REG-BlackRock Greater Europe Investment Trust Plc: Portfolio Update

Blackrock Greater Europe Investment TrustAnnouncement

20/09/2024 14:45

The information contained in this release was correct as at 31 August 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 31 August 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)  2.0%       -1.0%         16.4%     -1.6%        797.9%              
 Share price                  -1.6%      -3.5%         15.5%     -10.0%       747.3%              
 FTSE World Europe ex UK      1.5%       -0.1%         15.8%     18.7%        461.2%              

Sources: BlackRock and Datastream
 

 

At month end

 Net asset value (capital only):      639.14p     
 Net asset value (including income):  644.81p     
 Share price:                         601.00p     
 Discount to NAV (including income):  6.8%        
 Net Gearing:                         8.0%        
 Net yield 1 :                        1.1%        
 Total assets (including income):     £640.5m     
 Ordinary shares in issue 2 :         99,332,161  
 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 ended 31 August
2024.

2  Excluding 18,596,777 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              26.6              
 Consumer Discretionary   23.0              
 Technology               18.4              
 Health Care              15.5              
 Financials               8.9               
 Basic Materials          6.9               
 Consumer Staples         0.9               
 Net Current Liabilities  -0.2              
                          -----             
                          100.0             
                          =====             
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                              
 Country Analysis         Total Assets (%)  
 France                   20.9              
 Netherlands              20.5              
 Switzerland              17.8              
 Denmark                  10.6              
 United Kingdom           6.5               
 Ireland                  6.0               
 Sweden                   5.3               
 Italy                    4.4               
 United States            3.8               
 Germany                  2.1               
 Belgium                  1.9               
 Finland                  0.4               
 Net Current Liabilities  -0.2              
                          -----             
                          100.0             
                          =====             
                                            
                                            
                                            
                                            
                                            
                                            

 


 

 Top 10 holdings     Country         Fund %  
 Novo Nordisk        Denmark         8.9     
 ASML                Netherlands     7.2     
 RELX                United Kingdom  6.5     
 LVMH                France          5.3     
 Ferrari             Italy           4.4     
 Hermès              France          4.1     
 Safran              France          3.9     
 Schneider Electric  France          3.9     
 ASM International   Netherlands     3.8     
 Linde               United States   3.8     
                                             

 

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

 

During the month, the Company’s Net Asset Value (NAV) rose by 2.0% and the
share price declined by 1.6%. For reference, the FTSE World Europe ex UK Index
had returned by 1.5% during the period.

 

August was marked by significant market volatility, primarily triggered by a
weak US jobs report that raised concerns about a potential downturn in the US
economy. This was compounded by the unwinding of the yen carry trade, leading
to a substantial decline in Japanese markets, spreading concerns globally.
However, the situation quickly stabilised as better economic data and a dovish
message from Fed Chair Powell at Jackson Hole reassured investors.

 

During the month, we saw a continued rotation out of cyclical stocks into
defensive ones which we had started to witness in the prior month, as
investors expressed a preference for safer assets amidst the uncertainty. Real
estate, communication services, healthcare and utilities were the strongest
performers while technology shares fell the most.

 

Despite the turbulence, European markets managed to hold up well. The Company
outperformed its reference benchmark, largely driven by strong stock
selection.

In sector terms, the portfolio’s zero exposure to energy aided returns, as
did a higher allocation to consumer discretionary. The higher allocation to
cyclical sectors such as IT hurt relative performance. An overweight to
industrials was also negative although offset by accurate stock selection.
Lower weights in defensive sectors including telecoms and consumer staples
were negative during August.

Ferrari was the top performer during the month thanks to very strong Q2
earnings with revenues 7% and EBIT 9% ahead of expectations, driven by both
product mix and higher than expected personalisation revenues. The average
selling price increased by 14% to EUR 423k and the order book remains full
providing earnings visibility through 2026.

 

IMCD, a global distributor of specialty chemicals and ingredients, started to
recover from its previous underperformance after delivering
better-than-expected results. The company achieved a slight beat on gross
profit and EBITA, as it enters a period of normalised comparables, driven by
M&A and a gradual recovery in the Americas business.

 

Adyen shares also gained after an H1 2024 report with results in line with
consensus estimates across metrics. Revenue growth of 23.6% came in above
consensus expectations which were looking for 21-23% organic sales growth,
which helped to alleviate much of the bear case concerns. Management also
spoke to the positive impact from hires made in 2023 and a longer client
pipeline adding to visibility.

 

Similar to what we observed in July, the technology sector was the largest
detractor in August, with ASML and ASMi among the most affected. Despite
semiconductor companies delivering robust Q2 earnings, shares were impacted by
concerns over the return on AI investments, potentially peaking hyperscaler
capex, and possible restrictions on selling to China. Intel's (not held)
warning about cutting capex spend caught the markets attention but will have
limited impact on 2024 earnings for the semiconductor companies we own. While
there is still no clarity on the return on AI investments, the race to build
the best AI infrastructure is still in its early stages, and there remains a
strong push to stay at the forefront.

Elsewhere in the sector, a holding in STMicro dragged on relative returns
following cuts during their Q2 update in July, bringing down full year sales
guidance as well as 2024 and 2025 EPS. With our thesis of an improved business
with greater margin resiliency through cycle challenged by the update, we are
reassessing the position.

 

Within healthcare, owning Lonza detracted with shares down marginally in
August after a >20% gain the previous month on the back of positive first half
results.  We remain pleased seeing the acceleration in sales momentum and
profitability beat come through following the earlier qualitative update,
leading to increased confidence in managements’ execution and communication.

 

Finally, RELX experienced some weakness in August after having shown strong
performance earlier in the year. Although there was no specific stock-related
news, it is likely that the shares were volatile as RELX is considered an AI
winner, and profit taking in this segment was broad based during the course of
the month.

 

 

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 elections as well as weaker macro
data in the US and China 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 economies
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. European Equities remain attractively valued
versus history and especially so in comparison to the US. Overall, evidence of
a resilient consumer, a healthy corporate sector and unchanged outlook for
structural investment spend in key segments of the market should be supportive
for the companies held in the portfolio.

 

 

20 September 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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