REG-BlackRock Throg Tst: Portfolio Update

Blackrock Throgmorton TrustAnnouncement

27/03/2020 17:50

The information contained in this release was correct as at 29 February
2020.  Information on the Company’s up to date net asset values can be
found on the London Stock Exchange Website at:

https://www.londonstockexchange.com/exchange/news/market-news/market-news-home.html. 

BLACKROCK THROGMORTON TRUST PLC (LEI: 5493003B7ETS1JEDPF59)
 

All information is at 29 February 2020 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     -10.0      -3.8    16.9     40.0     88.4 
 Share price         -13.8      -6.8    22.2     63.2    125.7 
 Benchmark*           -9.6      -5.1     1.4      4.4     24.2 

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:                                         599.13p 
 Net asset value incl. income:                                         603.24p 
 Share price                                                           590.00p 
 Discount to cum income NAV                                               2.2% 
 Net yield (1):                                                           1.7% 
 Total Gross assets (2):                                               £483.0m 
 Net market exposure as a % of net asset value (3):                     110.4% 
 Ordinary shares in issue (4):                                      80,074,312 
 2019 ongoing charges (excluding performance fees) (5,6):                 0.6% 
 2019 ongoing charges ratio (including performance fees) (5,6,7):         1.8% 

1. Calculated using the 2019 interim dividend declared on 23 July 2019 and
paid on 28 August 2019, together with the 2019 final dividend declared on 06
February 2020 and due to be paid on 02 April 2020.

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 456,014 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
2019.

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). On the first day of the financial year outperformance from the
previous financial year (if any) is carried forward and accrued in the daily
NAV released to the London Stock Exchange.

 Sector Weightings    % of Total Assets 
                                        
 Industrials                       27.2 
 Consumer Services                 25.5 
 Financials                        19.8 
 Consumer Goods                    10.7 
 Technology                         6.6 
 Health Care                        5.7 
 Telecommunications                 2.0 
 Basic Materials                    1.6 
 Oil & Gas                          0.1 
                                        
 Net current assets                 0.8 
                                  ----- 
 Total                            100.0 
                                  ===== 

   

 Market Exposure (Quarterly)                                 
                                                             
                  31.05.19   31.08.19   30.11.19   29.02.20  
                          %          %          %          % 
 Long                 113.7      109.1      103.2      119.3 
 Short                 13.2       11.2        7.4        8.9 
 Gross exposure       126.9      120.3      110.6      128.2 
 Net exposure         100.5       97.9       95.8      110.4 

   

 Ten Largest Investments                          
                                                  
 Company                  % of Total Gross Assets 
                                                  
 IntegraFin                                   3.2 
 YouGov                                       3.2 
 Serco Group                                  3.0 
 Watches of Switzerland                       2.8 
 WH Smith                                     2.5 
 Breedon                                      2.5 
 4imprint Group                               2.5 
 Games Workshop                               2.4 
 Dechra Pharmaceuticals                       2.2 
 Gamma Communications                         2.0 

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

During a month where global stock markets fell significantly, the Company fell
by 10.0% (net of fees), marginally underperforming our benchmark, the Numis
Smaller Companies plus AIM (excluding Investment Companies) Index, which fell
by 9.6%.

Unsurprisingly the short book contributed positively during the month, while
the long book detracted slightly. We would, however, attribute the small
underperformance of the long book to broader market movements rather than
major stock specific disappointments. In terms of positioning, our exposure
away from resources was a major positive contributor, however, our exposure to
the Travel & Leisure and the wider Consumer Services sectors were a drag to
relative performance during the month.

The two largest detractors to performance during the month were Dart Group and
WH Smith, which were both impacted by their exposure to airline travel
disruption caused by COVID-19. Both these shares have subsequently updated the
market with negative outlook statements reflecting the sheer speed and
severity of the disruption caused by necessary route closures.  The inability
to predict the duration of route closures for Dart or concession/shop closures
in transportation hubs for WH Smith has created enormous uncertainty over the
profit outlook and cash drain on both businesses.  Both business we believe
are well operated companies with strong track records of value creation, that
have proved themselves as good operators and market share winners. Importantly
they also have stronger financial structures than their peers and have levers
to pull to reduce costs and manage liquidity, but the situation remains fluid
hence the huge uncertainty and precipitous falls both these shares have seen
in February and March. We remain owners of both companies and believe their
management teams will do what is necessary in the interests of their
customers, staff and shareholders to ensure they get through this period and
emerge as stronger competitors with stronger market positions, as capacity
inevitably comes out of the market. We do not think the medium to long term
opportunity is reflected in the valuation of either company today.

On the positive side, the largest contributor to performance was YouGov. The
shares continued to perform well after issuing a trading update at the end of
January, highlighting particularly strong performance in its data products
business, in both the UK and US. Elsewhere Avon Rubber also added to
performance, benefitting from its positive trading update at the end of
January.

We are currently witnessing significant levels of volatility, reflecting the
huge uncertainty over the economic and societal impact from COVID-19, as
country by country tries to grapple with this global pandemic. Investors
continue to trade ahead of any company information, and it is really only in
the airline and cruise ship industries where company updates have been given,
but in time more sectors will follow. Clearly, in those industries the updates
are negative and the outlook highly uncertain. However, in broader industrial
companies there are fewer updates and it is uncertainty about Western demand
rather than Eastern production that is at issue, since most company management
teams have updated us that their production facilities are improving capacity
as Chinese facilities return to work. This gives us some confidence that the
economic effect can be a passing issue, which is not to dismiss it, but simply
to observe that the initially infected areas appear to now be improving,
though we accept these countries were very quick to act.

We can’t predict the duration of demand weakness caused by COVID-19 or
accurately quantify the economic impact on GDP or for corporate earnings, so
rather than look at conventional metrics like “Price to Earnings”, we
instead are focusing on balance sheet leverage and liquidity, determining
whether companies have sufficient cashflows to see them through. Those that
survive are likely to emerge as stronger operators and could go on to thrive
over the medium term.

We acknowledge that some of you may rightfully question why we have maintained
a high gross exposure (c.127%) and a net greater than 100%. We accept that
this will have been a drag on performance in the latter half of February,
early March, but the speed and severity of market falls has certainly exceeded
our own expectations, moreover, because of this rapid re-pricing of equity
values there has been limited liquidity. We are mindful not to reduce the
gross and net exposure too far in light of the potential rebound given the
size of falls already seen, and also because we have taken this opportunity to
close or reduce some of our shorts to lock in the gains as well as add to some
of our long positions that we think have been significantly oversold. We take
our role as fiduciary manager very seriously and will always do our best to
protect your capital, but we must also not be afraid to use times like these
when fear abounds, to capitalise on the opportunities we are presented with
and ensure the Company is well placed to prosper over the coming months and
years. We thank all our shareholders for their continued support.

(1)Source: BlackRock as at 29 February 2020

27 March 2020

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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