BlackRock Income Portfolio Update
November 18 2020 - 8:24AM
UK Regulatory
TIDMBRIG
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 Three One Three Five Since
Month Months Year Years Years 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
END
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