Portfolio Update

The information contained in this release was correct as at 30 April 2022. 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 30 April 2022 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) -5.6% -11.3% -8.9% 44.9% 605.0%
Share price -9.2% -14.4% -13.9% 46.4% 591.1%
FTSE World Europe ex UK -1.8% -3.7% 0.1% 24.8% 337.4%


Sources: BlackRock and Datastream
 

At month end

Net asset value (capital only): 516.89p
Net asset value (including income): 520.61p
Share price: 505.00p
Discount to NAV (including income): 3.0%
Net gearing: 8.6%
Net yield1: 1.2%
Total assets (including income): £532.6m
Ordinary shares in issue2: 102,300,411
Ongoing charges3: 1.02%

1  Based on a final dividend of 4.55p per share for the year ended 31 August 2021 and an interim dividend of 1.75p per share declared on 10 May 2022 for the year ending 31 August 2022.
2  Excluding 15,628,527 shares held in treasury.
3  Calculated as a percentage of average net assets and using expenses, excluding interest costs, after relief for taxation, for the year ended 31 August 2021.

Sector Analysis Total Assets (%)
Industrials 24.7
Health Care 20.7
Consumer Discretionary 18.1
Technology 18.0
Financials 9.6
Consumer Staples 5.5
Basic Materials 3.3
Net Current Assets 0.1
-----
100.0
=====
Country Analysis Total Assets (%)
Switzerland 20.3
Denmark 18.0
Netherlands 17.1
France 14.8
Sweden 8.8
United Kingdom 6.2
Italy 5.5
Spain 2.4
Ireland 2.2
Greece 1.7
Germany 1.0
Poland 1.0
Belgium 0.9
Net Current Assets 0.1
-----
100.0
=====

   

Top 10 holdings Country Fund%
Novo Nordisk Denmark 7.7
LVMH Moët Hennessy France 7.3
ASML Netherlands 7.3
Sika Switzerland 5.2
RELX United Kingdom 5.2
Lonza Group Switzerland 5.2
DSV Panalpina Denmark 4.3
Royal Unibrew Denmark 3.4
IMCD Netherlands 3.3
Hexagon Sweden 3.2

Commenting on the markets, Stefan Gries, representing the Investment Manager noted:

During the month, the Company’s NAV fell by 5.6% and the share price by 9.2%. For reference, the FTSE World Europe ex UK Index returned -1.8% during the period.

Europe ex UK equities experienced weakness again in April. Markets continued to focus on high inflation prints both in the US and in Europe driving bond yields higher, with the US 10 year getting close to 3% for the first time since 2018.

Defensive assets outperformed more cyclical stocks reflecting investors’ concerns around a weakening economic environment. However, so far, we have seen a strong Q1 earnings season for the vast majority of businesses in our portfolio, even though strong results have admittedly not been mirrored in share price performance. Telecommunications, utilities and consumer staples led the market during April. Technology and financials delivered the weakest performance.

The Company underperformed its reference index during the month, with both sector allocation and stock selection being negative. We continue to focus on our process and the bottom-up investment cases of our individual companies. The companies we own, for the most part, are producing solid results and we are confident in our stock selection process identifying well-managed, higher returning businesses that convert a lot of their earnings into cash, as this provides optionality to invest that capital into growth projects at attractive incremental returns. These are the types of companies that should be able to navigate these tougher economic periods and create value for shareholders over time.

In sector terms, a higher allocation to technology and industrials was negative for returns, as was a lower allocation to defensive areas including telecommunications and utilities. An underweight allocation to financials, as well as an overweight to health care, was positive.

April was another risk-off month, hence the Company’s largest detractors included a number of more cyclical, higher multiple stocks that fell on the market’s fear around inflation leading to a recession. One sector affected by this trend was the semiconductor sector. In our view, this industry is increasingly driven by more structural and less cyclical drivers. Demand is coming from a wider range of end markets ranging across multiple consumer and industrial applications. ASML and ASMi delivered robust results during the month, nevertheless this was not rewarded by the market. ASML stuck to its 2022 forecasts, as demand for their systems remains higher than their production capacity. ASMi reported record high first quarter revenue and order intake despite ongoing supply chain issues. The only disappointment from a fundamental point of view in the sector was BE Semiconductor, which missed expectations on order intake due to decreased demand from Chinese sub-contractors for both smartphone and mainstream electronics applications.

Shares in DSV fell 10% during the month despite having delivered stellar quarterly earnings. The business is extremely well-managed and, in our view, this is a management team one would want to be invested in, particularly in a more difficult market environment. DSV posted record profitability with gross profits growing 61% in the quarter on the back of high yields and their Agility integration is moving forward faster than expected. The world's third largest freight forwarder remains confident they have another strong year ahead of them and raised guidance.

Performance within the health care sector was mixed in April. Lonza and Straumann were amongst the bottom performers not behaving as defensively as expected and despite no negative fundamental news. In fact, Straumann reported outstanding results for Q1. Organic revenue growth was 27% year-on-year and the company achieved double digit growth in all regions, with Latin America growing the fastest. Guidance for 2022 has also been reiterated.

Within the same sector, however, Novo Nordisk proved the top performer. Shares moved higher with a pre-release of Q1 showing a beat and raise driven across their diabetes and obesity treatments. Quarterly sales were 7% ahead of consensus while operating profit was 12% ahead. They have also confirmed commercial production has restarted for their obesity drug, Wegovy, which was an important step in getting capacity back up to a level that can satisfy script demand. Polypeptide also contributed positively, responding to strong results reported during the previous month, as well as a number of broker upgrades. Finally, avoiding Schneider Electric, Siemens, Infineon and Kering was also helpful for performance.

At the end of the period the Company had a higher allocation than the reference index towards technology, consumer discretionary, industrials and health care. The Company had an underweight allocation to financials, utilities, energy, consumer staples, telecoms, real estate and basic materials.

Outlook

After an exceptional 2021 for European markets, so far 2022 has been challenging, with concerns over the economic implications of the Russia invasion of Ukraine, rising interest rates and continued supply chain disruptions weighing on equity returns.

While we believe the environment remains supportive for corporate profits overall, there is potential for a slowdown as growth begins to normalise during the latter half of the year. Meanwhile, the operating environment for companies continues to be complicated by supply chain and labour market disruptions. In addition, we expect some of the strong cyclical tailwinds, and indeed policy support seen in 2021, to fade over the course of 2022. Whilst rate markets and inflation expectations are likely to stay volatile, we do not expect policy in Europe to change meaningfully.

We continue to stay close to our companies which allows us to understand the environment they are operating in. We expect greater dispersion between sector and stock outcomes and with that a need for greater selectivity. In our view this will favour well-managed, well-organised businesses with an element of pricing power, and we believe that holding these businesses will benefit our shareholders over the medium to long term.

19 May 2022

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.

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