REG-BlackRock Throg Tst: Portfolio Update

Blackrock Throgmorton TrustAnnouncement

27/04/2020 13:25

The information contained in this release was correct as at 31 March 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 31 March 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     -24.7     -31.4   -14.1      1.9     42.7 
 Share price         -21.7     -32.1    -7.3     29.5     77.5 
 Benchmark*          -23.9     -32.7   -23.2    -22.6     -4.3 

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:                                         450.07p 
 Net asset value incl. income:                                         454.43p 
 Share price                                                           462.00p 
 Premium to cum income NAV                                                1.7% 
 Net yield (1):                                                           2.2% 
 Total Gross assets (2):                                               £366.0m 
 Net market exposure as a % of net asset value (3):                     105.2% 
 Ordinary shares in issue (4):                                      80,530,326 
 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 paid on 27 March 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 0 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                       27.3 
 Consumer Services                 22.3 
 Financials                        18.5 
 Consumer Goods                     9.4 
 Technology                         7.5 
 Health Care                        6.5 
 Telecommunications                 2.2 
 Basic Materials                    1.7 
 Oil & Gas                          0.2 
                                        
 Net current assets                 4.4 
                                  ----- 
 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 
                                                  
 YouGov                                       3.8 
 Serco Group                                  3.1 
 IntegraFin                                   3.0 
 Qinetiq Group                                2.6 
 Dechra Pharmaceuticals                       2.6 
 Breedon                                      2.6 
 4imprint Group                               2.2 
 Gamma Communications                         2.2 
 Watches of Switzerland                       2.0 
 Team17                                       2.0 

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

During a month where global stock markets continued to fall significantly, the
Company fell by 24.7%(1) (net of fees), thereby marginally underperforming our
benchmark, the Numis Smaller Companies plus AIM (excluding Investment
Companies) Index, which fell by 23.9%(1). Unsurprisingly the short book
contributed positively to performance during the month, delivering +2.4%(1),
whilst the long book detracted.

During March we saw an acceleration of the spread of the Coronavirus into
Europe and the US, which caused rapid sell offs in stock markets globally. The
market falls during the month have not only been large, but also very sharp,
with daily falls larger than those experienced in the 2008 financial crisis,
with large daily and intra-day moves throughout the month.

The scale of government and monetary authority interventions over the month
were huge. These include both lower interest rates and monetary easing as well
as direct interventions to cover labour costs and ease business costs in the
face of a social shutdown. On this last point, leisure has been one of the
industries hit hardest in the sell-off and this, with our wider consumer
services exposure, has been a material drag on returns. Whilst we don’t
think the Government’s actions will draw a line under valuations, this
should help alleviate an emerging liquidity crisis engulfing so many
businesses that were on a completely different trajectory only a matter of
weeks ago. Unfortunately, many companies, will not make it through to the
other side, or will survive but in a much-weakened state. It is our belief
that this virus will result in the structural withdrawal of capacity in many
industries, and  therefore we are likely to enter a period of heightened
“corporate Darwinism” will that will create opportunities for those
survivors with the financial resources to win market share and further
solidify their market position, which will be increasingly important for
industries where the recovery in demand is more elongated.

The largest detractors from performance during the month came from our
holdings in Consumer Services, where several companies we own have been
mandated to suspend operations and are therefore generating zero, or close to
zero, revenues. To hold ourselves up to account, with hindsight we were too
slow to reduce our exposure in Consumer Services in aggregate, particularly
those with exposure to airport passenger volumes. WH Smith and Watches of
Switzerland were among the top detractors during the month. We were short
several other companies in this space too however, with inferior financial
positions which were among the top contributors during the month.

While the businesses on the consumer side of our portfolio have hurt
performance the most, reflecting a sudden move that has collapsed short-term
demand, the companies we own exposed to business-to-business spending have
fared much better. Many of the long-term trends in this area could really
accelerate in our opinion due to COVID-19; notably the adoption of software
and cloud infrastructure to aid the digital transformation
(infrastructure-as-a-service, business software, cloud communications), or
digital payments. The reality is that COVID-19 will change many habits, from
increased “working-from-home” (and the software and systems required to
support this) to online communication/collaborations, online ordering/delivery
and digital payments. We believe our portfolio includes many companies driving
these secular shifts and therefore continue to see many years of positive
growth ahead. It should also be noted that some of these new changes to our
lifestyles, both work and social, could have far reaching negative
implications for some incumbent models if they persist, which we think is
quite probable. As such, the “recovered” earnings for some companies will
likely disappoint, and this is an area exercising a lot of our attention and
where we see grounds for new longer duration short positions.

It should be noted, that amidst all the panic and uncertainty right now, long
term investment opportunities continue to present themselves. Many companies
we’ve engaged with recently have been able to quickly reduce their cash burn
so enable them to “hibernate” to preserve equity value for the upturn.
Others have sought equity injections to ensure they emerge from this crisis on
the front foot, or have secured waivers of their banking covenants. We also
believe that some industries will see their aggregate growth rates accelerate
on a 5-year view e.g. digital payments, cloud audio/visual communication,
software-as-a-service, infrastructure-as-a-service. Other companies will
emerge with a strong market position as capacity exits. And to the future,
there will be new and exciting small and medium sized companies that will
emerge to capitalize on the profound changes many industries will endure and
the structural changes in corporate and consumer behaviour that will likely
occur.

(1)Source: BlackRock as at 31 March 2020

27 April 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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