BlackRock Income and Growth Investment Trust Plc - Portfolio Update

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

All information is at 31 May 2019 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	-4.8%	0.8%	-4.5%	15.6%	31.7%	82.1%
Net asset value	-2.5%	2.9%	-4.7%	19.7%	36.3%	75.3%
FTSE All-Share Total Return	-3.0%	2.3%	-3.2%	28.4%	29.3%	70.2%
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:	193.81p
Net asset value - cum income*:	198.56p
Share price:	188.00p
Total assets (including income):	£49.8m
Discount to cum-income NAV:	5.3%
Gearing:	2.5%
Net yield**:	3.7%
Ordinary shares in issue***:	23,085,371
Gearing range (as a % of net assets)	0-20%
Ongoing charges****:	1.1%

   

* includes net revenue of 4.75 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 2018 final dividend of 4.40p per share declared on 20 December 2018 and paid to shareholders on 19 March 2019 and the 2018 interim dividend of 2.50p per share declared on 25 June 2018 and paid to shareholders on 3 September 2018.

*** excludes 9,848,561 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 2018.

   

Sector Analysis	Total assets (%)
Oil & Gas Producers	11.7
Life Insurance	8.1
Pharmaceuticals & Biotechnology	8.0
Banks	7.7
Household Goods & Home Construction	6.9
Media	6.5
Financial Services	6.5
Food Producers	6.0
Support Services	5.9
Tobacco	4.4
Food & Drug Retailers	3.5
Travel & Leisure	3.3
Mining	3.2
Industrial Engineering	2.6
Nonlife Insurance	2.6
Gas, Water & Multiutilities	1.9
Mobile Telecommunications	1.5
Electronic & Electrical Equipment	1.4
Construction & Materials	1.1
Chemicals	0.9
Personal Goods	0.6
Net Current Assets	5.7
	------
Total	100.0
	======

   

Ten Largest Equity Investments
Company	Total assets (%)
Royal Dutch Shell 'B'	6.8
RELX	4.8
AstraZeneca	4.1
Prudential	4.0
GlaxoSmithKline	3.9
BP Group	3.7
British American Tobacco	3.7
Tesco	3.5
BHP	3.3
Reckitt Benckiser	3.2

   

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

After a period of four consecutive months of positive returns, the UK market fell 3% during May. Year-to-date the FTSE All-Share Index remains in positive territory up 9%. Equity markets globally sold off during the month on the back of growing concerns over the outlook for global growth and increasing US/China trade tensions. Economic data was broadly disappointing. The US manufacturing sector recorded its slowest activity level in nearly a decade and new orders fell for the first time since August 2009, and in Europe growth in the manufacturing sector was slower than expected. Central bank policy meeting minutes showed European Central Bank policymakers were concerned about weaker-than-expected growth in the Eurozone, while their peers at the Federal Reserve were adhering to their view that the below-target inflation was “transitory”. In the UK Prime Minister Theresa May announced that she will step down as leader of the Conservative Party on 7 June 2019. While the move was widely expected, this was yet another development that adds further uncertainty to Brexit negotiations and the outlook for the UK. The UK is scheduled to leave the EU on 31 October, therefore the next PM will have a tight window to make key decisions, with a wide range of outcomes. Defensive areas of the market performed well during the month as did the Oil & Gas sector on the back of a rally in the oil price, while Telecomms and Industrials underperformed. Despite ongoing Brexit related uncertainty small and mid-caps outperformed large caps during the month.

Over the month the Company delivered a return of -2.5%, outperforming the FTSE All-Share which delivered a return of -3.0%.

Our holding in RELX was the largest contributor to performance during the month. Against a backdrop of increasing concerns around global growth and trade tensions, investors sought shelter in more defensive businesses, seeking to benefit from the defensive characteristics of their earnings. Shares in Whitbread recovered in May after their downgrade in the prior month citing weakness in end demand. Corporate activity was the key driver behind the share recovery as company management indicated it is attempting to buy back shares up to 25% of Whitbread’s issued share capital as part of its second phase of the capital return programme. Homeserve, a home emergency repairs business, had a positive trading statement update boosting its shares during the month. It reported that group revenue exceeded £1bn, with North America once again their best performing region.

EasyJet reported a £275m loss in the first half of its financial year, citing rising costs per seat due to fuel price rises, currency and underlying cost inflation, as well as the impact of drones at Gatwick in December 2018. The company maintained profit guidance for the second half of the year, despite the challenging trading environment, while the shares are also trading at an attractive valuation relative to fleet value. It was a choppy month for shares in Prudential which ended the month lower on no specific corporate news flow but seemingly impacted by the month’s volatility. Tesco shares declined through the month, and while it had news flow stating their banking operations under Tesco Bank would cease new mortgage lending, this only had a small impact on its shares.

During the month we added to positions including GlaxoSmithKline and HSBC. We have reduced exposure to Lloyds and Tesco.

We expect nominal growth to remain modest as we see structural pressures from demographics, corporate underinvestment and new technology continuing to act as a drag on inflation. The dovish tilt from central banks has been supportive for markets, however this is a fragile equilibrium such that we expect markets to oscillate between periodically worrying about a deterioration in growth and shifts in interest rate policies from central banks.  With heightened political uncertainty and investor nervousness, we expect volatility to return to markets. As active managers of a concentrated fund, we believe that this market environment continues to provide us with the opportunity to find high quality, cash generative businesses, with robust balance sheets, that can 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 spend whilst at the same time we are watching for signs of overheating in the US and monitoring economic growth in China.  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 recent past has 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.

21 June 2019

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