BLACKROCK
GREATER EUROPE INVESTMENT TRUST
PLC (LEI - 5493003R8FJ6I76ZUW55)
All
information is at
31 May 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)
|
2.7%
|
-0.8%
|
16.6%
|
13.3%
|
806.8%
|
Share
price
|
1.9%
|
-0.7%
|
17.9%
|
6.2%
|
778.3%
|
FTSE
World Europe ex UK
|
3.7%
|
5.7%
|
18.1%
|
26.3%
|
461.5%
|
Sources:
BlackRock and Datastream
At month
end
Net
asset value (capital only):
|
645.70p
|
Net
asset value (including income):
|
651.16p
|
Share
price:
|
623.00p
|
Discount to NAV
(including income):
|
4.3%
|
Net
gearing:
|
8.0%
|
Net
yield1:
|
1.1%
|
Total
assets (including income):
|
£652.1m
|
Ordinary shares
in issue2:
|
100,142,022
|
Ongoing
charges3:
|
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
17,786,916 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
|
24.5
|
Consumer
Discretionary
|
22.5
|
Technology
|
22.3
|
Health
Care
|
14.9
|
Financials
|
8.7
|
Basic
Materials
|
5.5
|
Consumer
Staples
|
0.8
|
Net
Current Assets
|
0.8
|
|
-----
|
|
100.0
|
|
=====
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country
Analysis
|
Total
Assets (%)
|
France
|
21.9
|
Netherlands
|
20.8
|
Switzerland
|
16.9
|
Denmark
|
11.0
|
United
Kingdom
|
6.5
|
Sweden
|
6.2
|
Ireland
|
5.9
|
Italy
|
3.7
|
United
States
|
2.7
|
Belgium
|
1.8
|
Germany
|
1.8
|
Net
Current Assets
|
0.8
|
|
-----
|
|
100.0
|
|
=====
|
|
|
Top 10 holdings
|
Country
|
Fund %
|
Novo
Nordisk
|
Denmark
|
9.3
|
ASML
|
Netherlands
|
7.7
|
RELX
|
United
Kingdom
|
6.1
|
LVMH
|
France
|
5.8
|
Safran
|
France
|
4.2
|
Hermès
|
France
|
4.0
|
ASM
International
|
Netherlands
|
4.0
|
BE
Semiconductor
|
Netherlands
|
4.0
|
Ferrari
|
Italy
|
3.7
|
Schneider
Electric
|
France
|
3.6
|
|
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 2.7% and the share price by
1.9%. For reference, the FTSE World Europe ex UK Index returned
3.7% during the period.
European ex UK
markets rebounded from the prior month’s decline as US inflation
came in at expected levels, down from the previous months’ above
forecast result and bond yields steadied.
The
market’s top performance was driven by a distinctive mix of
sectors, with real utilities and financials emerging as the leading
contributors. Energy and consumer discretionary were the weakest
sectors in the market.
Generally, we saw
concerns around the Chinese and North American consumer, with
European consumers being a brighter spot. However, incremental
evidence of an improving business cycle continues to come through:
many industries are seeing a bottoming in end-markets; GDP is
growing and indicators such as PMIs are improving; large projects
are coming back in a sign of confidence; and European banks
continue to show no stress in provisions.
We
are currently finding the broadest opportunity set in Europe we have seen for many years and
generally expect company messaging to continue its positive
trajectory on the 6–18-month view. Overall, we retain our core
exposure to companies with predictable business models, higher than
average returns on capital, strong cash flow conversions and
opportunities to reinvest that cash flow into future growth
projects at high incremental returns.
The
Company slightly underperformed the reference index in May, largely
driven by our exposure to the luxury sector.
In
sector terms, the portfolio’s higher weight to consumer
discretionary detracted, as did a lower weight to financials. A
zero weight in the energy sector as well as a higher weight in
industrials contributed positively.
The
portfolio’s holding in LVMH detracted on suggestions of modestly
weaker trading. We had noted risks versus near-term consensus
expectations for LVMH through the alternative data we track and had
an eye on recent management changes, with the latest coming in the
role overseeing their fashion group. Overall, nothing has changed
in our long-term view of this business, which we believe to be one
of the best companies in the market and expect shares to respond
favourably to any sign of improved trading through the
year.
Positions in
Hermès and Ferrari also detracted with shares down on the slightly
bearish comments on luxury demand, but also influenced by
sensitivity to long-term interest rates.
A
pull back in the portfolio’s position in Linde weighed on relative
returns in May. The company released solid Q1 2024 results, but the
market seemed disappointed 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.
The
portfolio’s holding in Lonza detracted, with shares pulling back
slightly after strong performance earlier in the year. The company
released a Q1’24 qualitative update during May which kept the FY’24
outlook unchanged, looking for flat sales growth and EBITDA margin
in the high 20s. While there was a nod to softer performance in Q1,
they also suggested it has been normalising across H1 with
expectations for H2 sales to be solid given timing of batch
releases.
On
the positive side, shares in Chemometec recovered from oversold
levels in May. We have recently met with the CEO and are encouraged
to see a pivot to their strategy to one we believe to be quite
promising from a commercial perspective.
Companies exposed
to secular trends also benefited during the month. Schneider
Electric was amongst the top performers, largely on the back of
strong messaging around data centres and AI at several industry
events that investors, including ourselves, attended during the
month. Read-across from peers reporting during May also showed very
strong data centre spend coming through. US-based NVIDIA reported
another set of strong results, reaffirming our view that the
topline growth forecast for Schneider remains very well set as
Schneider is extremely well positioned for data centre
investments.
Similarly,
positions in semiconductor companies did well in the month. Shares
in ASMi and BE Semiconductor rose on the back of AI
trends.
Outlook
We
remain 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 interest rates have started to come down in Europe.
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 remains 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,
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.
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.
26 June 2024