Portfolio Update

The information contained in this release was correct as at 30 June 2023. 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 2023 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)	1.5%	1.6%	26.1%	36.2%	689.7%
Share price	0.7%	1.6%	27.5%	32.5%	650.6%
FTSE World Europe ex UK	2.4%	0.6%	19.6%	32.1%	386.9%

Sources: BlackRock and Datastream
 

At month end

Net asset value (capital only):	568.97p
Net asset value (including income):	573.66p
Share price:	539.00p
Discount to NAV (including income):	6.0%
Net gearing:	6.1%
Net yield1:	1.2%
Total assets (including income):	£579.4m
Ordinary shares in issue2:	101,000,161
Ongoing charges3:	0.98%

1  Based on a final dividend of 4.85p per share for the year ended 31 August 2022 and an interim dividend of 1.75p per share for the year ending 31 August 2023.

2  Excluding 16,928,777 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 2022.

Sector Analysis Total Assets (%) Industrials 24.0 Technology 23.9 Consumer Discretionary 21.0 Health Care 17.2 Financials 7.3 Consumer Staples 4.4 Basic Materials 2.5 Net Current Liabilities -0.3 ----- 100.0 =====

Country Analysis Total Assets (%) Switzerland 19.8 France 19.4 Netherlands 19.1 Denmark 16.7 United Kingdom 6.0 Italy 5.1 Sweden 5.0 Ireland 3.6 Spain 2.5 Belgium 2.0 Germany 1.1 Net Current Liabilities -0.3 ----- 100.0 =====

Top 10 holdings	Country	Fund %
Novo Nordisk	Denmark	8.6
LVMH Moët Hennessy	France	7.9
ASML	Netherlands	7.1
RELX	United Kingdom	5.4
DSV Panalpina	Denmark	4.7
Lonza Group	Switzerland	4.5
Hermès International	France	4.3
STMicroelectronics	Switzerland	4.1
BE Semiconductor	Netherlands	3.6
Ferrari	Italy	3.4

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

During the month, the Company’s NAV rose by 1.5% and the share price by 0.7%. For reference, the FTSE World Europe ex UK Index returned 2.4% during the period. Europe ex UK markets were up during June, finishing a strong H1 with the reference index returning 9.3%.

During a month that lacked fundamental newsflow, markets were somewhat directionless and a number of previously ‘unloved’ sectors delivered better performance. Consumer discretionary, financials and utilities led the market, while telecommunications and health care were the bottom performers.

Persistent core inflation pressures meant that the European Central Bank increased rates to 3.5%, the Bank of England to 5.0%, while the Federal Reserve skipped this time. Importantly, however, the majority of hikes are behind us and in company management meetings we hear less concerns around high input costs and incremental price increases whilst the labour market, apart from many services industries, is cooling off.

We see pockets of weakness in the market where there have been warnings by companies exposed to destocking cycles. However, our regular contact with management teams reassures us that the direction of earnings and cashflows for the companies in our portfolio remains on track on a medium to long-term view.

The Company underperformed its reference index during the month, driven by negative stock selection.

In sector terms, the Company’s lower weight to financials was negative, as a number of banks not held performed well on the back of higher rates. An overweight allocation to the information technology sector was negative for returns as the sector saw a degree of weakness following a very strong May. The Company’s higher allocation to consumer discretionary aided returns, as did an underweight to the telecommunications sector.

Within health care, shares in biopharma supplier Sartorius Stedim fell post a company update. Whilst destocking of biopharma equipment, which Sartorius make, had been flagged, the magnitude of weakness surprised the market negatively. Sartorius indicated there has been little improvement to business trends during the current quarter and flagged that the destocking cycle may continue for the rest of the year.

This news also impacted our position in Lonza, continuing to put short-term pressure on shares. We don’t see a direct read across, suggesting the move in Lonza’s shares is sentiment driven rather than fundamental risk to their recent qualitative update confirming key projects are progressing well and that all is on track for full year targets. Also, within health care, Novo Nordisk detracted in the month despite any stock specific news.

Within materials, chemicals distribution business IMCD was amongst the worst performers. Whilst the company hasn’t reported yet, the sector was shaken by several chemicals companies’ profit warnings ahead of second quarter results. The sector is struggling with customer destocking given lower demand, particularly in end markets including construction, electronics and staples, as well as a sluggish recovery in China. We believe IMCD’s long-term strategy remains intact despite the potential for a weaker quarter.

We also saw weakness within the semiconductor sector following strong performance during the prior month on the back of Artificial Intelligence enthusiasm. Shares in BE Semi, ASML and ASMi experienced weakness which in our mind was largely due to profit taking. STMicroelectronics on the other hand – trading at lower valuations - was the strongest positive contributor during June as underlying trends such as electric vehicles appear to remain strong.

The Company’s only ‘auto’ stock, Ferrari – although we would classify it amongst the luxury sector – aided returns as the sportscar maker announced two new plug-in hybrid models based on the SF90 supercar. These cars will be available in a limited series at top-end prices from early 2024.

Our LVMH holding supported returns with shares recovering after a bit of weakness in May on China macro concerns. Our channel checks, and alternative data, continue to suggest all is on track for the company to deliver at the top of their guidance range.

DSV shares also continued their recent path higher with further evidence of yields staying higher for longer while the freight forwarding industry goes through a period of normalisation which appears to have stabilised, suggesting it may have found its trough.

Finally, not holding Siemens Energy also helped performance as the company issued a profit warning in their wind turbine business.

Outlook

The European markets continue to be unloved, recording strong outflows from the asset class. Despite this, the European equities have produced very strong performance during H1 and those gains made by the European market year-to-date are far broader than that recorded in the US, for example. This breadth, we believe, is partly conditioned by earnings surprises. With high pessimism on entry to earnings season, Q1 reporting saw the percentage of net beats exceeding 40%, the highest reading in over 15 years. In previews for Q2 earnings, we also see evidence of better bottom-up sentiment than top-down indicators portray.

We believe the question of ‘recession or not’ is the wrong one and looking at averages of earnings or market falls in a recession may not be useful. Ingredients for a structural recession are not present and megatrends backed by increasing capex can improve earnings outlooks. To our mind, the economic cycle cannot be understood at present without detailed bottom-up work.

Long-term structural trends and large amounts of fiscal spending via the Recovery Fund, Green Deal and the REPowerEU plan in Europe can drive demand for years to come, for example in areas such as infrastructure, automation, innovation in medicines, the shift to electric vehicles, digitalisation or decarbonisation. We believe the portfolio is well aligned to many of these structural spending streams. 

17 July 2023

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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