My mother still remembers VE Day back in 1945. As celebrations erupted, she was just looking forward to her Daddy coming home. There were mixed emotions at the recent commemorations, too: joy mixed with sadness and a sense of danger in the air.

President Trump is upending old alliances. Autocrats the world over are flexing their muscles. India and Pakistan are at daggers drawn. Iran is a constant threat and state-backed cyber attacks are soaring.

Shares in defence giants such as BAE Systems have already shot up in response to this new environment. Other, lower-profile companies should follow suit. These three stocks could deliver long-term gains for investors climbing on board now as defence spending moves up a gear.

RC Fornax

Defence contracts can run into billions of pounds and take years to complete. Complex and costly, they are known for delays and disruption. RC Fornax was founded by two RAF veterans, with one purpose – to ensure that projects are delivered on time and on budget, across land, air and sea.

Paul Reeves and Dan Clark each spent 12 years in the Royal Air Force as ground electronic engineers, moving on to jobs with top contractors across the defence industry. In 2020, they put their experience to work.

Instead of throwing large numbers of people at a project, RC Fornax focuses on how to achieve the most efficient outcomes, bringing in the right teams to fit the job in hand. The strategy is delivering results. The business has been operating for less than five years and already counts some of the biggest names in defence among its clients.

Advanced air power: An F-35B Lightning II fighter, which can land vertically, prepares to take off from HMS Queen Elizabeth

Projects range from helping with early-stage designs for RAF fighter jets to installing top technology for tanks and developing safety systems on submarines. The work is demanding, timing is critical and RC Fornax has just a couple of dozen of employees.

But the group has amassed a web of around 4,000 skilled associates, who can bring their expertise to bear when the need arises. The model seems to work.

Just last month, Reeves and Clark opened a new head office in Bristol, including an ultra-secure space for top-secret projects.

There are plans for similar facilities in Manchester and Cranfield, Bedfordshire and the group would like to open a hub in Scotland too.

RC Fornax is a small player in a £55 billion market, dominated by large multinationals. But it has established a reputation as a pedigree operator and should benefit as the Ministry of Defence (MoD) expands its roster.

RC Fornax floated on Aim in February at 32.5p. The shares have since risen to 38p and should increase materially from here.

As well as financial success, Clark and Reeves are motivated by a desire for former colleagues to benefit from the best products

and services. The combination of commercial nous and personal integrity gives RC Fornax shares extra appeal. Buy and hold.

Traded on: Aim Ticker: RCFX Contact: rcfornax.co.uk or 0161 823 7137

Sirius Real Estate

Post-war Germany has had an ambiguous attitude towards defence, for obvious reasons. Now, however, with the Russian bear roaring and the American eagle proving hard to gauge, Europe has to become stronger.

Germany’s new chancellor Friedrich Merz is keen to play his part, pledging to invest about €900 billion (£760 billion) on defence and related infrastructure. The commitment could give a huge boost to Germany’s economy and UK property firm Sirius Real Estate should benefit.

Germany accounts for about 75 per cent of the business, with tenants ranging from defence giant Rheinmetall and carmaker Volkswagen to thousands of small businesses. Under the savvy leadership of chief executive Andrew Coombs, Sirius has managed to deliver sustained growth in Germany by choosing the right sites, selecting tenants with care and managing properties astutely. Demand should accelerate and Coombs is already sensing change both in Germany and over here.

In 2021, Sirius forked out £245 million on BizSpace, a UK property firm with warehouses, mills and industrial sites across the country.

Rents have almost doubled since then and there are high hopes for more, reflecting robust demand for industrial space and smart acquisitions. These include the recent purchase of a former ammunition depot in Southampton. Used in the Second World War, the site has since been converted to an industrial park but retains the ten-ton floor loadings and power supplies that were installed with defence in mind.

Coombs said last month that like-for-like rents grew 6.3 per cent in the year to March 31, the eleventh year that rents have risen by more than 5 per cent. That drives dividend growth, with analysts expecting a 2 per cent increase to 6.2p, when results are unveiled next month, the twelfth consecutive year of increased payouts.

Coombs is certainly motivated to be generous to investors. With 11.6 million shares, his dividend payments exceed his salary, so his interests are closely aligned to those of shareholders.

Despite delivering consistent results, however, Sirius shares have fallen from a peak of £1.45 four years ago to 92p today. The decline seems undeserved, making this stock a buy – and the dividends make it even more appealing.

Traded on: main market Ticker: SRE Contact: sirius-real-estate.com or FTI Consulting on 020 3727 1000

Serco

The threat of nuclear war has hung over society ever since the Second World War. But the risks seem greater today than they have been for decades.

RAF Fylingdales in North Yorkshire is responsible for alerting UK and US governments if a nuclear missile has been launched anywhere in the Northern Hemisphere. The radar systems behind the Ballistic Missile Early Warning System are operated and maintained by London-listed Serco.

Serco is better known for housing asylum-seekers, tagging and transporting criminals and assessing applicants for disability allowances. But the business has been integral to our nuclear deterrent capabilities for more than 50 years. And about 40 per cent of group turnover comes from defence.

In Britain, Serco tug boats help the Navy to take warships, such as HMS Queen Elizabeth and HMS Prince of Wales, from dock to open waters, performing a similar service for submarines.

The company also works at the highest level with the MoD and its US equivalent and governments around the world.

New chief executive Anthony Kirby is hoping to gain even more business in this sector and recent wins have been encouraging.

In February, Kirby secured a seven-year recruitment contract with the UK Armed Forces which could be worth up to £1.5 billion.

Serco was also chosen to run the US Army’s Holistic Health and Fitness System, ensuring soldiers are ‘warrior ready’ both mentally and physically. More contracts should be forthcoming and Kirby is hoping to benefit as Europe ratchets up defence spending.

Operating in 20 countries, with 55,000 staff and annual turnover approaching £5 billion, Serco works in some of the most difficult areas of daily life and has come a cropper more than once.

Looking ahead, however, there is a record £11 billion pipeline, dividends are set to rise and Kirby has a track record of strong leadership. Investors should benefit from his stewardship and the shares, at £1.74, are a buy.

Traded on: main market Ticker: SRP Contact: serco.com or 01256 745900

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