REG-BlackRock Throg Tst: Portfolio Update

Blackrock Throgmorton TrustAnnouncement

30/12/2019 16:00

BLACKROCK THROGMORTON TRUST PLC (LEI: 5493003B7ETS1JEDPF59)
 

All information is at 30 November 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       6.8       8.2    24.4     62.1    114.3 
 Share price           9.2      11.5    42.8    109.0    161.2 
 Benchmark*            4.2       6.5     8.0     19.1     41.6 

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:                                         628.10p 
 Net asset value incl. income:                                         634.09p 
 Share price                                                           640.00p 
 Discount to cum income NAV                                               0.9% 
 Net yield (1):                                                           1.6% 
 Total Gross assets (2):                                               £470.1m 
 Net market exposure as a % of net asset value (3):                      95.8% 
 Ordinary shares in issue (4):                                      74,130,326 
 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 6,400,000 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                 26.6 
 Industrials                       25.2 
 Financials                        18.1 
 Consumer Goods                     7.6 
 Health Care                        7.1 
 Technology                         6.8 
 Telecommunications                 2.0 
 Basic Materials                    1.2 
 Oil & Gas                          0.5 
 Net current assets                 4.9 
                                  ----- 
 Total                            100.0 
                                  ===== 

   

 Market Exposure (Quarterly)                                 
                                                             
                  28.02.19   31.05.19   31.08.19   30.11.19  
                          %          %          %          % 
 Long                 108.7      113.7      109.1      103.2 
 Short                 14.9       13.2       11.2        7.4 
 Gross exposure       123.6      126.9      120.3      110.6 
 Net exposure          93.8      100.5       97.9       95.8 

   

 Ten Largest Investments                          
                                                  
 Company                  % of Total Gross Assets 
                                                  
 WH Smith                                     3.0 
 4imprint Group                               2.9 
 IntegraFin                                   2.8 
 YouGov                                       2.8 
 Workspace Group                              2.6 
 Serco Group                                  2.5 
 Dechra Pharmaceuticals                       2.5 
 SSP                                          2.4 
 Bodycote                                     2.4 
 Aveva                                        2.0 

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

During November the Company’s NAV per share rose by 6.8%(1) to 634.09p on a
cum income basis, whilst our benchmark index, the Numis Smaller Companies plus
AIM (excluding Investment Companies) Index, rose by 4.2%(1). Performance
during the month was driven by holdings within the long book, whilst the short
book moderately detracted.

November also marks the end of the Company’s financial year, and we are
pleased to announced that the Company returned 24.4%, outperforming our
benchmark by 16.4% during the year (on a net basis).

Whilst stock market returns were positive in November and the Company
outperformed the benchmark, market conditions remained volatile against a
backdrop of the UK General Election and updates on US/China trade
negotiations. UK domestic assets in particular performed strongly over the
month as sterling rose in response to polling data that leaned towards a
Conservative majority in the election.

The largest positive contributor to performance was Bodycote, which saw its
share price rise after issuing a positive trading update, highlighting an
improving trend on first half performance. Games Workshop, which is best known
as the creator of the Warhammer miniatures game, delivered a very strong set
of results ahead of expectations and also upgraded their forward guidance.
Shares in WH Smith continued to rise in response to the strategic acquisition
of Marshall Retail Group (MRG) which was announced during October. Trading at
WH Smith remains robust, and the acquisition of MRG is an important step in
the company’s expansion into the US market.

The largest detractor to performance during the month was veterinary medicine
producer, Eco Animal Health Group, which fell after the company issued a
profit warning in response to a sharp slowdown in sales in China, where demand
has fallen sharply in response to the African Swine Fever epidemic that has
significantly reduced the pig herd and where the impact on revenues was far
greater than we had anticipated. The company’s decision to maintain the cost
base so they are well placed to benefit from the recovery in demand once the
outbreak is contained meant the reduction in revenues had a disproportionate
impact on profitability. We have subsequently reduced the position but
maintain a holding as we see its long-term competitive position unchanged.
Hiscox remained weak after October’s results and Beazley warned of
heightened claims activity impacting profitability.

We deliberately reduced the gross and net exposures of the portfolio towards
the end of the month, using the recent strength in UK domestic stocks as an
opportunity to pare back exposure as we felt a rather asymmetrical risk/reward
profile developing for many UK businesses heading into the General Election.
This was aimed to protect clients’ capital in the event of an adverse
political outcome, and it leaves us in a position to add risk in the event of
greater political clarity. The subsequent Conservative majority does remove a
tail risk in our view, and more clarity should lead to increased business
confidence and corporate spending (something we will look for evidence of in
our interactions with company management teams). This has the potential to
create a healthy backdrop of improving corporate profitability both for
domestic and global facing UK PLCs.

However, before we get too carried away, we would like to remind investors
that rather than making knee-jerk decisions in response to recent currency
movements, we continue to build the portfolio based on stock and industry
specific investment cases and our investment process remains centred around
the factors that we think lead to long-term compounding growth for successful
companies. Nor do we think the Election outcome will reverse many of the
structural issues facing some UK domestic industries. The progress (or lack
thereof) of trade talks between the US and China is of far greater
significance for the global economy and relevance to many of the portfolio’s
holdings, so positive developments here combined with the improving business
confidence and spending in the UK (if it materialises) could certainly create
an attractive backdrop for our asset class in 2020.

In summary, 2019 has been a successful year for the Company and the
outperformance of the benchmark has far exceeded our expectations. We believe
this result is evidence for our belief that stock and industry specifics can
triumph over macro, particularly during times of uncertainty. We thank
shareholders for their support during the year and look forward to the
opportunities that 2020 will bring.

(1)Source: BlackRock as at 30 November 2019

30 December 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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