Portfolio Update

BLACKROCK INCOME & GROWTH INVESTMENT TRUST PLC (LEI:5493003YBY59H9EJLJ16)

All information is at 31 July 2024 and unaudited.

Performance at month end with net income reinvested

	One Month	Three Months	One Year	Three Years	Five Years	Since 1 April 2012
Sterling
Share price	2.4%	8.2%	12.3%	14.6%	21.3%	136.8%
Net asset value	4.7%	6.3%	13.6%	27.1%	32.8%	144.5%
FTSE All-Share Total Return	3.1%	4.4%	13.5%	27.1%	32.4%	138.2%
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:	226.04p
Net asset value - cum income*:	228.71p
Share price:	199.00p
Total assets (including income):	£49.5m
Discount to cum-income NAV:	13.0%
Gearing:	6.5%
Net yield**:	3.8%
Ordinary shares in issue***:	19,897,822
Gearing range (as a % of net assets):	0-20%
Ongoing charges****:	1.28%
* Includes net revenue of 2.67 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 2023 final dividend of 4.80p per share declared on 21 December 2023 with pay date 15 March 2024, and the Interim Dividend of 2.70p per share declared on 20 June 2024 with pay date 03 September 2024.
*** 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 2023.  In addition, the Company's Manager has also agreed to cap ongoing charges by rebating a portion of the management fee to the extent that the Company's ongoing charges exceed 1.15% of average net assets.

Sector Analysis	Total assets (%)
Support Services	11.0
Banks	8.7
Pharmaceuticals & Biotechnology	8.2
Financial Services	7.6
Media	7.0
Real Estate Investment Trusts	7.0
Oil & Gas Producers	6.7
Household Goods & Home Construction	6.1
General Retailers	6.0
Mining	4.8
Travel & Leisure	3.5
Personal Goods	3.4
Industrial Engineering	3.4
Nonlife Insurance	3.0
Gas, Water & Multiutilities	3.0
Life Insurance	2.5
Electronic & Electrical Equipment	1.7
Food Producers	1.7
Tobacco	1.5
General Industrials	1.1
Net Current Assets	2.1
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Total	100.0
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Country Analysis	Percentage
United Kingdom	94.4
United States	1.9
Switzerland	1.6
Net Current Assets	2.1
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	100.0
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Top 10 holdings	Fund %
AstraZeneca	7.2
RELX	5.5
Shell	4.8
3i Group	4.4
HSBC Holdings	3.8
Rio Tinto	3.7
Unilever	3.4
National Grid	3.0
Segro	2.8
London Stock Exchange Group	2.7

Commenting on the markets, representing the Investment Manager noted:

Performance Overview

The Company returned +4.7% during the month net of fees, outperforming the FTSE All-Share which returned +3.1%.

Market Summary

In July, the UK economy experienced further stabilisation of inflationary pressures with the Consumer Price Index (CPI) remaining steady at 2.0% year-on-year1.

The service sector experienced a slight increase, while the production and construction sectors saw minor contractions. Retail activity across the UK had a slight uptick, with retail footfall increasing by 1%2.

GDP estimates remained flat3, and the labour market continued to soften, with job adverts down 20% compared to the previous year4.

Over the month, UK equities experienced gains across the board with the FTSE-All Share index rising 3.13%. Led by Utilities, Consumer Goods and Services and Financials. The result of UK election saw strong performance, notably amongst domestic facing companies as investors were notably reassured by the potential for political stability. 

Stock comments

During the month the portfolio performed strongly with several contributors. Amongst these was SGS, the Swiss testing business reported strong results as new management continues to establish a strong platform for growth. This is a recent purchase this year and we expect to see both an acceleration of organic and inorganic growth with margin progression. Another strong contributor was WH Smith which has recovered from a weak start to the year with an improved delivery in its North American business. This was reflected in a strong price rise during the month.

A recent purchase, Rosebank, contributed to performance on its initial public offering (IPO). This is a small cash shell launched by a strong management team we know well. We would anticipate as the year progresses that targets will be established for the management team to execute on their buy, build and sell strategy.

In terms of detractors, Rio Tinto was weak amongst a broad retrenchment from mining companies. An underweight in Unilever detracted from performance following a strong set of interim results. The new management team are successfully implementing change by improving resource allocation with further scope for mix and productivity gains to be reflected in profits. This comes from a low base which was reflected in the valuation. Hays fell during the month as the continued lack on recruitment momentum weighed on the shares.

Changes

During the month, we started a new position in Rosebank. This is the old Melrose management team gearing up for a new round of buy, improve, sell business model in the industrial space. We lean on the high regard and success of this team in this niche and following meetings we have had on the strategy.

We also sold the remainder of the Company's position in Games Workshop. The shares have done well, especially following a recent robust trading update, however, the company now faces tough comparatives and the premium valuation is demanding in the context of other consumer exposed names where momentum should be improving from here.

Outlook

Equity markets entered 2024 in a buoyant mood following a strong and broad rally in the latter part of 2023. The outlook, and optimism, is a far cry from 12 months ago, when supply chains were hugely disrupted, and inflation was double digit and well ahead of central banks' targets prompting rapid and substantial interest rates hikes despite an uncertain demand environment. China was the surprise negative in 2023, with no noticeable COVID re-opening recovery and lacklustre growth despite government attempts to stimulate.

Markets have shifted to `goldilocks' territory whereby slowing inflation has signalled the peak for interest rates while broad macroeconomic indicators that have been weak are not expected to deteriorate further. This is also helpful for the cost and availability of credit which has recently improved having been deteriorating through most of 2023. Despite expectations for rate cuts moderating significantly, stock markets have continued to make progress in the developed world. Labour markets remain resilient for now with low levels of unemployment while real wage growth is supportive of consumer demand albeit presenting a challenge to corporate profit margins.

With the UK's election now over, the markets attention will turn its focus on the US election in November. The replacement of President Biden as the Democratic candidate will contribute further to the uncertainty, and we continue to expect that geopolitics will play a more significant role in asset markets. This year sees the biggest election year in history with more than 60 countries representing over half of the world's population going to the polls. We believe political certainty now evident in the UK will be helpful for the UK and address the UK's elevated risk premium that has persisted since the damaging Autumn budget of 2022. Whilst we do not position the portfolios for any election outcome, we are mindful of the potential volatility and the opportunities that may result, some of which have started to emerge.

The UK stock market continues to remain depressed in valuation terms relative to other developed markets offering double-digit discounts across a range of valuation metrics. This valuation `anomaly' saw further reactions from UK corporates with a robust buyback yield of the UK market. Combining this with a dividend yield of 3.7% (FTSE All Share Index yield as at 30 April 2024 source: The Investment Association), the cash return of the UK market is attractive in absolute terms and comfortably higher than other developed markets. Although we anticipate further volatility ahead, we believe that in the course of time risk appetite will return and opportunities are emerging. We have identified several potential opportunities with new positions initiated throughout the year in both UK domestic and midcap companies.

We continue to focus the portfolio on cash generative businesses that we believe offer durable, competitive advantages as we believe these companies are best placed to drive returns over the long-term. Whilst we anticipate economic and market volatility will persist throughout the year, we are excited by the opportunities this will likely create; by seeking to identify the companies that strengthen their long-term prospects as well as attractive turnarounds situations.

Sources:

[1] ONS 17/07/2024 https://www.ons.gov.uk/economy/inflationandpriceindices

[2] ONS 25/07/2024

https://www.ons.gov.uk/economy/economicoutputandproductivity/output/bulletins/economicactivityandsocialchangeintheukrealtimeindicators/latest

[3] ONS 11/07/2024

https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpmonthlyestimateuk/may2024

[4] ONS 25/07/2024

https://www.ons.gov.uk/economy/economicoutputandproductivity/output/bulletins/economicactivityandsocialchangeintheukrealtimeindicators/latest

16 August 2024

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Release

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