These names reflect different facets of the UK’s evolving economy: clean energy, defence & industrial, and technology.
1. Ceres Power Holdings plc (LSE: CWR) – Hydrogen & Clean-Tech Innovator
What they do: Ceres Power develops and licenses solid oxide fuel cell (SOFC) and electrolysis technologies. These are critical for green hydrogen production and distributed clean energy powering everything from data centres to EV charging infrastructure.
Why it’s compelling:
Asset-light business model: Ceres doesn’t manufacture everything itself but licenses its IP, which could drive scalable margins.
High environmental relevance: It holds a Green Economy Mark from the LSE, underlining the company’s alignment with decarbonisation and low-carbon infrastructure.
Long-term potential: As governments push more aggressively on hydrogen strategies, Ceres could benefit disproportionately, given its technology’s role in “power-to-X” and distributed clean energy systems.
Risks: Technology execution risk, capital intensity for scaling, competition from other green hydrogen players.
2. ITM Power plc (LSE: ITM) – Electrolyser Manufacturer & Hydrogen Enabler
What they do: ITM Power manufactures PEM (proton-exchange membrane) electrolysers, which use electricity + water to produce green hydrogen.
Why it’s compelling:
At the heart of the hydrogen economy: As the UK and Europe aim to ramp up green hydrogen production, ITM’s electrolysers may become critical infrastructure.
Growing order backlog: According to analysts, ITM has a strong pipeline (or backlog) of orders tied to green hydrogen capacity.
Strategic alignment: The UK government’s hydrogen ambitions potentially provide tailwinds for ITM’s growth.
Risks: Profitability is not yet stable; capital costs are high; technology risk and execution risk remain.
3. Babcock International Group plc (LSE: BAB) – Defence & Critical Infrastructure Contractor
What they do: Babcock is a leading UK defence contractor supporting naval, aviation, and nuclear infrastructure. It also provides services in energy, transport, and specialized engineering.
Why it’s compelling:
Geopolitical relevance: With increasing focus on UK and NATO defence spending, Babcock’s role in maintaining naval assets and building future ships (e.g., Type 31 frigates) may drive demand.
Financial momentum: The company recently raised its profit targets and initiated a share buyback, suggesting confidence in its future cash flows.
Strategic resilience: Defence infrastructure and maintenance is typically less cyclical than purely commercial sectors, which gives Babcock a foundation for stable long-term contracts.
Risks: Contract and execution risk, government budget variability, currency exposure, and cost inflation in defence materials.
Ardentis Capital’s Viewpoint on These Three
Ceres Power & ITM Power tap into the energy transition megatrend: hydrogen is becoming central to decarbonisation, and both companies are uniquely positioned with different but complementary technologies one in fuel cells, the other in electrolysers.
Babcock International represents a more traditional yet strategically relevant theme: defence and infrastructure. In a world of geopolitical uncertainty, its capabilities in naval and nuclear sectors could see renewed demand.
Together, these three companies give exposure to clean energy innovation, infrastructure security, and long-term structural growth themes in the UK.
Investor Note:
For Australian investors (or others), exposure to UK equities can be obtained via ETFs or global share platforms.
Risk management is key: these names are growth-oriented and may involve higher volatility than stable income stocks.
Make sure to combine top-down thesis (e.g., hydrogen, geopolitics) with bottom-up analysis (balance sheet, order backlog, margin structure) when assessing them.
Disclaimer: This article reflects Ardentis Capital’s research insights and market observations only. It is not financial advice. Please conduct your own due diligence or seek independent advice before making any investment decisions.
