European defence stocks tick up on NATO spending pledge
June 26 (Reuters) - Shares in European defence firms edged up on Thursday after NATO leaders on Wednesday backed the increase in defence spending demanded by U.S. President Donald Trump.
As of 0814 GMT, German contractor Rheinmetall (RHMG.DE), opens new tab and Italy's Fincantieri (FCT.MI), opens new tab, which on Thursday said it received an order worth 700 million euros ($820.89 million), were the top gainers, up between 3% and 6%.
A broader European defence index (.SXPARO), opens new tab, which this year has rallied 49% on the back of a changed stance towards the sector in Europe, was up 1.3%.
Countries on Wednesday pledged to spend 3.5% of GDP on core defence and 1.5% on broader defence-related measures, a jump worth hundreds of billions of dollars a year from the current goal of 2% of GDP.
However, J.P. Morgan analysts say that the market is lukewarm to the targets, which are to be achieved over the next 10 years.
"The European defense companies we cover and the European defense investors we speak with do not believe that most European countries will be able to spend 3.5% of GDP on core defense in the next 5-10 years," they wrote in a note to clients.
Tom Guinchard, equity research analyst at Pareto Securities said the focus for defence companies would be Northern Europe, Germany and the Baltics, which are most likely to reach the targets.
"Already last week, we saw Spain get the exception," said Guinchard. "France will have difficulties leveraging up to 3.5% of GDP and most of the southern countries are going to be quite hesitant."
($1 = 0.8527 euros)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Telegraph
31 minutes ago
- Telegraph
Britain has just spent £1bn on new F-35s. Were we right to do so?
For a Labour government keen to showcase its defence credentials to the world – and particularly Donald Trump – it was the perfect party piece. Ahead of this week's Nato summit in the Hague, Sir Keir Starmer announced the purchase of 12 new F-35A fighter jets, ordered from the United States at a cost of nearly £1 billion. Armed with state-of-the art technology and radar jammers, the so-called 'flying computer' can operate almost invisible to enemy eyes: as its maker Lockheed Martin boasts, 'it is built to conduct missions others can't'. More importantly, it can carry bombs that others can't. The F-35A will enable Britain to carry US B61s – tactical nuclear weapons that could be deployed on a battlefield in the event of a war with Russia. The idea is to widen Britain's range of nuclear response options, which currently rest only in the much bigger strategic missiles carried on its Trident submarine fleet. In nuclear weapons terms, that is the difference between a scalpel and a sledgehammer – and while the purchase has horrified disarmament campaigners, Sir Keir insists it is a necessary evil. 'In an era of radical uncertainty, we can no longer take peace for granted,' he declared. What has also not been taken for granted, however, is the F-35's complete reliability. For despite being billed as America's foremost combat jet, critics say it has suffered more than its fair share of glitches during its 19-year flying history. In 2019, the military magazine Defense News revealed that Pentagon chiefs had identified precisely 857 'deficiencies' in the aircraft's design, including seven that were potentially 'critical'. Most have since been dealt with, but to this day the F-35 programme remains dogged by technical hitches and concerns about reliability and maintenance. Britain has been a major customer of the F-35s, and already owns 48 F-35Bs – a variation on the F-35A that also has vertical take-off and landing capabilities, making it suitable for use on aircraft carriers. Worldwide, however, at least a dozen F-35s have been involved in accidents or serious technical failures since 2018. Sometimes the cause has been malfunctioning headsets or software failures; on other occasions pilots have simply struggled with the complex technology. In January, an F-35A fighter jet crashed during a training session at an Air Force base in Alaska after an in-flight malfunction, forcing the pilot to eject. Three years ago, a South Korean Air Force F-35A made a belly landing after a bird strike and a landing gear malfunction. Just this week, it was revealed that a British F-35B serving with an aircraft carrier in the Indian Ocean has been stranded on the Indian mainland for more than 10 days after monsoon rains forced it to make an emergency landing. A technical issue with the craft was reportedly identified after it landed, and a British Merlin helicopter from the aircraft carrier flew technicians in to try to fix the suspected hydraulic failure. But like a fancy sports car that can only be repaired by authorised dealers, the F-35 was deemed in need of a team of specialists from the UK. Meanwhile, Royal Navy chiefs are said to have turned down an offer by the Indians to move the jet out of the rain and into a hangar, for fear they might take a sneaky peak at its sensitive technologies. Problems with software updates have meant that hundreds of the planes have at times lain in hangars in the US, hindering ongoing roll-out programmes to Europe's other Nato players. Like much high-tech Pentagon equipment – especially anything nuclear-capable – the US military is cagey about the exact nature of the issues. But outsiders have not been shy in airing criticisms, among them aviation expert Bill Sweetman, a Hampshire-born former editor for Janes (a global open-source intelligence company), who now lives in the US. While Lockheed Martin hails its product as 'stealthy, speedy and the future of air dominance across the world,' Sweetman is rather less complimentary. In a book published last year, detailing the programme's problems and vast cost overruns, he famously dubbed the F-35 a ' trillion-dollar trainwreck '. Others – including a former acting defence secretary under Trump – have been equally damning, dismissing it as a 'rathole' and 'f----d up.' Sweetman paints a picture of a vast, outdated flight development programme, which began in the late 1990s when computer technology was far less developed than it is now, and has been playing catch-up ever since. As a result, he argues, the F-35 is rather like a clunky late-1990s laptop onto which lots of additional hard-drives and software have had to be awkwardly grafted. 'Operating a stealth aircraft [one designed to be invisible to radar] is always a unique challenge, in that you are also trying to minimise all the electronic signals that the plane might emit,' he says. 'But a big problem has been the design of the electronics, as how one did these things 25 years ago is very different to how they might be done today. By the late 2010s, for example, they were already running out of memory for the plane's computers, so they had to install first one new computer control system, and then another. That's very complicated and also affects the jet's avionics – how it flies. It might have been better to have had a design that kept the avionics separate from the control systems.' Lockheed Martin disputes that assessment, and compares the updates to 'how an iPhone receives a software update on a base operating system'. John Neilson, the firm's director of international media and corporate affairs, says: 'We continue to release iterations of software that will further enhance combat capabilities, operational effectiveness and readiness of the aircraft.' More than 1,000 F-35s have already been produced, several hundred of which are already in use by Nato allies or due for delivery in coming years. Sweetman believes that the programme, like many large-scale defence contracts, ended up being simply too big to abandon, and that 'every failed fix made matters worse'. Last year, members of the United States House Committee on Armed Services even argued for scaling back procurement of the planes until the problems were ironed out for good. The programme, however, is already seriously behind schedule, making matters even worse. 'They were all supposed to be delivered before 2030,' Sweetman says. 'Now that target is more like 2054.' Greg Bagwell, a retired air marshal and distinguished fellow at the Royal United Services Institute, says the issues extend beyond 'teething problems'. 'The F-35 is a big and long programme, with some way yet still to go,' he says. 'And while you can excuse any teething problems… there are clearly issues.' Bagwell likens the F-35 to a thoroughbred racehorse or Formula One racing car, arguing that because of its high-performance capabilities, it was always likely to suffer occasional technical hiccups. 'But if you look at the total number of flying hours that have already been put in, the number of serious issues has been pretty low,' he adds. The plane was in action over Iran recently during the US-Israeli bombing raids, with no performance issues or combat losses. 'There is some truth to the criticisms of people like Bill Sweetman, but based on exercises and operations we've seen so far, the F-35 is well above anything else we have,' says Bagwell. Other defenders of the plane, which took part in its first combat missions against Isis in Iraq in 2019, agree that despite its problems, it is still currently peerless. Its 360-degree vision gives pilots unrivalled situational awareness, and it also has formidable electronic warfare capabilities that can overwhelm enemy air defences. As one writer put it in an article last year for the magazine European Security & Defence: 'If the task is to go and drop a pair of small precision-guided missiles through someone's roof, and return home safely – probably undetected, and certainly unmolested – then there is no better aircraft to achieve that than an F-35.' Defence analysts also point out that glitches are routine with any high-performance aircraft, and that most of the more serious ones with the F-35 – such as problems with cockpit pressure leading to pilots suffering sinus pain – have now been ironed out. The debate over the F-35s' effectiveness, however, comes amid a wider discussion about whether the military should continue investing in manned aircraft and ' Top Gun ' pilots at all. With drones now effectively dominating the battlefield in Ukraine, many wonder if the West would be better off focusing purely on unmanned planes, controlled in turn by AI technology. Among those who believe so is American entrepreneur Elon Musk, who made his feelings known on social media last year when posting a video of a drone swarm. 'Meanwhile, some idiots are still building manned fighter jets like the F-35,' he said, adding: 'Crewed fighter jets are an inefficient way to extend the range of missiles or drop bombs. A reusable drone can do so without all the overhead of a human pilot.' Even Sweetman, however, points out that no drones currently have anything like the speed, range or weapons-carrying ability that a fighter jet has. And as the US bombing raid on Iran's nuclear facilities proved earlier this week, manned flights still have their uses. In an interview with The Telegraph last year, Paul Livingston, the chief executive of Lockheed Martin's UK arm, insisted the F-35's capabilities were still 'beyond anything else out there'. 'Before the F-35, if I was going to fly a mission into a peer nation's territory to strike against a well-protected target, I would need a minimum of 16 aircraft,' he said. 'You would have jamming aircraft – which, by the way, says, 'Hello, we're coming' – then you'd send in suppression of enemy air defence aircraft, because you'd have to kill the radars off, then you'd send fast strike aircraft in. 'I can now do that same mission with four F-35s and no support. And they don't need protection afterwards, because they can fight their way out.'
Times
34 minutes ago
- Times
Moonpig boss unexpectedly steps down
The chief executive of Moonpig, the online greetings cards business, has stepped down after seven years, catching the City and his leadership team unawares. The company's share price dropped by 9 per cent on Thursday as the market digested the unexpected news of Nickyl Raithatha's departure, which was delivered alongside the annual results. Raithatha will serve out his 12-month notice period to ensure a smooth transition. 'It has been a great time in a business that I love and I want to leave on a high,' he said. 'I feel like I'll be able to do that with good momentum, good trading and a rock solid team. I'll miss it, but it should be a really strong platform for someone to come in and build on.' The card retailer's reported profit before tax dropped 93 per cent to £3 million because of a £56.7 million charge representing a loss in value for its experiences division. It bought the Buyagift and Red Letter Days businesses from Otium Capital for £124 million in 2022 to cash in on what it saw as a shift from physical gifts towards experiences such as afternoon tea at Harrods or a day driving supercars on the Top Gear test track. The unit, which marked the company's first acquisition since its £1.2 billion IPO in 2021, struggled as lower consumer confidence and economic challenges pushed down spending on gifts. The company's ebitda earnings were £96.8 million, up 1.3 per cent, slightly above analyst expectations of £94 million. Its revenue of £350 million, up 2.6 per cent from the year before, was at the bottom end of the guidance, due to a slower second half with consumers less willing to pay for extras, such as choosing a larger card or adding a more expensive gift. After the end of the financial year, sales growth bounced back with Moonpig's strongest Father's Day yet, the company said. • Moonpig launches AI-driven handwriting tool 'There's a lot of uncertainty in the world so people are holding back,' Raithatha said. 'The good news for us is that we have managed to start growing gifting meaningfully, despite that consumer pullback, which we're really proud of internally.' Moonpig was founded in 2000 by Nick Jenkins, a former commodity trader who named his company after his school nickname. Raithatha launched Moonpig on to the London stock market during the pandemic, one of a clutch of companies that went public in 2021, at a price of 350p with a £1.2 billion valuation, only to see its share price plummet when the lockdowns ended. It has never quite recovered. On Thursday, the shares retreated another 22½p, or 9.2 per cent, to close at 221p. Analysts at Peel Hunt described Raithatha's departure as 'more of an eyebrow raise than a shock. Nickyl has been an impressive figurehead and Moonpig has progressed well under his leadership'. RBC said: 'Whilst the resignation of Raithatha will be a key talking point, we focus on the business's performance. The group has delivered a 6 per cent adjusted PBT [profit before tax] beat in 2025, with growth at the core Moonpig brand now back in double-digit growth.' Reflecting on his tenure, Raithatha said: 'If you live and die by share price, you can become very depressed very quickly. I look back at the last seven years and we have quadrupled revenues, we have quintupled profits, the workforce is six times bigger and we have entered new countries. 'The fact that we've got 12 million customers, they're more loyal, they're more engaged. It means the strategy has worked pretty consistently over that time. The IPO was obviously a pretty big highlight which put Moonpig on the map. 'We've obviously come off the highs from a share price perspective. But the business is bigger, more profitable and faster growing than it was at the IPO. From our perspective we're delivering for customers and that should translate to delivering for shareholders.' On Thursday morning when Nickyl Raithatha explained to Moonpig staff in a company 'all-hands meeting' that he was leaving, they were taken aback by the news. His leadership team are, by all accounts, still processing it. Heart emojis filled the screen on the video call as staff expressed digitly that they were genuinely sorry to see him go. After celebrating Raithatha's seven-year 'Mooniversary', as it is cloyingly called internally, with a Moonpig card, he felt it was time to explore pastures new. Those who know him are not surprised. At just 42, the young chief is extremely ambitious and was unlikely to be celebrating Mooniversaries for the rest of his life. His parents were among the Ugandan Indians forced to flee Idi Amin's regime in 1972. Raithatha grew up helping in his father's pharmacy. After a degree at Cambridge, he went on to cut his teeth at Goldman Sachs and then, while the financial crisis took hold, left to do an MBA at Harvard. This planted the seed of working in business, which is where his career swerved away from the more staid world of banking, into tech and start-ups. He founded Finery, a fashion retail business, which he sold to Touker Suleyman of Dragons' Den. Moonpig was not an obvious next step and growing the business has not been straightforward. The share price has not kept pace with the growth of the company and been a constant disappointment to investors. However, he has gained a lot of experience along the way and quite a network: his chairwoman is Kate Swann, the former boss of WH Smith. While he has not decided what he wants to do next, it will be related to the worlds of tech and digital. 'I'm still early in my career, I've got plenty of time and capacity to take on new challenges and try new things,' he said. In this rapidly accelerating era of AI there is no shortage of tech excitement in the business world. No doubt the headhunters are already knocking. And it'll be the end of people singing 'Mooooooonpig dot com' at him.
Times
34 minutes ago
- Times
Next 15 sacks three executives over potential misconduct at Mach49
A marketing company quoted on London's junior Aim market has warned on profits and said that its chief executive would step down after uncovering 'potential serious misconduct' relating to a company that it previously acquired. The potential misconduct was discovered by Next 15 after a review of a big contract for Mach49, an advisory company based in Silicon Valley, which was cancelled early in September. The loss of part of the contract lowered the earnout for the sellers of the business, which was based on how profitable the agency was between 2020, when it was acquired, and January 2025. Next 15 said it expected 'a lower conversion of opportunities within this brand's pipeline' after uncovering the potential issues, which together with a weakening in the dollar, meant that adjusted operating profit for the current financial year would be 'materially below' market expectations of £80.5 million. The company generates about half of its revenue in dollars. Three members of Mach49's senior management team have been sacked, including Linda Yates, Mach49's founder and chief executive, and no further payments will be made to Yates, the company said. Next 15 said it was in the process of reporting the matters to relevant law enforcement agencies and would 'ensure that full co-operation is provided to those agencies'. Tim Dyson, the company's chief executive of more than 30 years, will retire from the business and be replaced by Sam Knights, who is the boss of Shopper Media Group, a marketing company owned by Next 15. Dyson's exit came on the same day as the company's annual meeting, which meant a resolution for his re-election as a director was withdrawn. The $400 million contract, which was announced 18 months after Next 15 acquired the company in 2020, was cancelled at the end of last year and not in 2026, as had been expected previously. Winning the contract had increased the earnout due to the owners of Mach49 by £107 million, according to Next 15's 2022 full-year results, which pushed the company to a £80.1 million pre-tax loss that year. The shares, which have fallen 76 per cent over the past 12 months, were down 77p, or 27 per cent, to 212p in afternoon trading. Next 15 is best known in the City as the owner of MHP Group, which handles the financial communications for dozens of companies listed on the stock market, including its parent. It also owns other consultancies, advising clients on everything from marketing to technology to communications. Next 15's agencies have worked with some of the world's best-known brands and companies, including Apple, BAE Systems and Pepsi.
