Portfolio Update

The information contained in this release was correct as at 28 February 2022.  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 2022 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	-6.1	-15.6	2.8	53.3	83.8
Share price	-7.8	-17.8	0.7	61.9	116.2
Benchmark*	-4.9	-7.0	1.5	28.5	32.3

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:	768.12p
Net asset value incl. income:	770.40p
Share price	761.00p
Premium to cum income NAV	1.2%
Net yield1:	1.4%
Total Gross assets2:	£794.9m
Net market exposure as a % of net asset value3:	119.5%
Ordinary shares in issue4:	103,184,864
2021 ongoing charges (excluding performance fees)5,6:	0.57%
2021 ongoing charges ratio (including performance fees)5,6,7:	1.38%

1. Calculated using the 2021 interim dividend declared on 26 July 2021 and paid on 27 August 2021, together with the 2021 final dividend declared on 07 February 2022 and payable on 31 March 2022.

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 0 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 2021.

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
Industrials	30.0
Consumer Discretionary	22.5
Financials	17.7
Technology	8.2
Health Care	6.5
Consumer Staples	6.5
Basic Materials	2.6
Telecommunications	2.6
Net current assets	3.4
	-----
Total	100.0
	=====
Country Weightings	% of Total Assets
United Kingdom	92.4
United States	5.3
France	1.1
Sweden	0.9
Australia	0.5
Germany	-0.2
	-----
Total	100.0
	=====

Market Exposure (Quarterly)
	31.05.21 %	31.08.21 %	30.11.21 %	28.02.22 %
Long	121.3	119.4	121.3	121.8
Short	1.5	2.4	2.7	2.3
Gross exposure	122.8	121.8	123.9	124.1
Net exposure	119.8	117.0	118.6	119.5

Ten Largest Investments
Company	% of Total Gross Assets
Gamma Communications	3.5
Electrocomponents	3.3
Oxford Instruments	3.2
Watches of Switzerland	3.0
IntegraFin	2.9
YouGov	2.5
Impax Asset Management	2.5
Dechra Pharmaceuticals	2.4
Auction Technology	2.4
Baltic Classifieds Group	2.3

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

The Company returned -6.1%¹ in February, underperforming its benchmark, the Numis Smaller Companies +AIM (ex Investment Trusts) Index, which returned -4.9%¹. The long book detracted during the month while the short book made a positive contribution.

Financial market conditions in February were influenced by the continued fear of high inflation and rising bond yields at the start of the month, then latterly the uncertainty created by the Russian invasion of Ukraine. These two factors sometimes combined to accentuate problems, such as faster rising oil prices, but in other ways contrasted, such as the subsequent fall in bond yields as economic uncertainty following the invasion led to a reduction in rate expectations. The interplay of these macro effects impacted the portfolio differently during the period but were negative overall.

The rotation between growth and value remained a feature especially at the start of the month but was less true towards the end as general economic fears led to a wider sell off and many of the more cyclical value shares were caught up in this and reversed their earlier gains. Similar to last month, we have not yet heard much reporting from most of these companies directly – in this area the fall in share prices remains largely one of fear and/or anticipation of problems at this point rather than actual events.

Many of the largest detractors were UK small & mid-cap companies which continued the sell-off seen last month. We think this effect shows the scale and nature of the sell-off we have seen this year. One of the largest detractors was Electrocomponents which had a positive trading update in January, but the shares continued to sell-off. The company has subsequently delivered a very strong update in March. Similarly shares in IntegraFin detracted on fears of wider global financial problems, although the company continues to trade well. Both these companies have strong balance sheets which is a major positive in times of economic uncertainty as well as long term secular growth prospects. Shares in Team17 also sold-off during the month having been a strong performer over the past year but more recently have been a source of profit taking.

The top contributor was our holding in Oxford Instruments which received an indicative bid at a large premium after the shares had fallen. This bid has subsequently fallen through, but regardless it does reinforce the opportunities this reversal has created, and we expect more bid activity where there is disconnect between strong fundamentals and weak share prices. We sold some of the holding in Oxford Instruments after the offer was announced to keep the position size in check as this is a company we had been adding to in recent weeks. The second largest contributor during the month was from our holding in YouGov which reported good results at the very end of January and the shares rose into February. The third largest contributor was Ergomed, which provided a strong trading update in January (with upgrades) and in February announced the acquisition of pharmaceutical quality assurance specialist, ADAMAS.

Performance during the first two months of 2022 has been disappointing, but we are also mindful of the extremes of rotation we’ve experienced and the valuation opportunities that confront us across a myriad of sectors. News flow from our holdings continues to be overwhelmingly positive so we do see a growing disconnect between share prices and solid fundamentals. It is notable that balance sheets of many of our companies are extremely strong at present, so the fall in market cap looks anomalous not least because 10-30% of the market cap of several holdings are now represented by net balance sheet cash. This is both a source of security against poor economic conditions but also a huge opportunity going forward if it can be deployed wisely or indeed simply returned to shareholders. Conversely many of our shorts have weak balance sheets as they’ve struggled through the COVID-19 pandemic and their recovery in revenues hasn’t been as swift as hoped. The rise in commodity prices in addition to increased supply chain challenges creates further complexity and headwinds to corporate profitability. We continue to add to shorts where we see growing evidence of weakening demand and increasing cost pressures.

Overall, as febrile as the market is at present, there are many compelling opportunities, both long and short. In the long book we think valuations discount significant and enduring profit problems for most companies that we do not consider a likely scenario, and so we remain positive that any reversion towards normality will deliver strong positive performance. On that basis we retain a net of c.118% which is above normal levels but is indicative of the current opportunities that we are finding in our universe. We thank shareholders for their ongoing support during this challenging environment.

¹Source: BlackRock as at 28 February 2022

24 March 2022

ENDS

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