REG-BlackRock Throg Tst: Portfolio Update

Blackrock Throgmorton TrustAnnouncement

24/03/2022 17:30

The information contained in this release was correct as at 28 February
2022.  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 28 February 2022 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      -6.1     -15.6     2.8     53.3     83.8 
 Share price          -7.8     -17.8     0.7     61.9    116.2 
 Benchmark*           -4.9      -7.0     1.5     28.5     32.3 

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:                                          768.12p 
 Net asset value incl. income:                                          770.40p 
 Share price                                                            761.00p 
 Premium to cum income NAV                                                 1.2% 
 Net yield (1):                                                            1.4% 
 Total Gross assets (2):                                                £794.9m 
 Net market exposure as a % of net asset value (3):                      119.5% 
 Ordinary shares in issue (4):                                      103,184,864 
 2021 ongoing charges (excluding performance fees) (5,6):                 0.57% 
 2021 ongoing charges ratio (including performance fees) (5,6,7):         1.38% 

1. Calculated using the 2021 interim dividend declared on 26 July 2021 and
paid on 27 August 2021, together with the 2021 final dividend declared on 07
February 2022 and payable on 31 March 2022.

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
2021.

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 
                                            
 Industrials                           30.0 
 Consumer Discretionary                22.5 
 Financials                            17.7 
 Technology                             8.2 
 Health Care                            6.5 
 Consumer Staples                       6.5 
 Basic Materials                        2.6 
 Telecommunications                     2.6 
 Net current assets                     3.4 
                                      ----- 
 Total                                100.0 
                                      ===== 
                                            
 Country Weightings       % of Total Assets 
                                            
 United Kingdom                        92.4 
 United States                          5.3 
 France                                 1.1 
 Sweden                                 0.9 
 Australia                              0.5 
 Germany                               -0.2 
                                            
                                      ----- 
 Total                                100.0 
                                      ===== 

   

 Market Exposure (Quarterly)                                 
                                                             
                  31.05.21   31.08.21   30.11.21   28.02.22  
                          %          %          %          % 
 Long                 121.3      119.4      121.3      121.8 
 Short                  1.5        2.4        2.7        2.3 
 Gross exposure       122.8      121.8      123.9      124.1 
 Net exposure         119.8      117.0      118.6      119.5 

   

 Ten Largest Investments                            
                                                    
 Company                    % of Total Gross Assets 
                                                    
 Gamma Communications                           3.5 
 Electrocomponents                              3.3 
 Oxford Instruments                             3.2 
 Watches of Switzerland                         3.0 
 IntegraFin                                     2.9 
 YouGov                                         2.5 
 Impax Asset Management                         2.5 
 Dechra Pharmaceuticals                         2.4 
 Auction Technology                             2.4 
 Baltic Classifieds Group                       2.3 

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

The Company returned -6.1%(1) in February, underperforming its benchmark, the
Numis Smaller Companies +AIM (ex Investment Trusts) Index, which returned
-4.9%(1). The long book detracted during the month while the short book made a
positive contribution.

Financial market conditions in February were influenced by the continued fear
of high inflation and rising bond yields at the start of the month, then
latterly the uncertainty created by the Russian invasion of Ukraine. These two
factors sometimes combined to accentuate problems, such as faster rising oil
prices, but in other ways contrasted, such as the subsequent fall in bond
yields as economic uncertainty following the invasion led to a reduction in
rate expectations. The interplay of these macro effects impacted the portfolio
differently during the period but were negative overall.

The rotation between growth and value remained a feature especially at the
start of the month but was less true towards the end as general economic fears
led to a wider sell off and many of the more cyclical value shares were caught
up in this and reversed their earlier gains. Similar to last month, we have
not yet heard much reporting from most of these companies directly – in this
area the fall in share prices remains largely one of fear and/or anticipation
of problems at this point rather than actual events.

Many of the largest detractors were UK small & mid-cap companies which
continued the sell-off seen last month. We think this effect shows the scale
and nature of the sell-off we have seen this year. One of the largest
detractors was Electrocomponents which had a positive trading update in
January, but the shares continued to sell-off. The company has subsequently
delivered a very strong update in March. Similarly shares in IntegraFin
detracted on fears of wider global financial problems, although the company
continues to trade well. Both these companies have strong balance sheets which
is a major positive in times of economic uncertainty as well as long term
secular growth prospects. Shares in Team17 also sold-off during the month
having been a strong performer over the past year but more recently have been
a source of profit taking.

The top contributor was our holding in Oxford Instruments which received an
indicative bid at a large premium after the shares had fallen. This bid has
subsequently fallen through, but regardless it does reinforce the
opportunities this reversal has created, and we expect more bid activity where
there is disconnect between strong fundamentals and weak share prices. We sold
some of the holding in Oxford Instruments after the offer was announced to
keep the position size in check as this is a company we had been adding to in
recent weeks. The second largest contributor during the month was from our
holding in YouGov which reported good results at the very end of January and
the shares rose into February. The third largest contributor was Ergomed,
which provided a strong trading update in January (with upgrades) and in
February announced the acquisition of pharmaceutical quality assurance
specialist, ADAMAS.

Performance during the first two months of 2022 has been disappointing, but we
are also mindful of the extremes of rotation we’ve experienced and the
valuation opportunities that confront us across a myriad of sectors. News flow
from our holdings continues to be overwhelmingly positive so we do see a
growing disconnect between share prices and solid fundamentals. It is notable
that balance sheets of many of our companies are extremely strong at present,
so the fall in market cap looks anomalous not least because 10-30% of the
market cap of several holdings are now represented by net balance sheet cash.
This is both a source of security against poor economic conditions but also a
huge opportunity going forward if it can be deployed wisely or indeed simply
returned to shareholders. Conversely many of our shorts have weak balance
sheets as they’ve struggled through the COVID-19 pandemic and their recovery
in revenues hasn’t been as swift as hoped. The rise in commodity prices in
addition to increased supply chain challenges creates further complexity and
headwinds to corporate profitability. We continue to add to shorts where we
see growing evidence of weakening demand and increasing cost pressures.

Overall, as febrile as the market is at present, there are many compelling
opportunities, both long and short. In the long book we think valuations
discount significant and enduring profit problems for most companies that we
do not consider a likely scenario, and so we remain positive that any
reversion towards normality will deliver strong positive performance. On that
basis we retain a net of c.118% which is above normal levels but is indicative
of the current opportunities that we are finding in our universe. We thank
shareholders for their ongoing support during this challenging environment.

(1)Source: BlackRock as at 28 February 2022

24 March 2022

ENDS

Latest information is available by typing www.blackrock.com/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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