REG-BlackRock Greater Europe Investment Trust Plc: Portfolio Update

Blackrock Greater Europe Investment TrustAnnouncement

24/04/2024 17:15

 

 

BLACKROCK GREATER EUROPE INVESTMENT TRUST PLC (LEI - 5493003R8FJ6I76ZUW55)

All information is at 31 March 2024 and unaudited.

Performance at month end with net income reinvested
 

                              One Month  Three Months  One Year  Three Years  Launch (20 Sep 04)  
                                                                                                  
 Net asset value (undiluted)  2.2%       12.7%         20.3%     29.7%        834.9%              
 Share price                  1.4%       12.7%         21.5%     23.4%        797.0%              
 FTSE World Europe ex UK      3.7%       6.9%          13.8%     31.8%        450.9%              

Sources: BlackRock and Datastream
 

 

At month end

 Net asset value (capital only):      671.09p      
 Net asset value (including income):  673.12p      
 Share price:                         638.00p      
 Discount to NAV (including income):  5.2%         
 Net gearing:                         10.1%        
 Net yield 1 :                        1.1%         
 Total assets (including income):     £675.6m      
 Ordinary shares in issue 2 :         100,363,934  
 Ongoing charges 3 :                  0.98%        

 

1 Based on an interim dividend of 1.75p per share, and a final dividend of
5.00p per share, for the year ended 31 August 2023.

2 Excluding 17,565,004 shares held in treasury.
3 The Company’s ongoing charges are calculated as a percentage of average
daily net assets and using the management fee and all other operating expenses
excluding finance costs, direct transaction costs, custody transaction
charges, VAT recovered, taxation, write back of prior year expenses and
certain non-recurring items for the year ended 31 August 2023.

 

                         
 Sector Analysis         Total Assets (%)  
 Industrials             25.2              
 Consumer Discretionary  22.8              
 Technology              21.5              
 Health Care             15.2              
 Financials              8.6               
 Basic Materials         5.5               
 Consumer Staples        1.1               
 Net Current Assets      0.1               
                         -----             
                         100.0             
                         =====             
                                           
                                             
 Country Analysis        Total Assets (%)  
 France                  22.0              
 Netherlands             20.2              
 Switzerland             17.6              
 Denmark                 12.6              
 United Kingdom          6.4               
 Sweden                  5.7               
 Ireland                 5.3               
 Italy                   3.8               
 United States           2.8               
 Belgium                 1.8               
 Germany                 1.7               
 Net Current Assets      0.1               
                         -----             
                         100.0             
                         =====             
                                           
                                           

 


 

 Top 10 holdings    Country         Fund %  
 Novo Nordisk       Denmark         9.0     
 ASML               Netherlands     7.2     
 LVMH               France          6.2     
 RELX               United Kingdom  5.8     
 Hermès             France          4.2     
 BE Semiconductor   Netherlands     4.0     
 Safran             France          3.9     
 Ferrari            Italy           3.8     
 ASM International  Netherlands     3.4     
 Partners Group     Switzerland     3.2     
                                            
                                            

 

Commenting on the markets, Stefan Gries and Alexandra Dangoor, representing
the Investment Manager noted:

   

During the month, the Company’s net asset value rose by 2.2% and the share
price was up by 1.4%. For reference, the FTSE World Europe ex UK Index
increased by 3.7% during the period.

 

Europe ex UK markets were up during March, finishing an exceptionally strong
quarter for European equities. Following two months of strong performance of
growth assets, value sectors led strong market returns during March. Lower
quality cyclicals such as financials and energy delivered impressive
performance, while real estate and utilities also rebounded post a tougher
period. Technology and the consumer sectors underperformed in the rising
market. Stock specific news flow was slightly lighter during the month as the
earnings season largely came to an end. Macroeconomic data remained robust.
Eurozone and US inflation data continued to head towards central bank targets,
whilst economic activity continued to improve.

 

The Company underperformed its reference index during the month, driven by
both sector allocation and stock selection. In sector terms, the Company’s
lower weight to the financial sector was negative for returns as particularly
the banking sector delivered strong performance during the month. The
Company’s higher allocation to technology was the largest detractor from
returns as the sector saw somewhat of a reversal after very strong performance
in January and February. The portfolio benefited from lower weights in
consumer staples and telecommunications.

 

The technology sector was the largest detractor from relative returns. The
sector gave back some of its very strong performance in previous months.
Additionally, BE Semiconductor (Besi) was hit by negative newsflow, which led
to shares falling close to 15%. Press reports during the month suggested that
the adoption of Besi’s hybrid bonding offering may be slower than some had
hoped for, specifically in the high bandwidth memory applications. While the
short-term uptake of this new technology may be delayed for a short period, we
think it is likely that hybrid bonding will play a significant role in high
bandwidth memory production in future years and so our medium-term view on the
stock is unchanged.

 

Exposure to the consumer discretionary sector was also negative as
particularly the luxury industry was dragged down by Kering’s (not held in
the Company) profit warning. Whilst not owning Kering was positive, shares in
LVMH stumbled in sympathy despite no fundamental newsflow.

 

A mixed contribution came from the banking sector during the month. The sector
was up on a mix of generally better economic activity, rate expectations
holding up better than some had feared and support from share buybacks. Allied
Irish Banks was the top contributor during March after reporting strong 2023
results with good revenue visibility. However, not owning BBVA, BNP Paribas
and Banco Santander detracted from relative returns.

 

A number of shares from the industrials sector performed well – for example,
IMCD rose on signs that destocking in some end markets is coming to an end.
The company reported FY 2023 results in line with expectations, while 2024
consensus estimates seem to be in a good place compared to the updates
provided by management.

 

Positioning within health care continues to be additive with a positive effect
from owning Novo Nordisk and Lonza, while avoiding more defensive assets such
as Roche and Novartis that continue to lag the market gains. The investment
case for Novo Nordisk continues to tick along nicely with news in March
supportive of a growing total addressable market for their GLP-1 treatments.
The US approved Wegovy for cardiovascular risk reduction in people with
obesity, and in doing so, opened the door for Medicare coverage. Late in the
month, we saw the first US insurers agree to begin paying for Wegovy through
Medicare.

 

 

Outlook

 

We remain fairly constructive on European equities as the set-up should be
positive: inflation is on a downwards trajectory and the economy appears
relatively robust, Eurozone inflation figures have fallen and, whilst there
may be volatility in month-to-month data, the economy can handle these levels
of inflation. This also means that we have come to, or are close to, peak
rates and at some point, it is fair to assume interest rates will come down.
We have already started to see a positive impact on falling mortgage rates in
many European countries.

 

The corporate sector in Europe is healthy. There is limited corporate debt,
margins are strong, there is no need for major layoffs and the end of the
destocking across most industries is in sight. This in turn is good news for
the consumer: a supply chain and energy crisis that is largely done, combined
with high employment numbers and falling inflation suggest that the
cost-of-living crisis has cooled off. This puts the region in a much better
position compared to one year ago.

 

Nevertheless, the asset class has been under-owned ever since the Russian
invasion of Ukraine in February 2022. As always in Europe, it is key to remain
selective. Assessing the economy from the bottom-up can uncover areas for
greater optimism than traditional economic indicators may suggest. Our regular
contact with management teams helps us understand whether the direction of
earnings and cashflows on a medium to long-term view for the companies in our
portfolio remain on track.

 

Long-term structural trends and large amounts of fiscal spending via the
Recovery fund, Green Deal and the REPowerEU plan in Europe can also drive
demand for years to come, for example in areas such as infrastructure,
automation, innovation in medicines, the shift to electric vehicles,
digitisation or decarbonisation. Valuations are attractive versus history and
especially versus US equities. Overall, evidence of a resilient consumer,
healthy corporate sector and decent outlooks underpinned by green stimulus,
give us confidence that many of the companies in our portfolio can continue to
weather the storm.

 

 

 

ENDS

 

Latest information is available by typing www.blackrock.com/uk/brge on the
internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3
(ICV terminal).  Neither the contents of the Manager’s website nor the
contents of any website accessible from hyperlinks on the Manager’s website
(or any other website) is incorporated into, or forms part of, this
announcement.

 

 

24 April 2024



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