Portfolio Update

BLACKROCK THROGMORTON TRUST PLC (LEI: 5493003B7ETS1JEDPF59)
 

All information is at 30 September 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	-2.3	-1.8	15.1	66.9	111.0
Share price	0.7	-1.7	26.6	77.5	113.2
Benchmark*	-1.0	-1.0	1.5	32.5	51.9

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:	592.66p
Net asset value incl. income:	599.92p
Share price	548.00p
Discount to cum income NAV	8.7%
Net yield1:	1.7%
Total Gross assets2:	£438.7m
Net market exposure as a % of net asset value3:	112.2%
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	30.7
Financials	21.7
Consumer Services	17.7
Technology	11.9
Consumer Goods	7.8
Health Care	6.4
Basic Materials	3.2
Oil & Gas	1.2
Net current liabilities	-0.6
	-----
Total	100.0
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Market Exposure (Quarterly)
	30.11.17	28.02.18	31.05.18	31.08.18
Long	116.9	119.6	115.9	119.4
Short	6.3	8.4	10.0	9.6
Gross exposure	123.2	128.0	125.9	129.0
Net exposure	110.6	111.2	105.9	109.8

Ten Largest Investments
Company	% of Total Gross Assets
Ascential	3.2
Bodycote	2.8
Hiscox	2.7
SSP	2.7
Fever-Tree Drinks	2.5
4imprint Group	2.3
Robert Walters	2.3
Integrafin	2.2
Craneware	2.2
Workspace Group	2.2

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

During September the Company’s NAV per share fell by 2.3%¹ to 592.7p on a cum income basis, underperforming our benchmark, the Numis Smaller Companies plus AIM (excluding Investment Companies) Index, which fell by 1.0%¹; the large cap FTSE 100 Index rose by 1.0%¹ (all performance figures are in sterling terms with income reinvested).

September was a challenging month for the Company, battling an unfavourable market backdrop where value outperformed growth, led by resources, and a month where we also suffered two notable stock specific setbacks. Despite the underperformance, we had several stock specific successes including a large contribution from a differentiated UK smaller company that we recently added to the portfolio, and a short that fell by more than 30%.

The biggest detractor was from our long position in Dechra Pharmaceuticals which fell sharply in response to a modest earnings downgrade as the company incurred some incremental costs related to Brexit contingency planning. This is exactly the sort of commendable action we expect our companies to take, however an earnings downgrade for a growth share that “looks expensive” is still an earnings downgrade. Matters were further complicated by the management’s description of a faster changing market, indirectly referring to Mars’ recent consolidatory acquisitions of Dechra’s end customers i.e. veterinary practices, and noting some changing patterns from distributors. We’ve discussed these trends at length with management for some time now and feel confident that Dechra, with its global patented product portfolio, dominating specific niches too small for widespread generic interest, leave them well placed to thrive. Alliance Pharma also fell after reporting half year revenues up by 4%, a touch behind expectations, and some of our holdings within Industrials were weighed down by concerns over global-growth and corporate capex spend.

On the positive side Learning Technologies was the largest contributor to performance after the company’s half year results beat expectations. Craneware rallied strongly in response to results that were ahead of expectations and a material upgrade to outer year forecasts. Craneware is a UK listed software company. Their core database is the market leader in US hospitals, helping them manage all their procedures and products with the correct authorisation code, to ensure hospitals are correctly reimbursed for the work they carry out. They’ve since layered on further analytical tools to help hospitals reduce costs, which plays well into a sector where operational costs continue to rise in absolute terms and as a percentage of sales.

Our third largest positive contributor was a short position in a loss making UK technology company that fell by more than 30% in response to a weak H1 trading update. This has been a beneficial short for us year-to-date and we continue to have concerns over the company’s ability to monetise its technology, and struggle to reconcile lack of commercial traction versus the market capitalisation it has been ascribed.

Portfolio positioning remains broadly unchanged however at the margin we have been adding to our existing holdings in Craneware, Aveva and Boku.

¹Source: BlackRock as at 30 September 2018

16 October 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.