BlackRock Income Portfolio Update
17 August 2018 - 11:30PM
UK Regulatory
TIDMBRIG
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 Three One Three Five Since
Month Months Year Years Years 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): GBP56.0m
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
======
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
END
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