REG-BlackRock Greater Europe Investment Trust Plc: Portfolio Update

Blackrock Greater Europe Investment TrustAnnouncement

16/12/2024 16:45

The information contained in this release was correct as at 30 November 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 November 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)  -0.1%      -7.4%         6.3%      -9.3%        731.6%              
 Share price                  0.2%       -7.9%         5.7%      -18.1%       680.2%              
 FTSE World Europe ex UK      -1.3%      -4.6%         8.2%      15.9%        435.1%              

Sources: BlackRock and Datastream 

 

At month end

 Net asset value (capital only):      591.68p     
 Net asset value (including income):  591.80p     
 Share price:                         548.00p     
 Discount to NAV (including income):  7.4%        
 Net gearing:                         10.4%       
 Net yield 1 :                        1.3%        
 Total assets (including income):     £580.0m     
 Ordinary shares in issue 2 :         98,013,150  
 Ongoing charges 3 :                  0.95%       

 

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

2Excluding 19,915,788 shares held in treasury.
3The 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              30.5              
 Consumer Discretionary   20.6              
 Health Care              15.3              
 Technology               14.9              
 Financials               10.4              
 Basic Materials          7.3               
 Real Estate              1.3               
 Consumer Staples         0.9               
 Net Current Liabilities  -1.2              
                          -----             
                          100.0             
                          =====             
                                              
 Country Analysis         Total Assets (%)  
 Netherlands              19.7              
 France                   18.9              
 Switzerland              17.0              
 Denmark                  10.3              
 United Kingdom           7.4               
 Ireland                  6.1               
 Sweden                   4.9               
 Italy                    4.4               
 Germany                  4.1               
 United States            4.1               
 Finland                  2.3               
 Belgium                  2.0               
 Net Current Liabilities  -1.2              
                          -----             
                          100.0             
                          =====             

 

 Top 10 holdings           Country         Fund %  
 Novo Nordisk              Denmark         8.0     
 RELX                      United Kingdom  7.3     
 ASML                      Netherlands     5.8     
 Schneider Electric        France          5.3     
 Safran                    France          4.7     
 Partners Group            Switzerland     4.6     
 Ferrari                   Italy           4.3     
 Hermès                    France          4.1     
 Linde                     United States   4.1     
 Allied Irish Banks (AIB)  Ireland         3.7     
                                                   

 

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

   

During the month, the Company’s NAV was flat at -0.1% and the share price
returned 0.2%. For reference, the FTSE World Europe ex UK Index returned -1.3%
during the period.1

 

Europe ex UK equities were down in November. The disparity in performance
between European and US equities became more prominent during the month
following the result of the US election. Comparatively stronger US
macroeconomic data and investor confidence, bolstered by expectations of
deregulation and fiscal stimulus, drove US markets. On the other hand, Europe
faced slightly worsening economic conditions, highlighted by declining PMIs
(the Purchasing Managers’ Index) and negative economic surprises, likely
exacerbated by uncertainty from US tariffs and the political backdrop in
France. One area which shows continued progress in Europe is inflation,
supporting continued interest rate cuts into 2025.

 

European markets were driven by expectations of what President-elect Donald
Trump is likely to implement when he comes into office. Over the period we
also had the remainder of the Q3 earnings. In summary, corporate reporting
highlighted ongoing trends: weakness in the automotive sector, polarization in
the luxury market, industrial short-cycle businesses awaiting a demand rebound
and strong performance from long-duration, capex focused companies.

 

Going into next year, we maintain a cautiously optimistic outlook on European
equities, given the combination of very low sentiment, attractive valuations
and the prospect of faster monetary easing in Europe compared to the US. As
interest rates come down there are cyclical sectors such as construction and
other short-cycle industries that have faced significant challenges which
could see a recovery from depressed levels.

 

Within the reference index, sectors such as technology performed strongly
thanks to post-election optimism and strong investor sentiment. Telecoms also
rose, while sectors including materials and the consumer sectors fell.

 

The Company was ahead of its reference index during the month, largely driven
by stock selection whilst sector allocation was also positive.

 

In sector terms, the portfolio benefited from an overweight exposure to
industrials, particularly those with high exposure to the US, with Trump's
clear pro-business mandate being seen as beneficial for growth and capex
spend. Similarly, the portfolio’s higher allocation to technology was
positive as ‘animal spirits’ kicked driving many cyclical shares higher.

 

On the flip side, a lower weight to financials detracted, although
significantly offset by stock selection. Higher weights to consumer
discretionary and materials detracted from active returns.

 

From a stock specific perspective, there were a number of positive
contributors driven by the factors mentioned above. For example, information
and analytics company RELX was also amongst the best performers, with
approximately 55% of its revenue coming from North America and the company's
operations in the US span across its various business segments, including
scientific, technical, and medical information, risk and business analytics,
legal, and exhibitions.

 

Linde also benefited from strong exposure to the US. At Q3 results, Americas
represented about 43% of sales but 72% of the project backlog, indicating
strong opportunities for further growth in the market.

 

Aerospace company Safran was also amongst the top performers over the month,
benefiting from strong results in the previous month where trends in the
market continue to be favourable.

 

Within financials, the portfolio benefited from its exposure to Partners
Group, an alternative asset manager. Shares performed strongly during the
month as financing conditions and deal activity continues to improve. There is
also increasing optimism around potential deregulation and tax cuts in the US,
which could create a favourable environment for private equity investments.

 

In the technology sector, BE Semi provided the top positive attribution effect
as shares bounced off recent weakness that had been driven by the broader
semiconductor sector sell-off. Whilst traditional packaging markets have yet
to recover, there is optimism that we are at the bottom of the cycle, while
their more advanced Hybrid Bonding technology is also seeing encouraging order
trends.

 

Shares in Chemometec continued on a positive trajectory over the month. The
company released encouraging results for the July-September quarter and
upgraded its full-year 2024/25 revenue and EBITDA guidance. We remain
encouraged by the company’s accelerating top line momentum driven by new
launches.

 

On the negative side, a holding in Kingspan was the largest detractor
following a trading update that guided to flat year-on-year EBIT, a small cut
to expectation. Whilst price-cost has been a headwind for Kingspan in 2024,
the results demonstrated improving volume dynamics and also solid order intake
which should be bode well for 2025.

 

Finally, shares in Ferrari detracted in the month, having performed well for
much of the year. The company reported overall solid results but there was a
lack of upgrades which led to some profit taking. Management expressed their
increased confidence in earnings over the medium term supported by a full
order book.

 

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

 

16 December 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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