BLACKROCK INCOME AND GROWTH INVESTMENT TRUST PLC The information contained in this release was correct as at 31 October 2020. 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 31 October 2020 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 | -10.7% | 6.2% | -14.8% | -12.1% | 5.0% | 65.5% |
| Net asset value | -5.2% | -3.5% | -16.7% | -14.6% | 2.2% | 50.0% |
| FTSE All-Share Total Return | -3.8% | -3.2% | -18.6% | -14.4% | 8.9% | 43.3% |
| 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: | 158.82p |
| Net asset value – cum income*: | 161.72p |
| Share price: | 162.50p |
| Total assets (including income): | 40.4m |
| Premium to cum-income NAV: | 0.5% |
| Gearing: | 7.2% |
| Net yield**: | 4.4% |
| Ordinary shares in issue***: | 22,511,625 |
| Gearing range (as a % of net assets): | 0-20% |
| Ongoing charges****: | 1.1% |
| * Includes net revenue of 2.90 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 4.4% and includes the 2019 final dividend of 4.60p per share declared on 24 December 2019 and paid to shareholders on 19 March 2020 and the 2020 interim dividend of 2.60p per share declared on 24 June 2020 and to be paid to shareholders on 1 September 2020. | |
| *** 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 2019. | |
| Sector Analysis | Total assets (%) |
| Financial Services | 10.6 |
| Pharmaceuticals & Biotechnology | 8.3 |
| Support Services | 8.2 |
| Household Goods & Home Construction | 7.5 |
| Personal Goods | 6.9 |
| Media | 6.6 |
| Mining | 5.4 |
| Banks | 5.1 |
| Gas, Water & Multiutilities | 5.1 |
| General Retailers | 4.8 |
| Tobacco | 4.5 |
| Oil & Gas Producers | 4.2 |
| Food & Drug Retailers | 3.1 |
| Nonlife Insurance | 3.1 |
| Travel & Leisure | 2.8 |
| Health Care Equipment & Services | 2.7 |
| Life Insurance | 2.2 |
| Industrial Engineering | 1.6 |
| Electronic & Electrical Equipment | 1.5 |
| Technology Hardware & Equipment | 0.8 |
| Real Estate Investment Trusts | 0.6 |
| Mobile Telecommunications | 0.6 |
| Beverages | 0.3 |
| Net Current Assets | 3.5 |
| ----- | |
| Total | 100.0 |
| ===== |
| Country Analysis | Percentage |
| United Kingdom | 94.5 |
| United States | 2.0 |
| Net Current Assets | 3.5 |
| ----- | |
| 100.0 | |
| ===== |
| Top 10 holdings | Fund % |
| AstraZeneca | 6.8 |
| Unilever | 5.6 |
| Reckitt Benckiser | 4.8 |
| RELX | 4.8 |
| British American Tobacco | 4.5 |
| Rio Tinto | 3.7 |
| Tesco | 3.1 |
| 3i | 2.9 |
| Royal Dutch Shell ‘B’ | 2.8 |
| National Grid | 2.8 |
Commenting on the markets, Adam Avigdori and David Goldman representing the Investment Manager noted:
Performance Overview:
The BlackRock Income and Growth Trust returned -5.2% during the month, underperforming the FTSE All-Share which returned -3.8%.
Market Summary:
October saw volatility in global markets rise; led by a resurgence in coronavirus cases and the announcement of widespread restrictions, the upcoming US Presidential Elections, lack of agreement around US fiscal stimulus and Brexit. All major European economies have reported new highs in infection rates, and ultimately over the month national level restrictions were in many cases re-imposed after local restrictions failed to sufficiently reduce cases. The IMF upgraded its 2020 growth forecasts in the October World Economic Outlook; the CY20 global contraction was trimmed to -4.4% YoY. Asian markets were resilient, with strong Chinese data in the month helping emerging market stocks to return over 2%. Chinese economic data continues to be strong with September imports 13.2% higher year on year.
In the UK, some encouraging messaging around post-Brexit trade talks gave sterling a modest boost, however Britain and the EU remain far apart on fishing rights and other key sticking points as the looming mid-November deadline nears. Government support for the economy continues with additional support measures announced including the Government absorbing a greater proportion of the Job Support Scheme. The changes should provide a greater incentive for companies to retain staff on lower hours, rather than making redundancies, which should help mitigate the inevitable rise in unemployment.
The FTSE All Share fell -3.8% in October, with Consumer Goods, Healthcare and Basic Materials as top underperforming sectors, while Utilities and Telecommunications outperformed.
Stocks:
Not owning HSBC was the biggest detractor to returns during October as the shares rallied, alongside the banking sector and rising bond yields in anticipation of increased fiscal stimulus. RELX also detracted from returns. The company reported results in the month. Whilst the numbers were in line, the market took further downgrades for the exhibition business negatively, particularly considering the rise in coronavirus cases and further lockdowns will likely be slow to recover. BHP Group also detracted from returns as the mining sector generally underperformed.
Premier Miton was the top contributor to returns in the month. Having been weak for a number of months the market is slowly reacting to the improving AUM flow and performance at the business. Bodycote also contributed to returns, a beneficiary of the reflation, pro-cyclical rally in the market. Being underweight GlaxoSmithKline also contributed to returns. Healthcare stocks were generally weak in the month, on US election fears as well as pro cyclical and recovery stocks doing better. The company reported at the end of the month with consumer health showing weak performance.
Portfolio Activity:
Over the month the Trust purchased Electrocomponents. This is a business we see as another market share gainer, with end markets that we expect to recover; broad industrials that should recover as well as some growth in data centres. The business’ gross margin is benefitting from its own brand and share-gaining from all their suppliers and the company has potential to see significant growth in Asia and the US. We trimmed Next and Ferguson as shares rallied on good results and added to Rio Tinto, Royal Dutch Shell and Lloyds, all of which were weak during the month.
Dividends
From peak to trough, FTSE All Share dividends fell by around 40%. The Trust has fared better than this as we have either not owned or been underweight the biggest cuts, and conversely, we have been overweight the more resilient parts of the market, we estimate that our fund has seen a c.30% peak to trough decline in dividends. We believe that this relative resilience stems from our focus on identifying cash generative franchises with robust balance sheets.
When assessing the dividend outlook for the FTSE All Share, we estimate that around half of this 40% peak-to-trough fall in dividends will prove permanent and half will be temporary. Turning to the Trust, we expect less than 10% of the portfolio’s dividend to be permanently impaired and we are already seeing a number of holdings coming back to the dividend list, in some cases reinstating dividends that had been deferred during the pandemic.
We view the dividend outlook for the UK market with renewed optimism as we expect dividends, in aggregate, to be more resilient and to grow faster in future. A number of companies that we have considered to be overdistributing for a number of years have now reset their distributions to more appropriate levels. This gives us confidence that UK Equities offer an attractive source of yield in an income-starved global context.
Outlook:
We have seen a continued normalisation, with improved economic activity benefiting from ongoing fiscal and monetary support while government restrictions were easing. In the UK, we have seen schools and offices reopening while companies attempt to gauge the underlying demand for their products and services as they prepare themselves for the impact of reduced and more selective furlough support. We continue to monitor rising unemployment levels and note that the banks are already braced for a significant increase in impairments. On a more bullish note, however, we have seen evidence of robust consumer spending as Covid-19 impacted travel and leisure spend is diverted to other parts of the economy as evidenced by retailers posting strong numbers and rising house prices. Accordingly, we continue to tread cautiously; balancing the significant long-term opportunities we see with the wide range of short-term scenarios and factors. We expect volatility is likely to persist given large binary events on the horizon in the near-term, notably the US election, Brexit ‘deal or no deal’ as well as news flow around Covid-19 in terms of rising case numbers and the potential for further lockdowns as well as vaccines and treatment updates. Longer term, we are conscious of the growing tension between the US and China, as well as watching for the potential for a more inflationary backdrop which would likely have significant implications for market leadership.
We continue use the scale and breath of the platform at BlackRock to leverage significant resources across stock analytics, market insights and data science. We know, from our experience in 2008/2009, how important these resources and support are and the opportunities it enables you to find. We seek to ensure the Trust continues to build on the resilience it has demonstrated amidst the volatility year to date to deliver strong capital and dividend growth over the long term.
18 November 2020
