BLACKROCK GREATER EUROPE INVESTMENT TRUST plc (LEI - 5493003R8FJ6I76ZUW55)
All information is at31 March 2018 and unaudited.
Performance at month end with net income reinvested
(20 Sep 04)
|Net asset value (undiluted)||-3.4%||-3.6%||9.7%||33.7%||328.4%|
|Net asset value* (diluted)||-3.4%||-3.6%||9.7%||35.1%||328.8%|
|FTSE World Europe ex UK||-3.3%||-4.7%||4.3%||27.8%||228.4%|
* Diluted for treasury shares and subscription shares.
Sources: BlackRock and Datastream
At month end
|Net asset value (capital only):||332.35p|
|Net asset value (including income):||334.42p|
|Net asset value (capital only)1:||332.35p|
|Net asset value (including income)1:||334.42p|
|Discount to NAV (including income):||4.9%|
|Discount to NAV (including income)1:||4.9%|
|Total assets (including income):||£297.0m|
|Ordinary shares in issue3:||88,801,863|
1 Diluted for treasury shares.
2 Based on a final dividend of 3.70p per share and an interim dividend of 1.75p per share for the year ended 31 August 2017.
3 Excluding 21,527,075 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.
|Oil & Gas||3.3||Spain||4.8|
|Net current liabilities||(1.7)||Finland||3.3|
|Net current liabilities||(1.7)|
|Ten Largest Equity Investments|
|Fresenius Medical Care||Germany||4.0|
|Compagnie Financière Richemont||Switzerland||3.5|
Commenting on the markets, Stefan Gries, representing the Investment Manager noted:
During the month, the Company’s NAV decreased by 3.4% and the share price fell by 3.3%. For reference, the FTSE World Europe ex UK Index returned -3.3% during the period.
Continental European markets fell over the month as cyclical sectors, those more exposed to the economy, dragged the market down. This was a result of leading indicators, such as economic surprise and the European Purchasing Managers’ Index (PMI), rolling over. Whilst we recognise the pull back in these indicators, we are cognisant this is from an elevated level and believe that the economic environment overall remains robust.
Politics played an important role during the month: Germany’s Social Democratic Party (SPD) membership approved entering a coalition with Chancellor Angela Merkel five months after the elections. In Italy, uncertainty rose in March when the country went to the polls. While the populist Five Star Movement received the most votes, the results led to a hung parliament, with no party or coalition winning enough votes to form a government.
The Company underperformed the market in March. Whilst stock selection was positive for performance, sector allocation detracted. As more defensive areas of the market, those less exposed to the economic cycle, proved resilient, the lower allocation towards utilities detracted from fund returns. The higher weighting towards consumer goods and industrials also detracted. Positively, the lower allocation towards financials, the worst performing sector in the market, aided returns.
Stock selection proved challenging within the health care sector where the Company saw holdings in Lonza, Straumann and Novo Nordisk detract from performance. Lonza saw shares fall as the market was disappointed by guidance provided by management in the first quarter, which was for flat margins based on higher operational switch over costs. We believe this is conservatism and results will likely exceed this guidance over the year.
Within industrials, a position in Safran detracted. Their results, released late February, led to a mechanical downgrade of growth based on accounting standard changes, which along with a broker downgrade based on Zodiac timing issues, weighed on the share price. The underlying economics of the company, however, remain strong.
A holding in Thales proved positive for performance, reporting strong numbers with full year orders 5% ahead of expectations. Free cash flow for the business proved robust, with 1.4 billion of operating cash flow versus 940 million expected.
A holding in Unilever aided returns as defensive names proved more resilient over the month. The company’s restructuring plan remains on track, which has begun to see greater recognition by the market.
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.
Whilst headline indicators, such as economic sentiment and PMIs, have rolled over in Europe, the environment remains robust. Unemployment continues to fall and inflation remains at bay, undershooting the European Central Banks’s (ECB) 2% target. Given the persistence of low inflation, we expect the ECB to remain relatively dovish and unlikely to embark on a rate rise programme until 2019. The narratives we hear from company management suggest the economic picture remains constructive and the expansion remains broad based. Staffing companies continue to see higher demands both in domestically led and export led industries and the order books of industrial companies are developing strongly. We therefore do not believe the economic make up of Europe has greatly changed over the quarter and continue to see opportunities for earnings growth across the market. Whilst the outcome of the Italian election has increased political uncertainty in the short term, we do not believe it will derail the European project. European equities continue to offer favourable valuation versus both other developed market equities and fixed income.
17 April 2018
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