BlackRock Greater Europe Investment Trust Plc - Portfolio Update
PR Newswire
London, November 11
BLACKROCK GREATER EUROPE INVESTMENT TRUST plc (LEI - 5493003R8FJ6I76ZUW55)
All information is at 31 October 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) | -0.4% | -1.8% | 15.5% | 40.0% | 420.8% |
| Net asset value* (diluted) | -0.4% | -1.8% | 15.5% | 40.0% | 421.3% |
| Share price | 0.3% | -1.3% | 18.4% | 41.0% | 407.6% |
| FTSE World Europe ex UK | -1.6% | -1.9% | 11.5% | 26.2% | 266.5% |
* Diluted for treasury shares and subscription shares.
Sources: BlackRock and Datastream
At month end
| Net asset value (capital only): | 393.85p |
| Net asset value (including income): | 393.85p |
| Net asset value (capital only)1: | 393.85p |
| Net asset value (including income)1: | 393.85p |
| Share price: | 380.00p |
| Discount to NAV (including income): | 3.5% |
| Discount to NAV (including income)1: | 3.5% |
| Net gearing: | 5.2% |
| Net yield2: | 1.5% |
| Total assets (including income): | £332.5m |
| Ordinary shares in issue3: | 84,419,001 |
| Ongoing charges4: | 1.09% |
1 Diluted for treasury shares.
2 Based on a final dividend of 4.10p per share and an interim dividend of 1.75p for the year ended 31 August 2019.
3 Excluding 25,909,937 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 2019.
| Sector Analysis | Total Assets (%) | Country Analysis | Total Assets (%) | |
| Industrials | 23.8 | Switzerland | 17.0 | |
| Health Care | 20.1 | Denmark | 16.3 | |
| Technology | 18.5 | Germany | 15.4 | |
| Consumer Goods | 16.8 | France | 15.1 | |
| Financials | 10.1 | Italy | 7.7 | |
| Consumer Services | 7.7 | Netherlands | 7.0 | |
| Basic Materials | 3.3 | Spain | 5.1 | |
| Telecommunications | 1.6 | Sweden | 5.0 | |
| Oil & Gas | 0.6 | United Kingdom | 4.3 | |
| Net current liabilities | -2.5 | Israel | 2.4 | |
| ----- | Poland | 2.1 | ||
| 100.0 | Ireland | 1.8 | ||
| ===== | Belgium | 1.6 | ||
| Greece | 1.0 | |||
| Finland | 0.7 | |||
| Net current liabilities | -2.5 | |||
| ----- | ||||
| 100.0 | ||||
| ===== |
| Ten Largest Equity Investments | ||
| Company | Country | % of Total Assets |
| SAP | Germany | 7.0 |
| Safran | France | 6.8 |
| Adidas | Germany | 5.8 |
| Sika | Switzerland | 5.8 |
| Novo Nordisk | Denmark | 5.7 |
| Royal Unibrew | Denmark | 5.3 |
| Lonza Group | Switzerland | 4.6 |
| ASML | Netherlands | 4.6 |
| DSV | Denmark | 4.4 |
| RELX | United Kingdom | 4.4 |
Commenting on the markets, Stefan Gries, representing the Investment Manager noted:
During the month, the Company's NAV fell by 0.4% and the share price rose by 0.3%. For reference, the FTSE World Europe ex UK Index returned -1.6% during the period.
The market was gripped by a global macro narrative in October. With perceived abating of both US-China tensions and a 'hard Brexit' risk, lower quality, value stocks which are under-owned led the market. This was particularly evident in 'Brexit buckets', groups of stocks created by banks which correlated to moves in GBP, including the European Banks Index. The European market was up over the month but down in GBP terms given sharp currency moves.
Sentiment towards Europe has somewhat improved with building expectation of greater fiscal support given rhetoric from Mario Draghi and Christine Lagarde, further supporting the top down macro narrative.
We continue to caution broad market buying given clear weakness in specific end markets from both cyclical and structural headwinds. At this point in the cycle, we believe a selective approach is important.
The Company outperformed the index over the month with both stock selection and sector allocation aiding returns. The higher allocation to the industrial sector proved positive for performance, as sectors which are more exposed to the economic cycle led the market. The lower allocation to utilities, a more defensive sector which is less sensitive to economic conditions, also aided returns.
The Company saw a number of strong contributors on the back of positive earnings releases. This included Sika which saw improved organic growth in Q3 and year-on-year gross margin improvement to 53.5%, a reassuring print in what has been a challenging sector.
A position in SAP performed strongly on good Q3 numbers. Europe's most valuable tech company reported an increase of 38% in new cloud bookings over the quarter, as well as cloud revenue growing by 37% year-over-year. The company confirmed its guidance for double-digit growth this year and will be returning substantial amounts of cash to its shareholders via share buybacks next year.
Straumann also released compelling results with 3Q organic growth up by 18.7%, ahead of consensus estimates. Guidance for the group was raised with sales expected to be mid-teens, up from low-to-mid-teens. We continue to back the management to execute on the growth strategy into adjacent markets with a strong product offering.
Royal Unibrew proved the largest detractor to the Company's relative performance over the month following a strong period of returns. Given the less economically sensitive profile of the company and a tough revenue comparative year-on-year, the shares came under pressure. We continue to believe this is a high-quality company with a strong management team which empowers local managers to make accretive capital allocation decisions.
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
Despite the challenging conditions which continue to plague industrial end markets in Europe, there are reasons emerging to be more hopeful. We have seen stabilisation in certain end markets which should be further supported by policy, both monetary and, in some select instances, fiscal. The strong fiscal position of the region, aided by lower yields, has the potential to make a meaningful difference and is complimented by a resilient consumer boasting some of the highest savings ratios in the developed world. Along with extreme consensus underweight positioning to the region, pillars of an investment case for Europe are building, leading to recommendation upgrades from sell-side commentators. We agree fiscal policy and falling political uncertainty could both give a boost to the region, but caution buying specific exposures based on macro narratives alone. Europe continues to have areas of the market which appear to be value traps with whole sectors suffering from falling profitability and management teams with limited ability to turn the tide. We believe selectivity in the region and a focus on long-term winners underpinned by superior fundamentals could be meaningful for the overall return achieved from the region. We continue to hold a preference for well positioned luxury goods and aerospace companies and avoid cyclically and structurally challenged areas such as autos and banks.
11 November 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.
