BlackRock Income Portfolio Update

 
TIDMBRIG 
 
BLACKROCK INCOME AND GROWTH INVESTMENT TRUST PLC (LEI:5493003YBY59H9EJLJ16) 
 
All information is at 31 December 2017 and unaudited. 
 
Performance at month end with net income reinvested 
 
 
 
                                   One    Three     One   Three      Five     Since 
                                 Month   Months    Year   Years     Years   1 April 
                                                                               2012 
 
Sterling 
 
Share price                       4.5%     5.0%   14.4%  31.8%      75.4%     92.0% 
 
Net asset value                   4.4%     4.3%   12.6%   33.4%     69.2%     80.0% 
 
FTSE All-Share Total Return       4.8%     5.0%   13.1%   33.3%     63.0%     72.5% 
 
Source: BlackRock 
 
 
 
BlackRock took over the investment management of the Company with effect from 
1 April 2012. 
 
 
 
At month end 
 
Sterling: 
 
Net asset value - capital only:                                       210.38p 
 
Net asset value - cum income*:                                        215.18p 
 
Share price:                                                          209.50p 
 
Total assets (including income):                                       GBP52.5m 
 
Discount to cum-income NAV:                                              2.6% 
 
Gearing:                                                                 3.7% 
 
Net yield**:                                                             3.2% 
 
Ordinary shares in issue***:                                       24,376,565 
 
Gearing range (as a % of net assets)                                    0-20% 
 
Ongoing charges****:                                                     1.1% 
 
 
 
* includes net revenue of 4.80 pence per share 
 
** The Company's yield based on dividends announced in the last 12 months as 
at the date of the release of this announcement is 3.2% and includes the 2017 
interim dividend of 2.50p per share declared on 26 June 2017 and paid to 
shareholders on 1 September 2017 and the 2017 final dividend of 4.10p per 
share declared on 20 December 2017 and payable to shareholders on 9 March 
2018. 
 
*** excludes 8,557,367 shares held in treasury 
 
**** Calculated as a percentage of average net assets and using expenses, 
excluding performance fees and interest costs for the year ended 31 October 
2017. 
 
 
 
Sector Analysis                                              Total assets (%) 
 
Banks                                                                     9.1 
 
Oil & Gas Producers                                                       8.0 
 
Pharmaceuticals & Biotechnology                                           7.3 
 
Tobacco                                                                   7.2 
 
Non-Life Insurance                                                        6.9 
 
Media                                                                     6.8 
 
Support Services                                                          6.4 
 
Financial Services                                                        6.2 
 
Travel & Leisure                                                          5.3 
 
Construction & Materials                                                  4.5 
 
General Retailers                                                         3.9 
 
Food Producers                                                            3.8 
 
Industrial Engineering                                                    3.8 
 
Fixed Line Telecommunications                                             2.7 
 
Beverages                                                                 2.6 
 
Food & Drug Retailers                                                     2.6 
 
General Industrials                                                       2.5 
 
Mobile Telecommunications                                                 2.0 
 
Household Goods & Home Construction                                       2.0 
 
Aerospace & Defence                                                       1.6 
 
Chemicals                                                                 1.5 
 
Gas, Water & Multiutilities                                               1.4 
 
Real Estate Investment Trusts                                             1.0 
 
Software & Computer Services                                              0.8 
 
Net current assets                                                        0.1 
 
                                                                        ----- 
 
Total                                                                   100.0 
 
                                                                        ===== 
 
 
 
Ten Largest Equity Investments 
 
Company                                                      Total assets (%) 
 
British American Tobacco                                                  6.3 
 
Royal Dutch Shell 'B'                                                     5.2 
 
RELX                                                                      4.2 
 
Lloyds Banking Group                                                      3.9 
 
Unilever                                                                  3.8 
 
Rentokil Initial                                                          3.4 
 
John Laing Group                                                          3.3 
 
HSBC Holdings                                                             3.1 
 
Ferguson                                                                  3.0 
 
Shire                                                                     2.8 
 
 
 
Commenting on the markets, Adam Avigdori and David Goldman representing the 
Investment Manager noted: 
 
UK equities finished the year on a strong note with a total return of 5.0% 
over the quarter and 13.1% for the year1.  The UK economic growth rate slowed 
in 20172, but the impact of Brexit was far less than many had feared: 
consumption and investment weakened but net trade provided an offset; the 
Chancellor took the opportunity provided by the Budget to modestly ease the 
fiscal stance. The domestic political environment remained febrile but the 
year ended with a declaration from the European Commission that 'sufficient 
progress' had been made to allow discussions to move on to Britain's future 
relationship with the EU.  Global economic growth remained robust and led to 
further monetary tightening with interest rates rising in both the UK and the 
US.  Small and mid-cap indices performed strongly over the year but broadly 
in line with the FTSE 100 in the fourth quarter1.  The rally in the oil price 
in the second half of the year led to further strength in the Oil & Gas 
sector; the Mining sector similarly benefited from the strength of metals 
prices towards the year end. 
 
Over the quarter the Company delivered a return of 3.9%, underperforming the 
FTSE All-Share which delivered a return of 5.0%3. 
 
Inchcape was the largest detractor from performance over the quarter. The 
company has been increasing its footprint in emerging markets and becoming 
more vertically integrated. Although next year's forecasts have been impacted 
by currency downgrades, the company has a strong balance sheet which we 
expect them to deploy through highly accretive M&A4. Next underperformed as 
concerns mounted around Christmas trading although the trading statement 
after the quarter end revealed that it had exceeded expectations, 
particularly in its Online business5. An underweight position in Royal Dutch 
Shell has been a performance drag relative to the benchmark as profits 
announcements were slightly ahead of expectations. There has been nervousness 
around the dividend but we do not see this being under pressure and believe 
that Shell will continue with their current dividend strategy. 
 
Premier Asset Management was the largest contributor to performance as 
they've been beneficiaries of strong market performance and a continuation of 
inflows into multi-asset products, where Premier currently has first quartile 
performance6. The firm has also recently declared a dividend. 
Intercontinental Hotel Group performed well over the quarter, aided by 
Sterling strength. The business has a very strong loyalty scheme with high 
recognition of their brands and a strong franchising culture. Their movement 
to an asset-light model has been beneficial and resulted in a low cost to 
serve with attractive free cash flow4. Ferguson rallied over the second half 
of the year as sales growth accelerated and it achieved a 
better-than-expected price for the sale of its Nordic operations. Ferguson 
demonstrates good control of working capital and their cash flow is strong 
with net debt falling7. 
 
We are positioning the portfolio more defensively and have made a number of 
recent transactions along these lines. The political deterioration post the 
election has made us more cautious of some of the traditional defensive names 
and in this regard we have sold our position in Babcock. We are being 
increasingly selective in our domestic UK holdings and have sold Foxtons and 
reduced our holdings in Forterra, Lloyds and Next. We have added to 
turnaround position Standard Chartered and participated in the IPO of Sabre 
Insurance as we are reassured by the pricing outlook in the motor insurance 
market. We have added to holdings in CRH, Diageo and TP ICAP3. 
 
As Brexit negotiations continue to stutter, the nervousness associated with 
the UK is palpable and this has been reflected in the substantial discount 
applied to UK domestic franchises.  Whilst we share this caution, we do 
believe that the indiscriminate discount applied to UK domestic franchises is 
generating interesting opportunities to invest in some fantastic long-term, 
cash generative companies at attractive valuations.  Elsewhere, we are 
positively disposed to companies exposed to infrastructure and construction 
spend in developed markets where activity levels remain subdued relative to 
longer term averages and requirements and are well supported by the political 
environment. 
 

Rising interest rates, while reassuring in affirming we are on the path of 
normalisation for monetary policy will impact corporate refinancing costs. 
We believe that it is crucial to invest in companies with sustainably strong 
cash generation and robust balance sheets such that they are able to 
perpetuate growth over the medium and longer term from within and not by 
relying on unlimited cheap credit. 
 
1   Source: London Stock Exchange as at 31 December 2017 
 
2   Source: ONS (Office for National Statistics) as at 31 December 2017 
 
3   Source: BlackRock as at 31 December 2017 
 
4   Source: Company financial statements 
 
5   Source: Company statement 
 
6   Source: Morningstar as at 31 December 2017 
 
7   Source: Company statement and financial accounts 
 
18 January 2018 
 
 
 
END 
 

(END) Dow Jones Newswires

January 18, 2018 07:24 ET (12:24 GMT)