REG-BlackRock Greater Europe Investment Trust Plc: Portfolio Update

Blackrock Greater Europe Investment TrustAnnouncement

17/07/2024 11:00

The information contained in this release was correct as at 30 June 2024.
Information on the Company’s up to date net asset values can be found on the
London Stock Exchange website at:

 

https://www.londonstockexchange.com/exchange/news/market-news/market-news-home.html. 

 

 

 

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

All information is at 30 June 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)  0.7%       -2.4%         15.6%     9.6%         812.8%              
 Share price                  -1.4%      -3.5%         15.3%     0.4%         765.7%              
 FTSE World Europe ex UK      -1.6%      0.3%          13.4%     22.0%        452.3%              

Sources: BlackRock and Datastream
 

 

At month end

 Net asset value (capital only):      649.95p     
 Net asset value (including income):  655.53p     
 Share price:                         614.00p     
 Discount to NAV (including income):  6.3%        
 Net gearing:                         8.3%        
 Net yield 1 :                        1.1%        
 Total assets (including income):     £654.2m     
 Ordinary shares in issue 2 :         99,795,601  
 Ongoing charges 3 :                  0.98%       

 

1  Based on a final dividend of 5.00p per share for the year ended 31 August
2023 and  an interim dividend of 1.75p per share for the year ending 31
August 2024.

2  Excluding 18,133,337 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              24.4              
 Technology               23.5              
 Consumer Discretionary   22.4              
 Health Care              14.7              
 Financials               8.1               
 Basic Materials          6.2               
 Consumer Staples         0.8               
 Net Current Liabilities  -0.1              
                          -----             
                          100.0             
                          =====             
                                            
                                            
                                            
                                            
                                            
                                              
 Country Analysis         Total Assets (%)  
 Netherlands              22.4              
 France                   20.6              
 Switzerland              17.5              
 Denmark                  10.6              
 United Kingdom           6.5               
 Sweden                   6.2               
 Ireland                  5.6               
 Italy                    3.7               
 United States            3.5               
 Germany                  1.8               
 Belgium                  1.7               
 Net Current Liabilities  -0.1              
                          -----             
                          100.0             
                          =====             
                                            
                                            

 


 

 Top 10 holdings     Country         Fund %  
 Novo Nordisk        Denmark         9.4     
 ASML                Netherlands     8.4     
 RELX                United Kingdom  6.5     
 LVMH                France          5.5     
 BE Semiconductor    Netherlands     4.6     
 ASM International   Netherlands     4.4     
 Hermès              France          3.9     
 Safran              France          3.8     
 Schneider Electric  France          3.7     
 Ferrari             Italy           3.7     
                                             

 

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

 

During the month, the Company’s NAV rose by 0.7% and the share price
declined by -1.4%. For reference, the FTSE World Europe ex UK Index returned
-1.6% during the period.

 

French political uncertainty led to market volatility. President Macron called
an unexpected election which led to concerns that a future government might
come in with a less fiscally responsible agenda. While creating negative
market sentiment in the near term, we think that a lack of clear mandate for
either the French right-wing populist party RN or the left-wing means that
there is a low chance that policies could have a significant direct negative
impact on our portfolio holdings.

 

During the month we saw high quality, internationally exposed businesses
outperform the market whilst particularly French-listed cyclicals and
financials performed poorly. The technology sector delivered absolute positive
returns given very limited impact from French election risk and continued
positive messaging around the ‘AI investment wave’ coming.

 

The Company outperformed the reference index thanks to its positioning in
technology and limited exposure to French domestic stocks, as well as an
underweight to financials. Both sector allocation and stock selection
contributed positively.

 

Semiconductors were amongst the top performers during June with shares in BE
Semiconducter (Besi), ASMi and ASML all moving higher. The tone from
management teams during roadshows was positive and all signs point to
increased orders ahead. Besi hosted a Capital Markets Day in the month where
their CEO reiterated a target model of over EUR 1bn sales over time (growing
from EUR 580m in 2023).

 

A position in RELX was also additive in June. RELX has been consistent in
confirming strong underlying trends, particularly on the back of AI trends in
their legal division.

 

Owning Novo Nordisk contributed positively to active returns in June with the
investment case continuing to progress well. To name a few of the headlines in
the month, Wegovy prescription data in the US was strong, the company
announced plans for an additional fill and finish site which continues to
build significant capacity growth from 2026 and Wegovy was approved as an
obesity treatment in China.

 

A position in Linde began to recover from recent weakness following Q1 2024
results which were solid yet seemed to disappoint the market with guidance
which was only raised at the low end of the company’s range. We think
management’s conservatism at Q1 is understandable and expect Linde to
continue showing strong execution and proving their ability to grow earnings.

 

Elsewhere, avoiding European banks such as BNP and Banco Santander was
helpful. The sector was dragged down by political volatility: BNP was
particularly impacted by the French elections, whilst Santander was impacted
by concerns around Brazil as well as an unexpected slowdown of rate cuts.

 

Shares in Chemometec fell in the month despite limited company specific
updates, as the recovery in life sciences is yet to be seen. Having recently
met with management we remain encouraged by the pivot in their strategy to one
we believe is quite promising from a commercial perspective.

 

The portfolio’s holding in Kingspan detracted with shares selling off on the
back of French political noise. The company generates close to 15% of revenues
in France, but from our read of RN party policies there is nothing that would
really impact the group negatively and thus the share price move (c. 10% down
in the month) may be overdone. General construction weakness and softer
commentary on recovery, with projects being delayed across the industry, also
weighed on sentiment.

 

Not holding a few of the reference index large defensive assets, such as SAP,
Roche and Novartis, detracted from relative returns as their shares
outperformed the falling market.

 

 

Outlook

 

As economic momentum gathers pace and company guidance strikes a more
optimistic tone, Europe has come into the spotlight. The European Central
Bank’s decision to cut rates was taken positively, although the jury remains
out on the speed rates fall from here. Whilst this rate change is positive for
asset class sentiment, operationally we see limited impact on companies.

 

Rising political discontent, however, has been a thorn in the region’s side.
Geopolitical tensions around tariffs and surprise elections in key economies
such as the UK and France have added a degree of uncertainty. We take
confidence in the changed regulatory landscape for banks in helping manage
perceived contagion risk that could arise from potentially weaker fiscal
positions and believe the negative impact of tariffs would only be meaningful
for a small group of companies. Whilst uncertainty on policy outcomes remains,
we believe the growth impact is likely limited in the near-term and economics
should continue their positive inflection.

 

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,
digitization, 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
should be supportive for the companies held in the portfolio.

 

 

17 July 2024

  

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.



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