BlackRock Income and Growth Investment Trust plc (LON:BRIG) has announced its latest portfolio update.
All information is at 30 April 2023 and unaudited.
For more information on the BlackRock Income and Growth Investment Trust, please visit: www.blackrock.com/uk/brig
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 | -1.0% | 0.6% | 6.1% | 30.9% | 17.5% | 115.3% |
| Net asset value | 4.1% | 2.8% | 7.3% | 42.5% | 23.2% | 119.3% |
| FTSE All-Share Total Return | 3.4% | 1.9% | 6.0% | 45.2% | 24.2% | 112.3% |
| 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: | 211.78p |
| Net asset value – cum income*: | 215.23p |
| Share price: | 191.00p |
| Total assets (including income): | £49.1m |
| Discount to cum-income NAV: | 11.3% |
| Gearing: | 5.3% |
| Net yield**: | 3.8% |
| Ordinary shares in issue***: | 20,949,796 |
| Gearing range (as a % of net assets): | 0-20% |
| Ongoing charges****: | 1.2% |
* Includes net revenue of 3.45 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 3.8% and includes the 2022 interim dividend of 2.60p per share declared on 22 June 2022 with pay date 1 September 2022 and the 2022 final dividend of 4.70p per share declared on 1 February 2023 with pay date 15 March 2023.
*** excludes 10,081,532 shares held in treasury.
**** The Company’s ongoing charges are calculated as a percentage of average daily net assets and using management fee and all other operating expenses excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation and certain non-recurring items for the year ended 31 October 2022.
| Sector Analysis | Total assets (%) |
| Support Services | 11.1 |
| Pharmaceuticals & Biotechnology | 10.3 |
| Oil & Gas Producers | 9.1 |
| Media | 7.8 |
| Household Goods & Home Construction | 7.2 |
| Banks | 6.9 |
| Financial Services | 6.4 |
| Mining | 5.7 |
| Personal Goods | 4.3 |
| General Retailers | 4.1 |
| Nonlife Insurance | 3.7 |
| Health Care Equipment & Services | 3.1 |
| Life Insurance | 2.9 |
| Electronic & Electrical Equipment | 2.9 |
| Food Producers | 2.7 |
| Tobacco | 2.0 |
| Travel & Leisure | 1.5 |
| Gas, Water & Multiutilities | 1.5 |
| Fixed Line Telecommunications | 1.4 |
| Real Estate Investment Trusts | 1.2 |
| Leisure Goods | 0.9 |
| Net Current Assets | 3.3 |
| —– | |
| Total | 100.0 |
| ===== | |
Country Analysis | Percentage |
United Kingdom | 90.3 |
| Switzerland | 2.6 |
| United States | 2.1 |
| France | 1.7 |
| Net Current Assets | 3.3 |
| —– | |
| 100.0 | |
| ===== | |
Top 10 holdings | Fund % |
| AstraZeneca | 7.3 |
| Shell | 7.3 |
| RELX | 5.1 |
| Reckitt Benckiser | 4.8 |
| 3i Group | 3.9 |
| Rio Tinto | 3.7 |
| Smith & Nephew | 3.1 |
| Unilever | 3.1 |
| Phoenix Group | 2.9 |
| Pearson | 2.7 |
Commenting on the markets, representing the Investment Manager noted:
Performance Overview:
The Company returned 4.1% during the month, performing broadly in-line with the FTSE All-Share which returned 3.4%.
The FTSE All Share Index rose 3.4% during the month with Telecommunications, Oil & Gas, and Health Care as top performing sectors while Basic Materials underperformed.
In the US, after a strong January, data showed that momentum in consumer spending dropped through Q1 and was flat in March. The core Personal Consumption Expenditure (PCE) index was higher than expected at 4.6%1 in March, highlighting the difficult growth-inflation trade-off the Federal Reserve continues to face.
April data showed positive upside surprise from the services Purchasing Managers Index (PMI) reading for the Eurozone, while the opposite occurred for manufacturing PMIs, which surprised to the downside for the region. Overall, the economy seemed to rebound from a feeble winter, but manufacturing weakness remained a concern and dampened the upturn.
In the UK, inflation data for March came in higher than expected as rising food prices kept year-on-year headline inflation in double digits at 10.1%2. Persistent services inflation kept core inflation at 6.2%. Wage growth also accelerated, despite an increase in labour supply.
In China, the restart from Covid lockdowns and additional policy support drove Q1 GDP growth to 4.5%3 year on year, up from 2.9% in Q4 2022, and above market expectations of 4.0%. Strong consumer spending played a key role in China’s restart, in contrast to the softer U.S. retail sales data.
Stocks:
Overall, the most recent earnings season has been a positive one for the underlying holdings of the Company, particularly, for some of the larger positions in the portfolio. Smith & Nephew beat earnings expectations for the first quarter as elective procedure volumes improved; the company’s sports medicine segment remains a standout with growth of 10%. Phoenix Group’s results were stronger than expected with solvency, cash generation and new business all ahead of target. Rentokil also delivered good organic growth in the first quarter with the Hygiene and French Workwear segments continuing to impress.
Equipment rental business, Ashtead was a top detractor during the month. The company’s share price was impacted by read-across from a peer reporting weaker first quarter results. Rio Tinto and BHP were impacted by broader weakness in the basic materials sector.
Changes:
During the period, we added to holdings in Admiral and Watches of Switzerland and reduced AstraZeneca and Smith & Nephew given strength in the share prices.
Outlook:
Inflation has consistently surprised in its depth and breadth, driven by resilient demand, supply chain constraints, and most importantly, by rising wages in more recent data. Central banks across the developed world continue to unwind ten years of excess liquidity by tightening monetary policy, desperate to prevent the entrenchment of higher inflation expectations. Meanwhile, March saw the first signs of financial stress with the bankruptcy of Silicon Valley Bank and Signature bank in the US serving to highlight the potential issues of the aggressive retrenchment of liquidity. Whilst the ramifications of this crisis remain unclear, it is likely that credit conditions and the availability of credit will continue to recede. This strengthens our belief that companies with robust balance sheets capable of funding their own growth will outperform. 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. We are conscious of the impact this has 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. We also see the potential for longer-term inflationary pressure from decarbonisation and deglobalisation, the latter as geopolitical tensions rise more broadly across the world.
We would expect broader demand weakness, although the ‘scars’ of supply chain disruption are likely to support parts of industrial capex demand as companies seek to enhance the resilience of their supply chains. A notable feature of our conversations with a wide range of corporates has been the ease with which they have been able to pass on cost increases and protect or even expand margins during 2022, as evidenced by US corporate margins reaching 70-year highs. We believe that as demand weakens and as the transitory inflationary pressures start to fade during 2023 (e.g. commodity prices, supply chain disruption), pricing conversations will become more challenging, despite pressure from wage inflation which may prove more persistent. While this does not bode well for margins in aggregate, we believe that 2023 will see greater differentiation as corporate pricing power will come under intense scrutiny.
The UK’s policy has somewhat diverged from the G7 in fiscal policy terms as the present government attempts to create stability after the severe reaction from the “mini-budget”. The early signs of stability are welcome as financial market liquidity has increased and the outlook, whilst challenged, has improved. Although the UK stock market retains a majority of internationally weighted revenues, the domestic facing companies have continued to be impacted by this backdrop, notably financials, housebuilders and property companies. The valuation of the UK market remains highly supportive as currency weakness supports international earnings, whilst domestic earners are in many cases at COVID or Brexit lows in share price or valuation terms. Although we anticipate further volatility ahead as earnings estimates moderate, we know that in the course of time risk appetites will return, and opportunities are emerging.
We continue to focus the portfolio on cash generative businesses with durable, competitive advantages, boasting strong leadership, as we believe these companies are best-placed to drive returns over the long-term. We anticipate economic and market volatility will persist throughout the year and we are excited by the opportunities this will likely create by identifying those companies using this cycle to strengthen their long-term prospects as well as attractive turnarounds situations.
1Financial Times – Rise in US labour costs and inflation strengthen case for Fed rate rise
2Financial Times – Double-digit UK inflation offers little hope for end to cost of living crisis
3Financial Times – China’s economy rebounds more than expected after Covid reopening
For more information on the BlackRock Income and Growth Investment Trust, please visit: www.blackrock.com/uk/brig
