Portfolio Update

BLACKROCK THROGMORTON TRUST PLC (LEI: 5493003B7ETS1JEDPF59)
 

All information is at 30 November 2018 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	-2.0	-15.4	-2.7	39.8	70.4
Share price	-3.8	-16.0	1.8	43.2	72.6
Benchmark*	-1.8	-10.8	-9.0	17.2	30.4

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 five year period indices have been blended to reflect this.

At month end
Net asset value capital only:	510.56p
Net asset value incl. income:	519.08p
Share price	457.00p
Discount to cum income NAV	12.0%
Net yield1:	2.1%
Total Gross assets2:	£379.6m
Net market exposure as a % of net asset value3:	93.2%
Ordinary shares in issue4:	73,130,326
2017 ongoing charges* (excluding performance fees)5,6:	0.9%
2017 ongoing charges* ratio (including performance fees)5,6,7:	2.2%

*Ongoing Charges: The management fee rate reductions, as detailed in the notes below impact management fees in 2017 and onwards. The impact of the new fee arrangements, assuming the same level of performance from the manager and assuming all other charges remain the same, would be to reduce the level of Ongoing Charges borne by the Company.

1. Calculated using the 2018 interim dividend declared on 26 July 2018 and paid on 29 August 2018, together with the 2017 final dividend declared on 12 February 2018 and paid on 29 March 2018.
2. Includes current year revenue and excludes gross exposure through contracts for difference.
3. Long positions less short positions as a percentage of net asset value.
4. Excluding 7,400,000 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 2017.
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 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	22.7
Financials	22.2
Consumer Services	20.0
Technology	10.8
Health Care	7.2
Consumer Goods	4.3
Basic Materials	2.8
Oil & Gas	1.0
Telecommunications	0.1
Net current assets	8.9
	-----
Total	100.0
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Market Exposure (Quarterly)
	28.02.18	31.05.18	31.08.18	30.11.18
Long	119.6	115.9	119.4	103.7
Short	8.4	10.0	9.6	10.5
Gross exposure	128.0	125.9	129.0	114.2
Net exposure	111.2	105.9	109.8	93.2

Ten Largest Investments
Company	% of Total Gross Assets
Hiscox	3.0
Ascential	2.9
SSP	2.8
Craneware	2.8
Aveva	2.8
Dechra Pharmaceuticals	2.7
4imprint Group	2.5
YouGov	2.4
Integrafin	2.2
Bodycote	2.2

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

During November the Company’s NAV per share fell 2.0%¹ to 510.56p on a cum income basis, marginally underperforming our benchmark index, the Numis Smaller Companies plus AIM (excluding Investment Companies) Index, which fell by 1.8%¹; the large cap FTSE 100 Index fell by 1.6%¹ (all performance figures are in sterling terms with income reinvested).

November brings the Company’s financial year to an end and despite some challenging environments to navigate throughout the year we are pleased to report that during the period the Company has outperformed the benchmark by +6.3%¹.

November proved to be another difficult month for the company. UK Equities experienced a second month of declines with a continued rotation away from “growth” shares, which is a challenging environment for our investment style and resulted in the Company finishing the month slightly behind the benchmark. The long book detracted during the month while short positions contributed a positive 90bps. Performance improved towards the end of the month reflecting a better backdrop for growth assets thanks to the Federal Reserve’s more measured comments with regards to rate tightening, and most importantly of all, some sizeable stock specific wins, notably in the short book.

The largest positive contributor to performance was from our short position in a UK contracting firm, which fell heavily on the news that it required an emergency rescue rights issue to strengthen its balance sheet. This is a company that we have been short for some time, concerned by its liabilities and weak cash generation. Interestingly, this company has publicly stated that “a number of lenders have indicated an intention to reduce their exposure to the construction and related sectors, which may affect the confidence of other credit providers and liquidity in the medium term”, and also that “potential clients and customers are increasingly focusing on service providers’ balance sheets”. These developments with key stakeholders have significant implications for the wider sector.  We feel well positioned to benefit from this, being short several other companies in the sector, and having added to these recently. We’ve also added to other over-leveraged companies with aggressive accounting policies that are now facing more scrutiny from the wider market.

The portfolio also had some successes in the long book. 4imprint continues to trade well, beating forecasts and raising guidance, as did Future PLC which reported strong earnings growth and raised its forward guidance.

On the negative side, it was disappointing that, despite having limited stock specific mishaps, the strong short contributors discussed above, were unable to offset the broader style trend in the market which impacted the portfolio’s performance. For example, shares like Robert Walters and Sumo Group continued to be sold off during the month despite no negative stock specific news-flow.

As we reflect over the final two months of our financial year, it is fair to say that the market rotation/reversal has been a challenge for our style. Despite the sell-off in a number of our long positions, we do believe that many of these will recover as the earnings outlook will not be compromised by macro factors like the latest Trump tweet on trade or the latest Brexit debacle. The last few days have seen a recovery in performance, and whilst it is too early to draw too many conclusions, the combination of positive updates from our long book and some big stock specific wins in our short book is promising. In particular, we can see a reappraisal of over-leveraged companies in some cases paying dividends they can’t afford – something we have highlighted for some time and which is now gaining greater market scrutiny. We think this reappraisal serves us well for delivering value in the short book even as the long book recovers. Our long book remains focused on well capitalised companies with strong and enduring growth prospects.

¹Source: BlackRock as at 30 November 2018

18 December 2018

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.