BlackRock Greater Europe Investment Trust Plc - Portfolio Update
PR Newswire
LONDON, United Kingdom, November 26
The information contained in this release was correct as at 31 October 2024. 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 October 2024 and unaudited.
Performance at month end with net income reinvested
| One Month | Three Months | One Year | Three Years | Launch (20 Sep 04) |
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Net asset value (undiluted) | -5.2% | -5.5% | 18.2% | -9.0% | 732.3% |
Share price | -7.2% | -9.7% | 18.7% | -17.3% | 678.3% |
FTSE World Europe ex UK | -1.9% | -1.9% | 16.6% | 15.4% | 441.9% |
Sources: BlackRock and Datastream
At month end
Net asset value (capital only): | 591.83p |
Net asset value (including income): | 597.70p |
Share price: | 552.00p |
Discount to NAV (including income): | 7.7% |
Net gearing: | 8.9% |
Net yield1: | 1.3% |
Total assets (including income): | £587.5m |
Ordinary shares in issue2: | 98,287,208 |
Ongoing charges3: | 0.95% |
1 Based on an interim dividend of 1.75p per share and final dividend of 5.25p per share for the year ended 31 August 2024.
2 Excluding 19,641,730 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 2024.
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Top 10 holdings | Country | Fund % |
Novo Nordisk | Denmark | 7.8 |
RELX | United Kingdom | 7.1 |
ASML | Netherlands | 5.6 |
Schneider Electric | France | 5.3 |
Ferrari | Italy | 4.7 |
Safran | France | 4.5 |
Partners Group | Switzerland | 4.3 |
Hermès | France | 4.2 |
Linde | United States | 4.0 |
Adyen | Netherlands | 3.6 |
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Commenting on the markets, Stefan Gries and Alexandra Dangoor, representing the Investment Manager noted:
During the month, the Company's NAV fell by 5.2% and the share price declined by 7.2%. For reference, the FTSE World Europe ex UK Index returned -1.9% during the period.1
Markets experienced a challenging month, with broad based weakness across the market and particularly challenged in technology, whilst even more defensive sectors like consumer staples also struggled.
There was positioning in the market ahead of the US elections and, in particular, we saw yields picking up in the US as well as Europe. However, Q3 2024 earnings were also in focus which has seen a mixed reporting season so far. The consumer sector remains challenged, with particularly poor results from companies with high exposure to China. The European consumer has proved to be more resilient than expected in certain categories, whilst the backdrop in China means that the Chinese consumer remains weak. Despite the weakness in the consumer sector there are certain sectors in the market that remain strong. For example, within the industrials sector we continue to see very healthy demand for electrical products supported by continued investment needs in data centres, the distribution grid and the electrification of buildings. Banks continue to perform well, with solid results despite rate cuts in the quarter and still limited delinquencies. The telecommunications and financials sectors were up during the month, while the sell-off was led by technology, consumer staples, real estate and materials.
The Company lagged its reference index during the month, largely driven by the portfolio's exposure to technology. In sector terms, the portfolio's overweight allocation to the technology sector hurt relative performance as ASML's weak results dragged down the sector. An underweight allocation to telecommunications also detracted, as we have seen the sector re-rate against a more uncertain economic backdrop. The portfolio's lower exposure to financials was also negative.
A higher exposure to consumer discretionary positions detracted during the month but was more than offset by strong stock selection. Our underweight allocation to consumer staples aided returns. Positively, the overweight exposure to industrials also aided performance, particularly as we see strength coming through in aerospace and defence.
Negative performance came from the semiconductor industry. The sector was hit by disappointing quarterly results from ASML. The company reduced its 2025 revenue guidance from EUR35bn to EUR32.5bn at the midpoint, representing 12% year-on-year growth, down from the previously expected 25%. The main reason for this warning is a reduction in the assumptions for extreme ultraviolet lithography (EUV) tool shipments in 2025, from 71 to 50, due to a slower recovery in end demand (excluding artificial intelligence (AI)), faster normalisation in China, and some customers, in particular Intel and Samsung, facing transition difficulties in moving to the next node. Despite these challenges, ASML's position in the ecosystem remains very strong and long-term trends in wafer growth, driven by AI, electrification, energy transition and the innovation curve, remain unchanged. ASML continues to be a monopoly business with the potential for double-digit growth over time.
BE Semiconductor (BESI) delivered weaker guidance for the upcoming quarter, expecting Q4 sales to be down by 5%-15% quarter-on-quarter, while Q3 sales already declined 8% quarter-on-quarter. Despite the short-term difficulties in end markets, BESI remains optimistic about its long-term prospects, particularly in the advanced packaging tools market, which is crucial for the development of more powerful semiconductor chips.
Elsewhere in the sector, ASM International (ASMI) provided a positive update over the month, highlighting strong demand for their technology, which allows them to continue growing despite a generally soft underlying market. Q3 sales and orders came in ahead of consensus and the company slightly increased its targets for 2025, aiming for sales between EUR3.2bn-3.6bn, compared to EUR3.0bn-3.6bn previously. However, shares still declined due to concerns that some of the issues affecting ASML could eventually impact ASMI as well.
On the positive side, Ferrari was the top performer to relative returns over the month. The sportscar manufacturer continues to see positive earnings momentum driven by a full order book and new product launches. Shares were also buoyed by optimism surrounding the unveiling of their long-awaited hypercar - the Ferrari F80 - which is expected to be a meaningful contributor to earnings growth from next year.
Schneider Electric was another top performer thanks to the company's strong Q3 financial results, which included a quarterly revenue increase by 8%. The company benefited from robust demand across various sectors and geographies, particularly within their data centres and infrastructure divisions. Industrial automation end markets remain weak though. With its strategic focus on electrification, digitisation and sustainability trends, we believe Schneider has positioned itself well to capitalise on these long-term growth drivers.
Shares in Safran also outperformed the falling market. Results showed better aftermarket dynamics, which have led to reiteration of FY free cash flow guidance for the business, against expectations that incremental working capital headwinds would be felt owing to Boeing issues.
Finally, avoiding positions in Capgemini, Bayer and Pernod-Ricard positively impacted relative returns, as these companies reported poor earnings in the month.
Outlook
We believe underlying economic conditions remain robust with consumers and corporates in healthy positions. Inflation is retreating and rate cutting cycles have begun in earnest across the globe, which increases investor propensity to move up the risk curve in search for higher returns. We continue to take scaled and deliberate cyclical risk in European equities as profitability continues to be resilient in many European cyclicals, with their sensitivity to economic shocks and the domestic economy significantly reduced. After a long period of underinvestment, long duration and structural investment spend is now in place to support these businesses and their underlying earnings should move higher over a multi-year period.
Alongside investment opportunities afforded by structural forces, such as the energy transition or AI, we also detect a cyclical upturn in a variety of industries like construction, life-sciences and chemicals which have suffered from pronounced volume declines for the best part of two years. We remain positive on the outlook, given a structurally improved market composition in Europe, potential for a cyclical recovery, and valuations in the European market at a record wide discount relative to the US.
1Source: BlackRock
26 November 2024
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.
