REG-BlackRock Throg Tst: Portfolio Update

Blackrock Throgmorton TrustAnnouncement

16/10/2018 11:45

BLACKROCK THROGMORTON TRUST PLC (LEI: 5493003B7ETS1JEDPF59)
 

All information is at 30 September 2018 and unaudited.
Performance at month end is calculated on a cum income basis

                      One     Three     One    Three     Five  
                    Month    months    year    years    years  
                         %         %       %        %        % 
 Net asset value      -2.3      -1.8    15.1     66.9    111.0 
 Share price           0.7      -1.7    26.6     77.5    113.2 
 Benchmark*           -1.0      -1.0     1.5     32.5     51.9 

Sources: BlackRock and Datastream

*With effect from 22 March 2018 the Numis Smaller Companies plus AIM
(excluding Investment Companies) Index replaced the Numis Smaller Companies
excluding AIM (excluding Investment Companies) Index as the Company’s
benchmark. The five year period indices have been blended to reflect this.

 At month end                                                                   
 Net asset value capital only:                                          592.66p 
 Net asset value incl. income:                                          599.92p 
 Share price                                                            548.00p 
 Discount to cum income NAV                                                8.7% 
 Net yield (1):                                                            1.7% 
 Total Gross assets (2):                                                £438.7m 
 Net market exposure as a % of net asset value (3):                      112.2% 
 Ordinary shares in issue (4):                                       73,130,326 
 2017 ongoing charges* (excluding performance fees) (5,6):                 0.9% 
 2017 ongoing charges* ratio (including performance fees) (5,6,7):         2.2% 

*Ongoing Charges: The management fee rate reductions, as detailed in the notes
below impact management fees in 2017 and onwards. The impact of the new fee
arrangements, assuming the same level of performance from the manager and
assuming all other charges remain the same, would be to reduce the level of
Ongoing Charges borne by the Company.
1. Calculated using the 2018 interim dividend declared on 26 July 2018 and
paid on 29 August 2018, together with the 2017 final dividend declared on 12
February 2018 and paid on 29 March 2018.
2. Includes current year revenue and excludes gross exposure through contracts
for difference.
3. Long positions less short positions as a percentage of net asset value.
4. Excluding 7,400,000 shares held in treasury.
5. Calculated as a percentage of average net assets and using expenses,
excluding performance fees and interest costs for the year ended 30 November
2017.
6. With effect from 1 August 2017 the base management fee was reduced from
0.70% to 0.35% of gross assets per annum.
7. Effective 1st December 2017 the annual performance fee is calculated using
performance data on an annualised rolling two year basis (previously, one
year) and the maximum annual performance fee payable is effectively reduced to
0.90% of two year rolling average month end gross assets (from 1% of average
annual gross assets over one year). Additionally, the Company now accrues this
fee at a rate of 15% of outperformance (previously 10%). The maximum annual
total fees (comprising the base management fee of 0.35% and a potential
performance fee of 0.90%) are therefore 1.25% of average month end gross
assets on a two year rolling basis (from 1.70% of average annual gross
assets).

 Sector Weightings         % of Total Assets 
                                             
 Industrials                            30.7 
 Financials                             21.7 
 Consumer Services                      17.7 
 Technology                             11.9 
 Consumer Goods                          7.8 
 Health Care                             6.4 
 Basic Materials                         3.2 
 Oil & Gas                               1.2 
 Net current liabilities                -0.6 
                                       ----- 
 Total                                 100.0 
                                       ===== 

   

 Market Exposure (Quarterly)                                 
                                                             
                  30.11.17   28.02.18   31.05.18   31.08.18  
                          %          %          %          % 
 Long                 116.9      119.6      115.9      119.4 
 Short                  6.3        8.4       10.0        9.6 
 Gross exposure       123.2      128.0      125.9      129.0 
 Net exposure         110.6      111.2      105.9      109.8 

   

 Ten Largest Investments                     
                                             
 Company             % of Total Gross Assets 
                                             
 Ascential                               3.2 
 Bodycote                                2.8 
 Hiscox                                  2.7 
 SSP                                     2.7 
 Fever-Tree Drinks                       2.5 
 4imprint Group                          2.3 
 Robert Walters                          2.3 
 Integrafin                              2.2 
 Craneware                               2.2 
 Workspace Group                         2.2 

Commenting on the markets, Dan Whitestone, representing the Investment Manager
noted:

During September the Company’s NAV per share fell by 2.3%(1) to 592.7p on a
cum income basis, underperforming our benchmark, the Numis Smaller Companies
plus AIM (excluding Investment Companies) Index, which fell by 1.0%(1); the
large cap FTSE 100 Index rose by 1.0%(1) (all performance figures are in
sterling terms with income reinvested).

September was a challenging month for the Company, battling an unfavourable
market backdrop where value outperformed growth, led by resources, and a month
where we also suffered two notable stock specific setbacks. Despite the
underperformance, we had several stock specific successes including a large
contribution from a differentiated UK smaller company that we recently added
to the portfolio, and a short that fell by more than 30%.

The biggest detractor was from our long position in Dechra Pharmaceuticals
which fell sharply in response to a modest earnings downgrade as the company
incurred some incremental costs related to Brexit contingency planning. This
is exactly the sort of commendable action we expect our companies to take,
however an earnings downgrade for a growth share that “looks expensive” is
still an earnings downgrade. Matters were further complicated by the
management’s description of a faster changing market, indirectly referring
to Mars’ recent consolidatory acquisitions of Dechra’s end customers i.e.
veterinary practices, and noting some changing patterns from distributors.
We’ve discussed these trends at length with management for some time now and
feel confident that Dechra, with its global patented product portfolio,
dominating specific niches too small for widespread generic interest, leave
them well placed to thrive. Alliance Pharma also fell after reporting half
year revenues up by 4%, a touch behind expectations, and some of our holdings
within Industrials were weighed down by concerns over global-growth and
corporate capex spend.

On the positive side Learning Technologies was the largest contributor to
performance after the company’s half year results beat expectations.
Craneware rallied strongly in response to results that were ahead of
expectations and a material upgrade to outer year forecasts. Craneware is a UK
listed software company. Their core database is the market leader in US
hospitals, helping them manage all their procedures and products with the
correct authorisation code, to ensure hospitals are correctly reimbursed for
the work they carry out. They’ve since layered on further analytical tools
to help hospitals reduce costs, which plays well into a sector where
operational costs continue to rise in absolute terms and as a percentage of
sales.

Our third largest positive contributor was a short position in a loss making
UK technology company that fell by more than 30% in response to a weak H1
trading update. This has been a beneficial short for us year-to-date and we
continue to have concerns over the company’s ability to monetise its
technology, and struggle to reconcile lack of commercial traction versus the
market capitalisation it has been ascribed.

Portfolio positioning remains broadly unchanged however at the margin we have
been adding to our existing holdings in Craneware, Aveva and Boku.

(1)Source: BlackRock as at 30 September 2018

16 October 2018

ENDS

Latest information is available by typing www.blackrock.co.uk/thrg on the
internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3
(ICV terminal).  Neither the contents of the Manager’s website nor the
contents of any website accessible from hyperlinks on the Manager’s website
(or any other website) is incorporated into, or forms part of, this
announcement.



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