REG-BlackRock Throg Tst: Portfolio Update

Blackrock Throgmorton TrustAnnouncement

27/09/2019 10:45

BLACKROCK THROGMORTON TRUST PLC (LEI: 5493003B7ETS1JEDPF59)
 

All information is at 31 August 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      -0.9       2.5    -2.7     55.7     92.0 
 Share price           2.6       8.4     7.6     85.7    120.4 
 Benchmark*           -2.7      -3.2    -9.6     13.7     28.5 

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:                                         581.69p 
 Net asset value incl. income:                                         586.10p 
 Share price                                                           574.00p 
 Discount to cum income NAV                                               2.1% 
 Net yield (1):                                                           1.7% 
 Total Gross assets (2):                                               £428.6m 
 Net market exposure as a % of net asset value (3):                      97.9% 
 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
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                 29.6 
 Industrials                       22.7 
 Financials                        20.7 
 Consumer Goods                     7.8 
 Health Care                        7.2 
 Technology                         6.2 
 Basic Materials                    1.5 
 Telecommunications                 1.2 
 Net current assets                 3.1 
                                  ----- 
 Total                            100.0 
                                  ===== 

   

 Market Exposure (Quarterly)                                 
                                                             
                  30.11.18   28.02.19   31.05.19   31.08.19  
                          %          %          %          % 
 Long                 103.7      108.7      113.7      109.1 
 Short                 10.5       14.9       13.2       11.2 
 Gross exposure       114.2      123.6      126.9      120.3 
 Net exposure          93.2       93.8      100.5       97.9 

   

 Ten Largest Investments                          
                                                  
 Company                  % of Total Gross Assets 
                                                  
 4imprint Group                               3.1 
 YouGov                                       3.0 
 Dechra Pharmaceuticals                       3.0 
 SSP                                          3.0 
 JD Sports Fashion                            2.7 
 IntegraFin                                   2.7 
 Serco                                        2.5 
 Workspace Group                              2.4 
 Bodycote                                     2.2 
 Aveva                                        2.2 

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

During August the Company’s NAV per share fell by 0.9%(1) to 586.10p on a
cum income basis, outperforming our benchmark index, the Numis Smaller
Companies plus AIM (excluding Investment Companies) Index, which fell by
2.7%(1). The long book fell by 1.1%(1) while the short book generated 0.4%(1)
of gross performance.

Against the backdrop of a falling market the Company delivered a strong
relative return during the month, with the short book delivering a positive
absolute return driven by some notable stock specific wins, while the long
book fell by less than the market.

The largest positive contributor to performance came from our holding in Avon
Rubber. The shares rallied after the company agreed to acquire the
ballistic-protection business from US peer 3M. The division manufactures
bulletproof vests and helmets for the US army and the acquisition should
increase the pace of the company’s expansion into global military and law
enforcement markets. The second biggest contributor was from our long position
in Entertainment One, which received a bid from Hasbro, reinforcing our view
on the value of premium content in an industry where large multinational media
companies are fighting a battle for customer engagement. In the short book the
portfolio benefitted from a short position in a finance litigation company
which fell heavily in response to a bear note which was published during the
month.

The largest detractor was US e-commerce business, Etsy. The company reported
second quarter earnings, however the shares fell in response to a cut to
margin guidance as a result of increased cost investment in marketing On the
short side, the largest detractor was from our short position in a UK
contractor which rallied in the month in response to a trading update which
revealed another profit warning, but which also confirmed a reduction in their
net debt guidance. We remain sceptical and believe that the company’s
reliance on off balance sheet finance (such as reverse factoring) will
ultimately lead to material losses for equity investors.

In summary, August was a challenging month for the stockmarket. However, the
Company continued to deliver relative outperformance helped by the short book
delivering a positive absolute return and the long book outperforming the
falling market. The key driver of performance has once again been company
specifics, which is where we focus our attention. We belief that fundamentals
will continue to be the main driver of share prices over the long term.
Importantly, during the month, which was relatively light in terms of
newsflow, of the company updates that were relevant to the Company, we were on
the right side of far more than we were wrong. There were a number of other
stock specific wins not discussed above which confirmed our theses. In recent
weeks we have seen an increase in M&A (mergers and acquisitions) activity, and
with the ongoing weakness in sterling and low interest rates allowing
international companies to purchase UK companies at a low cost, we expect to
see more bids by the end of the year. We therefore remain confident in the
outlook for UK equities and our portfolio consisting of many strong business
models with robust finances. However, we recognise the additional bid risks to
the short book from increased M&A activity. As such, maintaining a diverse
short book is key. We continue to operate the with a lower than average net
exposure to the market of 97.9%.

(1)Source: BlackRock as at 31 August 2019

27 September 2019

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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