Last checked at 25 Sep 2019 10:48
BlackRock Greater Europe Investment Trust Plc - Portfolio UpdateBlackRock Greater Europe Investment Trust Plc - Portfolio Update
PR Newswire
London, September 25
BLACKROCK GREATER EUROPE INVESTMENT TRUST plc (LEI - 5493003R8FJ6I76ZUW55)All information is at 31 August 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) | -1.4% | 8.1% | 6.2% | 46.1% | 422.8% |
| Net asset value* (diluted) | -1.4% | 8.1% | 6.2% | 46.1% | 423.2% |
| Share price | -1.0% | 9.7% | 7.9% | 49.1% | 408.7% |
| FTSE World Europe ex UK | -1.4% | 7.0% | 4.8% | 33.9% | 268.5% |
* Diluted for treasury shares and subscription shares.Sources: BlackRock and Datastream
At month end
| Net asset value (capital only): | 396.27p |
| Net asset value (including income): | 399.45p |
| Net asset value (capital only)1: | 396.27p |
| Net asset value (including income)1: | 399.45p |
| Share price: | 385.00p |
| Discount to NAV (including income): | 3.6% |
| Discount to NAV (including income)1: | 3.6% |
| Net gearing: | 0.7% |
| Net yield2: | 1.5% |
| Total assets (including income): | £338.4m |
| Ordinary shares in issue3: | 84,713,101 |
| 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 25,615,837 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 | 26.2 | Denmark | 17.6 | |
| Health Care | 20.9 | France | 16.6 | |
| Technology | 17.0 | Switzerland | 14.9 | |
| Consumer Goods | 16.5 | Germany | 13.7 | |
| Financials | 8.6 | Italy | 8.1 | |
| Consumer Services | 6.2 | Netherlands | 6.3 | |
| Basic Materials | 3.6 | Spain | 5.4 | |
| Telecommunications | 1.7 | United Kingdom | 4.6 | |
| Net current liabilities | -0.7 | Sweden | 4.5 | |
| ----- | Israel | 3.0 | ||
| 100.0 | Poland | 1.9 | ||
| ===== | Ireland | 1.7 | ||
| Belgium | 1.5 | |||
| Greece | 0.9 | |||
| Net current liabilities | -0.7 | |||
| ----- | ||||
| 100.0 | ||||
| ===== |
| Ten Largest Equity Investments | ||
| Company | Country | % of Total Assets |
| Novo Nordisk | Denmark | 6.7 |
| Safran | France | 6.6 |
| SAP | Germany | 5.9 |
| Adidas | Germany | 5.2 |
| Sika | Switzerland | 5.2 |
| Royal Unibrew A/S | Denmark | 4.9 |
| Lonza Group | Switzerland | 4.8 |
| DSV | Denmark | 4.8 |
| RELX | United Kingdom | 4.6 |
| ASML | Netherlands | 4.1 |
Commenting on the markets, Stefan Gries, representing the Investment Manager noted:
During the month, the Company’s NAV fell by 1.4% and the share price by 1.0%. For reference, the FTSE World Europe ex UK Index returned
-1.4% during the period.
The flight to ‘safety’ of fixed income assets somewhat dictated market returns over the month, with higher quality, defensive assets outperforming. German 10-year bond yields fell over 30bps during the month, ending August at circa -70bps. Positively for the region, political tensions abated somewhat in Italy as 5Stars and centre-left Democrats agreed to form a new and strongly pro-European coalition.
The Company performed in line with the index over the month. This was driven by sector allocation; stock selection proved additive over the period. The Company’s overweight towards real world economic cyclicals continued to prove a drag in performance as we headed out of the summer months. Equally, the lower allocation to the more traditionally defensive area of the market, those which see less volatility in earnings due to the market cycle, detracted from returns. However, as the oil price reached year-to-date lows given falling demand and potential for increased supply in the US Permian basin, our zero weighting towards this sector benefited performance.
Danish listed Royal Unibrew performed well over the month. Despite tough comparatives, the group beat on estimates for their Q2 earnings growth, upgrading guidance for full year revenue and earnings. Novo Nordisk also contributed positively to performance as Q2 sales of Ozempic (injectable GLP-1) beat expectations by 2%. Overall, the group’s gross margin beat expectations by 2% and Earnings Before Interest and Taxation by 3%.
DSV also aided returns as they posted strong results, despite the weaker trade environment globally. They also closed their deal with Panalpina which will take them to the number 2 freight forwarding player globally. With this, they advised of synergies at the mid-point of the guidance range, a positive for the market given management’s disposition to guide conservatively. Whilst all these companies are Danish listed, our positions in them do not reflect any structural view on the Danish economy. These companies have revenue streams that are very internationally diversified, as are the end markets they are exposed to.
A position in IMCD proved a drag on returns as quarterly results were weak, particularly in Europe, the Middle East and Africa. The management team reiterated their confidence in their business model and underlined how volatile any given month or quarter can be for the business based on different end markets. They had not lost any customers during the quarter and thus the slowdown was driven by weaker macro within industrials (autos and construction). Their consumer facing businesses have been more resilient. Whilst we do not believe Q2 weakness should necessarily be extrapolated, visibility for this business is relatively low. However, we believe the long-term investment case remains intact, as they benefit from outsourcing and an ability to undertake additive M&A in a fragmented industry which should deliver strong earnings growth at low capital intensity.
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 global economic environment is clearly deteriorating in response to the uncertainty caused by US-Chinese relations. We believe this has created disruption within supply chains and potential delays to capital expenditure, but do not see structural imbalances in the economy at this point in time. Policy remains supportive in Europe and the consumer resilient with Eurozone retail sales growing 2.6% year-on-year in June. Q2 earnings releases have unveiled a slow down in short-cycle companies, however our portfolios are generally not exposed to these types of businesses. At present, we do not see contagion beyond this. Valuation dispersion within the market remains a topic of conversation, but we believe the prevailing environment and structural headwinds warrant ‘cheap valuations’ for some sectors. Our portfolio capital is positioned to where we see the best upside driven by fundamentals. Whilst markets can respond to statistical indicators in the near-term, at times causing rotations, we believe company fundamentals drive long-term performance. We continue to have a small pro-cyclical tilt in portfolios, primarily expressed through late cycle industrials, such as aerospace stocks, and consumer exposed names, such as luxuries.
25 September 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.