BlackRock Income and Growth Investment Trust Plc - Portfolio Update

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

All information is at 31 July 2018 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	-0.2%	5.9%	4.5%	22.9%	50.5%	94.0%
Net asset value	0.9%	3.9%	7.9%	24.5%	55.5%	85.0%
FTSE All-Share Total Return	1.3%	3.9%	9.2%	30.2%	44.9%	77.7%
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:	211.93p
Net asset value - cum income*:	214.34p
Share price:	205.00p
Total assets (including income):	£56.0m
Discount to cum-income NAV:	4.4%
Gearing:	3.3%
Net yield**:	3.2%
Ordinary shares in issue***:	24,258,268
Gearing range (as a % of net assets)	0-20%
Ongoing charges****:	1.1%

   

* includes net revenue of 2.41 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 final dividend of 4.10p per share declared on 20 December 2017 and paid to shareholders on 9 March 2018 and the 2018 interim dividend of 2.50p per share declared on 25 June 2018 and payable to shareholders on 3 September 2018.

*** excludes 8,675,664 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 2017.

   

Sector Analysis	Total assets (%)
Oil & Gas Producers	10.3
Banks	9.6
Pharmaceuticals & Biotechnology	8.8
Support Services	6.6
Tobacco	6.4
Financial Services	6.0
Food Producers	5.4
Media	5.0
Life Insurance	4.8
Non-life Insurance	4.2
Industrial Engineering	3.7
Construction & Materials	3.4
General Retailers	3.2
Household Goods & Home Construction	3.1
Food & Drug Retailers	3.0
General Industrials	2.9
Travel & Leisure	2.4
Gas, Water & Multiutilities	2.1
Forestry & Paper	1.9
Chemicals	1.4
Software & Computer Services	0.9
Electronic & Electrical Equipment	0.8
Net Current Assets	4.1
	------
Total	100.0
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Ten Largest Equity Investments
Company	Total assets (%)
Royal Dutch Shell 'B'	5.9
British American Tobacco	5.4
RELX	3.9
Unilever	3.9
Lloyds Banking Group	3.7
John Laing Group	3.5
BP Group	3.5
GlaxoSmithKline	3.3
AstraZeneca	3.3
Ferguson	3.1

   

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

The UK equity market recorded another positive month during July returning 1.3%, although it underperformed global equities. Politics once again took centre stage in the UK with changes in Theresa May’s cabinet. Firstly, Brexit Secretary David Davis resigned over the Chequers agreement and soon after Foreign Secretary Boris Johnson stepped down, criticising the Prime Minister’s Brexit strategy. Despite instability within the party, the Prime Minister was able to win crucial votes on customs and trade bills, however renewed Brexit concerns and subdued wage growth data in the UK was enough to weigh on Sterling during the month. U.S. President Donald Trump and European Commission president Jean-Claude Juncker vowed to lower or scrap tariffs related to non-auto industrial goods and work to reform World Trade Organization rules to address unfair trade practices. The mining and oil & gas sectors performed poorly as ongoing concerns around trade wars led to further weakness in commodity prices. Dollar strength or Sterling weakness, saw a number of overseas earners perform well, whilst small and mid-caps underperformed large caps given the higher international exposure of the FTSE 100. Over the month the BlackRock Income and Growth Investment Trust delivered a return of 0.9%, underperforming the FTSE All-Share which delivered a return of 1.3%. TP ICAP shares have fallen significantly following a disappointing statement. The recent market volatility we have been seeing has failed to come through to revenue growth for TP ICAP as was expected, but the real issues are on the cost side. The expectations for cost saving synergies have been revised downwards and interest and broker compensation costs are increasing. Inchcape suffered as a slowdown in pre-registration activity put pressure on new and used car margins in the UK. Strength across parts of Europe helped to offset declines in the UK, but this wasn’t enough to put the brakes on the challenging back-drop for new car vehicle margins. Inchcape’s distribution business remains a high-quality business with a net cash balance sheet and modest growth expectations. Rentokil’s results were in line with expectations in that they delivered a modest slowdown in organic growth due to the continued impact of last year’s hurricanes on Puerto Rico as well as the cold weather in March and April delaying the pest season. M&A continues to contribute to revenue and profit growth. John Laing, one of the largest contributors for the month, highlighted an exciting pipeline of investments for the second half of the year which reinforces our positive view of the business. With the shares trading at a 10% discount to net asset value, we believe there is an attractive risk-reward on offer. DS Smith results demonstrated strong organic growth of 5.2% with further market share gains. Additionally, margins are improving as the cost recovery lag starts to work through the financial statements. British American Tobacco released reassuring results with the US business beating expectations and delivering improved profit margins. The business is generating good cash flow and the FX headwinds are easing. During the month we purchased a new position in Associated British Food and Phoenix Group Holdings. Additionally, we have added to positions in United Utilities, De La Rue, Diversified Oil & Gas and GlaxoSmithKline. We have reduced exposure to Wier Group, Rentokil, Next and TP ICAP and have sold our holdings in ITV, Direct Line and BT Group. We are broadly constructive on global markets and expect a continuation of the global growth that we have seen over the last few years, albeit in a less synchronised fashion across the G7 nations as this year brings more political and economic uncertainty. The trend of steady growth has provided a solid backdrop for equity market returns, which have also been helped by loose financial conditions from supportive governments and central banks. However, political uncertainty is rising, which combined with tightening financial conditions, means that we expect volatility to return to markets. This provides us, as active managers of a concentrated portfolio, with a great opportunity to identify high-quality cash generative businesses, with robust balance sheets, that can weather various market cycles and help to deliver long term capital and income growth for our clients. We continue to like cash generative consumer staple companies, especially those exposed to the emerging market consumer given the prevalent demographic trends in certain markets. These companies often generate substantial cash flow which allows them to invest in innovation, marketing and distribution to ensure the longevity of their brands while also paying attractive and growing dividends to shareholders. We have also sought exposure to infrastructure and construction spend, which remains well below long-term averages and initiatives to boost this spend features prominently in politicians’ manifestos, particularly in the US and Europe. We also note that inflationary pressures are starting to build and therefore we seek those companies with sufficient pricing power and efficiency potential to withstand rising costs.  As the last few months have demonstrated, it is crucial to be selective and to focus on those companies that are strong operators, that provide a differentiated service or product and that boast a strong balance sheet.

17 August 2018

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