BlackRock Greater Europe Investment Trust Plc - Portfolio Update
PR Newswire
London, June 13
BLACKROCK GREATER EUROPE INVESTMENT TRUST plc (LEI - 5493003R8FJ6I76ZUW55)
All information is at 31 May 2019 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) | -0.6% | 7.3% | 4.8% | 47.8% | 383.6% |
| Net asset value* (diluted) | -0.6% | 7.3% | 4.8% | 47.8% | 384.1% |
| Share price | -1.7% | 5.9% | 6.3% | 50.0% | 363.8% |
| FTSE World Europe ex UK | -1.7% | 4.9% | 1.8% | 39.4% | 244.5% |
* Diluted for treasury shares and subscription shares.
Sources: BlackRock and Datastream
At month end
| Net asset value (capital only): | 366.80p |
| Net asset value (including income): | 369.55p |
| Net asset value (capital only)1: | 366.80p |
| Net asset value (including income)1: | 369.55p |
| Share price: | 351.00p |
| Discount to NAV (including income): | 5.0% |
| Discount to NAV (including income)1: | 5.0% |
| Net gearing: | 2.8% |
| Net yield2: | 1.6% |
| Total assets (including income): | £314.0m |
| Ordinary shares in issue3: | 84,968,101 |
| Ongoing charges4: | 1.09% |
1 Diluted for treasury shares.
2 Based on a final dividend of 4.00p per share for the year ended 31 August 2018 and an interim dividend of 1.75p for the year ending 31 August 2019.
3 Excluding 25,360,837 shares held in treasury.
4 Calculated as a percentage of average net assets and using expenses, excluding interest costs, after relief for taxation, for the year ended 31 August 2018.
| Sector Analysis | Total Assets (%) | Country Analysis | Total Assets (%) | |
| Industrials | 29.9 | Switzerland | 17.1 | |
| Health Care | 19.4 | France | 16.3 | |
| Technology | 16.9 | Denmark | 15.2 | |
| Consumer Goods | 13.6 | Germany | 13.7 | |
| Financials | 8.5 | Italy | 7.4 | |
| Consumer Services | 6.9 | Netherlands | 6.1 | |
| Basic Materials | 4.1 | Spain | 5.2 | |
| Telecommunications | 1.6 | United Kingdom | 4.6 | |
| Net current liabilities | -0.9 | Sweden | 4.5 | |
| ----- | Israel | 3.3 | ||
| 100.0 | Finland | 2.0 | ||
| Ireland | 2.0 | |||
| Belgium | 1.6 | |||
| Greece | 1.2 | |||
| Poland | 0.7 | |||
| Net current liabilities | -0.9 | |||
| ----- | ||||
| 100.0 | ||||
| ===== | ||||
| Ten Largest Equity Investments | ||
| Company | Country | % of Total Assets |
| SAP | Germany | 6.2 |
| Safran | France | 6.1 |
| Novo Nordisk | Denmark | 5.5 |
| Sika | Switzerland | 5.4 |
| Adidas | Germany | 5.1 |
| RELX | United Kingdom | 4.6 |
| DSV | Denmark | 4.4 |
| Lonza Group | Switzerland | 4.3 |
| ASML | Netherlands | 3.6 |
| Ferrari | Italy | 3.4 |
Commenting on the markets, Stefan Gries, representing the Investment Manager noted:
During the month, the Company's NAV fell by 0.6%, and the share price fell by 1.7%. For reference, the FTSE World Europe Ex UK Index returned -1.7% during the period.
In May markets fell on growing concerns over global growth and rising US-China trade tensions. Basic materials, financials and oil & gas led the sell-off while more defensive sectors, those less exposed to the economic cycle, including utilities, telecoms and health care proved resilient. Politics continued to play an important role. Whilst the outcome of the European election was largely benign, with more pro-EU supporters winning share than not, the campaign for top jobs, both in parliament and at the European Central Bank, is creating some noise within the market.
Central bank policy meeting minutes showed that European Central Bank policy-makers were concerned about weaker-than-expected growth in the Eurozone and, subsequently in early June, announced that rates would remain at all-time-lows through the first half of 2020.
The Company outperformed the index over the month. This was driven by strong stock selection, whilst sector allocation marginally detracted.
The larger allocation to industrials, where we hold a number of heterogeneous names, detracted from performance; however, stock selection more than offset this. Our lower allocations to sectors such as telecoms and utilities also detracted from returns. Whilst we recognise the resilience of these businesses we believe many face structural headwinds which impairs their long-term profitability.
The top performing holding over the month was a position in Adidas. Shares rallied after the release of Q1 earnings figures, which demonstrated earnings 9% ahead of consensus as the group saw a sizeable expansion in gross margin. The Free Cash Flow profile of the company also improved through good inventory control and more favourable sourcing. We continue to hold the position as we believe there is a multi-year pathway for improvement in margin and cash flow conversion.
A position in Ferrari was also amongst the strongest contributors to the Company's performance as the luxury sports car maker beat on first quarter earnings and reiterated its full-year financial targets. Earnings in the first quarter rose by 14%, with strong performance contribution from its entry-level Portofino model. Shares further rallied given the launch of the SF90 Stradale model, which is Ferrari's first plug-in hybrid electric vehicle and expected to start selling mid-2020.
The Company's holding in RELX also proved resilient through the period as management delivered an encouraging update to the market. We believe RELX continues to be a defensive business that can exhibit attractive growth founded on the high barriers to entry and low cost of capital involved in their business.
Online broker Finecobank was the single largest detractor over the period, as Italian bank Unicredit started to sell down its 17% stake in the company. However, to our mind, this does not change the investment case and we still believe Finecobank is capable of attractive earnings growth as it further disrupts the Italian market and moves into new countries. Fineco has a highly scalable business model based on a differentiated digital platform, providing a low cost base which leads to an attractive cash conversion profile.
At the end of the period the Company had a higher allocation than the reference index towards industrials, technology, consumer services and health care. A lower allocation was held in financials, consumer goods, utilities, telecommunications, basic materials and oil & gas.
Outlook
The near-term outlook for markets remains uncertain, with global trade war rhetoric a significant influence, driving a deterioration in certain end markets such as industrial chemicals and autos. However, we believe the European economy looks reasonably positioned with a resilient consumer, high capacity utilisation rates and attractive funding costs. We believe these factors are likely to drive capex higher through 2019. We have begun to see tentative signs of the end of the earnings downgrade cycle, confirming that the recent setback is a mid-cycle slowdown as opposed to a recessionary environment, although global political challenges can prove disruptive in the near-term. With a combination of improving earnings, undemanding valuation and potential inflection in indicators, we believe investors are more likely to reassess their underweight position to the region. Within our portfolios we have a preference for industrial, health care and technology companies, assessing earnings opportunities through the lenses of wealth creation, resilience and change. We broadly avoid positions within financials, particularly banks, telecoms and materials.
13 June 2019
ENDS
Latest information is available by typing www.brgeplc.co.uk 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.
