The second paragraph of the commentary in the announcement released on 12 June
2018 was incorrect. This has now been corrected.
|BLACKROCK INCOME AND GROWTH INVESTMENT TRUST PLC (LEI:5493003YBY59H9EJLJ16)|
|All information is at 31 May 2018 and unaudited.|
|Performance at month end with net income reinvested|
|Net asset value||3.3%||9.4%||4.6%||22.7%||56.6%||84.0%|
|FTSE All-Share Total Return||2.8%||7.4%||6.5%||24.3%||45.4%||75.7%|
|BlackRock took over the investment management of the Company with effect from 1 April 2012.|
|At month end|
|Net asset value - capital only:||211.01p|
|Net asset value - cum income*:||215.64p|
|Total assets (including income):||£56.3m|
|Discount to cum-income NAV:||5.4%|
|Ordinary shares in issue***:||24,263,268|
|Gearing range (as a % of net assets)||0-20%|
|* includes net revenue of 4.63 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 3.2% and includes the 2017 interim dividend of 2.50p per share declared on 26 June 2017 and paid to shareholders on 1 September 2017 and the 2017 final dividend of 4.10p per share declared on 20 December 2017 and payable to shareholders on 9 March 2018.|
|*** excludes 8,670,664 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 2017.|
|Sector Analysis||Total assets (%)|
|Oil & Gas Producers||9.2|
|Pharmaceuticals & Biotechnology||7.7|
|Construction & Materials||3.5|
|Household Goods & Home Construction||2.9|
|Travel & Leisure||2.8|
|Food & Drug Retailers||2.8|
|Forestry & Paper||1.9|
|Gas, Water & Multiutilities||1.4|
|Software & Computer Services||1.0|
|Fixed Line Telecommunications||0.1|
|Net Current Assets||5.9|
|Ten Largest Equity Investments|
|Company||Total assets (%)|
|Royal Dutch Shell 'B'||5.9|
|British American Tobacco||5.0|
|Lloyds Banking Group||3.7|
|John Laing Group||3.3|
|Commenting on the markets, Adam Avigdori and David Goldman representing the Investment Manager noted:
|UK Equities delivered a 2.8% return during May as equity markets, with the exception of Europe ex-UK, continued to grind higher, albeit with increasing levels of volatility. Despite a difficult start to the year, a second consecutive positive month moved the FTSE All-Share into positive territory in the year to date, now up 1.9%. Geopolitical events continued to dominate headlines during the month, most notably in Italy, where the populist Five Star Movement and League Party struck a deal to form a coalition government, led by Giuseppe Conte. While remote in likelihood, ‘Quitaly’, serves as a reminder that challenges in relation to Europe are not confined to Brexit. President Trump scrapped a planned meeting between the US and North Korea, and trade tensions continue to rise as the US announced it would implement tariffs on US$50 billion of Chinese imports and impose steel and aluminum tariffs on imports from Canada, Mexico and EU. Eurozone growth came in as expected but inflation data disappointed. The Fed kept rates on hold but reiterated confidence in the U.S. inflation outlook while US unemployment hit the lowest level since April 2000. In the UK Q1 growth was unrevised at the disappointing +0.1% quarter-on-quarter which led to Sterling weakness. Oil & Gas was the strongest performing sector during May on the back of higher crude oil prices, while Financials led by banks were the weakest.
Over the month the Company delivered a return of 3.3%, outperforming the FTSE All-Share which delivered a return of 2.8%.
Having no exposure to Vodafone helped relative performance as the shares fell over the month. Italian competitor Iliad announced incredibly aggressive pricing which far undercuts Vodafone and competition in Spain also remains a risk. Additionally, the acquisition of Liberty’s European assets was debt funded, leaving the business very highly leveraged. Rentokil continues to perform well after a recent trading update illustrated 11% total revenue growth. Their pest control division in particular has a long runway of growth supported by structural tailwinds, technology and a fragmented market with plenty of opportunity for acquisition. The company also boasts an impressive employee retention rate at 86%. Queuing and ticketing software provider, Accesso Technology, has had a strong start to the year driven by new business wins, geographic expansion and acquisitions. The company has strengthened its core operations in the leisure industry but is also broadening its horizons and moving into adjacent areas such as ski resorts, tours and live event ticketing.
TP ICAP released a disappointing statement with slower revenue growth, particularly in their Data and Institutional Services divisions. Increased volatility, which management expect to continue, will be a positive for the business. John Laing Group shares declined 1% over the course of the month which was a drag on performance given our large active holding in the company. Lloyds saw a slight share price decline over the month. They have announced plans to close around 100 branches as they adapt to technological developments and aim to become the leading digital bank. Over the longer term it is our preferred domestic UK bank with strong capital generation and is supported by a rising rate environment.
During the month we purchased a new position in Barclays which is trading at a large discount to book value with improvements in cash generation and their capital position. We have added to British American Tobacco on share price weakness as well as to Prudential and Mondi. As competition for capital remains high, these trades were financed through sales in Derwent London and Sabre Insurance alongside a reduction in Direct Line, Shire and John Laing.
The outlook for the UK economy is more uncertain given ongoing Brexit negotiations in contrast to the acceleration in growth seen elsewhere. However, we believe these Brexit fears have provided us with the opportunity to own high quality franchises at attractive valuations. The UK is a hugely international market that is supported by very strong corporate governance, shareholder interaction, regulation, tax and accounting laws and transparency. This renders the UK market a fantastic hunting ground for some high quality international (and domestic) franchises that chose to list on the UK market.
We continue to like cash generative consumer staple companies, especially those exposed to the emerging market consumer given the improvement in the trading backdrop in key markets such as India and Brazil. 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, both in the UK and overseas. US and European construction and infrastructure spend remains well below long-term averages and initiatives to boost this spend features prominently in politicians’ manifestos. However, as the last few months have demonstrated, it is crucial to be selective when investing in these industries and to focus on the strong operators that provide a differentiated service and that boast a strong balance sheet.
|14 June 2018|