Portfolio Update

The information contained in this release was correct as at 30 June 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 June 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)	-7.4%	-16.2%	-24.9%	19.6%	526.1%
Share price	-7.5%	-22.6%	-31.7%	16.9%	488.8%
FTSE World Europe ex UK	-7.1%	-8.6%	-10.1%	11.1%	307.0%

Sources: BlackRock and Datastream
 

At month end

Net asset value (capital only):	455.51p
Net asset value (including income):	460.63p
Share price:	428.50p
Discount to NAV (including income):	7.0%
Net gearing:	0.7%
Net yield1:	1.5%
Total assets (including income):	£471.2m
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 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 (%) Health Care 21.9 Industrials 20.9 Consumer Discretionary 18.0 Technology 15.2 Financials 12.2 Consumer Staples 6.9 Basic Materials 3.2 Net Current Assets 1.7 ----- 100.0 =====

Country Analysis Total Assets (%) Denmark 20.3 Switzerland 17.6 Netherlands 16.1 France 13.4 United Kingdom 7.1 Sweden 6.3 Italy 6.0 Belgium 3.0 Spain 2.5 Poland 2.0 Greece 1.6 Ireland 1.2 Germany 1.2 Net Current Assets 1.7 ----- 100.0 =====

Top 10 holdings	Country	Fund%
Novo Nordisk	Denmark	8.6
ASML	Netherlands	7.1
LVMH Moët Hennessy	France	6.5
RELX	United Kingdom	6.1
Lonza Group	Switzerland	5.3
DSV Panalpina	Denmark	4.6
Royal Unibrew	Denmark	4.5
Sika	Switzerland	3.6
IMCD	Netherlands	3.3
Hermès International	France	3.1

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

During the month, the Company’s NAV fell by 7.4% and the share price by 7.5%. For reference, the FTSE World Europe ex UK Index returned -7.1% during the period.

Europe remains in the eye of the storm with high inflation prints, rising interest rates and the Russia-Ukraine war leading to an energy crisis on the continent. Fears of an economic slowdown have heightened further during the month, as Russia’s Gazprom cut gas supply via the Nord Stream pipeline to Germany by roughly 60%.

All sectors were down in negative terms. Real estate, materials and industrials fell the most while defensive areas including consumer staples, health care and communication services held up better in a falling market. The Company slightly underperformed its reference index during June.

Whilst macroeconomic news continues to create volatility, there are bright spots from a fundamental perspective, and it is key to stay selective in European markets. Unemployment in the region remains at record lows and consumers are willing to spend on services such as travel and experiences. At the same time, corporate leverage is low and balance sheets are in good shape. Large amounts of fiscal spending via the Recovery Fund, Green Deal and the REPowerEU Plan in Europe can drive demand in areas such as infrastructure, automation, the shift to electric vehicles, digitisation, renewables or the refurbishment of building stock for years to come. We believe the portfolio is well aligned to many of these spending streams.

Since the beginning of the year, we have reduced cyclicality in the portfolio and monitor each individual holding in the Company in terms of its end markets, energy intensity and consumer exposure.

In sector terms, the Company’s lower weight to consumer staples and communication services detracted from relative returns. Our higher allocation to industrials and IT also detracted as the market punished industries perceived as cyclical on fears of a recession. We would highlight that, in particular, in the industrials sector, the Company is exposed to several businesses that are quite defensive in nature.

The Company’s overweight to health care was positive, as was a higher allocation to consumer discretionary, as the sector started to recover after selling off significantly in recent months. An underweight to real estate was positive as the sector lost ground given its large exposure to Germany, as well as rising interest rates. Similarly, a lower allocation to materials was beneficial as the sector is likely to struggle amidst reduced gas supply.

June was another month where we saw share prices react to macroeconomic news while fundamental news was limited. Overall, defensive stocks outperformed cyclical parts of the market.

The largest negative contribution came from the IT sector. Our positions in semiconductor-exposed names such as ASML, BE Semiconductor and ASMi fell as the sector was impacted by recession fears. Not owning internet group Prosus also hurt performance as management announced a share buyback to reduce the holding company discount.

Within the industrials sector, shares in Kingspan fell following a disappointing update by management. The insulation manufacturer flagged a broad-based softening in volumes and demand during the most recent quarter after having put large price increases through at the beginning of the year. On the one hand, this reflects a confidence change in Europe, while on the other hand it could also be interpreted that some clients might have pre-ordered more in anticipation of price increases coming through. We are monitoring the developments carefully, but for now, their competitive position has not changed and mid-to-long term demand drivers, in particular around the refurbishment of buildings, remain firmly in place.

Elsewhere, not owning defensive businesses such as Roche and Nestlé also detracted.

On the positive side, Novo Nordisk was the best performer in June. The company has been trading well – with a strong pipeline in obesity and diabetes treatments - and we see earnings upgrades likely to come through at first half results. Elsewhere in the sector, owning DiaSorin and Chemometec was also positive.

Our position in LVMH also contributed positively during the month after shares had been weak previously. Positive newsflow around China softening their lockdowns has been positive for shares, whilst a strong recovery in European tourism is also supportive. The company benefits from American tourists in the region, helped by a weaker euro and stronger US dollar.

Defensive business models were in favour during the month, resulting in our holdings in drinks company Royal Unibrew, chocolate producer Lindt and analytics company RELX aiding returns.

Avoiding both Siemens and BASF was positive, as those German industrial conglomerates are expected to experience pressure from gas supply disruptions. 

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

Outlook

So far 2022 has been challenging, with concerns over the economic implications of the Russian 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 significantly.

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.

15 July 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.