The
information contained in this release was correct as at
31 May 2024. 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 May 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
|
8.8%
|
14.0%
|
11.8%
|
22.5%
|
30.8%
|
138.3%
|
Net
asset value
|
3.1%
|
10.2%
|
12.8%
|
23.1%
|
35.2%
|
137.1%
|
FTSE
All-Share Total Return
|
2.4%
|
9.9%
|
15.4%
|
25.5%
|
37.3%
|
133.7%
|
|
|
|
|
|
|
|
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:
|
219.86p
|
Net
asset value - cum income*:
|
224.50p
|
Share
price:
|
203.00p
|
Total
assets (including income):
|
£49.2m
|
Discount to
cum-income NAV:
|
9.6%
|
Gearing:
|
6.6%
|
Net
yield**:
|
3.6%
|
Ordinary shares
in issue***:
|
20,112,289
|
Gearing range (as
a % of net assets):
|
0-20%
|
Ongoing
charges****:
|
1.28%
|
* Includes net
revenue of 4.64 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 3.6%
and includes the 2023 Interim Dividend of 2.60p per share declared
on 21 June 2023 with pay date 1 September 2023, and the 2023 final
dividend of 4.80p per share declared on 21 December 2023 with pay
date 15 March 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
|
13.0
|
Banks
|
10.0
|
Pharmaceuticals
& Biotechnology
|
8.9
|
Financial
Services
|
8.2
|
Oil
& Gas Producers
|
7.0
|
Media
|
6.6
|
Household Goods
& Home Construction
|
6.1
|
Real
Estate Investment Trusts
|
5.7
|
Mining
|
5.6
|
General
Retailers
|
4.6
|
Travel &
Leisure
|
3.2
|
Industrial
Engineering
|
3.2
|
Personal
Goods
|
3.1
|
Nonlife
Insurance
|
3.0
|
Food
Producers
|
3.0
|
Life
Insurance
|
2.3
|
Electronic &
Electrical Equipment
|
1.6
|
Tobacco
|
1.3
|
Leisure
Goods
|
1.0
|
General
Industrials
|
0.5
|
Net
Current Assets
|
2.1
|
|
-----
|
Total
|
100.0
|
|
=====
|
Country Analysis
|
Percentage
|
United
Kingdom
|
94.0
|
United
States
|
2.5
|
Switzerland
|
1.4
|
Net
Current Assets
|
2.1
|
|
-----
|
|
100.0
|
|
=====
|
Top 10 holdings
|
Fund %
|
AstraZeneca
|
7.5
|
RELX
|
5.2
|
Shell
|
4.9
|
Rio
Tinto
|
4.4
|
3i
Group
|
4.4
|
HSBC
Holdings
|
4.0
|
London Stock
Exchange Group
|
3.2
|
Unilever
|
3.1
|
Tate
& Lyle
|
3.0
|
Segro
|
2.8
|
|
|
Commenting
on the markets, representing the Investment Manager
noted:
Market
Summary:
In
May, a rally in global equity markets was fuelled by declining
inflation and growing investor optimism about the economic
outlook.
The
FTSE 100 reached new record highs, outpacing Europe and the US driven by takeover activity,
a brighter macroeconomic outlook, and expectations of more buybacks
and IPOs1.
The
FTSE 250 also saw spillover effects, returning +4.19% over the
month (BlackRock, 31 May 2024). The
FTSE All Share rose by 2.41% in May with Telecommunications,
Industrials and Financials as the top performing sectors
(BlackRock, 31 May 2024).
In
the UK, inflation dropped to 2.3% year-on-year, hitting its lowest
level since summer 2021, although modestly higher than market and
Bank of England (BoE) forecasts of
2.1%2.
The UK exited a recession in the first quarter, according to the
Gross Domestic Product (GDP) data release indicating 0.6%
quarter-on-quarter vs. the expected 0.4%3.
There were also signs that manufacturing is on an upwards
trajectory with industrial production and manufacturing production
both rising more than expected. This followed the BoE holding rates
at the May Monetary Policy Committee.
In
the US, core Consumer Price Index (CPI) decelerated to 0.3% month
on month in April, from 0.4% in March and in line with
expectations; the S&P 500 and Nasdaq hit record highs as the
Federal Reserve (Fed) Chairman Powell pushed back against further
rate hikes. The US dollar declined in May amid expectations of one
or two Fed rate cuts this year4.
In Europe, senior European Central
Banks policymakers indicated the likelihood of rate cuts despite
higher-than-expected inflation of 2.6%
year-on-year5.
Stock
comments:
During the
month, Hays share price rallied, positioning it as a leading
positive contributor to the portfolio's performance. Big Yellow's
share price also contributed positively following robust financial
results. The Company's strategic decision to increase development
expenditure, after securing funding last year, aligns well with the
improving trade conditions. Standard Chartered benefited from the
upswing in the financial sector in addition to strong first quarter
results.
Conversely,
Mastercard's share price underwent a correction, retracting from
its previous highs, which adversely affected the portfolio's
relative performance. A new position for the portfolio, Inchcape,
was another detractor despite solid results.
Additionally,
Hiscox's share price witnessed a decline after a period of
strength.
Changes:
During the
month, we started new positions in several holdings including
Inchcape, Great Portland Estates, and Derwent London. In addition, we sold Smith &
Nephew.
Following the
recently announced sale of its UK retail business, Inchcape will
predominantly be an auto distributor. The company represents
approximately 60 brands across 40 markets, overseeing the supply of
new vehicles and official parts to retailers in smaller markets.
Key operational regions encompass South
America, South-East Asia,
Australia, as well as select
European and African nations. While automotive distribution
traditionally yields lower margins (operating margin of 6-7%), it
is a capital-efficient and cash-generative business model. Inchcape
boasts a commendable history of integrating new brands and markets,
leveraging its digital and parts capabilities to enhance value
further. We are confident in Inchcape's prospects for a cyclical
recovery in several crucial markets, its proven track record of
capital allocation, and its intention to utilize £100m from the UK
retail proceeds for a share buyback. With an initial valuation of
less than 10 times price-to-earnings ratio (P/E), a free cash flow
yield exceeding 10%, and a net debt to EBITDA (earnings before
interest, taxes, depreciation, and amortisation) ratio of less than
1, we believe the shares present an appealing risk-reward
proposition.
Following the
Great Portland Estates (GPE) rights issue to raise £350m we have
initiated a position in GPE and Derwent London (DLN); two central
London office developers. Both shares trade at 30% discounts to
their asset value as higher interest rates and slowing activity in
London has pressured values. We
believe with interest rates now close to a peak, coupled with a
pronounced scarcity in supply precipitating an acceleration in
rental growth, a stable to modestly improving UK GDP, and the
prospect of political stability post the forthcoming election, this
is potentially an attractive entry point to invest further in UK
real estate given very attractive absolute valuations.
To
fund these new purchases and given the persistent operational
challenges and subsequent consistent downgrades, we have sold Smith
& Nephew. The significant restructuring within the company has
adversely impacted its free cash flow, leading us to seek more
advantageous investment opportunities within the UK domestic
market. While Smith & Nephew's shares remain reasonably priced,
it is imperative to maintain a competitive capital allocation
within the portfolio.
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 date now set for July
4th, we continue to expect that geopolitics will play a more
significant role in asset markets. This year will see the biggest
election year in history with more than 60 countries representing
over half of the world's population going to the polls. While most,
such as the UK's, are unlikely to have globally significant
economic or geopolitical ramifications, others, such as the US
elections in November, could have a material impact. We believe
political certainty 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
particular 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 a number of 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.
1 Reuters,
8th May 2024,
https://www.reuters.com/world/uk/astrazeneca-lifts-ftse-100-record-high-boe-rate-decision-tap-2024-05-08/#:~:text=The%20blue%2Dchip%20FTSE%20100,record%20high%20of%2020%2C491.99%20points.
2 Financial Times,
22nd May 2024,
https://www.ft.com/content/c17be87f-c7ff-426c-9679-18eedb1bdeb6
3 Financial Times,
10 May 2024
https://www.ft.com/content/d8ec3955-d45f-435a-912a-5d12bb556a5b#post-b1961804-5c70-491c-aaa9-6bd0ef56a132
4 Financial Times,
15th May 2024
https://www.ft.com/content/ef0028e6-ec29-4521-80fa-2cb6531adb39
5 Financial Times,
29th April 2024
https://www.ft.com/content/083b6312-55f7-465c-b63e-a98e7b403eb2
26 June 2024