BLACKROCK INCOME AND GROWTH INVESTMENT TRUST PLC BLACKROCK INCOME AND GROWTH INVESTMENT TRUST PLC
LEI: 5493003YBY59H9EJLJ16
HALF YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 APRIL 2022
PERFORMANCE RECORD
|
As at 30 April 2022 |
As at 31 October 2021 | Change % | |
| Net assets (£’000)1 | 44,028 | 43,468 | +1.3 |
| Net asset value per ordinary share (pence) | 207.67 | 203.13 | +2.2 |
| Ordinary share price (mid-market) (pence) | 187.00 | 191.00 | -2.1 |
| Discount to net asset value2 | 10.0% | 6.0% | |
| FTSE All-Share Index | 8430.58 | 8173.30 | +3.1 |
| --------------- | --------------- | --------------- | |
| Performance (with dividends reinvested) | |||
| Net asset value per share2 | 4.5% | 30.4% | |
| Ordinary share price2 | 0.3% | 22.2% | |
| FTSE All-Share Index | 3.1% | 35.4% | |
| ========= | ========= |
| For the six months ended 30 April 2022 |
For the six months ended 30 April 2021 | Change % | |
| Revenue | |||
| Net profit after taxation (£'000) | 752 | 699 | +7.6 |
| Revenue earnings per ordinary share (pence)3 | 3.53 | 3.15 | +12.1 |
| --------------- | --------------- | --------------- | |
| Dividends (pence) | |||
| Interim | 2.60 | 2.60 | - |
| ========= | ========= | ========= |
1 The change in net assets reflects the market movements during the period, the purchase of the Company’s own shares and dividends paid.
2 Alternative Performance Measures, see Glossary in the Half Yearly Financial Report.
3 Further details are given in the Glossary in the Half Yearly Financial Report.
Sources: BlackRock and Datastream.
CHAIRMAN’S STATEMENT
Dear Shareholder
OVERVIEW
Recent reports to shareholders were, inevitably, dominated by the COVID-19 pandemic and its inpacts on markets and economies. Direct impacts, lockdowns and the like have reduced over the recent months, although the receding pandemic has left behind it a number of related supply constraints, causing inflation to rise sharply as demand for goods outstripped supply as economic activity restarted. These effects were then compounded by Russia’s invasion of Ukraine and the resulting humanitarian crisis. Market volatility spiked and sentiment has been firmly orientated towards fear not greed, with market participants reducing exposure and seeking safe havens. The West’s response to Russia’s invasion has been decisive, applying unprecedented sanctions on Russian companies and financial institutions, freezing assets and even the announcement by the UK and the US of a total ban on the import of Russian oil and gas.
Although many would argue these severe actions have been entirely appropriate, they have not been without significant cost to Western economies. The resulting energy supply shock has seen energy prices skyrocket and this, coupled with the existing post-COVID-19 supply constraints mentioned above, has pushed inflation to levels not seen in decades in the UK, hitting a 40 year high of 9.1% in May 2022. This has left central banks walking a delicate tightrope act between intervening to address soaring inflation, while running the risk of curtailing economic growth. The Bank of England raised interest rates by 0.25 percentage points to 1% in May 2022 and by a further 0.25 percentage points in June 2022, with further rate hikes likely later this year, which along with other policy tightening, points to a likely drop in the rate of inflation over the next half year or so. Looking into the future though, equity markets have given back much of the gains made from the economic restart, reflecting the anticipation of further interest rate hikes, the rapidly rising cost of living and lower consumer spending, higher operational costs for companies as the price of commodities and energy rise and, ultimately, lower overall levels of growth for UK public companies.
Against the turmoil described above, I am pleased to report that our portfolio has been resilient, outperforming many of its sector peers and the benchmark return during the period. In addition, it is also positive to see that the revenue generated by our investment portfolio has risen versus the prior year, despite the challenges during the period. As you will read in the Investment Manager's report which follows, our portfolio saw strong performance from our exposure to commodities and energy. Our financial holdings also performed well as interest rates rose, and our portfolio managers have added several new holdings which are well placed to benefit from rising energy prices and the UK Government’s focus on energy security.
PERFORMANCE
During the period, the Company’s net asset value per share (NAV) returned 4.5%, compared with the Company’s benchmark, the FTSE All-Share Index (total return), which returned 3.1%. The Company’s share price returned 0.3% (all percentages in Sterling with dividends reinvested).
Subsequent to the period end and as at 20 June 2022, the net asset value per share of the Company has decreased by 6.5% from 207.67 pence per share to 194.27 pence per share and the Company’s share price has fallen by 5.3% from 187.00 pence to 177.00 pence per share. The Company’s Benchmark Index has decreased by 5.6% over the same period.
Further information on the significant components of overall performance and the changes to portfolio composition are set out in the Investment Manager’s Report below.
REVENUE PROFIT AND DIVIDENDS
Revenue profit for the period was 3.53 pence per share (six months to 30 April 2021: 3.15 pence per share), an increase of 12.1% year-on-year. The Board is pleased to declare an interim dividend of 2.60 pence per share (2021: 2.60 pence per share). This dividend will be paid on 1 September 2022 to shareholders on the Company’s register at the close of business on 22 July 2022 (the ex-dividend date is 21 July 2022).
I am pleased to report that our interim dividend is fully covered by the revenue generated during the period. After the payment of this year’s interim dividend, the Company will have approximately one year’s dividend cover in revenue reserves.
SHARE CAPITAL
The Directors recognise the importance to investors that the Company’s share price should not trade at a significant discount to NAV, and therefore, in normal market conditions, may use the Company’s share buy back, sale of shares from treasury and share issuance powers to seek to ensure that the share price does not differ excessively from the underlying NAV.
Buying back shares at a discount is accretive to NAV and can help narrow the discount to NAV at which the Company’s shares trade. It can also help to provide additional liquidity. During the period the Company’s shares traded at an average discount of 8.9% and ended the period at 10.0%. At the close of business on 20 June 2022 the discount had narrowed to 8.9%.
A total of 198,206 ordinary shares were bought back and cancelled during the period at an average price of 183.65 pence and for a total consideration of £364,000. No shares were issued or sold from treasury during the period under review. As at 20 June 2022, 32.3% of the Company’s issued ordinary share capital is held in treasury and may be issued to satisfy any demand for the Company’s shares that may arise.
GEARING
The Company operates a flexible gearing policy which depends on prevailing conditions and the outlook for the market. Gearing is subject to a maximum level of 20% of net assets at the time of investment. The Company reduced levels of gearing during the period under review and at 30 April 2022 the Company had net gearing of 1.4%. Gearing levels and sources of funding are reviewed regularly to ensure that the Company has access to the most competitive borrowing rates available to it. The Company currently has a two-year unsecured Sterling revolving credit facility of £4,000,000 with ING Bank (Luxembourg) S.A., which is fully drawn down and is scheduled to mature in November 2023.
SHAREHOLDER COMMUNICATION
The Board appreciates how important access to regular information is to our shareholders. To supplement our Company website, we now offer shareholders the ability to sign up to the Trust Matters newsletter which includes information on the Company as well as news, views and insights. Further information on how to sign up is included on the inside cover of the Half Yearly Financial Report.
OUTLOOK
As you will read in their report which follows below, your investment managers continue to seek out companies that can generate strong, consistent cash flow, from robust business models which have favourable industry characteristics or scope for management driven self-help. They are focused on bottom-up stock selection and are emboldened by the attractive stock-specific opportunities on offer.
Given the ongoing market volatility our portfolio managers continue to apply prudent balance to the portfolio which has resulted in resilience and the protection of shareholder capital during these most challenging times. However, they also continue to seek exposure to macro trends and growth through those companies best placed to thrive in the current environment, whilst applying a degree of caution as the powerful macroeconomic drivers described above play out through the remainder of the year and beyond.
As we move into an economic and policy environment which is more than usually changeable, your Board remains fully supportive of our portfolio managers' approach and to their aim of positioning the portfolio to deliver on the Company’s investment objective.
GRAEME PROUDFOOT
Chairman
22 June 2022
INVESTMENT MANAGER’S REPORT
PERFORMANCE
For the six month period since 31 October 2021, the Company’s NAV returned 4.5%, outperforming its benchmark, the FTSE All-Share Index (the Benchmark Index), which returned 3.1% over the same period (all percentages in Sterling with dividends reinvested).
INVESTMENT APPROACH
In assembling the Company’s portfolio, we adopt a concentrated investment approach to ensure that our best ideas contribute significantly to returns. We believe that it is the role of the portfolio overall to generate an attractive and growing yield alongside capital growth rather than every individual company within the portfolio. This gives the Company increased flexibility to invest where returns are most attractive. This approach results in a portfolio which differs substantially from the index and in any individual year the returns will vary, sometimes significantly from those of the index. The foundation of the portfolio, approximately 70%, is in high free cash flow companies that can sustain cash generation and pay a growing dividend whilst aiming to deliver a double-digit total return. Additionally, we look to identify and invest 20% of the portfolio in ‘growth’ companies that have significant barriers to entry and scalable business models that enable them to grow consistently. We also look for turnaround companies, at around 10% of portfolio value, which represent those companies that are out of favour with the market offering attractive recovery potential.
MARKET REVIEW
The Benchmark Index rose 3.1% over the six months to 30 April 2022 with Oil & Gas, Utilities and Basic Materials as top outperformers. The Benchmark Index was a notable outperformer versus other developed markets indices where a number of emerging and strengthening headwinds served to put pressure on risk assets globally. These headwinds include the Omicron COVID-19 variant, Russia’s invasion of Ukraine as well as a general increase in geopolitical tensions, rising inflation, weakening consumer sentiment and record high energy prices.
The Omicron variant created a ripple effect in developed markets early in the period and although its impact faded as 2022 has progressed, it continues to disrupt economic activity, most notably in China where stringent lockdowns are still enforced affecting global supply chains.
Prior to Russia’s invasion of Ukraine, markets had been impacted by the steep rise in bond yields as investors rapidly repriced the scale and speed of interest rate rises in response to high and persistent inflation. Supply constraints have been widespread with the shortage of semiconductors perhaps the highest profile.
The war has only served to exacerbate those inflationary concerns with key commodities across energy and agricultural markets rising sharply in price; security of energy supply becoming a key focus as countries seek to reduce their dependence on Russia. Market performance was dominated by the strength in commodities prices which benefitted the Mining and Oil & Gas sectors. These are relatively large weights in the Benchmark Index contributing to its relative resilience over this period. Defensive sectors, such as Tobacco and Pharmaceuticals, also benefitted from greater economic uncertainty. Meanwhile, long-duration assets were negatively impacted by rising interest rates which reduce the present value of their growth.
CONTRIBUTORS TO AND DETRACTORS FROM PERFORMANCE
Positive contributors to performance included stock selection in the Consumer Services, Basic Materials and Consumer Goods sectors and the overweight positioning to the Health Care sector.
The mining sector performed strongly during the period reflecting strength in commodity markets and continued capital discipline from the miners as demonstrated by further large shareholder returns. As a result, the holdings in Rio Tinto and BHP were significant contributors to the returns of the Company during the period.
Standard Chartered was also a top contributor to performance benefitting from increases in interest rates and a return to revenue growth. Mastercard also contributed to performance after the company reported solid results with strong payment volumes and an encouraging acceleration in cross-border volume linked to increased travel. This supports our thesis that growth will accelerate as the continued structural shift towards digital payments is boosted by a normalisation in consumer activity post COVID-19.
As economic uncertainty boosted defensive holdings, British American Tobacco and nutrition ingredients business, Tate & Lyle rose and performed well during the period. Other positive contributors to performance during the period included education business, Pearson which received a takeover approach even though the bid has subsequently fallen away, and Drax Group, the power generator, benefitting from the disruption in oil and gas markets. Both Tate & Lyle and Drax Group were recent additions to the Company having been purchased during the second half of 2021.
Detractors from performance included the underweight positioning to Oil & Gas given the strength in the oil price and the sector. Holdings in the Industrials sector also detracted, impacted by the rotation away from growth stocks, concerns regarding the risk of supply chain shocks and as recessionary fears emerged. We remain confident that we have invested in franchises that have built durable competitive advantages, are cash generative and boast strong balance sheets that are well placed to navigate this challenging operating environment.
Notable detractors included Hays and Moonpig Group which reflected concerns of a deterioration in the economic backdrop and consumer weakness given rising inflationary pressures. Taylor Wimpey was impacted by fears of further costs associated with the cladding removal bill as well as the impact of rising inflation and interest rates on their customers and their profitability. Adobe Systems also fell despite robust operational performance given the increase in the interest rates which has reduced the premium at which high growth, technology companies are valued.
TRANSACTIONS
We purchased a new holding in BT Group which is building out the UK’s national fibre network, targeting more than 25 million homes, providing consumers and businesses with access to high-speed internet. We believe that the regulatory landscape for the UK telecom industry is improving and that the market participants are behaving more rationally. We are seeing price rises of Consumer Prices Index (CPI) +4%, with limited backlash so far and all operators are following suit. The company has the ability to put through in-contract price rises in their contract wording, limiting any sticker shock. The average telecoms bill represents 0.4% of UK household’s bills such that the currently expected 9% price rise equates to a c.£50 increase in the annual bill. There is a high drop through from these price rises to the company’s profits and cash flow, while the capex investment phase around fibre slows in around 4 years, at which point we expect a meaningful uplift in free cash flow generation. We also purchased a new holding in Centrica, the British gas company, as we view it as a beneficiary of rising energy costs and of the increased focus on security of supply.
During the period we continued to reduce our Consumer exposure by selling Next and Tesco and reduced the US exposure with the sale of Analog Devices. We sold our holding in Oxford Nanopore following the strong share price performance post Initial Public Offering. We also sold the position in Smiths Group. After the successful sale of the company’s medical division and recent strength in the share price, the investment case required an acceleration in organic growth which we believe may prove more challenging given the difficult economic backdrop. We also materially reduced our position in BP Group given its large stake in Rosneft, continuing to favour a larger position in Shell.
Ferguson’s strong logistics enabled the company to thrive during this period of disrupted supply chains while high commodity prices boosted revenues and margins. The strong share price combined with our concern over the sustainability of this performance prompted us to sell the holding. We used some of the proceeds of the Ferguson sale to purchase a new holding in Ashtead Group, the US focused equipment rental company offering attractive structural growth from continued outsourcing trends in this fragmented industry following recent share price weakness.
GEARING
Our general approach to gearing is that we aim to run the Company with a modest and consistent level of gearing to enhance income generation and capital growth; accordingly, the Company is typically 5-10% geared, however, at 30 April 2022, the Company had employed net gearing of 1.4% to reflect our more cautious views on markets.
OUTLOOK
We are conscious that, at the time of writing, there is a significant conflict and human suffering. Whilst we continue to reference the investment implications of this, we recognise there are also tremendous implications for humanity. The Russian invasion of Ukraine has contributed not just to the volatility of 2022, but also to the range of outcomes. The backdrop for global equities therefore, in our view, is mixed. Although demand remains strong, the outlook for corporate revenue and earnings growth is likely to worsen over the course of 2022 as the potential negative jaws of rising oil prices and rates raise the spectre once again of stagflation. It is still likely that despite the emerging cost of living crisis, government stimulus continues to be retracted, and monetary policy is tightened in the face of more persistent inflationary pressures. It will be incredibly important to focus on companies with strong, competitive positions that can deliver in this environment and that trade at attractive valuations.
Central banks, universally across the developed world, have entered 2022 in a far more hawkish manner and as a result, market expectations for higher rates and faster quantitative tightening have risen considerably. Time will tell whether the conflict impacts the growth outlook and therefore the hawkishness of central banks. It is also more likely we will see increasingly divergent regional monetary approaches with the US being somewhat more insulated from the impact of the conflict, than for example, Europe. We still do not know whether the current inflationary trends are temporary or structural. Within this calculation one must consider the impact from the significant COVID-19 stimulus, the unwinding of extreme COVID-19 behaviours, a more structural shift in the cost of labour and the impact on costs from the decarbonisation agenda or, indeed, a combination of the above. It is difficult to have a high degree of confidence in the outcome, but we would note, given the uncertainty, there is a rising risk of a policy mistake; either being 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.
The strain on supply chains, caused by strong economic activity overwhelming COVID-19 afflicted capacity and restricted labour availability, will continue to provide inflationary pressures which can squeeze companies’ margins. 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. However, 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 expand margins. Management teams have pointed to robust demand, prioritisation of security of supply as well as well-publicised supply chain disruption and cost pressures. However, we believe that as some of 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 structural 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 markets tighten further.
The UK stock market has started the year far better than any other developed market indices, benefitting from a far lower, and thus more attractive, starting valuation. The Benchmark Index has benefitted from the lack of a widespread re-rating seen in many other markets as well as its relatively high exposure to commodities. We continue to see appetite to acquire great market positions, real assets and/or unlevered free cash flow as highlighted by takeover approaches for two portfolio holdings – Oxford Instruments and Pearson. While most companies are paying dividends once more, we note the large contribution from special dividends that may not persist. That said, as the highest dividend yielding market in the developed world, we see the fundamental valuation of the UK as attractive. We also view the outlook for ordinary dividends for the UK market with optimism as most companies have emerged from the COVID-19 crisis with appropriate dividend policies.
We continue to have conviction in cash generative companies with durable competitive advantages, 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.
ADAM AVIGDORI AND DAVID GOLDMAN
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
22 June 2022
Ten largest investments*
1 = AstraZeneca (2021: 1st)
Sector: Pharmaceuticals & Biotechnology
Market value: £3,637,000
Percentage of portfolio: 8.2% (2021: 7.2%)
AstraZeneca is an Anglo-Swedish multinational pharmaceutical group with its headquarters in the UK. It is a science-led biopharmaceutical business with a portfolio of products for major disease areas including cancer, cardiovascular infection, neuroscience and respiration.
2 + Shell (2021: 3rd)
Sector: Oil & Gas Producers
Market value: £3,161,000
Percentage of portfolio: 7.1% (2021: 4.7%)
Shell is a global oil and gas group. The group operates in both Upstream and Downstream industries. The Upstream division is engaged in searching for and recovering crude oil and natural gas, the liquefaction and transportation of gas. The Downstream division is engaged in manufacturing, distribution and marketing activities for oil products and chemicals.
3 + Rio Tinto (2021: 7th)
Sector: Mining
Market value: £2,408,000
Percentage of portfolio: 5.4% (2021: 3.7%)
Rio Tinto is a metals and mining group operating in about 36 countries around the world, producing iron ore, copper, diamonds, gold and uranium.
4 - RELX (2021: 2nd)
Sector: Media
Market value: £2,394,000
Percentage of portfolio: 5.4% (2021: 5.2%)
RELX is a global provider of professional information solutions that includes publication of scientific, medical, technical and legal journals. It also has the world’s leading exhibitions, conference and events business.
5 - Reckitt Benckiser (2021: 4th)
Sector: Household Goods & Home Construction
Market value: £2,085,000
Percentage of portfolio: 4.7% (2021: 4.5%)
Reckitt Benckiser is a global leader in consumer health, hygiene and home products. Its products are sold in 200 countries and its 19 most profitable brands are responsible for 70% of net revenues.
6 + British American Tobacco (2021: 8th)
Sector: Tobacco
Market value: £1,653,000
Percentage of portfolio: 3.7% (2021: 3.7%)
British American Tobacco is one of the world’s leading tobacco groups, with more than 200 brands in the portfolio selling in approximately 180 markets worldwide.
7 - 3i Group (2021: 6th)
Sector: Financial Services
Market value: £1,534,000
Percentage of portfolio: 3.4% (2021: 3.8%)
3i Group is a leading international investor focused on mid-market Private Equity and Infrastructure. 3i Group invests in mid-market buyouts, growth capital and infrastructure. Sectors invested in are business and financial services, consumer, industrials and energy and health care.
8 + Phoenix Group (2021: 21st)
Sector: Life Insurance
Market value: £1,504,000
Percentage of portfolio: 3.4% (2021: 2.1%)
Phoenix Group is one of the largest providers of insurance services in the United Kingdom. The group offers a broad range of pensions and savings products to support people across all stages of the savings life cycle.
9 = Electrocomponents (2021: 9th)
Sector: Support Services
Market value: £1,480,000
Percentage of portfolio: 3.3% (2021: 3.4%)
Electrocomponents is a British-based distributor of industrial and electronics products. Operating in 80 countries, the group is a global omni-channel provider of product and service solutions for designers, builders and maintainers of industrial equipment and operations.
10 + Standard Chartered (2021: 12th)
Sector: Banks
Market value: £1,409,000
Percentage of portfolio: 3.2% (2021: 3.1%)
Standard Chartered is a British multinational banking and financial services group headquartered in London. It operates a network of more than 1,200 branches and outlets across more than 70 countries; working across some of the world’s most dynamic markets including Asia, Africa and the Middle East.
* The following symbols shown after the portfolio ranking number indicate the change in the relative ranking of the position in the portfolio compared to its ranking as at 31 October 2021: + indicates an increase, - indicates a decrease and = indicates no change.
All percentages reflect the value of the holding as a percentage of total investments as at 30 April 2022.
Together, the ten largest investments represent 47.8% of total investments (31 October 2021: 43.5%).
Distribution of investments as at 30 April 2022
Analysis of portfolio by sector
| % of investments by market value |
Benchmark Index | |
| Support Services | 13.8 | 4.3 |
| Pharmaceuticals & Biotechnology | 9.7 | 10.9 |
| Household Goods & Home Construction | 8.1 | 1.2 |
| Oil & Gas Producers | 8.0 | 10.3 |
| Media | 7.7 | 3.2 |
| Mining | 7.2 | 7.6 |
| Life Insurance | 6.4 | 2.6 |
| Financial Services | 5.4 | 4.1 |
| Banks | 4.9 | 7.9 |
| Non-Life Insurance | 4.0 | 0.8 |
| Tobacco | 3.7 | 3.8 |
| Health Care Equipment & Services | 2.8 | 0.7 |
| Food Producers | 2.7 | 0.6 |
| Electronic & Electrical Equipment | 2.7 | 0.9 |
| Travel & Leisure | 2.6 | 2.8 |
| General Retailers | 1.7 | 2.8 |
| Personal Goods | 1.7 | 0.4 |
| Fixed Line Telecommunications | 1.5 | 2.0 |
| Electricity | 1.4 | 1.0 |
| Gas, Water & Multiutilities | 1.3 | 2.7 |
| Software & Computer Services | 1.0 | 0.0 |
| Industrial Engineering | 0.9 | 0.6 |
| Real Estate Investment Trusts | 0.8 | 2.7 |
Sources: BlackRock and Datastream.
Investment size
| Number of investments | % of investments by market value | |
| <£1m | 25 | 30.7 |
| £1m to £2m | 13 | 38.5 |
| £2m to £3m | 3 | 15.5 |
| £3m to £4m | 2 | 15.3 |
Source: BlackRock.
Investments as at 30 April 2022
|
Market value £’000 | % of investments | |
| Support Services | ||
| Electrocomponents | 1,480 | 3.3 |
| Rentokil Initial | 1,287 | 2.9 |
| Hays | 1,220 | 2.8 |
| Mastercard1 | 1,158 | 2.6 |
| Ashtead Group | 593 | 1.3 |
| Grafton Group | 409 | 0.9 |
| --------------- | --------------- | |
| 6,147 | 13.8 | |
| ========= | ========= | |
| Pharmaceuticals & Biotechnology | ||
| AstraZeneca | 3,637 | 8.2 |
| Sanofi1 | 680 | 1.5 |
| --------------- | --------------- | |
| 4,317 | 9.7 | |
| ========= | ========= | |
| Household Goods & Home Construction | ||
| Reckitt Benckiser | 2,085 | 4.7 |
| Taylor Wimpey | 959 | 2.1 |
| Berkeley Group | 578 | 1.3 |
| --------------- | --------------- | |
| 3,622 | 8.1 | |
| ========= | ========= | |
| Oil & Gas Producers | ||
| Shell | 3,161 | 7.1 |
| BP Group | 404 | 0.9 |
| --------------- | --------------- | |
| 3,565 | 8.0 | |
| ========= | ========= | |
| Media | ||
| RELX | 2,394 | 5.4 |
| Pearson | 1,041 | 2.3 |
| --------------- | --------------- | |
| 3,435 | 7.7 | |
| ========= | ========= | |
| Mining | ||
| Rio Tinto | 2,408 | 5.4 |
| BHP | 809 | 1.8 |
| --------------- | --------------- | |
| 3,217 | 7.2 | |
| ========= | ========= | |
| Life Insurance | ||
| Phoenix Group | 1,504 | 3.4 |
| Legal & General Group | 1,340 | 3.0 |
| --------------- | --------------- | |
| 2,844 | 6.4 | |
| ========= | ========= | |
| Financial Services | ||
| 3i Group | 1,534 | 3.4 |
| Premier Asset Management Group | 526 | 1.2 |
| IntegraFin | 353 | 0.8 |
| --------------- | --------------- | |
| 2,413 | 5.4 | |
| ========= | ========= | |
| Banks | ||
| Standard Chartered | 1,409 | 3.2 |
| Lloyds Banking Group | 778 | 1.7 |
| --------------- | --------------- | |
| 2,187 | 4.9 | |
| ========= | ========= | |
| Non-Life Insurance | ||
| Direct Line Group | 1,088 | 2.4 |
| Hiscox | 728 | 1.6 |
| --------------- | --------------- | |
| 1,816 | 4.0 | |
| ========= | ========= | |
| Tobacco | ||
| British American Tobacco | 1,653 | 3.7 |
| --------------- | --------------- | |
| 1,653 | 3.7 | |
| ========= | ========= | |
| Health Care Equipment & Services | ||
| Smith & Nephew | 1,268 | 2.8 |
| --------------- | --------------- | |
| 1,268 | 2.8 | |
| ========= | ========= | |
| Food Producers | ||
| Tate & Lyle | 1,231 | 2.7 |
| --------------- | --------------- | |
| 1,231 | 2.7 | |
| ========= | ========= | |
| Electronic & Electrical Equipment | ||
| Schneider Electric1 | 613 | 1.4 |
| Oxford Instruments | 585 | 1.3 |
| --------------- | --------------- | |
| 1,198 | 2.7 | |
| ========= | ========= | |
| Travel & Leisure | ||
| Whitbread | 806 | 1.8 |
| Fuller Smith & Turner – A Shares | 355 | 0.8 |
| Patisserie Holdings2 | – | – |
| --------------- | --------------- | |
| 1,161 | 2.6 | |
| ========= | ========= | |
| General Retailers | ||
| Moonpig Group | 388 | 0.9 |
| WH Smith | 363 | 0.8 |
| --------------- | --------------- | |
| 751 | 1.7 | |
| ========= | ========= | |
| Personal Goods | ||
| Unilever | 745 | 1.7 |
| --------------- | --------------- | |
| 745 | 1.7 | |
| ========= | ========= | |
| Fixed Line Telecommunications | ||
| BT Group | 656 | 1.5 |
| --------------- | --------------- | |
| 656 | 1.5 | |
| ========= | ========= | |
| Electricity | ||
| Drax Group | 619 | 1.4 |
| --------------- | --------------- | |
| 619 | 1.4 | |
| ========= | ========= | |
| Gas, Water & Multiutilities | ||
| Centrica | 558 | 1.3 |
| --------------- | --------------- | |
| 558 | 1.3 | |
| ========= | ========= | |
| Software & Computer Services | ||
| Adobe Systems1 | 431 | 1.0 |
| --------------- | --------------- | |
| 431 | 1.0 | |
| ========= | ========= | |
| Industrial Engineering | ||
| Chart Industries1 | 425 | 0.9 |
| --------------- | --------------- | |
| 425 | 0.9 | |
| ========= | ========= | |
| Real Estate Investment Trusts | ||
| Big Yellow Group | 365 | 0.8 |
| --------------- | --------------- | |
| 365 | 0.8 | |
| ========= | ========= | |
| Total investments | 44,624 | 100.0 |
| ========= | ========= |
1 Non-UK listed investments.
2 Company under liquidation.
All investments are in ordinary shares unless otherwise stated. The total number of investments held at 30 April 2022 was 43 (31 October 2021: 48).
As at 30 April 2022, the Company did not hold any equity interests comprising more than 3% of any company’s share capital.
Interim management report and responsibility statement
The Chairman’s Statement and the Investment Manager’s Report above give details of the important events which have occurred during the period and their impact on the financial statements.
Principal risks and uncertainties
The principal risks faced by the Company can be divided into various areas as follows:
· Investment performance;
· Income/dividend;
· Gearing;
· Legal & regulatory compliance;
· Operational;
· Political;
· Market; and
· Financial.
The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 31 October 2021. A detailed explanation can be found in the Strategic Report on pages 32 to 35 and in note 16 on pages 85 to 91 of the Annual Report and Financial Statements which are available on the website maintained by BlackRock at: www.blackrock.com/uk/brig.
The ongoing COVID-19 pandemic has had a profound impact on all aspects of society in recent years. The impact of this significant event on the Company’s financial risk exposure is disclosed in note 9.
The Directors have assessed the impact of market conditions arising from the COVID-19 outbreak on the Company’s ability to meet its investment objective. Based on the latest available information, the Company continues to be managed in line with its investment objective, with no disruption to its operations.
Certain financial markets have fallen towards the end of the financial period due primarily to geo-political tensions arising from Russia’s invasion of Ukraine and the impact of the subsequent range of sanctions, regulations and other measures which impaired normal trading in Russian securities. The Board and the Investment Manager continue to monitor investment performance in line with the Company’s investment objectives, and the operations of the Company and the publication of net asset values are continuing.
In the view of the Board, other than those matters noted above, there have not been any material changes to the fundamental nature of these risks since the previous report and these principal risks and uncertainties, as summarised, are as applicable to the remaining six months of the financial year as they were to the six months under review.
Going concern
The Board remains mindful of the ongoing uncertainty surrounding the potential duration of the COVID-19 pandemic and its longer term effects on the global economy and the current heightened geo-political risk. Nevertheless, the Directors, having considered the nature and liquidity of the portfolio, the Company’s investment objective and the Company’s projected income and expenditure, are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future and is financially sound.
For this reason, they continue to adopt the going concern basis in preparing the financial statements. The Company has a portfolio of investments which are considered to be readily realisable and is able to meet all of its liabilities from its assets and income generated from these assets. Ongoing charges (calculated as a percentage of average daily net assets and using the 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 2021 were approximately 1.21%.
Related party disclosure and transactions with the Manager
BlackRock Fund Managers Limited (BFM) was appointed as the Company’s Alternative Investment Fund Manager (AIFM) with effect from 2 July 2014. BFM has, with the Company’s consent, delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Both BFM and BIM (UK) are regarded as related parties under the Listing Rules. Details of the management fee payable are set out in note 3 and note 11 below. The related party transactions with the Directors are set out in note 10 below.
Directors’ responsibility statement
The Disclosure Guidance and Transparency Rules of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements.
The Directors confirm to the best of their knowledge that:
· the condensed set of financial statements contained within the Half Yearly Financial Report has been prepared in accordance with the applicable UK Accounting Standard FRS 104 ‘Interim Financial Reporting’; and
· the Interim Management Report, together with the Chairman’s Statement and Investment Manager’s Report, include a fair review of the information required by 4.2.7R and 4.2.8R of the FCA’s Disclosure Guidance and Transparency Rules.
The Half Yearly Financial Report has not been audited or reviewed by the Company’s Auditors.
The Half Yearly Financial Report was approved by the Board on 22 June 2022 and the above responsibility statement was signed on its behalf by the Chairman.
Graeme Proudfoot
For and on behalf of the Board
22 June 2022
Income statement for the six months ended 30 April 2022
|
Six months ended 30 April 2022 (unaudited) |
Six months ended 30 April 2021 (unaudited) |
Year ended 31 October 2021 (audited) | ||||||||
Notes |
Revenue £’000 |
Capital £’000 |
Total £’000 |
Revenue £’000 |
Capital £’000 |
Total £’000 |
Revenue £’000 |
Capital £’000 |
Total £’000 | |
| Gains on investments held at fair value through profit or loss | – | 1,259 | 1,259 | – | 8,714 | 8,714 | – | 8,980 | 8,980 | |
| (Losses)/gains on foreign exchange | – | (1) | (1) | – | 4 | 4 | – | (3) | (3) | |
| Income from investments held at fair value through profit or loss | 2 | 902 | – | 902 | 877 | 303 | 1,180 | 1,919 | 303 | 2,222 |
| Other income | 2 | 4 | – | 4 | 5 | – | 5 | 8 | – | 8 |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Total income | 906 | 1,258 | 2,164 | 882 | 9,021 | 9,903 | 1,927 | 9,280 | 11,207 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| Expenses | ||||||||||
| Investment management fee | 3 | (30) | (89) | (119) | (29) | (87) | (116) | (60) | (180) | (240) |
| Other operating expenses | 4 | (129) | (3) | (132) | (146) | (3) | (149) | (284) | (6) | (290) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Total operating expenses | (159) | (92) | (251) | (175) | (90) | (265) | (344) | (186) | (530) | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| Net profit on ordinary activities before finance costs and taxation | 747 | 1,166 | 1,913 | 707 | 8,931 | 9,638 | 1,583 | 9,094 | 10,677 | |
| Finance costs | (4) | (13) | (17) | (5) | (15) | (20) | (10) | (30) | (40) | |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Net profit on ordinary activities before taxation | 743 | 1,153 | 1,896 | 702 | 8,916 | 9,618 | 1,573 | 9,064 | 10,637 | |
| Taxation credit/(charge) | 9 | – | 9 | (3) | – | (3) | (16) | – | (16) | |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Net profit on ordinary activities after taxation | 6 | 752 | 1,153 | 1,905 | 699 | 8,916 | 9,615 | 1,557 | 9,064 | 10,621 |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| Earnings per ordinary share (pence) | 6 | 3.53 | 5.41 | 8.94 | 3.15 | 40.15 | 43.30 | 7.10 | 41.35 | 48.45 |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
The total column of this statement represents the Company’s profit and loss account. The supplementary revenue and capital accounts are both prepared under guidance published by the Association of Investment Companies (AIC). All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period. All income is attributable to the equity holders of the Company.
The net profit on ordinary activities for the period disclosed above represents the Company’s total comprehensive income.
Statement of changes in equity for the six months ended 30 April 2022
Note |
Called up share capital £’000 |
Share premium account £’000 |
Capital redemption reserve £’000 | Capital reserve £’000 | Special reserve £’000 | Revenue reserve £’000 | Total £’000 | |
| For the six months ended 30 April 2022 (unaudited) | ||||||||
| At 31 October 2021 | 315 | 14,819 | 234 | 11,870 | 13,843 | 2,387 | 43,468 | |
| Total comprehensive income: | ||||||||
| Net profit for the period | – | – | – | 1,153 | – | 752 | 1,905 | |
| Transactions with owners, recorded directly to equity: | ||||||||
| Ordinary shares purchased for cancellation | (2) | – | 2 | – | (362) | – | (362) | |
| Share purchase costs | – | – | – | – | (2) | – | (2) | |
| Dividends paid1 | 5 | – | – | – | – | – | (981) | (981) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| At 30 April 2022 | 313 | 14,819 | 236 | 13,023 | 13,479 | 2,158 | 44,028 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| For the six months ended 30 April 2021 (unaudited) | ||||||||
| At 31 October 2020 | 326 | 14,819 | 223 | 2,806 | 15,816 | 2,411 | 36,401 | |
| Total comprehensive income: | ||||||||
| Net profit for the period | – | – | – | 8,916 | – | 699 | 9,615 | |
| Transactions with owners, recorded directly to equity: | ||||||||
| Ordinary shares purchased for cancellation | (6) | – | 6 | – | (1,071) | – | (1,071) | |
| Share purchase costs | – | – | – | – | (6) | – | (6) | |
| Dividends paid2 | – | – | – | – | – | (1,015) | (1,015) | |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| At 30 April 2021 | 320 | 14,819 | 229 | 11,722 | 14,739 | 2,095 | 43,924 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| For the year ended 31 October 2021 (audited) | ||||||||
| At 31 October 2020 | 326 | 14,819 | 223 | 2,806 | 15,816 | 2,411 | 36,401 | |
| Total comprehensive income: | ||||||||
| Net profit for the year | – | – | – | 9,064 | – | 1,557 | 10,621 | |
| Transactions with owners, recorded directly to equity: | ||||||||
| Ordinary shares purchased for cancellation | (11) | – | 11 | – | (1,961) | – | (1,961) | |
| Share purchase costs | – | – | – | – | (12) | – | (12) | |
| Dividends paid3 | – | – | – | – | – | (1,581) | (1,581) | |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| At 31 October 2021 | 315 | 14,819 | 234 | 11,870 | 13,843 | 2,387 | 43,468 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= |
1 Final dividend paid in respect of the year ended 31 October 2021 of 4.60p per share, declared on 13 January 2022 and paid on 17 March 2022.
2 Final dividend paid in respect of the year ended 31 October 2020 of 4.60p per share, declared on 1 February 2021 and paid on 17 March 2021.
3 Interim dividend paid in respect of the six months ended 30 April 2021 of 2.60p per share was declared on 23 June 2021 and paid on 1 September 2021. Final dividend paid in respect of the year ended 31 October 2020 of 4.60p per share was declared on 1 February 2021 and paid on 17 March 2021.
For information on the Company’s distributable reserves, please refer to note 8 below.
Balance sheet as at 30 April 2022
Notes |
30 April 2022 (unaudited) £’000 |
30 April 2021 (unaudited) £’000 |
31 October 2021 (audited) £’000 | |
| Fixed assets | ||||
| Investments held at fair value through profit or loss | 9 | 44,624 | 47,598 | 46,080 |
| Current assets | ||||
| Current tax asset | 4 | – | 11 | |
| Debtors | 441 | 380 | 324 | |
| Cash and cash equivalents | 3,724 | 806 | 1,362 | |
| --------------- | --------------- | --------------- | ||
| Total current assets | 4,169 | 1,186 | 1,697 | |
| ========= | ========= | ========= | ||
| Creditors – amounts falling due within one year | ||||
| Bank loan | (4,000) | (4,000) | (4,000) | |
| Other creditors | (765) | (860) | (309) | |
| --------------- | --------------- | --------------- | ||
| Total current liabilities | (4,765) | (4,860) | (4,309) | |
| ========= | ========= | ========= | ||
| Net current liabilities | (596) | (3,674) | (2,612) | |
| --------------- | --------------- | --------------- | ||
| Net assets | 44,028 | 43,924 | 43,468 | |
| ========= | ========= | ========= | ||
| Capital and reserves | ||||
| Called up share capital | 7 | 313 | 320 | 315 |
| Share premium account | 14,819 | 14,819 | 14,819 | |
| Capital redemption reserve | 236 | 229 | 234 | |
| Capital reserve | 13,023 | 11,722 | 11,870 | |
| Special reserve | 13,479 | 14,739 | 13,843 | |
| Revenue reserve | 2,158 | 2,095 | 2,387 | |
| --------------- | --------------- | --------------- | ||
| Total shareholders’ funds | 6 | 44,028 | 43,924 | 43,468 |
| ========= | ========= | ========= | ||
| Net asset value per ordinary share (pence) | 6 | 207.67 | 200.63 | 203.13 |
| ========= | ========= | ========= |
Statement of cash flows for the six months ended 30 April 2022
|
Six months ended 30 April 2022 (unaudited) £’000 |
Six months ended 30 April 2021 (unaudited) £’000 |
Year ended 31 October 2021 (audited) £’000 | |
| Operating activities | |||
| Net profit on ordinary activities before taxation | 1,896 | 9,618 | 10,637 |
| Add back finance costs | 17 | 20 | 40 |
| Gains on investments held at fair value through profit or loss | (1,259) | (8,714) | (8,980) |
| Losses/(gains) on foreign exchange | 1 | (4) | 3 |
| Sales of investments held at fair value through profit or loss | 10,711 | 12,841 | 22,755 |
| Purchases of investments held at fair value through profit or loss | (7,459) | (12,212) | (21,084) |
| Increase in other debtors | (257) | (285) | (89) |
| (Decrease)/increase in other creditors | (3) | 9 | 60 |
| Taxation on investment income | 16 | (3) | (27) |
| --------------- | --------------- | --------------- | |
| Net cash generated from operating activities | 3,663 | 1,270 | 3,315 |
| --------------- | --------------- | --------------- | |
| Financing activities | |||
| Ordinary shares purchased for cancellation | (300) | (1,071) | (1,961) |
| Share purchase costs paid | (2) | (6) | (12) |
| Interest paid | (17) | (20) | (40) |
| Dividends paid | (981) | (1,015) | (1,581) |
| --------------- | --------------- | --------------- | |
| Net cash used in financing activities | (1,300) | (2,112) | (3,594) |
| --------------- | --------------- | --------------- | |
| Increase/(decrease) in cash and cash equivalents | 2,363 | (842) | (279) |
| Cash and cash equivalents at beginning of period/year | 1,362 | 1,644 | 1,644 |
| Effect of foreign exchange rate changes | (1) | 4 | (3) |
| --------------- | --------------- | --------------- | |
| Cash and cash equivalents at end of period/year | 3,724 | 806 | 1,362 |
| --------------- | --------------- | --------------- | |
| Comprised of: | |||
| Cash at bank | 89 | 424 | 63 |
| Cash Fund1 | 3,635 | 382 | 1,299 |
| --------------- | --------------- | --------------- | |
| 3,724 | 806 | 1,362 | |
| ========= | ========= | ========= |
1 Cash Fund represents investment in BlackRock Institutional Cash Series plc - Sterling Liquid Environmentally Aware Fund.
Notes to the financial statements for the six months ended 30 April 2022
1. Principal activity and basis of preparation
The principal activity of the Company is that of an investment trust company within the meaning of Section 1158 of the Corporation Tax Act 2010.
The financial statements of the Company are prepared on a going concern basis in accordance with Financial Reporting Standard 104 Interim Financial Reporting (FRS 104) applicable in the United Kingdom and Republic of Ireland and the revised Statement of Recommended Practice – ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ (SORP) issued by the Association of Investment Companies (AIC) in October 2019 and updated in April 2021 and the provisions of the Companies Act 2006.
The accounting policies and estimation techniques applied for the condensed set of financial statements are as set out in the Company’s Annual Report and Financial Statements for the year ended 31 October 2021.
2. Income
|
Six months ended 30 April 2022 (unaudited) £’000 |
Six months ended 30 April 2021 (unaudited) £’000 |
Year ended 31 October 2021 (audited) £’000 | |
| Investment income: | |||
| UK dividends | 794 | 749 | 1,503 |
| UK scrip dividends | – | 19 | 19 |
| UK special dividends | 33 | 45 | 226 |
| UK REIT dividends | 5 | 4 | 9 |
| Overseas dividends | 70 | 60 | 162 |
| --------------- | --------------- | --------------- | |
| Total investment income | 902 | 877 | 1,919 |
| ========= | ========= | ========= | |
| Other income: | |||
| Interest from Cash Fund | 4 | – | 1 |
| Underwriting commission | – | 5 | 7 |
| --------------- | --------------- | --------------- | |
| Total income | 906 | 882 | 1,927 |
| ========= | ========= | ========= |
Dividends and interest received in cash during the period amounted to £725,000 and £2,000 respectively (six months ended 30 April 2021: £606,000 and £nil; year ended 31 October 2021: £1,771,000 and £1,000).
No special dividends have been recognised in capital (six months ended 30 April 2021: £303,000; year ended 31 October 2021: £303,000).
3. Investment management fee
|
Six months ended 30 April 2022 (unaudited) |
Six months ended 30 April 2021 (unaudited) |
Year ended 31 October 2021 (audited) | |||||||
|
Revenue £’000 |
Capital £’000 |
Total £’000 |
Revenue £’000 |
Capital £’000 |
Total £’000 |
Revenue £’000 |
Capital £’000 |
Total £’000 | |
| Investment management fee | 30 | 89 | 119 | 29 | 87 | 116 | 60 | 180 | 240 |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
| Total | 30 | 89 | 119 | 29 | 87 | 116 | 60 | 180 | 240 |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | |
Under the terms of the investment management agreement, BFM is entitled to a fee of 0.6% per annum of the Company’s market capitalisation. The investment management fee is allocated 75% to capital reserves and 25% to the revenue reserve. There is no additional fee for company secretarial and administration services.
4. Other operating expenses
|
Six months ended 30 April 2022 (unaudited) £’000 |
Six months ended 30 April 2021 (unaudited) £’000 |
Year ended 31 October 2021 (audited) £’000 | |
| Allocated to revenue: | |||
| Custody fees | – | 1 | 1 |
| Depositary fees | 2 | 2 | 5 |
| Audit fees1 | 15 | 15 | 29 |
| Registrars’ fee | 12 | 12 | 24 |
| Directors’ emoluments | 49 | 53 | 100 |
| Marketing fees | 7 | 7 | 11 |
| Printing and postage fees | 20 | 20 | 32 |
| Legal and professional fees | 3 | 4 | 32 |
| London Stock Exchange fee | 5 | 5 | 10 |
| FCA fee | 3 | 3 | 7 |
| Other administration costs | 13 | 24 | 33 |
| --------------- | --------------- | --------------- | |
| 129 | 146 | 284 | |
| ========= | ========= | ========= | |
| Allocated to capital: | |||
| Custody transaction costs2 | 3 | 3 | 6 |
| --------------- | --------------- | --------------- | |
| 132 | 149 | 290 | |
| ========= | ========= | ========= |
1 No non-audit services were provided by the auditors.
2 For the six month period ended 30 April 2022, expenses of £3,000 (six months ended 30 April 2021: £3,000; year ended 31 October 2021: £6,000) were charged to the capital account of the Income Statement. These relate to transaction costs charged by the custodian on sale and purchase trades.
The transaction costs incurred on the acquisition of investments amounted to £42,000 for the six months ended 30 April 2022 (six months ended 30 April 2021: £48,000; year ended 31 October 2021: £86,000). Costs relating to the disposal of investments amounted to £6,000 for the six months ended 30 April 2022 (six months ended 30 April 2021: £7,000; year ended 31 October 2021: £14,000). All transaction costs have been included within capital reserves.
5. Dividend
The Directors have declared an interim dividend of 2.60p per share for the period ended 30 April 2022 payable on 1 September 2022 to shareholders on the register on 22 July 2022. The total cost of the dividend based on 21,175,164 ordinary shares in issue at 15 June 2022 was £551,000 (30 April 2021: £566,000).
In accordance with FRS102, Section 32, Events After the End of the Reporting Period, the interim dividend payable on the ordinary shares has not been included as a liability in the financial statements, as interim dividends are only recognised when they have been paid.
6. Earnings and net asset value per ordinary share
Revenue and capital returns per share and net asset value per share are shown below and have been calculated using the following:
|
Six months ended 30 April 2022 (unaudited) |
Six months ended 30 April 2021 (unaudited) |
Year ended 31 October 2021 (audited) | |
| Net revenue profit attributable to ordinary shareholders (£’000) | 752 | 699 | 1,557 |
| Net capital profit attributable to ordinary shareholders (£’000) | 1,153 | 8,916 | 9,064 |
| --------------- | --------------- | --------------- | |
| Total profit attributable to ordinary shareholders (£’000) | 1,905 | 9,615 | 10,621 |
| ========= | ========= | ========= | |
| Total shareholders’ funds (£’000) | 44,028 | 43,924 | 43,468 |
| ========= | ========= | ========= | |
| Earnings per share | |||
| The weighted average number of ordinary shares in issue during the period, on which the earnings per ordinary share was calculated was: | 21,315,326 | 22,206,362 | 21,920,081 |
| The actual number of ordinary shares in issue at the period end, on which the net asset value per ordinary share was calculated was: | 21,200,636 | 21,892,990 | 21,398,842 |
| Calculated on weighted average number of ordinary shares: | |||
| Revenue earnings per share (pence) - basic and diluted | 3.53 | 3.15 | 7.10 |
| Capital earnings per share (pence) - basic and diluted | 5.41 | 40.15 | 41.35 |
| --------------- | --------------- | --------------- | |
| Total earnings per share (pence) - basic and diluted | 8.94 | 43.30 | 48.45 |
| ========= | ========= | ========= |
|
As at 30 April 2022 (unaudited) |
As at 30 April 2021 (unaudited) |
As at 31 October 2021 (audited) | |
| Net asset value per ordinary share (pence) | 207.67 | 200.63 | 203.13 |
| Ordinary share price (mid-market) (pence) | 187.00 | 184.00 | 191.00 |
| ========= | ========= | ========= |
There were no dilutive securities at 30 April 2022 (30 April 2021: nil; 31 October 2021: nil).
7. Called up share capital
|
Ordinary shares number |
Treasury shares number |
Total shares number |
Nominal value £’000 | |
| Allotted, called up and fully paid share capital comprised: | ||||
| Ordinary shares of 1 pence each: | ||||
| At 31 October 2021 | 21,398,842 | 10,081,532 | 31,480,374 | 315 |
| Shares purchased for cancellation | (198,206) | – | (198,206) | (2) |
| At 30 April 2022 | 21,200,636 | 10,081,532 | 31,282,168 | 313 |
| ========= | ========= | ========= | ========= |
During the period to 30 April 2022, 198,206 ordinary shares (six months ended 30 April 2021: 618,635; year ended 31 October 2021: 1,112,783) were purchased and subsequently cancelled for a total consideration including costs of £364,000 (six months ended 30 April 2021: £1,077,000; year ended 31 October 2021: £1,973,000).
Since the period end and up to 20 June 2022, a further 25,472 ordinary shares have been bought back and cancelled for a total consideration of £45,600.
8. Reserves
The share premium account and capital redemption reserve are not distributable reserves under the Companies Act 2006. In accordance with ICAEW Technical Release 02/17BL on Guidance on Realised and Distributable Profits under the Companies Act 2006, the special reserve and capital reserve may be used as distributable profits for all purposes and, in particular, the repurchase by the Company of its ordinary shares and for payments as dividends. In accordance with the Company’s Articles of Association, the special reserve, capital reserve and the revenue reserve may be distributed by way of dividend. The capital reserve arising on the revaluation of investments of £4,735,000 (30 April 2021: gain of £6,138,000; 31 October 2021: gain of £4,762,000) is subject to fair value movements and may not be readily realisable at short notice, as such it may not be entirely distributable. The investments are subject to financial risks; as such the capital reserve (arising on investments sold) and the revenue reserve may not be entirely distributable if a loss occurred during the realisation of these investments.
9. Valuation of financial instruments
Market risk arising from price risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting similar financial instruments traded in the market. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issue, recessions, climate change or other events could have a significant impact on the Company and its investments.
The infectious respiratory illness caused by a novel coronavirus known as COVID-19 has had a profound impact on all aspects of society over the last two years. While there is a growing consensus in developed economies that the worst of the impact is now over, there is an expectation that travel restrictions, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, cancellations, supply chain disruptions, and lower consumer demand will create ongoing challenges. While widescale vaccination programmes are now in place in many countries and are having a positive effect, the impact of COVID-19 continues to affect adversely the economies of many nations across the entire global economy and this impact may be greater where vaccination rates are lower, such as in certain emerging markets. While it is difficult to make timing predictions, it is expected that the economic effects of COVID-19 will continue to be felt for a period after the virus itself has moved from being pandemic to endemic in nature and this in turn may continue to impact investments held by the Company.
Valuation of financial instruments
Financial assets and financial liabilities are either carried in the Balance Sheet at their fair value (investments) or at an amount which is a reasonable approximation of fair value (due from brokers, dividends and interest receivable, due to brokers, accruals, cash and cash equivalents, bank overdrafts and bank loans). Section 34 of FRS 102 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Company are explained in the accounting policies note on page 78 of the Annual Report and Financial Statements for the year ended 31 October 2021.
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset.
The fair value hierarchy has the following levels:
Level 1 – Quoted market price for identical instruments in active markets
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The Company does not adjust the quoted price for these instruments.
Level 2 – Valuation techniques using observable inputs
This category includes instruments valued using quoted prices for similar instruments in markets that are considered less active, or other valuation techniques where all significant inputs are directly or indirectly observable from market data.
Level 3 – Valuation techniques using significant unobservable inputs
This category includes all instruments where the valuation technique includes inputs not based on market data and these inputs could have a significant impact on the instrument’s valuation.
This category also includes instruments that are valued based on quoted prices for similar instruments where significant entity determined adjustments or assumptions are required to reflect differences between the instruments and instruments for which there is no active market. The Investment Manager considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and provided by independent sources that are actively involved in the relevant market.
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes ‘observable’ inputs requires significant judgement by the Investment Manager.
Fair values of financial assets and financial liabilities
For exchange listed equity investments the quoted price is the bid price. Substantially all investments are valued based on unadjusted quoted market prices. Where such quoted prices are readily available in an active market, such prices are not required to be assessed or adjusted for any price related risks, including climate risk, in accordance with the fair value related requirements of the Company’s Financial Reporting Framework.
The table below sets out fair value measurements using the FRS 102 fair value hierarchy.
Financial assets at fair value through profit or loss |
Level 1 £’000 |
Level 2 £’000 |
Level 3 £’000 |
Total £’000 |
| Equity investments at 30 April 2022 (unaudited) | 44,624 | – | – | 44,624 |
| Equity investments at 30 April 2021 (unaudited) | 47,598 | – | – | 47,598 |
| Equity investments at 31 October 2021 (audited) | 46,080 | – | – | 46,080 |
| ========= | ========= | ========= | ========= |
There were no transfers between levels for financial assets and financial liabilities during the period/year recorded at fair value as at 30 April 2022, 30 April 2021 and 31 October 2021. The Company held no Level 3 securities during the period to 30 April 2022 (period to 30 April 2021: nil; year to 31 October 2021: nil).
10. Related party disclosure
The Board consists of four non-executive Directors, all of whom are considered to be independent by the Board. None of the Directors has a service contract with the Company. With effect from 1 November 2021, the Chairman receives an annual fee of £30,750, the Chairman of the Audit Committee receives an annual fee of £25,000 and each of the other Directors receives an annual fee of £21,500.
At the period end and as at 21 June 2022 members of the Board held ordinary shares in the Company as set out below:
|
Ordinary shares 21 June 2022 |
Ordinary shares 30 April 2022 |
Ordinary shares 31 October 2021 | |
| Graeme Proudfoot (Chairman) | 60,000 | 60,000 | 60,000 |
| Nicholas Gold | 20,000 | 20,000 | 20,000 |
| Charles Worsley1 | 987,539 | 987,539 | 987,539 |
| Win Robbins | 12,106 | 12,106 | 12,106 |
| ========= | ========= | ========= |
1 Including a non-beneficial interest of 655,500 ordinary shares.
11. Transactions with the manager and the Investment Manager
BlackRock Fund Managers Limited (BFM) provides management and administration services to the Company under a contract which is terminable on six months’ notice. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Further details of the investment management contract are disclosed in the Directors’ Report on pages 43 to 48 in the Annual Report and Financial Statements for the year ended 31 October 2021.
The investment management fee due for the six months ended 30 April 2022 amounted to £119,000 (six months ended 30 April 2021: £116,000; year ended 31 October 2021: £240,000). At the period end, £180,000 was outstanding in respect of the investment management fee (as at 30 April 2021: £116,000; as at 31 October 2021: £180,000).
In addition to the above services, BIM (UK) provided the Company with marketing services. The total fees paid or payable for these services for the six months ended 30 April 2022 amounted to £7,000 including VAT (six months ended 30 April 2021: £7,000; year ended 31 October 2021: £11,000). Marketing fees of £17,000 including VAT were outstanding at 30 April 2022 (as at 30 April 2021: £20,000; as at 31 October 2021: £11,000).
The Company holds an investment in the BlackRock Institutional Cash Series plc - Sterling Liquid Environmentally Aware Fund of £3,635,000 (30 April 2021: £382,000; 31 October 2021: £1,299,000) which has been presented in the financial statements as a cash equivalent.
The ultimate holding company of the Manager and the Investment Manager is BlackRock, Inc., a company incorporated in Delaware USA.
12. Contingent liabilities
There were no contingent liabilities at 30 April 2022 (30 April 2021: nil; 31 October 2021: nil).
13. Publication of non statutory accounts
The financial information contained in this Half Yearly Financial Report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The financial information for the six months ended 30 April 2022 and 30 April 2021 has not been audited.
The information for the year ended 31 October 2021 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The report of the auditor on those accounts contained no qualification or statement under Sections 498 (2) or (3) of the Companies Act 2006.
14. Annual results
The Board expects to announce the annual results for the year ended 31 October 2022, in December 2022. Copies of the results announcement can be obtained from the Secretary on 020 7743 3000 or by email at cosec@blackrock.com. The Annual Report and Financial Statements should be available in December 2022, with the Annual General Meeting being held in March 2023.
BlackRock Investment Management (UK) Limited
12 Throgmorton Avenue
London
EC2N 2DL
22 June 2022
ENDS
The half yearly financial report will also be available on the BlackRock website at http://www.blackrock.com/uk/brig. Neither the contents of the Manager’s website nor the contents of any website accessible from hyperlinks on the Manager’s website (or any other website) is incorporated into, or forms part of, this announcement.
For further information please contact:
Melissa Gallagher, Managing Director Closed End Funds – Tel: 020 7743 3893
Emma Phillips, Media & Communications, BlackRock Investment Management (UK) Limited – Tel: 020 7743 2922
Press enquires:
Ed Hooper, Lansons Communications
Tel: 020 7294 3620
E-mail: BlackRockInvestmentTrusts@lansons.com or EdH@lansons.com
