BRIG Blackrock Income And Growth Investment Trust Plc

The information contained in this release was correct as at 28 February 2021. 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 28 February 2021 and unaudited.

Performance at month end with net income reinvested

BlackRock took over the investment management of the Company with effect from 1 April 2012.

At month end

Sterling:

*These percentages reflect portfolio exposure per stock and include more than one holding per stock where relevant.

Commenting on the markets, representing the Investment Manager noted:

Performance Overview:

The Company returned 1.6% during the month, underperforming the FTSE All-Share which returned 2.0%. 

Market Summary:

Global equity markets rose during February on the back of continued vaccine deployment and the promise of further fiscal stimulus in the US.

Optimism around a strong economic recovery led to rising inflation expectations driving the US 10-year Treasury yield to 1.37%, the highest since March 2020.  Commodity prices have continued to rise. Johnson & Johnson’s single dose Covid-19 vaccine was announced as the third approved vaccine in the US late in the month.

Strong vaccine rollout continued in the UK as the PM announced the roadmap out of the current lockdown beginning with the reopening of schools due in early March with non-essential retail due to re-open in April. The FTSE All Share rose 2.0% during February with Basic Materials, Oil & Gas, and Financials outperforming while Health Care, Utilities and Consumer Goods underperformed.

Stocks:

Smith & Nephew was a top detractor from the Company during the month; the recovery in elective procedures is slow and affected the company’s outlook. RELX was another top detractor; the company was punished as a bond yield proxy given it is a high-quality defensive with long term cash flows.

The top positive contributor to the Company during the month was MoonPig, a company which had its Initial Public Offering (IPO) in January and followed up with a strong trading update in February. The online card-and-gifts specialist revealed continued progress in its key revenue drivers: customer growth, order frequency, and order value.  Whitbread was another top positive contributor; the Travel & Leisure company was a beneficiary of the positive news around reopening. Rio Tinto also fared well as the price of iron ore rose.

Portfolio Activity:

Over the month we purchased a new holding in Smiths Group, a diversified engineering business consisting of a collection of four predominantly industrial focused divisions and a Medical devices division. The imminent sale or demerger of the medical division this year will leave the rest of the group trading at an attractive valuation and at a significant discount to industrial peers, despite its collection of high-quality businesses, while activity is improving in their end markets.

We also bought new positions in MoonPig and Chart Industries and added to Legal & General and Berkeley Group and reduced RELX and Lloyds.

Dividends

From peak to trough, FTSE All Share dividends fell by around 40%. The Company 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 Company, 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 the 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. Additionally, the Company’s income reserve provides further resilience to the Company’s dividend outlook.

Outlook:

Given economic activity is heavily suppressed by the health response to the virus – as opposed to typical business cycle – a delayed restart could mean a faster recovery once the vaccine is distributed, unleashing pent-up consumer and corporate demand. Until then, policy support remains essential with more needed in Europe as vaccine deployment has lagged the US and UK. For one of the few times in the past four decades since partisan alliances became stronger, a single party controls all branches of the US government – White House, House and Senate; this will shape the future of US fiscal response. One of the big issues to watch in 2021 is the extent to which inflationary pressures build and the response from central banks, especially in the US with significant implications for market leadership. 

Turning to the UK specifically, we have, finally, got a Brexit deal that provides increased clarity on the UK’s trading relationship with the EU. This is against a backdrop of UK valuations that have been extreme, trading at multi-decade lows versus other international markets with a recent flurry of M&A deals highlighting the dispersion and value on offer in the FTSE. 

We continue to believe that this dispersion should narrow given the increased certainty and reduced risk regarding Brexit. Finally, we continue to be encouraged by the outlook for UK dividends as a number of companies used this crisis to reset their dividends to more sustainable levels and as regulatory, social and economic pressures ease. Resilience was a crucial feature of the fund and its underlying holdings in 2020 and while this will still be important in 2021, we are excited by the approaching economic recovery and the opportunity to deliver strong capital and dividend growth for our clients over the long-term.

22 March 2021