-zero carbon footprint.

The company plans to build a large-scale steel production facility in Northern Sweden, in the region of Norrbotten.

The facility, known as ‘The H2GS Factory,’ will employ advanced technologies such as electric arc furnaces and hydrogen-based direct reduction, allowing for the production of high-quality steel while minimising environmental impact.

The company’s vision extends beyond just producing green steel.

It also aims to create an entire ecosystem for sustainable steel production, including the development of renewable energy infrastructure and partnerships with suppliers and customers who share their commitment to decarbonisation.

By pioneering the use of green hydrogen in steel production, H2 Green Steel hopes to contribute to the reduction of greenhouse gas emissions in the steel industry and accelerate the transition to a more sustainable and circular economy.

Its investors include Hitachi Energy, Kobe Steel, Scania, Mercedes-Benz, and Kingspan. Its customers include BMW, Electrolux, Bilstein, SPM and Miele.

Aira

The heating of residential buildings is Europe’s third largest contributor of CO2 emissions.

Aira aims to provide clean energy-tech solutions to consumers and is targeting to become Europe’s number one brand within the industry.

The company was founded by Vargas in Stockholm, Sweden, in 2022, with a mission to empower people to join the clean energy revolution, one home at a time.

Aira, which is a direct-to-consumer brand, looks to accelerate electrification of residential heating with intelligent clean energy-tech to enable the net zero future we all need.

The enemy is the gas boiler and Aira looks to be the catalyst to get Europe off gas.

Switching to a heat pump running on electricity instantly reduces CO2 emissions by at least 75%, increasing to 100% with fossil-free electricity generation.

With Aira, consumers across Europe have a go-to-provider for complete home energy saving solutions, with intelligent heat pumps at the heart.

Its consumer-centric subscription model and vertical integration enables the best consumer economics and cost leadership.

Headquartered in Stockholm, Sweden, with 200 employees, Aira’s first markets are Italy, Germany and the UK, and Aira has already secured a manufacturing site in Wroclaw, Poland.

The company plans to scale into more than 20 countries, to employ 10,000 Clean Energy Technicians, and to serve 5m European homes with greener and cheaper residential heating within the next 10 years, by so doing it is targeting a CO2 reduction which is the equivalent of taking 10m cars off the street.

Aira is on a mission to change that by supporting the net-zero transition and cutting consumers energy bills.

By electrifying residential heating with intelligent technology, it is empowering people to join the clean energy revolution, one home at a time.

This technology has already proven its effectiveness in Sweden, where 60% of households already have a heat pump installed and they account for 92% of new heating system installations.

Savings from day one, with zero up-front costs, typically amounting to €15,000–€25,000, and an affordable monthly fee lowering monthly heating bills by up to 40%.

Aira plans to offer a hassle-free customer experience, taking the customer from quote to installation within four weeks and offering an industry leading 10-year warranty, together with a money-back indoor comfort guarantee.

The market for clean energy-tech has a significant, and still largely untapped, potential.

To meet a booming demand for heat pumps, Aira will swiftly establish and grow its business over the coming years.

To conclude

Vargas Holding, with its four ‘unicorns’ is working quietly in the background, aiming to build up from being a major player on the European business stage, into becoming a premier force on the global stage in accelerating decarbonisation.

Its constituent companies are gaining prominence and, as they begin to achieve their various goals, their efforts will become recognised across the world.

* So exactly what is a ‘unicorn’?

A Unicorn startup company is a private company that is looking forward to significant growth, having a post-money valuation of $1bn or more.

The term was coined by venture capitalist Aileen Lee in 2013, drawing an analogy to the rarity of spotting a mythical unicorn.

Unicorns are typically high-growth companies that have attracted significant investments from venture capitalists, private equity firms, or other institutional investors.

The term ‘unicorn’ is used to highlight the exceptional achievement of a startup reaching such a high valuation before going public or being acquired.

Historically, it was relatively rare for companies to achieve billion-dollar valuations in their early stages.

However, with the rise of technology and the increased availability of venture capital, the number of unicorns has grown significantly in recent years.

Unicorns often operate in sectors such as technology, e-commerce, software, biotechnology, or fintech.

They are characterised by disruptive business models, innovative technologies, and the potential for rapid expansion and scalability.

It is important to note that a high valuation as a ‘unicorn’ does not guarantee long-term success or profitability.

The valuation is based on investor confidence and potential future prospects, and the actual financial performance and sustainability of a unicorn may vary.

The collective noun for a number of unicorns is a ‘blessing’.

UK GDP shrank less than expected in May, GBP/USD gains

UK Investor Magazine
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UK GDP shrank less than expected in May, GBP/USD gains

The UK economy shrank 0.1% in May, less than the 0.3% contraction expected by economists.

UK GDP provided little reason for optimism, although, it should make households and investors slightly less pessimistic. A smaller-than-expected contraction is good news for avoiding a recession, and a slowing economy will be considered by the Bank of England when deciding on future rates.

“While the economy shrank modestly in May, that could be down to the extra bank holiday for the Coronation as well as industrial action across the health, rail and education sectors. If true that would suggest the underlying picture is of an economy that remains strong, despite the Bank of England’s attempts to cool activity with higher interest rates,” said Nicholas Hyett, Investment Manager, Wealth Club.

Moneyfarm’s Chief Investment Officer highlighted the conundrum for the government and their fiscal strategy in a low-growth environment.

“Stagnant GDP growth, while better than expected, still represents a challenge for the government in its wage negotiation with public sector workers. The combination of a high cost of debt and an already high tax burden leaves the government few with options to address the cost of living concerns in the public sector,” said Richard Flax, Chief Investment Officer at Moneyfarm.

GBP/USD rose following the release as traders ultimately maintained positioning for pound strength in the face of high UK inflation and soaring wage growth.

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