BlackRock Income and Growth has published results for the year ended 31 October 2022. The trust managed to just beat its benchmark over the period, returning -2.3% to the All-Share’s -2.8%. However, its discount widened from 6.0% at the start of the financial year to 10.8%, leaving shareholders with a return of -7.0%.
The dividend was increased from 7.2p to 7.3p despite a fall in earnings from 7.10p to 6.77p. The company has £2.3m in its revenue reserve.
Just 226,918 shares were repurchased at a cost of £416,000 in an attempt to control the discount. The median discount in the trust’s sector was 9.2% at the end of the year. [It could perhaps have been a bit more agggressive in its efforts.]
There is a continuation vote at this year’s AGM, [but we don’t expect much dissent on this].
Extracts from the manager’s report
Contributors to and detractors from performance
During the period, the Company’s performance fell in absolute terms as rising interest rates and the implications of the “mini-budget” announcement weighed on performance, however, the portfolio outperformed in relative terms. International shares performed relatively better and contributed to relative performance of the portfolio while domestic holdings including BT Group, Taylor Wimpey and Moonpig Group performed poorly and detracted. Mining holdings Rio Tinto and BHP were top positive contributors to the returns of the Company reflecting the strength in commodity markets.
Pearson was a top positive contributor during the period despite rejecting a bid from private equity. The company has consistently posted strong results and was the strongest performing company in the index over the period. The education company is shifting emphasis away from the legacy textbook business to the stable growth, highly cash generative core, where we see material value.
Whilst the underweight positioning in the Oil & Gas sector detracted from performance given strength in the oil price, other holdings exposed to the energy sector including Drax and Chart Industries, a US-listed supplier of equipment to the clean energy sector performed well and contributed to relative performance. Whilst these had been relatively recent purchases for the Company, both have been subsequently sold following significant outperformance having risen c. 40% in absolute terms during the year.
US-listed Mastercard reported solid results with strong payment volumes and an encouraging acceleration in cross-border volume linked to increased travel as COVID-19 restrictions fade. EuroAPI, a pharmaceutical ingredients producer, was another top positive contributor to relative performance during the period. This was added to the portfolio after its spin-off from French pharmaceutical company, Sanofi. The company announced very strong numbers in September for its first statement as a public company where revenue beat expectations by 5% and EBITDA by 10%.
Heightened recession concerns impacted the portfolio with the potential for consumer weakness, housing price falls and rising unemployment leading to weakness in several holdings, such as Moonpig Group, Hays, Taylor Wimpey and Grafton Group. Whilst cyclical exposure in the Company was moderated, we continue to own positions in these areas given the attractive valuations on offer. We are also reassured by strong balance sheets and cash generation and where we see the opportunity for companies to improve market positions through the downturn.
Elsewhere the holding in Integrafin negatively impacted performance. Although the technology platform for independent financial advisers reported strong results, we were disappointed to see a meaningful cost increase causing us to question the operational strength of the company. We have sold the position.
BRIG : Revenue fall eats into BlackRock Income and Growth revenue reserves