Blackrock Greater Europe Investment Trust PLC

Net Asset Value • Aug 16, 2023

National Storage Mechanism | Additional information

BlackRock Greater Europe Investment Trust Plc - Portfolio Update

PR Newswire

LONDON, United Kingdom, August 16

The information contained in this release was correct as at *31 July 2023*. 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 July 2023* 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)	1.8%	4.2%	17.2%	37.2%	703.9%
Share price	2.2%	3.3%	19.3%	30.8%	667.3%
FTSE World Europe ex UK	2.0%	0.3%	16.1%	36.7%	396.6%

Sources: BlackRock and Datastream

At month end

Net asset value (capital only):	579.23p
Net asset value (including income):	583.99p
Share price:	551.00p
Discount to NAV (including income):	5.6%
Net gearing:	6.3%
Net yield1:	1.2%
Total assets (including income):	£589.8m
Ordinary shares in issue2:	101,000,161
Ongoing charges3:	0.98%

1  Based on a final dividend of 4.85p per share for the year ended 31 August 2022 and an interim dividend of 1.75p per share for the year ending 31 August 2023.

2  Excluding 16,928,777 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 2022.

Sector Analysis	Total Assets (%)
Industrials	24.4
Technology	23.4
Consumer Discretionary	20.6
Health Care	16.4
Financials	8.7
Consumer Staples	4.1
Basic Materials	2.7
Net Current Liabilities	-0.3
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	100.0
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Country Analysis	Total Assets (%)
Switzerland	19.7
Netherlands	19.5
France	19.1
Denmark	15.9
United Kingdom	6.0
Italy	5.2
Ireland	4.7
Sweden	4.4
Spain	2.3
Belgium	2.1
Germany	1.2
Russia	0.2
Net Current Liabilities	-0.3
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	100.0
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*Top 10 holdings*	*Country*	*Fund %*
Novo Nordisk	Denmark	8.3
LVMH	France	7.6
ASML	Netherlands	6.8
RELX	United Kingdom	5.3
STMicroelectronics	Switzerland	4.3
DSV Panalpina	Denmark	4.3
Lonza Group	Switzerland	4.3
Hermès	France	4.2
BE Semiconductor	Netherlands	3.9
Sika	Switzerland	3.4

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

During the month, the Company’s NAV rose by 1.8% and the share price by 2.2%. For reference, the FTSE World Europe ex UK Index returned 2.0% during the period.

Europe ex UK markets continued their strength during July which was somewhat of a reversal month, one where market leadership came primarily from sectors that lagged the year to date rally. Real estate, financials, energy, materials and health care were the best performing sectors, while telecoms, utilities and technology lagged the market.

The Q2 reporting period is underway and offering more talk of green shoots from companies in different sectors. In particular, talk of inventory destock coming to an end in areas such as semiconductors, freight volumes and health care would support a pickup in economic activity over H2 2023. However, share price moves were not only driven by the results, but general positioning appeared to play a significant role as many companies sold off on strong numbers.

Areas of the market where earnings missed – such as several chemicals, industrials and health care companies going through destocking cycles - had been well flagged coming into the quarter. Messaging from management teams has perhaps been incrementally more supportive with signs that we may be closer to a trough.

The Company’s performance was slightly behind its reference index during the month, with sector allocation being negative and stock selection positive.

In sector terms, the Company’s higher weight to technology detracted, although partially offset by accurate stock selection. A lower weight to the financials sector was negative but again, significantly offset by strong stock selection as select positions in Finecobank, AIB and KBC contributed positively.

The Company’s zero exposure to both telecoms and utilities was positive, as was an underweight exposure to consumer staples.

The Company’s holding in Hexagon was the single largest detractor to relative performance over the month, as shares in the company came under pressure following accusations from a short seller. We have been engaging with the company to improve transparency and governance in recent years, see no merit in these accusations and have not traded upon this news.

A position in DSV detracted after having performed strongly in previous months with further pressure on shares coming from a large placement at a 5% discount to the market. The company also reported results where volumes were weak, partially as a result of management focusing on pricing discipline. The company expects the Q2 result to be the trough on volumes with Q3/Q4 moving past the worst on the outlook. DSV continue to execute well on cost control and a share buyback commencing in H2 should further support the shares.

Lonza was another detractor after releasing a weak set of H1 results and a cut to full year 2023 guidance and 2024 margin expectations. The main drag has been a lower contribution from early-stage assets within biotech and cell and gene therapies which have a high drop through rate and thus are impactful on profitability. New projects coming online within biologics and small molecules should be supportive as they ramp-up through H2 and into 2024. We expect the October Capital Markets Day to bring a positive message, pointing to double digit growth and margin expansion for 2023-2027.

Positions in Semiconductor businesses – BE Semiconductor, ASMI, and ST Micro – were amongst top contributors to active returns in July. BE Semi delivered a Q2 result with sales and margins better than consensus, yet weaker orders driven by a continued slump in mobile demand. Guidance was mixed with Q3 orders guided down while expecting Q4 sales to significantly exceed Q3, supported by visibility on scheduled shipments. All in all, the market took management’s commentary positively, believing the company is coming towards the end of a period of weaker orders. Similarly, ASMI guided for second half orders to be stronger than Q2 driven by China strength and a degree of recovery in logic/foundry.

Ahead of reporting results, shares in Sika moved higher supported by read across commentary from companies with exposure to construction and infrastructure spend which signalled we are likely moving closer to a bottom on weaker volumes.

Kingspan was the single top contributor due to a positive update to the market. In a brief statement, the company said trading profit in H1 2023 is 10% ahead of their prior guide with pricing holding up much better than expected. Although noting a wide range of performance difference between categories, they are confident on how they are positioned for Q3’ with an encouraging pipeline.

Finally, Sartorius Stedim shares bounced off recent lows caused by the company warning ahead of Q2 results. The Q2 report was disappointing, as expected, with order intake down 37% driven by all regions. However, messaging from the company post the release offered a bit more optimism for orders to improve between Q3 & Q4, which would be earlier than the 2024 recovery most analysts were anticipating. This news moved shares 24% higher during July.

Outlook

The European markets continue to be unloved, recording strong outflows from the asset class. Despite this, European equities have produced strong performance during H1, with gains recorded year-to-date being far broader than those seen in the US. This breadth, we believe, is partly conditioned by earnings surprises. With high pessimism on entry to earnings season, Q1 reporting saw the percentage of net beats exceeding 40%, the highest reading in over 15 years. The Q2 earnings season got underway in recent weeks and at the point of writing is progressing as expected. With consensus having moved up over the course of the quarter – following significant upside surprise catching analysts off guard after Q1 reporting – companies mostly met or slightly exceeded expectations. The market’s reaction function also seems to have shifted, requiring a higher bar to be met for meaningful positive share price reaction.

We believe the question of ‘recession or not’ is the wrong one to ask. Looking at averages of earnings or market falls during recessionary environments is of little utility to us. We do not see the ingredients for a structural recession in place as megatrends backed by increasing capex spend are improving the earnings outlook for many businesses we own in this portfolio. To our mind, the economic cycle cannot be understood at present without detailed bottom-up work.

Long-term structural trends and large amounts of fiscal spending via the Recovery Fund, Green Deal and the REPowerEU plan in Europe can drive demand for years to come, for example in areas such as infrastructure, automation, innovation in medicines, the shift to electric vehicles, digitalisation or decarbonisation. We believe the portfolio is well aligned to many of these structural spending streams.

16 August 2023

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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