Last checked at 16 Aug 2018 17:14
BlackRock Greater Europe Investment Trust Plc - Portfolio UpdateBlackRock Greater Europe Investment Trust Plc - Portfolio Update
PR Newswire
London, August 15
BLACKROCK GREATER EUROPE INVESTMENT TRUST plc (LEI - 5493003R8FJ6I76ZUW55)All information is at 31 July 2018 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) | 4.0% | 8.7% | 14.7% | 49.9% | 383.5% |
| Net asset value* (diluted) | 4.0% | 8.7% | 14.7% | 51.5% | 383.9% |
| Share price | 2.0% | 8.5% | 14.7% | 49.2% | 361.1% |
| FTSE World Europe ex UK | 5.1% | 4.4% | 5.8% | 41.2% | 256.7% |
* Diluted for treasury shares and subscription shares.Sources: BlackRock and Datastream
At month end
| Net asset value (capital only): | 371.32p |
| Net asset value (including income): | 375.53p |
| Net asset value (capital only)1: | 371.32p |
| Net asset value (including income)1: | 375.53p |
| Share price: | 355.00p |
| Discount to NAV (including income): | 5.5% |
| Discount to NAV (including income)1: | 5.5% |
| Net gearing: | 2.4% |
| Net yield2: | 1.5% |
| Total assets (including income): | £324.7m |
| Ordinary shares in issue3: | 86,459,691 |
| Ongoing charges4: | 1.10% |
1 Diluted for treasury shares.2 Based on a final dividend of 3.70p per share for the year ended 31 August 2017 and an interim dividend of 1.75p per share for the year ending 31 August 2018.3 Excluding 23,869,247 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 2017.
| Sector Analysis | Total Assets (%) | Country Analysis | Total Assets (%) | |
| Industrials | 34.3 | Switzerland | 19.3 | |
| Health Care | 20.6 | France | 15.2 | |
| Financials | 13.0 | Denmark | 11.5 | |
| Consumer Goods | 10.8 | Netherlands | 11.3 | |
| Technology | 8.2 | Germany | 11.0 | |
| Consumer Services | 6.8 | Sweden | 7.2 | |
| Basic Materials | 3.5 | Spain | 5.1 | |
| Oil & Gas | 1.7 | Russia | 4.1 | |
| Telecommunications | 1.6 | Israel | 3.5 | |
| Net current liabilities | (0.5) | Finland | 3.1 | |
| ----- | Italy | 2.4 | ||
| 100.0 | Belgium | 2.1 | ||
| ===== | Ireland | 2.0 | ||
| Greece | 1.4 | |||
| Poland | 1.3 | |||
| Net current liabilities | (0.5) | |||
| ----- | ||||
| 100.0 | ||||
| ===== |
| Ten Largest Equity Investments | ||
| Company | Country | % of Total Assets |
| Lonza Group | Switzerland | 5.6 |
| Novo Nordisk | Denmark | 4.9 |
| Safran | France | 4.5 |
| Sika | Switzerland | 4.4 |
| Unilever | Netherlands | 3.7 |
| Fresenius Medical Care | Germany | 3.5 |
| Hexagon | Sweden | 3.3 |
| Wartsila | Finland | 3.0 |
| Compagnie Financière Richemont | Switzerland | 3.0 |
| Industria de Diseño Textil Inditex | Spain | 3.0 |
Commenting on the markets, Stefan Gries, representing the Investment Manager noted:
During the month, the Company’s NAV rose by 4.0% and the share price increased by 2.0%. For reference, the FTSE World Europe ex UK Index returned 5.1% during the period.
Continental European markets rallied in July. Markets were led primarily by stocks exposed to the value factor, which rebounded after a significant period of underperformance. Through the start of the European earnings season, we saw those stocks with rich valuations punished where their earnings or management guidance proved weaker than expected. Politics remained centre stage in Europe, with the Italian uncertainty weighing on the country’s economic activity in the first half of 2018, as evidenced by the broad-based softening in survey-based indicators. The news flow is closely examined by investors, key points being new information about the budget deficit, pension reform, the dignity decree and appointments of key civil servants. Headline inflation rose to 2.15% year-on-year in July (from 1.96% year-on-year in June), 10 basis points higher than expected, primarily due to higher energy prices. Core inflation remains at bay. As expected, the European Central Bank kept key interest rates unchanged at their July meeting. Whilst Draghi expressed greater conviction in the Eurozone’s inflation outlook, he explicitly referenced uncertainties stemming from global trade as a risk to growth.
The Company underperformed the market over the month. Stock selection drove the Company’s underperformance, whilst sector allocation proved neutral. The higher allocation to technology proved a drag on returns, whilst the higher weighting towards the health care sector was positive for performance. However, stock selection within the health care sector detracted as large-cap pharmaceutical companies, which we do not own, led the sector.
The greatest detractor to performance during the month was a holding in Danske Bank. The stock has been weighed down by ongoing issues pertaining to money laundering in the Estonian division between 2011 and 2015. Although the primary regulators have broadly resolved this issue and imposed only small fines, Danske has committed to donate the entire income from that division, which will be taken as a cost on this year’s income statement. Whilst revenue growth continues, this additional cost has led lower Net Interest Income (NII) this year.
A position in Kering also detracted. Whilst growth in the Gucci brand remained exceptionally strong at +40% like-for-like in the second quarter, this proved a disappointment to the market following the company’s strong brand and share price performance over the prior 18 months.
A position in lock maker Assa Abloy also hampered performance. Whilst the group posted robust results, sentiment in the questioning towards the company within the press conference seemed negative, focusing on the US margin. This has come under pressure as Assa have fallen behind on price-cost when it comes to steel doors, but ultimately we believe this will be resolved and, along with growth from smart lock doors, will drive earnings higher.
Lonza proved the best performing stock in the Company over the month. The company upgraded their underlying revenue target from mid-single digit to mid to high-single digit. Lonza saw strong growth within the Pharma & Biotech and Consumer businesses with organic growth +14.7% and +7.6% respectively, which came with margin expansion.
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 apparent attractiveness of European equities has waned year-to-date. Political headlines have shifted sentiment towards the region and expectations have been reset lower. These expectations, and indeed market positioning, have, however, come from bullish levels at the onset of 2018. We continue to see earnings progressing positively in the region and note that FX impacts are probably past their worst. The continued global growth has supported revenues in Europe. Risks are clearly present in the market, but resolutions on trade wars could prove a catalyst for the region and particularly for stocks with depressed valuations. We believe navigating risks and extreme valuations through active stock selection is increasingly important at this stage in the cycle. From a fundamental standpoint, there are ample attractive investment opportunities within Europe which can deliver earnings growth and strong cash flow irrespective of the political environment.
16 August 2018
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.