Portfolio Update

BLACKROCK THROGMORTON TRUST PLC (LEI: 5493003B7ETS1JEDPF59)
 

All information is at 30 November 2019 and unaudited.
Performance at month end is calculated on a cum income basis

	One Month	Three months	One year	Three years	Five years
Net asset value	6.8	8.2	24.4	62.1	114.3
Share price	9.2	11.5	42.8	109.0	161.2
Benchmark*	4.2	6.5	8.0	19.1	41.6

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:	628.10p
Net asset value incl. income:	634.09p
Share price	640.00p
Discount to cum income NAV	0.9%
Net yield1:	1.6%
Total Gross assets2:	£470.1m
Net market exposure as a % of net asset value3:	95.8%
Ordinary shares in issue4:	74,130,326
2018 ongoing charges (excluding performance fees)5,6:	0.6%
2018 ongoing charges ratio (including performance fees)5,6,7:	1.3%

1. Calculated using the 2019 interim dividend declared on 23 July 2019 and paid on 28 August 2019, together with the 2018 final dividend declared on 12 February 2019 and paid on 28 March 2019.

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 6,400,000 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 2018.

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
Consumer Services	26.6
Industrials	25.2
Financials	18.1
Consumer Goods	7.6
Health Care	7.1
Technology	6.8
Telecommunications	2.0
Basic Materials	1.2
Oil & Gas	0.5
Net current assets	4.9
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Total	100.0
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Market Exposure (Quarterly)
	28.02.19	31.05.19	31.08.19	30.11.19
Long	108.7	113.7	109.1	103.2
Short	14.9	13.2	11.2	7.4
Gross exposure	123.6	126.9	120.3	110.6
Net exposure	93.8	100.5	97.9	95.8

Ten Largest Investments
Company	% of Total Gross Assets
WH Smith	3.0
4imprint Group	2.9
IntegraFin	2.8
YouGov	2.8
Workspace Group	2.6
Serco Group	2.5
Dechra Pharmaceuticals	2.5
SSP	2.4
Bodycote	2.4
Aveva	2.0

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

During November the Company’s NAV per share rose by 6.8%¹ to 634.09p on a cum income basis, whilst our benchmark index, the Numis Smaller Companies plus AIM (excluding Investment Companies) Index, rose by 4.2%¹. Performance during the month was driven by holdings within the long book, whilst the short book moderately detracted.

November also marks the end of the Company’s financial year, and we are pleased to announced that the Company returned 24.4%, outperforming our benchmark by 16.4% during the year (on a net basis).

Whilst stock market returns were positive in November and the Company outperformed the benchmark, market conditions remained volatile against a backdrop of the UK General Election and updates on US/China trade negotiations. UK domestic assets in particular performed strongly over the month as sterling rose in response to polling data that leaned towards a Conservative majority in the election.

The largest positive contributor to performance was Bodycote, which saw its share price rise after issuing a positive trading update, highlighting an improving trend on first half performance. Games Workshop, which is best known as the creator of the Warhammer miniatures game, delivered a very strong set of results ahead of expectations and also upgraded their forward guidance. Shares in WH Smith continued to rise in response to the strategic acquisition of Marshall Retail Group (MRG) which was announced during October. Trading at WH Smith remains robust, and the acquisition of MRG is an important step in the company’s expansion into the US market.

The largest detractor to performance during the month was veterinary medicine producer, Eco Animal Health Group, which fell after the company issued a profit warning in response to a sharp slowdown in sales in China, where demand has fallen sharply in response to the African Swine Fever epidemic that has significantly reduced the pig herd and where the impact on revenues was far greater than we had anticipated. The company’s decision to maintain the cost base so they are well placed to benefit from the recovery in demand once the outbreak is contained meant the reduction in revenues had a disproportionate impact on profitability. We have subsequently reduced the position but maintain a holding as we see its long-term competitive position unchanged. Hiscox remained weak after October’s results and Beazley warned of heightened claims activity impacting profitability.

We deliberately reduced the gross and net exposures of the portfolio towards the end of the month, using the recent strength in UK domestic stocks as an opportunity to pare back exposure as we felt a rather asymmetrical risk/reward profile developing for many UK businesses heading into the General Election. This was aimed to protect clients’ capital in the event of an adverse political outcome, and it leaves us in a position to add risk in the event of greater political clarity. The subsequent Conservative majority does remove a tail risk in our view, and more clarity should lead to increased business confidence and corporate spending (something we will look for evidence of in our interactions with company management teams). This has the potential to create a healthy backdrop of improving corporate profitability both for domestic and global facing UK PLCs.

However, before we get too carried away, we would like to remind investors that rather than making knee-jerk decisions in response to recent currency movements, we continue to build the portfolio based on stock and industry specific investment cases and our investment process remains centred around the factors that we think lead to long-term compounding growth for successful companies. Nor do we think the Election outcome will reverse many of the structural issues facing some UK domestic industries. The progress (or lack thereof) of trade talks between the US and China is of far greater significance for the global economy and relevance to many of the portfolio’s holdings, so positive developments here combined with the improving business confidence and spending in the UK (if it materialises) could certainly create an attractive backdrop for our asset class in 2020.

In summary, 2019 has been a successful year for the Company and the outperformance of the benchmark has far exceeded our expectations. We believe this result is evidence for our belief that stock and industry specifics can triumph over macro, particularly during times of uncertainty. We thank shareholders for their support during the year and look forward to the opportunities that 2020 will bring.

¹Source: BlackRock as at 30 November 2019

30 December 2019

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.