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BlackRock Income (BRIG)

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Wednesday 20 March, 2019

BlackRock Income

Portfolio Update

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

All information is at 28 February 2019 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  1.5%  3.7% -0.9% 20.2% 32.6% 80.7%
Net asset value  3.4%  3.2%  1.3% 19.1% 32.6% 70.4%
FTSE All-Share Total Return  2.3%  2.6%  1.7% 30.4% 27.6% 66.4%

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: 191.16p
Net asset value - cum income1: 192.95p
Share price: 186.50p
Total assets (including income): £50.3m
Discount to cum-income NAV: 3.3%
Gearing: 4.7%
Net yield2: 3.7%
Ordinary shares in issue3: 24,004,668
Gearing range (as a % of net assets) 0-20%
Ongoing charges4: 1.1%

1 Includes net revenue of 1.79 pence per share.

2 The Company’s yield based on dividends announced in the last 12 months as at the date of the release of this announcement is 3.7% and includes the 2018 final dividend of 4.40p per share declared on 20 December 2018 and to be paid to shareholders on 19 March 2019 and the 2018 interim dividend of 2.50p per share declared on 25 June 2018 and paid to shareholders on 3 September 2018.

excludes 8,929,264 shares held in treasury.

4 Calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs for the year ended 31 October 2018.

Sector Analysis Total assets (%)
Oil & Gas Producers 11.1
Banks 8.0
Pharmaceuticals & Biotechnology 7.8
Media 7.5
Financial Services 6.6
Life Insurance 6.5
Food Producers 6.4
Support Services 6.3
Household Goods & Home Construction 5.9
Travel & Leisure 5.1
Tobacco 4.1
Industrial Engineering 4.0
Food & Drug Retailers 3.9
Mining 3.2
Gas, Water & Multi-utilities 2.6
Nonlife Insurance 2.5
Mobile Telecommunications 1.5
Electronic & Electrical Equipment 1.1
Construction & Materials 0.9
Personal Goods 0.7
Chemicals 0.6
General Retailers 0.1
Net Current Assets 3.6
------
Total 100.0
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Ten Largest Equity Investments
Company Total assets (%)
Royal Dutch Shell 'B' 6.5
RELX 5.1
AstraZeneca 4.0
Unilever 4.0
Prudential 4.0
Lloyds Banking Group 3.9
Reckitt Benckiser 3.9
Tesco 3.9
GlaxoSmithKline 3.8
BP Group 3.7

Commenting on the markets, Adam Avigdori and David Goldman representing the Investment Manager noted:

The UK market rose for a second consecutive month in February, with the FTSE All-Share Index returning 2.3%1. Year-to-date the UK market has returned 6.6%, recovering a large proportion of the losses from the turbulent fourth quarter of 2018. Equity markets globally continued to rise during February, shrugging off the ongoing geopolitical uncertainty, softening global economic data and largely underwhelming corporate earnings newsflow. European economic data continued to disappoint and UK services PMI (Purchasing Managers Index), fell to its lowest level since July 2016. Optimistic messaging around US/China trade discussions continued. In the US, the Federal Reserve continued with a more dovish stance indicating a willingness to keep rates stable for some time. The Bank of England also left the base rate unchanged as expected, however it lowered its growth forecast for this year to 1.2%. UK politics weren’t far from the headlines during the month, however February’s developments took a more positive turn with MPs voting in favour of the Cooper amendment, giving Parliament the ability to force Theresa May to request an extension to article 50 and therefore diminishing the risk of a ‘no-deal’ Brexit. Sterling strengthened as a result, causing a headwind for more international large-cap businesses towards the end of the month.

Over the month the Company’s net asset value rose by 3.4%, outperforming the FTSE All-Share Index, which delivered a return of 2.3%.

Hiscox reported strong profit for the year with the London market leading the way as it returns to growth. Regulatory action is leading to more capital and pricing discipline in the market, meaning prices are rising. Having substantially changed the portfolio over the last few years, management feel now is the right time to capitalise on the better environment. John Laing has demonstrated a continued ability to grow net asset value through a diversified portfolio of infrastructure projects. The company has a strong pipeline of opportunities to invest in both existing and new markets. Phoenix Group recently reported strong growth in profit with the business beating expectations for both cash flow and capital generation. The life assurance company is delivering on their strategic priorities, having completed the acquisition of the Standard Life Assurance business and their preparations for Brexit.

Associated British Foods performed poorly after like-for-like growth within Primark was lower than the market expected. The expansion of Primark across the US offers large growth potential and rising sugar prices should benefit their sugar business. Reckitt Benckiser delivered better than expected sales growth despite a weak flu season and some manufacturing issues. The Mead Johnson business was a standout success for last year. From here, the market will be watching the progress of the search for a new CEO as Rakesh Kapoor has announced his decision to retire at the end of the year. Whilst trading was broadly in line with expectations at Accesso Technology, the uncertainty caused by the announcement of a strategic review combined with the departure of the Executive Chairman had a negative impact on the shares in the month.

During the month we purchased a new position in easyJet, which we believe has an opportunity to benefit from both yield management and a changing short-haul competitor environment. We have added to positions including London Stock Exchange, MoneySupermarket and Associated British Foods and we have reduced exposure to Inchcape, John Laing and HSBC and have sold our holding in Accesso Technology.

We are broadly constructive on global markets and expect continued global growth, albeit in a less synchronised fashion across the G7 nations and at a lower level than in recent past. The trend of steady growth has provided a solid backdrop for equity market returns, which have also been helped by loose financial conditions from supportive governments and central banks. However political uncertainty is rising, which combined with tightening financial conditions (led by the Federal Reserve) means that we expect volatility to return to markets. This provides us, as active managers of a concentrated portfolio, with a great opportunity to identify high-quality cash generative businesses, with robust balance sheets, that can weather various market cycles and help to deliver long-term capital and income growth for our clients.

We continue to like cash generative consumer staple companies, especially those exposed to the Emerging Market consumer given the prevalent demographic trends in certain markets. These companies often generate substantial cash flow which allows them to invest in innovation, marketing and distribution to ensure the longevity of their brands while also paying attractive and growing dividends to shareholders. We have also sought exposure to infrastructure and construction spend whilst at the same time we are watching for signs of overheating in the US and monitoring the natural slowdown in China. US construction spend remains well below long-term averages and initiatives to boost this spend feature prominently on the political agenda. We also note that inflationary pressures are starting to build and therefore we seek those companies with sufficient pricing power and efficiency potential to withstand rising costs. As the last few months have demonstrated, it is crucial to be selective and to focus on those companies that are strong operators and that provide a differentiated service or product and boast a strong balance sheet.

19 March 2019

1Source: BlackRock as at 28 February 2018

ENDS

Latest information is available by typing www.blackrock.co.uk/brig on the internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV terminal).  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.


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