REG-BlackRock Greater Europe Investment Trust Plc: Portfolio Update

Blackrock Greater Europe Investment TrustAnnouncement

26/11/2024 12:00

The information contained in this release was correct as at 31 October 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 October 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)  -5.2%      -5.5%         18.2%     -9.0%        732.3%              
 Share price                  -7.2%      -9.7%         18.7%     -17.3%       678.3%              
 FTSE World Europe ex UK      -1.9%      -1.9%         16.6%     15.4%        441.9%              

Sources: BlackRock and Datastream
 

 

At month end

 Net asset value (capital only):      591.83p     
 Net asset value (including income):  597.70p     
 Share price:                         552.00p     
 Discount to NAV (including income):  7.7%        
 Net gearing:                         8.9%        
 Net yield 1 :                        1.3%        
 Total assets (including income):     £587.5m     
 Ordinary shares in issue 2 :         98,287,208  
 Ongoing charges 3 :                  0.95%       

 

1  Based on an interim dividend of 1.75p per share and final dividend of
5.25p per share for the year ended 31 August 2024.

2  Excluding 19,641,730 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 2024.

                         
 Sector Analysis         Total Assets (%)  
 Industrials             31.0              
 Consumer Discretionary  20.7              
 Health Care             14.6              
 Technology              13.6              
 Financials              9.7               
 Basic Materials         7.3               
 Real Estate             1.3               
 Consumer Staples        0.9               
 Net Current Assets      0.9               
                         -----             
                         100.0             
                         =====             
                                             
 Country Analysis        Total Assets (%)  
 Netherlands             19.0              
 France                  18.6              
 Switzerland             17.1              
 Denmark                 9.6               
 United Kingdom          7.0               
 Ireland                 6.2               
 Sweden                  5.0               
 Italy                   4.7               
 United States           4.0               
 Germany                 3.7               
 Finland                 2.3               
 Belgium                 1.9               
 Net Current Assets      0.9               
                         -----             
                         100.0             
                         =====             
                                           


 Top 10 holdings     Country         Fund %  
 Novo Nordisk        Denmark         7.8     
 RELX                United Kingdom  7.1     
 ASML                Netherlands     5.6     
 Schneider Electric  France          5.3     
 Ferrari             Italy           4.7     
 Safran              France          4.5     
 Partners Group      Switzerland     4.3     
 Hermès              France          4.2     
 Linde               United States   4.0     
 Adyen               Netherlands     3.6     
                                             

 

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

 

During the month, the Company’s NAV fell by 5.2% and the share price
declined by 7.2%. For reference, the FTSE World Europe ex UK Index returned
-1.9% during the period.1

 

Markets experienced a challenging month, with broad based weakness across the
market and particularly challenged in technology, whilst even more defensive
sectors like consumer staples also struggled.

 

There was positioning in the market ahead of the US elections and, in
particular, we saw yields picking up in the US as well as Europe. However, Q3
2024 earnings were also in focus which has seen a mixed reporting season so
far. The consumer sector remains challenged, with particularly poor results
from companies with high exposure to China. The European consumer has proved
to be more resilient than expected in certain categories, whilst the backdrop
in China means that the Chinese consumer remains weak. Despite the weakness in
the consumer sector there are certain sectors in the market that remain
strong. For example, within the industrials sector we continue to see very
healthy demand for electrical products supported by continued investment needs
in data centres, the distribution grid and the electrification of buildings.
Banks continue to perform well, with solid results despite rate cuts in the
quarter and still limited delinquencies. The telecommunications and financials
sectors were up during the month, while the sell-off was led by technology,
consumer staples, real estate and materials.

 

The Company lagged its reference index during the month, largely driven by the
portfolio’s exposure to technology. In sector terms, the portfolio’s
overweight allocation to the technology sector hurt relative performance as
ASML’s weak results dragged down the sector. An underweight allocation to
telecommunications also detracted, as we have seen the sector re-rate against
a more uncertain economic backdrop. The portfolio’s lower exposure to
financials was also negative.

 

A higher exposure to consumer discretionary positions detracted during the
month but was more than offset by strong stock selection. Our underweight
allocation to consumer staples aided returns. Positively, the overweight
exposure to industrials also aided performance, particularly as we see
strength coming through in aerospace and defence.

 

Negative performance came from the semiconductor industry. The sector was hit
by disappointing quarterly results from ASML. The company reduced its 2025
revenue guidance from EUR35bn to EUR32.5bn at the midpoint, representing 12%
year-on-year growth, down from the previously expected 25%. The main reason
for this warning is a reduction in the assumptions for extreme ultraviolet
lithography (EUV) tool shipments in 2025, from 71 to 50, due to a slower
recovery in end demand (excluding artificial intelligence (AI)), faster
normalisation in China, and some customers, in particular Intel and Samsung,
facing transition difficulties in moving to the next node. Despite these
challenges, ASML's position in the ecosystem remains very strong and long-term
trends in wafer growth, driven by AI, electrification, energy transition and
the innovation curve, remain unchanged. ASML continues to be a monopoly
business with the potential for double-digit growth over time.

 

BE Semiconductor (BESI) delivered weaker guidance for the upcoming quarter,
expecting Q4 sales to be down by 5%-15% quarter-on-quarter, while Q3 sales
already declined 8% quarter-on-quarter. Despite the short-term difficulties in
end markets, BESI remains optimistic about its long-term prospects,
particularly in the advanced packaging tools market, which is crucial for the
development of more powerful semiconductor chips.

 

Elsewhere in the sector, ASM International (ASMI) provided a positive update
over the month, highlighting strong demand for their technology, which allows
them to continue growing despite a generally soft underlying market. Q3 sales
and orders came in ahead of consensus and the company slightly increased its
targets for 2025, aiming for sales between EUR3.2bn-3.6bn, compared to
EUR3.0bn-3.6bn previously. However, shares still declined due to concerns that
some of the issues affecting ASML could eventually impact ASMI as well.

 

On the positive side, Ferrari was the top performer to relative returns over
the month. The sportscar manufacturer continues to see positive earnings
momentum driven by a full order book and new product launches. Shares were
also buoyed by optimism surrounding the unveiling of their long-awaited
hypercar - the Ferrari F80 - which is expected to be a meaningful contributor
to earnings growth from next year.

 

Schneider Electric was another top performer thanks to the company's strong Q3
financial results, which included a quarterly revenue increase by 8%. The
company benefited from robust demand across various sectors and geographies,
particularly within their data centres and infrastructure divisions.
Industrial automation end markets remain weak though. With its strategic focus
on electrification, digitisation and sustainability trends, we believe
Schneider has positioned itself well to capitalise on these long-term growth
drivers.

 

Shares in Safran also outperformed the falling market. Results showed better
aftermarket dynamics, which have led to reiteration of FY free cash flow
guidance for the business, against expectations that incremental working
capital headwinds would be felt owing to Boeing issues.

 

Finally, avoiding positions in Capgemini, Bayer and Pernod-Ricard positively
impacted relative returns, as these companies reported poor earnings in the
month.

  

Outlook

 

We believe underlying economic conditions remain robust with consumers and
corporates in healthy positions. Inflation is retreating and rate cutting
cycles have begun in earnest across the globe, which increases investor
propensity to move up the risk curve in search for higher returns. We continue
to take scaled and deliberate cyclical risk in European equities as
profitability continues to be resilient in many European cyclicals, with their
sensitivity to economic shocks and the domestic economy significantly reduced.
After a long period of underinvestment, long duration and structural
investment spend is now in place to support these businesses and their
underlying earnings should move higher over a multi-year period.

 

Alongside investment opportunities afforded by structural forces, such as the
energy transition or AI, we also detect a cyclical upturn in a variety of
industries like construction, life-sciences and chemicals which have suffered
from pronounced volume declines for the best part of two years. We remain
positive on the outlook, given a structurally improved market composition in
Europe, potential for a cyclical recovery, and valuations in the European
market at a record wide discount relative to the US.

 

1Source: BlackRock

 

26 November 2024

   

ENDS

 

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(or any other website) is incorporated into, or forms part of, this
announcement.



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