BlackRock Income and Growth Investment Trust Plc - Portfolio Update
PR Newswire
London, July 18
The information contained in this release was correct as at 30 June 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 30 June 2022 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 | 0.6% | -2.4% | 0.4% | 2.6% | 8.2% | 95.3% |
| Net asset value | -5.7% | -4.8% | 0.3% | 6.8% | 13.6% | 93.1% |
| FTSE All-Share Total Return | -6.0% | -5.0% | 1.6% | 7.4% | 17.8% | 89.5% |
| 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: | 192.05p |
| Net asset value - cum income*: | 196.16p |
| Share price: | 180.00p |
| Total assets (including income): | £45.5m |
| Discount to cum-income NAV: | 8.2% |
| Gearing: | 3.1% |
| Net yield**: | 4.0% |
| Ordinary shares in issue***: | 21,171,914 |
| Gearing range (as a % of net assets): | 0-20% |
| Ongoing charges****: | 1.2% |
* Includes net revenue of 4.11 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 4.0% 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 | 11.3 |
| Pharmaceuticals & Biotechnology | 10.6 |
| Oil & Gas Producers | 8.4 |
| Household Goods & Home Construction | 7.3 |
| Media | 7.1 |
| Banks | 6.0 |
| Life Insurance | 5.7 |
| Mining | 5.2 |
| Financial Services | 4.5 |
| Nonlife Insurance | 3.9 |
| Tobacco | 3.8 |
| Health Care Equipment & Services | 2.9 |
| Personal Goods | 2.4 |
| Travel & Leisure | 2.4 |
| Food Producers | 2.2 |
| Electronic & Electrical Equipment | 2.2 |
| Fixed Line Telecommunications | 1.8 |
| General Retailers | 1.7 |
| Gas, Water & Multiutilities | 1.2 |
| Industrial Engineering | 1.0 |
| Software & Computer Services | 0.9 |
| Real Estate Investment Trusts | 0.8 |
| Electricity | 0.7 |
| Net Current Assets | 6.0 |
| ----- | |
| Total | 100.0 |
| ===== |
| Country Analysis | Percentage |
| United Kingdom | 86.2 |
| United States | 4.1 |
| France | 3.7 |
| Net Current Assets | 6.0 |
| ----- | |
| 100.0 | |
| ===== | |
Top 10 holdings | Fund % |
| AstraZeneca | 8.1 |
| Shell | 6.8 |
| RELX | 4.9 |
| Reckitt Benckiser | 4.5 |
| Rio Tinto | 3.9 |
| British American Tobacco | 3.8 |
| Phoenix Group | 3.5 |
| Standard Chartered | 3.1 |
| Smith & Nephew | 2.9 |
| 3i Group | 2.7 |
Commenting on the markets, representing the Investment Manager noted:
Performance Overview:
The Company returned 0.6% during the month, outperforming the FTSE All-Share which returned -6.0%.
Global equity markets fell in June as tightening monetary policy from central banks and recessionary fears sent shockwaves through markets. The Fed raised rates by 75bps, the largest hike since 1994, the Bank of England raised rates a further 25bps to 1.25%, the Swiss National Bank announced a surprise 50bp hike from -0.75% to -0.25%, and the European Central Bank announced it would halt asset purchases. Following this, global equity markets experienced the weakest week since the beginning of the pandemic with a 2.6% fall for the S&P 500 and a -4% decline for the FTSE All-Share index. The declines in June mean H1 was the worst half-year for the S&P 500 since 1970, the Dow Jones Index since 1962 and the Nasdaq ever.
The tightening and easing of Covid restrictions in China added to volatility. The month began with mass testing in Shanghai and Beijing creating negative sentiment early in the period. This was followed by some relaxation of restrictions later in the month which provided some relief for risk assets.
Poor activity data and suggestion from Central Banks that a soft landing is unlikely reinforced global economic slowdown fears. Consequently, the Materials, Energy, and Consumer Discretionary sectors fell during the month as commodities prices dropped and consumer confidence waned. Where Financials initially performed strongly on the back of rising interest rates, the sector later fell on rising fears of a recession. More defensive sectors including Health Care performed better and was the only sector with a positive return during the period.
Stocks:
The Company's more defensive holdings were relative positive contributors to performance during the month; these included RELX, Reckitt Benckiser, and Tate & Lyle. Euroapi was another top positive contributor to relative performance after its recent spin off from Sanofi to start operating as a standalone business.
Whilst Rio Tinto was a drag on relative performance, this was offset by not holding other shares in the Mining sector, notably Anglo American and Glencore. After rallying earlier in the year, iron ore and copper prices declined on global economic slowdown fears. 3i was another top detractor from relative performance; the company's investment in the discount retailer, Action accounts for over 50% of the NAV and is valued at a multiple reflecting the long duration rollout potential across Europe. 3i shares sold off on market concerns about read-across to Action from consumer weakness seen in the Walmart/Target profit warnings earlier in the year, coupled with a de-rating of longer duration growth companies. Smith & Nephew also detracted from relative performance on concerns growth will be weaker due to volume-based procurement and lockdowns in China.
Portfolio Activity:
During the month, we added to more defensive names including Unilever and BT while reducing more cyclical names including Hays. We also reduced our underweight in HSBC given prevailing interest rates sensitivity and the low valuation starting point.
We continue to maintain relative balance in the portfolio abstaining from taking a bias towards any style or factor, allowing us flexibility in these uncertain market conditions.
Outlook
The headwinds facing global equity markets have grown steadily over the first half of 2022. Inflation has surprised in its depth and breadth so far, 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 and, notably, on un-profitable or extremely highly valued businesses. 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 this will likely have 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.
19 July 2022
