Portfolio Update

BLACKROCK THROGMORTON TRUST PLC (LEI: 5493003B7ETS1JEDPF59)
 

All information is at 31 August 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	-0.9	2.5	-2.7	55.7	92.0
Share price	2.6	8.4	7.6	85.7	120.4
Benchmark*	-2.7	-3.2	-9.6	13.7	28.5

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:	581.69p
Net asset value incl. income:	586.10p
Share price	574.00p
Discount to cum income NAV	2.1%
Net yield1:	1.7%
Total Gross assets2:	£428.6m
Net market exposure as a % of net asset value3:	97.9%
Ordinary shares in issue4:	73,130,326
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 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 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	29.6
Industrials	22.7
Financials	20.7
Consumer Goods	7.8
Health Care	7.2
Technology	6.2
Basic Materials	1.5
Telecommunications	1.2
Net current assets	3.1
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Total	100.0
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Market Exposure (Quarterly)
	30.11.18	28.02.19	31.05.19	31.08.19
Long	103.7	108.7	113.7	109.1
Short	10.5	14.9	13.2	11.2
Gross exposure	114.2	123.6	126.9	120.3
Net exposure	93.2	93.8	100.5	97.9

Ten Largest Investments
Company	% of Total Gross Assets
4imprint Group	3.1
YouGov	3.0
Dechra Pharmaceuticals	3.0
SSP	3.0
JD Sports Fashion	2.7
IntegraFin	2.7
Serco	2.5
Workspace Group	2.4
Bodycote	2.2
Aveva	2.2

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

During August the Company’s NAV per share fell by 0.9%¹ to 586.10p on a cum income basis, outperforming our benchmark index, the Numis Smaller Companies plus AIM (excluding Investment Companies) Index, which fell by 2.7%¹. The long book fell by 1.1%¹ while the short book generated 0.4%¹ of gross performance.

Against the backdrop of a falling market the Company delivered a strong relative return during the month, with the short book delivering a positive absolute return driven by some notable stock specific wins, while the long book fell by less than the market.

The largest positive contributor to performance came from our holding in Avon Rubber. The shares rallied after the company agreed to acquire the ballistic-protection business from US peer 3M. The division manufactures bulletproof vests and helmets for the US army and the acquisition should increase the pace of the company’s expansion into global military and law enforcement markets. The second biggest contributor was from our long position in Entertainment One, which received a bid from Hasbro, reinforcing our view on the value of premium content in an industry where large multinational media companies are fighting a battle for customer engagement. In the short book the portfolio benefitted from a short position in a finance litigation company which fell heavily in response to a bear note which was published during the month.

The largest detractor was US e-commerce business, Etsy. The company reported second quarter earnings, however the shares fell in response to a cut to margin guidance as a result of increased cost investment in marketing On the short side, the largest detractor was from our short position in a UK contractor which rallied in the month in response to a trading update which revealed another profit warning, but which also confirmed a reduction in their net debt guidance. We remain sceptical and believe that the company’s reliance on off balance sheet finance (such as reverse factoring) will ultimately lead to material losses for equity investors.

In summary, August was a challenging month for the stockmarket. However, the Company continued to deliver relative outperformance helped by the short book delivering a positive absolute return and the long book outperforming the falling market. The key driver of performance has once again been company specifics, which is where we focus our attention. We belief that fundamentals will continue to be the main driver of share prices over the long term. Importantly, during the month, which was relatively light in terms of newsflow, of the company updates that were relevant to the Company, we were on the right side of far more than we were wrong. There were a number of other stock specific wins not discussed above which confirmed our theses. In recent weeks we have seen an increase in M&A (mergers and acquisitions) activity, and with the ongoing weakness in sterling and low interest rates allowing international companies to purchase UK companies at a low cost, we expect to see more bids by the end of the year. We therefore remain confident in the outlook for UK equities and our portfolio consisting of many strong business models with robust finances. However, we recognise the additional bid risks to the short book from increased M&A activity. As such, maintaining a diverse short book is key. We continue to operate the with a lower than average net exposure to the market of 97.9%.

¹Source: BlackRock as at 31 August 2019

27 September 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.