July 19, 2018 - 11:24 AM EDT
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BlackRock Income and Growth Investment Trust Plc - Portfolio Update
BLACKROCK INCOME AND GROWTH INVESTMENT TRUST PLC (LEI:5493003YBY59H9EJLJ16)
All information is at 30 June 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 2.0% 10.1% 7.7% 24.1% 60.2% 94.5%
Net asset value -0.4% 9.7% 7.8% 27.7% 63.9% 83.3%
FTSE All-Share Total Return -0.2% 9.2% 9.0% 31.6% 52.8% 75.4%
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: 209.97p
Net asset value - cum income*: 214.82p
Share price: 208.00p
Total assets (including income): £52.1m
Discount to cum-income NAV: 3.2%
Gearing: 1.4%
Net yield**: 3.2%
Ordinary shares in issue***: 24,263,268
Gearing range (as a % of net assets) 0-20%
Ongoing charges****: 1.1%

   

* includes net revenue of 4.85 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 8,670,664 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 9.8
Banks 9.4
Pharmaceuticals & Biotechnology 7.9
Support Services 6.7
Media 6.6
Financial Services 6.6
Tobacco 5.9
Non-Life Insurance 5.2
Industrial Engineering 4.0
Food Producers 4.0
General Retailers 4.0
Life Insurance 3.6
Construction & Materials 3.4
Household Goods & Home Construction 2.9
Food & Drug Retailers 2.9
Travel & Leisure 2.4
General Industrials 2.4
Forestry & Paper 1.8
Gas, Water & Multiutilities 1.5
Chemicals 1.3
Software & Computer Services 1.0
Electronic & Electrical Equipment 0.8
Fixed Line Telecommunications 0.1
Net Current Assets 5.8
------
Total 100.0
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Ten Largest Equity Investments
Company Total assets (%)
Royal Dutch Shell 'B' 6.0
British American Tobacco 5.0
Unilever 4.0
RELX 3.8
Lloyds Banking Group 3.7
BP Group 3.6
John Laing Group 3.3
Ferguson 3.2
AstraZeneca 2.9
Tesco 2.9

   

Commenting on the markets, Adam Avigdori and David Goldman representing the Investment Manager noted:
 
Global equity markets were strong in the second quarter and particularly the UK equity market, with the FTSE All Share rising 9.2% in the second quarter of 2018. Although the ECB indicated that it could raise rates this summer, the UK did not, as weaker consumer spending and lower inflation expectations eased the need. Continued rhetoric around trade wars, coupled with the instigation of certain tariffs and restrictions, has heightened fears of slowing economic growth and has also served to increase commodity prices.

In a reversal of last quarter large-caps outperformed mid-caps, notably due to strong contributions from the mega-cap oil companies whose share prices were supported by a rising oil price for most of the quarter. Equity markets significantly outperformed fixed income, with gilts up only 0.2% versus the FTSE All Share up 9.2%. The strongest sectors were oil and oil services, with a notable rise in food retail. On the other side banks continued their weakness as did tobacco shares, the former on poor revenue updates and the latter on fears that vaping might negatively impact their market position.

Over the quarter the Company delivered a return of 9.7%, outperforming the FTSE All-Share which delivered a return of 9.2%.

Rentokil continues to perform well after a recent trading update illustrated 11% total revenue growth. Their pest control division in particular has a long runway of growth supported by structural tailwinds, technology and a fragmented market with plenty of opportunity for acquisition. The company also boasts an impressive employee retention rate at 86%. Tesco’s share price responded favourably to results that came in ahead of market estimates. The company demonstrated improved cash flow and a reduction in debt levels. We believe the Booker deal is additive to the investment case both financially and strategically. Having no exposure to Vodafone helped relative performance as the shares fell over the quarter. Italian competitor Iliad announced incredibly aggressive pricing which far undercuts Vodafone and competition in Spain also remains a risk. Additionally, the acquisition of Liberty’s European assets was debt funded, leaving the business very highly leveraged.

Elementis, the largest detractor for the quarter, has announced a $600m acquisition of Mondo Minerals, an industrial talc business. Whilst it appears to be a quality business, the market is digesting the impact of the deal. In the near term, the equity raise needed to fund the deal has created an overhang. An underweight exposure to Royal Dutch Shell detracted from relative performance as the shares have risen strongly over the quarter. The company has disposed of a Canadian oil stands business as it looks to move away from certain oil operations to focus more on Australian gas and US shale opportunities. The British American Tobacco share price continues to be impacted by uncertainty surrounding the tobacco sector. We are confident that the company is leading the way with regards to next generation technologies and that this will be additive to the profit pool over the medium to longer term.

During the quarter we purchased a new position in De La Rue which we see as having a strong currency business in particular. The company offers an attractive yield that is well covered by cash flow, is on a reasonably cheap valuation and is relatively uncorrelated to markets. We also purchased positions in Taylor Wimpey, Barclays and Oxford Instruments. We have added to positions in Bodycote, Prudential, Weir Group and British American Tobacco. Competition for capital remains high and these trades were financed through reductions in BT, Rentokil, Shire and Carnival and sales including Derwent London, Diageo, Kier Group and Sabre Insurance.

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.
19 July 2018

Source: PR Newswire (July 19, 2018 - 11:24 AM EDT)

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