REG-BlackRock Throg Tst: Portfolio Update

Blackrock Throgmorton TrustAnnouncement

18/12/2018 16:05

BLACKROCK THROGMORTON TRUST PLC (LEI: 5493003B7ETS1JEDPF59)
 

All information is at 30 November 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      -2.0     -15.4    -2.7     39.8     70.4 
 Share price          -3.8     -16.0     1.8     43.2     72.6 
 Benchmark*           -1.8     -10.8    -9.0     17.2     30.4 

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:                                          510.56p 
 Net asset value incl. income:                                          519.08p 
 Share price                                                            457.00p 
 Discount to cum income NAV                                               12.0% 
 Net yield (1):                                                            2.1% 
 Total Gross assets (2):                                                £379.6m 
 Net market exposure as a % of net asset value (3):                       93.2% 
 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                       22.7 
 Financials                        22.2 
 Consumer Services                 20.0 
 Technology                        10.8 
 Health Care                        7.2 
 Consumer Goods                     4.3 
 Basic Materials                    2.8 
 Oil & Gas                          1.0 
 Telecommunications                 0.1 
 Net current assets                 8.9 
                                  ----- 
 Total                            100.0 
                                  ===== 

   

 Market Exposure (Quarterly)                                 
                                                             
                  28.02.18   31.05.18   31.08.18   30.11.18  
                          %          %          %          % 
 Long                 119.6      115.9      119.4      103.7 
 Short                  8.4       10.0        9.6       10.5 
 Gross exposure       128.0      125.9      129.0      114.2 
 Net exposure         111.2      105.9      109.8       93.2 

   

 Ten Largest Investments                          
                                                  
 Company                  % of Total Gross Assets 
                                                  
 Hiscox                                       3.0 
 Ascential                                    2.9 
 SSP                                          2.8 
 Craneware                                    2.8 
 Aveva                                        2.8 
 Dechra Pharmaceuticals                       2.7 
 4imprint Group                               2.5 
 YouGov                                       2.4 
 Integrafin                                   2.2 
 Bodycote                                     2.2 

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

During November the Company’s NAV per share fell 2.0%(1) to 510.56p on a cum
income basis, marginally underperforming our benchmark index, the Numis
Smaller Companies plus AIM (excluding Investment Companies) Index, which fell
by 1.8%(1); the large cap FTSE 100 Index fell by 1.6%(1) (all performance
figures are in sterling terms with income reinvested).

November brings the Company’s financial year to an end and despite some
challenging environments to navigate throughout the year we are pleased to
report that during the period the Company has outperformed the benchmark by
+6.3%(1).

November proved to be another difficult month for the company. UK Equities
experienced a second month of declines with a continued rotation away from
“growth” shares, which is a challenging environment for our investment
style and resulted in the Company finishing the month slightly behind the
benchmark. The long book detracted during the month while short positions
contributed a positive 90bps. Performance improved towards the end of the
month reflecting a better backdrop for growth assets thanks to the Federal
Reserve’s more measured comments with regards to rate tightening, and most
importantly of all, some sizeable stock specific wins, notably in the short
book.

The largest positive contributor to performance was from our short position in
a UK contracting firm, which fell heavily on the news that it required an
emergency rescue rights issue to strengthen its balance sheet. This is a
company that we have been short for some time, concerned by its liabilities
and weak cash generation. Interestingly, this company has publicly stated that
“a number of lenders have indicated an intention to reduce their exposure to
the construction and related sectors, which may affect the confidence of other
credit providers and liquidity in the medium term”, and also that
“potential clients and customers are increasingly focusing on service
providers’ balance sheets”. These developments with key stakeholders have
significant implications for the wider sector.  We feel well positioned to
benefit from this, being short several other companies in the sector, and
having added to these recently. We’ve also added to other over-leveraged
companies with aggressive accounting policies that are now facing more
scrutiny from the wider market.

The portfolio also had some successes in the long book. 4imprint continues to
trade well, beating forecasts and raising guidance, as did Future PLC which
reported strong earnings growth and raised its forward guidance.

On the negative side, it was disappointing that, despite having limited stock
specific mishaps, the strong short contributors discussed above, were unable
to offset the broader style trend in the market which impacted the
portfolio’s performance. For example, shares like Robert Walters and Sumo
Group continued to be sold off during the month despite no negative stock
specific news-flow.

As we reflect over the final two months of our financial year, it is fair to
say that the market rotation/reversal has been a challenge for our style.
Despite the sell-off in a number of our long positions, we do believe that
many of these will recover as the earnings outlook will not be compromised by
macro factors like the latest Trump tweet on trade or the latest Brexit
debacle. The last few days have seen a recovery in performance, and whilst it
is too early to draw too many conclusions, the combination of positive updates
from our long book and some big stock specific wins in our short book is
promising. In particular, we can see a reappraisal of over-leveraged companies
in some cases paying dividends they can’t afford – something we have
highlighted for some time and which is now gaining greater market scrutiny. We
think this reappraisal serves us well for delivering value in the short book
even as the long book recovers. Our long book remains focused on well
capitalised companies with strong and enduring growth prospects.

(1)Source: BlackRock as at 30 November 2018

18 December 2018

ENDS

Latest information is available by typing www.blackrock.co.uk/thrg on the
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(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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