REG-BlackRock Throgmorton Trust Plc: Portfolio Update

Blackrock Throgmorton TrustAnnouncement

24/03/2025 15:15

The information contained in this release was correct as at 28 February
2025.  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 2025 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  -5.0      -7.3       0.7      -14.0     12.8      
 Share price      -5.6      -4.0       -0.8     -21.5     4.0       
 Benchmark*       -3.6      -2.8       6.2      -7.5      17.2      

  

Sources: BlackRock and Deutsche Numis

*With effect from 15 January 2024 the Numis Smaller Companies plus AIM
(excluding Investment Companies) Index to Deutsche Numis Smaller Companies
plus AIM (excluding Investment Companies).

 

 At month end                                                         
 Net asset value capital only:                            616.38p     
 Net asset value incl. income:                            618.67p     
 Share price                                              555.00p     
 Discount to cum income NAV                               10.3%       
 Net yield 1 :                                            3.2%        
 Total Gross assets 2 :                                   £498.5m     
 Net market exposure as a % of net asset value 3 :        112.9%      
 Ordinary shares in issue 4 :                             80,574,864  
 2024 ongoing charges (excluding performance fees) 5,6 :  0.56%       
 2024 ongoing charges ratio (including performance        0.82%       
  fees) 5,6,7 :                                                       

1. Calculated using the Final Dividend declared on 20 February 2025 payable on
11 April 2025, together with the Interim Dividend declared on 24 July 2024
paid on 21 August 2024.

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 22,635,000 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 2024.

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
2023.

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             32.9               
 Financials              23.2               
 Consumer Discretionary  12.4               
 Basic Materials         8.2                
 Technology              6.9                
 Real Estate             4.1                
 Consumer Staples        3.2                
 Communication Services  1.7                
 Health Care             1.6                
 Telecommunications      1.4                
 Energy                  0.6                
                                            
 Net Current Assets      3.8                
                         -----              
 Total                   100.0              
                         =====              
                                            
 Country Weightings      % of Total Assets  
                                            
 United Kingdom          93.1               
 United States           3.7                
 Ireland                 1.3                
 Australia               0.9                
 France                  0.5                
 Canada                  0.5                
                                            
                         -----              
 Total                   100.0              
                         =====              
                                            

 

 Market Exposure (Quarterly)                                 
                                                             
                 31.05.24   31.08.24   30.11.24   28.02.25   
                  %          %          %          %         
 Long            114.9      111.7      111.9      117.8      
 Short           2.3        2.7        3.4        4.9        
 Gross exposure  117.2      114.4      115.3      122.7      
 Net exposure    112.6      109.0      108.5      112.9      

 

 Ten Largest Investments                           
                                                   
 Company                  % of Total Gross Assets  
                                                   
 Breedon                  3.2                      
 Hill & Smith Holdings    3.2                      
 Rotork                   3.1                      
 Tatton Asset Management  3.1                      
 IntegraFin               2.8                      
 GPE                      2.8                      
 Bellway                  2.7                      
 XPS Pensions Group       2.6                      
 Oxford Instruments       2.5                      
 Grafton Group            2.3                      

 

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

 

The Company returned -5.0% in February, underperforming its benchmark, the
Deutsche Numis Smaller Companies +AIM (excluding Investment Companies) Index,
which returned -3.6%.1

 

February proved to be a very volatile month; a difficult start catalysed by
tariff threats followed by a risk rally (when a last-minute extension was
granted for Canada and Mexico), before finally ending with a large sell-off on
tariffs plus concerns on higher inflation. The Magnificent 7 fared
particularly badly, posting their worst month since December 2022 which in
turn dragged down US equities more broadly (Nasdaq -4%, S&P 500 -2.1%) and
catalysed a broad rotation amidst hedge fund deleveraging and large US retail
selling. Closer to home, the FTSE 100 Index delivered another positive month,
but the return was unusually concentrated by name and sector, only 30% of
shares outperformed the index and outperformance was concentrated in banks and
mega-cap pharmaceuticals. The FTSE 250 Index fell -2.9% and is now at a new
5-year low relative to UK large-caps, with almost 10% performance differential
between the two indices just this year-to-date. The shape of these broader
index trends was unhelpful to the Company’s positioning, and despite a
momentum reversal, many cheap UK mid-cap shares that we own continued to fall.
A frustrating reminder that despite weak share prices, low valuations, and
resilient updates, if there’s a risk off event somewhere in the world,
whatever the catalyst, the chances are high that UK small and mid-caps will
fall and perhaps fall even more. That said, this makes watching a UK
housebuilder trading on <0.7x TNAV (tangible net asset value) at the bottom of
the cycle falling mid-teens in a month amidst a tech rotation and global
tariff tussle between the US and Mexico/Canada/China no easier to accept. Or
indeed, watching a recovery in European industrials whilst the UK industrials
with similar end market exposures fall!

 

Shares in Bellway fell amidst a broader sell off in UK domestics and rate
sensitives. However, the company did publish a trading update for H125
reiterating their prior guidance for the full year on volumes, prices, and
adjusted profit margins. There definitely seems to have been some
miscommunication/confusion around the numbers, with some analysts downgrading
numbers on slower delivery, but management sounded far more positive on the
road than the outlook statement would suggest. Indeed, current trading sounds
encouraging (borne out by peers in recent updates, as well as industry data)
and their guidance assumes no increase in selling rates or pricing. We think
Bellway is a very well-run housebuilder, with a prudent management team, and
remain well positioned with their sites to be leveraged into an upturn.
Trading on less than 0.7x TNAV for 2025 when UK housing volumes are almost 30%
below the 20-year average, with a Government focused on increasing production
(some form of support for first time buyers surely goes up by the week?) seems
a very asymmetric risk reward to us. We continue to hold and like this stock.
Similarly, Graton was caught up in the sell-off in UK small and mid-caps, with
the shares falling by 10% on no stock specific news flow. Grafton has
subsequently published full year results in March which came in ahead of
expectations. Whilst the outlook for “RMI” (Repair, Maintenance,
Improvement) remains challenging there are early signs of improving trends.
With a net cash balance sheet and valued on sub 12x current year’s earnings
for an earnings base that is depressed post the volume reduction witnessed in
the last couple of years strikes us as a very good risk reward. Shares in
IntegraFin also weakened during the month, frustratingly giving back some of
their outperformance after their positive trading update in January.

 

On the positive side, the largest positive contributor during the month was
Chemring, which rose after US Private Equity business, Bain Capital,
reportedly offered £1 billion for the UK-based defence business. Chemring
issued a solid trading update at the end of the month with a £40 million
share buyback and a positive outlook for future growth. Shares in XPS Pensions
rose after upgrading full year revenue guidance as the business has continued
to see strong demand for its services driven by regulatory changes, new client
wins and the inflation-linked nature of its contracts. Alfa Financial Software
continued to rise following strong full-year results at the end of January,
which showed operating profits that were 5% of market expectations. The
company has benefited from shifting its business towards software as a service
license model to meet customer demand and has a strong pipeline to support
future growth.

 

In summary, February was undoubtedly a frustrating month. Not just because of
the negative return, both in absolute and relative terms, but specifically how
and why we got there. The compounding effect of risk-off sentiment driven by
tariffs and the impact that this might have on global growth or inflation has
catalysed a wave of fresh selling across the UK small and mid-cap market,
regardless of industry or end market exposure. Liquidity in this market
continues to remain scarce, and we ourselves are having to sell holdings we
think are materially undervalued every day to manage the current daily share
buyback underway. 

 

As stated in many recent updates, the valuation for many of the highest
quality UK domestic assets are very attractive on a medium-term view and
trading remains resilient. However, this has been little consolation and
provided little protection from the ongoing selling pressure that UK small and
mid-cap equities continue to face. As such any comments on the outlook for the
economy or underlying businesses, seems slightly redundant at this time, and
the real challenge facing the asset class is outflows, which needs to moderate
for the value in many of these businesses to be realised. Considering this
outlook and the challenging flow backdrop, we are trying to reduce the gross
and net exposure, as communicated in previous updates, but this is made a more
complex challenge due to the share buyback programme. The net is currently
around 112% and the gross around 119%.

 

We thank shareholders for your patience and ongoing support.

 

1Source: BlackRock as at 28 February 2025

 

24 March 2025

 

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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