REG-BlackRock Throg Tst: Portfolio Update

Blackrock Throgmorton TrustAnnouncement

14/08/2019 17:05

BLACKROCK THROGMORTON TRUST PLC (LEI: 5493003B7ETS1JEDPF59)
 

All information is at 31 July 2019 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       2.5       4.7    -1.9     64.2     98.9 
 Share price          -0.7       3.3     3.1     90.3    124.6 
 Benchmark*            0.1      -1.4    -7.4     20.0     34.2 

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 performance of the indices have been blended to reflect this.

 At month end                                                                  
 Net asset value capital only:                                         587.84p 
 Net asset value incl. income:                                         594.22p 
 Share price                                                           562.00p 
 Discount to cum income NAV                                               5.4% 
 Net yield (1):                                                           1.8% 
 Total Gross assets (2):                                               £434.6m 
 Net market exposure as a % of net asset value (3):                      99.9% 
 Ordinary shares in issue (4):                                      73,130,326 
 2018 ongoing charges (excluding performance fees) (5,6):                 0.6% 
 2018 ongoing charges ratio (including performance fees) (5,6,7):         1.3% 

1. Calculated using the 2019 interim dividend declared on 23 July 2019 and due
to be paid on 28 August 2019, together with the 2018 final dividend declared
on 12 February 2019 and paid on 28 March 2019.
2. Includes current year revenue and excludes gross exposure through contracts
for difference.
3. Long exposure less short exposure 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
2018.
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 management 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 
                                        
 Consumer Services                 30.0 
 Industrials                       22.4 
 Financials                        21.0 
 Consumer Goods                     8.3 
 Health Care                        7.4 
 Technology                         6.7 
 Basic Materials                    1.6 
 Telecommunications                 1.3 
 Net current assets                 1.3 
                                  ----- 
 Total                            100.0 
                                  ===== 

   

 Market Exposure (Quarterly)                                 
                                                             
                  31.08.18   30.11.18   28.02.19   31.05.19  
                          %          %          %          % 
 Long                 119.4      103.7      108.7      113.7 
 Short                  9.6       10.5       14.9       13.2 
 Gross exposure       129.0      114.2      123.6      126.9 
 Net exposure         109.8       93.2       93.8      100.5 

   

 Ten Largest Investments                          
                                                  
 Company                  % of Total Gross Assets 
                                                  
 4imprint Group                               3.1 
 Dechra Pharmaceuticals                       3.1 
 YouGov                                       2.9 
 SSP                                          2.9 
 JD Sports Fashion                            2.9 
 IntegraFin                                   2.7 
 Serco                                        2.5 
 Watches of Switzerland                       2.4 
 Aveva                                        2.3 
 Bodycote                                     2.2 

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

During July the Company’s NAV per share rose by 2.5%(1) to 594.22p on a cum
income basis, outperforming our benchmark index, the Numis Smaller Companies
plus AIM (excluding Investment Companies) Index, which rose by 0.1%(1). The
long book generated 2.4%(1) and the short book generated 0.3%(1) of gross
performance.

This was a strong month for the Company in absolute and relative terms,
particularly in the context of a flattish month for our benchmark. It was also
a month where both the long and short books made a positive contribution to
the Company’s overall monthly returns.

The largest positive contributor to performance during the month came from one
of our biggest holdings, JD Sports. The shares rose in response to a strong
trading statement issued in early July, confirming trading has remained strong
throughout the period and that the company “continues to be on track to
deliver headline profit before tax for the full year at least equal to current
consensus expectations”. As discussed in previous updates, this
differentiated consumer proposition has consistently delivered despite a
difficult UK consumer backdrop, reflecting the strength of its management, its
business model and growth opportunities.

The second biggest contributor was from Chegg, one of our US listed holdings,
which delivered positive results for the second quarter of 2019 which beat
expectations; the company also raised their full-year guidance. We view Chegg
as a fast growing, differentiated and disruptive direct-to-consumer student
learning platform, focused on providing third party study resources through a
subscription-based model. This result re-emphasised in our mind the long
runway of growth that we think lies ahead for this company, both domestically
in the US and internationally, to drive subscriptions as well as the levers
that management has to pull to improve monetisation.

The third biggest contributor was from another core holding, YouGov, which
delivered an upgrade to consensus forecasts. We’ve spoken a lot about this
company in previous updates so I’ll refrain from writing more, but suffice
to say we are encouraged by the update and continue to be impressed with the
company’s management and their sustained level of high revenue and profit
growth.

The short book had a strong month, with the biggest contributor coming from a
luxury car manufacturer which fell sharply in response to a material profit
warning and increasing concerns over the company’s financial structure.

Turning our attention to what hasn’t been so successful for us in the month,
the top 10 detractors individually cost the Company somewhere in the range of
0.1% to 0.3%, unhelpful but not material. It is also worth noting that four of
the top 10 detractors were shares in our benchmark that the Company does not
own, namely EI Group, Energean Oil & Gas, Ultra Electronics and Acacia Mining.
The top 2 detractors were both long positions, namely Bodycote and Robert
Walters. Bodycote delivered first half of 2019 numbers which were soft
overall, reflecting weakness in some of their end markets, though the highest
quality and highest margins areas performed well in our opinion, and
Management are comfortable with full-year expectations. Clearly the share
prices of Bodycote and other global cyclicals are particularly sensitive right
now to any update on currency and/or trade, but we think Bodycote remains a
well-capitalised differentiated industrial. The third biggest detractor during
the month was not owning Enterprise Inns, which holds a decent sized position
in our benchmark, and was on the receiving end of a bid.

In summary, July was a strong month for the Company with both longs and shorts
delivering positive returns, and where stock specifics triumphed over macro.
Escalating trade tensions clearly present a risk to global growth and
potentially to stock markets, but we feel well positioned to deliver a good
investment outcome whatever happens next. Global cyclical exposure in the long
book has been moderated in recent weeks (despite many structural trends that
benefit our long positions) and our long book is comprised of many advantaged
business models with robust finances. The pace of industry change isn’t
slowing and multi-year secular trends, like the need for corporates to invest
in digital transformation, shows no signs of slowing and benefits many of our
holdings. On the flip side we remain short financial leverage and continue to
identify lots of opportunities to short commoditised business with weakening
demand, as well structurally flawed business models who we believe will be the
first and real victims of any global slowdown. We continue to operate with a
lower than average net exposure to the market of 99.9%.

(1)Source: BlackRock as at 31 July 2019

14 August 2019

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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