BlackRock Income Portfolio Update

 
TIDMBRIG 
 
The information contained in this release was correct as at 31 August 2022. 
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 INCOME & GROWTH INVESTMENT TRUST PLC (LEI:5493003YBY59H9EJLJ16) 
 
All information is at 31 August 2022 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                      -1.0%     9.9%       6.6%    12.1%      17.5%    113.5% 
 
Net asset value                  -1.6%    -3.4%       0.2%    10.9%      15.4%     97.8% 
 
FTSE All-Share Total Return      -1.7%    -3.6%       1.0%    12.0%      17.8%     94.4% 
 
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:                                              194.95p 
 
Net asset value - cum income*:                                               198.39p 
 
Share price:                                                                 194.00p 
 
Total assets (including income):                                              £46.0m 
 
Discount to cum-income NAV:                                                     2.2% 
 
Gearing:                                                                        1.3% 
 
Net yield**:                                                                    3.7% 
 
Ordinary shares in issue***:                                              21,171,914 
 
Gearing range (as a % of net assets):                                          0-20% 
 
Ongoing charges****:                                                            1.2% 
 
 
* Includes net revenue of 3.44 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 3.7% and includes the 2021 
final dividend of 4.60p per share declared on 13 January 2022 and paid to 
shareholders on 17 March 2022, and the 2022 interim dividend of 2.60p per share 
declared on 22 June 2022 with pay date 1 September 2022. 
 
*** excludes 10,081,532 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 
2021. 
 
 
 
Sector Analysis                                                     Total assets (%) 
 
Support Services                                                                11.7 
 
Oil & Gas Producers                                                              9.0 
 
Pharmaceuticals & Biotechnology                                                  8.6 
 
Media                                                                            7.7 
 
Household Goods & Home Construction                                              7.3 
 
Banks                                                                            5.9 
 
Life Insurance                                                                   5.6 
 
Mining                                                                           5.1 
 
Financial Services                                                               4.6 
 
Tobacco                                                                          4.1 
 
Nonlife Insurance                                                                3.4 
 
Personal Goods                                                                   2.6 
 
Health Care Equipment & Services                                                 2.5 
 
Travel & Leisure                                                                 2.3 
 
Electronic & Electrical Equipment                                                2.3 
 
Food Producers                                                                   2.3 
 
General Retailers                                                                1.7 
 
Fixed Line Telecommunications                                                    1.4 
 
Gas, Water & Multiutilities                                                      1.4 
 
Industrial Engineering                                                           1.1 
 
Software & Computer Services                                                     1.0 
 
Real Estate Investment Trusts                                                    0.6 
 
Electricity                                                                      0.3 
 
Net Current Assets                                                               7.5 
 
                                                                               ----- 
 
Total                                                                          100.0 
 
                                                                               ===== 
 
 
 
Country Analysis                                                          Percentage 
 
United Kingdom                                                                  85.7 
 
United States                                                                    4.5 
 
France                                                                           2.3 
 
Net Current Assets                                                               7.5 
 
                                                                               ----- 
 
                                                                               100.0 
 
                                                                               ===== 
 
                                                                              Fund % 
Top 10 holdings 
 
AstraZeneca                                                                      7.5 
 
Shell                                                                            7.2 
 
RELX                                                                             5.1 
 
Reckitt Benckiser                                                                4.9 
 
British American Tobacco                                                         4.0 
 
Rio Tinto                                                                        3.8 
 
Phoenix Group                                                                    3.5 
 
Standard Chartered                                                               3.0 
 
3i Group                                                                         2.9 
 
Rentokil Initial                                                                 2.8 
 
Commenting on the markets, representing the Investment Manager noted: 
 
Performance Overview: 
 
The Company returned -1.6% during the month, modestly outperforming the FTSE 
All-Share which returned -1.7%. 
 
Global equity markets fell in August as the global economy and policymakers 
faced a sharper inflation-growth trade-off. Equity markets initially moved 
higher in the first half of the month as they priced in a slowing Fed hiking 
cycle on a softer-than-expected US CPI inflation then fell later when both the 
Fed and ECB made it clear that there is more tightening to come. 
 
In the US, headline CPI including food and energy is still running at a near 
four-decade high of 8.5%1 with continued concern that inflation is becoming 
embedded in expectations and thus more persistent. Meanwhile in Europe, markets 
fell as another looming interruption to Russian gas supplies hit the region; 
raising the prospects of recession and energy rationing. 
 
The Bank of England hiked rates 50bps to 1.75%2, its largest hike in almost 
three decades. UK inflation hit double-digit figures for the first time in four 
decades, mainly driven by a combination of supply shocks pushing up core 
inflation. This prompted the market to price in a more urgent pace of Bank of 
England rate hikes. 
 
China reported disappointing economic data and reduced consumer confidence due 
to uncertainty around renewed lockdowns as part of its zero-Covid policy. The 
People's Bank of China cut the medium-term lending rate for one-year loans, by 
10bps to 2.75%3 in an effort to spur economic growth. 
 
The FTSE All Share Index returned -1.70% for August. The worst performing 
sectors included Health Care, Utilities and Industrials, conversely, Technology 
and Oil & Gas sectors had the strongest performance. 
 
Stocks: 
 
RS Group was a top positive contributor to relative performance of the Company 
during August. The company's share price had been supported by good results in 
July and later the announcement of a small acquisition in early August. Pearson 
posted a very strong set of interim results and announced a new £100m cost 
efficiency programme leading analysts to upgrade medium term forecasts by 
10-20%. We feel the management turnaround is beginning to show real traction 
with emphasis shifting away from the legacy textbook business to the stable 
growth, highly cash generative core where we see material value. In the next 12 
months we anticipate several new digital product launches which we expect to be 
accretive to growth. The share price of Standard Chartered rose after the 
company reported strong results at the end of July. The company also benefitted 
from rising interest rates and contributed positively to returns of the Company 
during August. 
 
Sanofi was a top detractor from relative performance during the month due to 
the recent concerns on litigation around the recalled drug Zantac. Zantac is a 
product that Sanofi had owned and disturbed for two years. It is yet unclear 
whose legal liability this is going to fall through as there were a number of 
pharmaceutical companies which have been distributing this product. This is 
likely to takes years to resolve and the share price has been weak on the 

initial news. RELX was another top detractor from relative performance during 
August. Shares sold off in response to a policy memo from the White House 
Office of Science and Technology seeking to make federally funded research 
papers publicly available with no embargo. While this policy move represents 
risk of c.1.5% of RELX's revenue and profits, we expect the outcome to be more 
benign given the value institutions see in the publishing and peer review 
process. Taylor Wimpey also detracted from relative performance. The 
housebuilding sector underperformed along with other consumer facing cyclicals 
on consumer income pressure and in response to rising mortgage rates. While 
house prices have thus far remained robust, build cost inflation remains a 
headwind. 
 
Portfolio Activity: 
 
During August, we sold the portfolio holding in Sanofi given our concerns 
around the aforementioned litigation. We reduced Drax and added to Ashmore. 
 
Outlook: 
 
The headwinds facing global equity markets have grown steadily over the first 
half of 2022. Inflation has surprised in its depth and breadth driven by 
ongoing COVID related disruption, the war in Ukraine, rising labour costs and 
the persistence of these factors. Central banks and governments are tightening 
monetary and fiscal policy as interest rates rise and stimulus is withdrawn. 
The subsequent rise in the risk-free or discount rate has many consequences, 
not least the pressure on valuation frameworks. We are mindful of this and feel 
it is incredibly important to focus on companies with strong, competitive 
positions, at attractive valuations that can deliver in this environment. 
 
The political and economic impact of the war in Ukraine has been significant in 
uniting Europe and its allies, whilst exacerbating the demand/supply imbalance 
in the oil and soft commodity markets likely pushing inflation higher for 
longer. We are conscious of the impact on the cost of energy, and we continue 
to expect divergent regional monetary approaches with the US being somewhat 
more insulated from the impact of the conflict, than for example, Europe. 
Complicating this further, is the continued impact COVID is having on certain 
parts of the world, notably China, which has used lockdowns to control the 
spread of the virus impacting economic activity during the first half. We also 
see the potential for longer-term inflationary pressure from decarbonisation 
and deglobalisation. It is difficult to have a high degree of confidence in how 
these evolve but we believe there is rising risk of a policy mistake as central 
banks attempt to curb inflation; too late to tighten and/or tightening too 
hard. We expect this, and the geopolitical ramifications of the Ukraine war, to 
be the prevailing debate of 2022 and beyond. 
 
Although demand remains strong at present, the outlook for corporate revenue 
and earnings growth is likely to worsen over the course of 2022 as the pressure 
on real incomes raises the spectre once again of stagflation. A notable feature 
of our conversations with a wide range of corporates in 2021 was the ease with 
which they were able to pass on cost increases and protect or even expand 
margins. We believe that when the transitory inflationary pressures start to 
fade (e.g. commodity prices, supply chain disruption) then pricing 
conversations will become more challenging. We are also increasingly focused on 
wage inflation which may be more persistent and yet, in our experience, harder 
to pass on. Corporates have already pointed to wages picking up, the 
introduction of bonuses and growing pressure on employee retention rates as 
competition for labour intensifies. We therefore believe that employee 
retention will be an important differentiator in 2022 given the productivity 
benefits of a stable workforce as labour market tighten further. 
 
The FTSE 100, with a majority of international weighted revenues, high 
commodity weighting and low starting valuation, has proven to be a port in the 
storm, as one of the best performing developed markets during the first half. 
The FTSE 250, with its higher domestic focus and lower liquidity has suffered 
given the weakness in the domestic economy. We would expect the FTSE 100 to 
continue to be advantaged until we see a stabilisation in the domestic economy 
and subsequent strengthening of sterling or, more likely, a weakening of the 
dollar. Whilst we anticipate further volatility ahead as earnings estimates 
moderate, we know that in the course of time, risk appetites will return. We 
are currently spending time identifying our 'wish list' of opportunities 
utilising our flexible approach, experience and strong absolute valuation 
framework. 
 
As a reminder, we continue to concentrate the portfolio on businesses with 
pricing power and durable, competitive advantages as we see these as best 
placed to protect margins and returns over the medium and long-term. Further, 
we continue to have conviction in cash generative companies with exceptional 
management teams and underappreciated growth potential. At present, whilst we 
are excited by the attractive stock-specific opportunities on offer, we 
continue to approach the year with balance in the portfolio. 
 
1Financial Times - US inflation eased slightly in July on lower petrol prices 
2Financial Times - Bank of England raises rates sharply and warns of 13% 
inflation by end of year 
3Financial Times - China cuts lending rate as economic data disappoint and 
Covid cases rise 
 
20 September 2022 
 
 
 
END 
 
 

(END) Dow Jones Newswires

September 20, 2022 06:59 ET (10:59 GMT)