REG-BlackRock Throgmorton Trust Plc: Portfolio Update

Blackrock Throgmorton TrustAnnouncement

27/07/2023 17:00

The information contained in this release was correct as at 30 June 2023. 
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 30 June 2023 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  -1.0      0.9        5.2      14.7      7.9       
 Share price      -1.9      -1.0       7.4      7.5       11.3      
 Benchmark*       -1.0      -1.6       -2.8     19.9      -0.7      

  

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:                            602.24p      
 Net asset value incl. income:                            612.31p      
 Share price                                              576.00p      
 Discount to cum income NAV                               5.9%         
 Net yield 1 :                                            1.9%         
 Total Gross assets 2 :                                   £613.2m      
 Net market exposure as a % of net asset value 3 :        105.5%       
 Ordinary shares in issue 4 :                             100,145,785  
 2022 ongoing charges (excluding performance fees) 5,6 :  0.54%        
 2022 ongoing charges ratio (including performance        0.54%        
  fees) 5,6,7 :                                                        

1. Calculated using the 2022 interim dividend declared on 20 July 2022 and
paid on 26 August 2022, together with the 2022 final dividend declared on 10
February 2023 and paid on 31 March 2023.

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 3,064,079 shares held in treasury.

5. The Company’s ongoing charges are calculated as a percentage of average
daily net assets and using the management fee and all other operating
expenses, excluding performance fees, finance costs, direct transaction
charges, VAT recovered, taxation and certain other non-recurring items for the
year ended 30 November 2022.

6. With effect from 1 August 2017 the base management fee was reduced from
0.70% to 0.35% of gross assets per annum. The Company’s ongoing charges are
calculated as a percentage of average daily net assets and using the
management fee and all other operating expenses, including performance fees,
but excluding finance costs, direct transaction charges, VAT recovered,
taxation and certain other non-recurring items for the year ended 30 November
2022.

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             29.1               
 Consumer Discretionary  25.1               
 Financials              15.2               
 Technology              8.3                
 Basic Materials         4.5                
 Health Care             3.9                
 Consumer Staples        3.5                
 Telecommunications      3.0                
 Communication Services  1.9                
 Real Estate             1.0                
 Energy                  0.8                
 Net Current Assets      3.7                
                         -----              
 Total                   100.0              
                         =====              
                                            
 Country Weightings      % of Total Assets  
                                            
 United Kingdom          94.5               
 United States           3.2                
 Australia               0.8                
 Ireland                 0.8                
 France                  0.7                
                                            
                         -----              
 Total                   100.0              
                         =====              

 

 Market Exposure (Quarterly)                                 
                                                             
                 31.08.22   30.11.22   28.02.23   31.05.23   
                  %          %          %          %         
 Long            102.0      105.8      110.3      111.7      
 Short           4.1        2.5        2.3        3.6        
 Gross exposure  106.1      108.3      112.6      115.3      
 Net exposure    97.9       103.3      108.0      108.1      

 

 Ten Largest Investments                        
                                                
 Company               % of Total Gross Assets  
                                                
 Gamma Communications  3.0                      
 WH Smith              3.0                      
 YouGov                2.9                      
 4imprint Group        2.8                      
 Breedon Group         2.7                      
 CVS Group             2.7                      
 Diploma               2.6                      
 Grafton Group         2.5                      
 Ergomed               2.5                      
 Computacenter         2.4                      

 

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

 

The Company returned -1.0% in June, which was in line with the Numis Smaller
Companies +AIM (excluding Investment Companies) benchmark which also returned
-1.0%.1

 

Global markets were strong overall in June, with the FTSE 100 Index up by
1.4%, MSCI ACWI +5.8%, led by the US with the S&P 500 up 6.5% on the back of
some stronger US macro data points. Frustratingly however, the FTSE 250 Index
was once again the outlier and was down 1.3%. Poor UK inflation data (food and
travel related) and its subsequent impact on the UK interest rate outlook led
to pronounced weakness in the UK mid-cap and domestically oriented shares.
Despite this headwind to performance, the portfolio performed in-line with our
benchmark thanks to solid trading within the long book across a broad range of
companies that continue to defy the macro doom and gloom.

 

Games Workshop has continued to grow revenues and profits ahead of
expectations with sales and profits considerably higher than those achieved
during the work-from-home era. In a year of limited new product launches and
rising costs, the strength of these results should not be underestimated. The
recent news of a potential deal with Amazon (specific details still unknown)
to develop a TV series should create a significant positive halo effect on
marketing for the brand, in addition to the cashflow benefit from licensing.
Herc Holdings was a beneficiary of stronger US macro data as fears of a hard
landing receded. We have written before about our view that the current
industry dynamics in US equipment rental are strongly favouring the largest
players in the industry (Herc, United Rentals and Ashtead, all of which we own
across the Emerging Companies team). The underlying secular story is the
continued transition from contractors owning construction equipment to renting
it. On top of this is overlaid strong demand trends coming from
“megaprojects” which have been driven by the twin tailwinds of re-shoring
and the Inflation Reduction Act. Mega projects favour the larger players as
they were able to continue to invest through the last 2 years and secure
supply of new equipment from OEMs (original equipment manufacturers) and as a
result they have a much better invested fleet than smaller regional
competitors, while their national scale leaves them best placed to pick up the
most work. Despite recent moves and the positive outlook for the industry Herc
Holdings still only trades on 9x PE (price to earnings ratio). Shares in Alfa
Financial Software rose on the back of the announced bid, which has
subsequently been withdrawn, from private equity business EQT.

 

Of the largest three detractors to relative performance during the month, two
were shares that we do not own which rose strongly during the month, Carnival
and Aston Martin. Watches of Switzerland was the biggest detractor as the
shares continued to fall, caught up in the general drawdown in UK mid-cap
shares following June's inflation data. We continue to be surprised by the
extent of derating in what we consider to be a best-in-class route to market
in a structurally attractive category. The shares now trade on 11x its current
year's earnings, with a net cash balance sheet. We continue to think the
long-term opportunity here is deeply mispriced so retain a holding. Another
detractor was Impax Asset Management which fell following a statement
highlighting weaker than expected inflows into its core ESG strategies.

 

Despite weaker UK macro data in the month, we remain optimistic about the
prospects for the portfolio. The environment still feels somewhat febrile,
with heightened volatility both across markets and within market leadership.
Staying on top of these gyrations and their implications for markets and, more
importantly, the companies in the Trust, has been hard work but we continue to
see attractive opportunities and areas of significant mispricing within the
market, and this gives us confidence for future returns. We are now into the
second half of the Company’s financial year; the portfolio is +2.4%, ahead
of the benchmark despite 1) an ongoing challenging macroeconomic backdrop, and
2) having the continued headwind of mid-cap underperformance in the UK. We
continue to see myriad compelling opportunities within the UK mid-cap complex
in particular, therefore we remain confident in the return potential of the
Company. The net of the Company crept down slightly over the month to c.105%,
while the gross is c.113%.

 

 

1Source: BlackRock as at 30 June 2023

 

27 July 2023

 

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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