BlackRock Income and Growth Investment Trust Plc - Portfolio Update

BLACKROCK INCOME AND GROWTH INVESTMENT TRUST PLC (LEI:5493003YBY59H9EJLJ16)

All information is at 31 July 2017 and unaudited.

Performance at month end with net income reinvested

   

	One Month	Three Months	One Year	Three Years	Five Years	Since 1 April 2012
Sterling
Share price	2.8%	3.8%	15.6%	34.5%	79.0%	85.6%
Net asset value	0.8%	2.0%	14.2%	33.4%	71.1%	71.5%
FTSE All-Share Total Return	1.2%	3.0%	14.9%	25.7%	65.0%	62.8%
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:	202.91p
Net asset value - cum income*:	205.02p
Share price:	202.50p
Total assets (including income):	£52.8m
Discount to cum-income NAV:	1.2%
Gearing:	3.3%
Net yield**:	3.2%
Ordinary shares in issue***:	24,754,268
Gearing range (as a % of net assets)	0-20%
Ongoing charges****:	1.0%

   

* includes net revenue of 2.11 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 2016 final dividend of 3.90p per share declared on 21 December 2016 and paid to shareholders on 10 March 2017 and the 2017 interim dividend of 2.50p per share announced on 26 June 2017 to be paid to shareholders on 1 September 2017.

*** excludes 8,179,664 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 2016.

   

Sector Analysis	Total assets (%)
Support Services	8.1
Banks	7.9
Pharmaceuticals & Biotechnology	7.8
Media	7.4
Tobacco	7.1
Travel & Leisure	6.3
Oil & Gas Producers	6.2
Financial Services	6.0
Food Producers	5.9
Non-Life Insurance	5.6
General Industrials	4.4
General Retailers	4.3
Construction & Materials	3.4
Industrial Engineering	3.3
Fixed Line Telecommunications	3.2
Food & Drug Retailers	2.2
Mobile Telecommunications	2.0
Real Estate Investment & Services	1.9
Aerospace & Defence	1.7
Household Goods & Home Construction	1.6
Chemicals	1.5
Real Estate Investment Trusts Software & Computer Services	0.9 0.7
Net Current Assets	0.6
	------
Total	100.0
	======

   

Ten Largest Equity Investments
Company	Total assets (%)
British American Tobacco	6.1
Unilever	5.9
Lloyds Banking Group	4.8
RELX	4.2
Royal Dutch Shell ‘B’	3.8
Rentokil Initial	3.7
John Laing Group	3.2
BT Group	3.2
HSBC Holdings	3.1
Shire	3.0

   

Commenting on the markets, Adam Avigdori and David Goldman representing the Investment Manager noted:

The UK stock market rose in July supported by the mining and banks sectors, whilst the tobacco and pharmaceutical sectors performed poorly. The US Federal Reserve’s (“the Fed”) July statement implied that US interest rates would continue to rise gradually if economic data remains supportive and the Fed would begin to normalise its balance sheet, whilst European economic growth continued to improve. UK economic growth was positive, yet weak with GDP rising 0.3% in Q2 supported by the services sector with the production and construction sectors contracting. Sterling strengthened modestly over the month versus the US dollar contributing to share price weakness in companies with US sales. Over the course of the month the BlackRock Income and Growth Investment Trust plc (“the Company”) has delivered a return of 0.8%, underperforming the FTSE All-Share which returned 1.2%. July is a busy month for corporate earnings with around half of the portfolio reporting over the course of the month. The results have been broadly positive and it is pleasing to see all top 10 contributors to performance in July being driven by companies where we have significant positions. This was offset by strong performance in some larger companies that we do not hold, particularly in the commodities sector. Bodycote was the largest contributor to performance in July. A recovery in their General Industrial business, growth in Aerospace and Automotive revenues and a net cash balance sheet which management are keen to use are all driving factors. Elsewhere in the Industrials space, RPC proved to be another strong contributor after a reassuring statement which demonstrated strong organic growth, Mergers & Acquisition synergies and a foreign exchange tailwind. Additionally, the company is launching a £100 million share buyback programme which further demonstrates their confidence in the business. Forterra, a supplier of building products for the UK construction industry, continues to perform well and is supported by a strong dynamic for UK brick manufacturers as sterling’s weakness limits imports. The shares trade on a low Price-to-Earnings multiple and deliver a high free cash flow yield. Our underweight position in mining names, including Glencore and BHP Billiton, detracted from performance in July as commodities performed well. We continue to have concerns in the mining industry regarding the volatility in Chinese demand. There are also signs that the industry will need to enter into the next phase of capital expenditure investment which will bring cash flow under strain. We remain comfortable not holding these names in the portfolio. An underweight position in HSBC also detracted from overall performance after the bank posted strong results with revenue ahead of expectations. Although costs were also higher than expectations, HSBC has seen accelerating loan growth driven by its Asian commercial business and UK and Hong Kong mortgages. We continue to run a flexible and concentrated portfolio with competition for capital ensuring we only hold the highest conviction positions. In this regard we have added new positions in Weir, who we see benefiting from the growth in the shale industry, and in Accesso Technologies, who are developing innovative technology that is increasing customer spend for their clients. Over the course of the month we have exited our position in Aggreko, reduced our position in AstraZeneca and added to Wolseley, Shire, Babcock and Bodycote. We see increasing pressure in the UK consumer space as rock bottom household savings are coupled with rising household debt levels. Whilst we remain cautious in this area, we certainly do not treat all companies equally. By focusing on those companies that can generate cashflow from strong business models, have strong balance sheets or scope for management driven self-help, we are able to access some of the fantastic domestic opportunities starting to emerge. As ever, we remain believers that over the longer-term earnings and cashflow growth tend to be the dominant driver of share prices and where equity markets fail to recognise that, corporates buyers have the potential to exploit the opportunity. With a combination of continued sterling weakness and a low rate environment fuelling cheap debt, we believe that Mergers & Acquisition activity will remain a theme throughout the year.

15 August 2017

Copyright t 15 PR Newswire