Portfolio Update

The information contained in this release was correct as at 30 June 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 30 June2022 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	-11.9	-21.0	-33.9	6.6	27.1
Share price	-14.0	-27.6	-40.3	0.6	39.2
Benchmark*	-9.4	-12.3	-19.0	10.1	9.7

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:	584.22p
Net asset value incl. income:	592.34p
Share price	546.00p
Discount to cum income NAV	7.8%
Net yield1:	1.9%
Total Gross assets2:	£605.3m
Net market exposure as a % of net asset value3:	98.7%
Ordinary shares in issue4:	102,186,194
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 paid 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 1,023,670 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	27.7
Consumer Discretionary	21.3
Financials	13.6
Health Care	7.3
Technology	6.9
Consumer Staples	4.0
Telecommunications	3.2
Basic Materials	1.5
Energy	0.8
Net Current Assets	13.7
	-----
Total	100.0
	=====
Country Weightings	% of Total Assets
United Kingdom	92.7
United States	5.0
France	1.8
Australia	0.7
Germany	-0.2
	-----
Total	100.0
	=====

Market Exposure (Quarterly)
	31.08.21 %	30.11.21 %	28.02.22 %	31.05.22 %
Long	119.4	121.3	121.8	104.8
Short	2.4	2.7	2.3	3.3
Gross exposure	121.8	123.9	124.1	108.1
Net exposure	117.0	118.6	119.5	101.5

Ten Largest Investments
Company	% of Total Gross Assets
Electrocomponents	3.3
Gamma Communications	3.2
CVS Group	3.2
Auction Technology Group	2.9
Watches of Switzerland	2.9
Oxford Instruments	2.7
WH Smith	2.5
Dechra Pharmaceuticals	2.5
Computacenter	2.4
Ergomed	2.1

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

The Company returned -11.9% during June, underperforming the Numis Smaller Companies plus AIM (excluding Investment Trusts) benchmark which returned -9.4%. 

June was a particularly poor month for equity markets, particularly the UK small & mid-cap market as concerns of a global recession magnified. Recent actions including reducing the gross and net helped protect against further relative underperformance, but importantly the mix of the market also played its part, with our short book delivering a positive return as over indebted companies with weak margin structures fell hard in addition to economically sensitive cyclicals. In contrast, companies with strong financial profiles fared better, also helping the portfolio on a relative basis.

As has been the case for most of 2022, UK small & mid-caps continued to suffer disproportionately during the month, particularly those exposed to the consumer. A case in point would be the biggest detractor, Watches of Switzerland, which continued to fall despite a strong update (with upgrades) in late May and so now trades on 13.5x p/e (price to earnings ratio) for its current financial year and has a very healthy balance sheet and in our view a large runway of further growth (organic and inorganic) in a supply constrained industry. Shares in Impax Asset Management weakened as the challenging market environment has seen their assets under management fall despite the business continuing to see net inflows, albeit at a slightly slower pace and digital marketing firm, YouGov, also fell during the month.

On the positive side, many of the largest positive contributors to performance were simply shares that we do not own that underperformed the falling market. Some of our more defensive holdings outperformed during the month, for example Alliance Pharma and Spirent Communications. The portfolio also benefited from a short position in a challenged UK semiconductor technology business which has continued to struggle since IPO (Initial Public Offering).

On the whole, negative news-flow in the UK continues to be quite isolated to a few specific areas linked to consumer spending in big ticket items, or within undifferentiated apparel retailing particularly within e-commerce where a combination of a change in customer behaviour (online back to store), increased returns, and too much inventory are leading to significantly negative operational leverage as demand softens. Generally, our long book continues to trade well so the weakness is more de-rating than in response to earnings changes, though of course that may follow. We continue to try and strike the right balance between near term earnings risk versus what is priced in and long-term franchise value and revisit every investment to track our thesis is still valid and the upside far outweighs any potential downside. There have certainly been higher profile negative updates in the US, particularly in US retail which we believe has weighed on some UK names in this space. One area where we’ve been increasing our short exposure is to over-leveraged companies that have large percentages of their debt due for refinancing soon. There are still lots of companies out there reliant on funding for growth, where the cost of debt has doubled with analyst DCF (discounted cash flow) models yet to reflect market reality.

As stated last month, we have reduced the gross of the portfolio and this is now around 106% (with the net approximately 101%) reflecting the heightened uncertainty and deteriorating backdrop. In light of the points above, we continue to ask ourselves what the appropriate net for the portfolio should be. The reason we haven’t gone net short is not because we have high conviction the market has bottomed, but because we continue to see a significant asymmetrical risk/reward profile in our long book where share prices are already pricing in significant earnings cuts whilst little to no attention (and value) is ascribed to their long-term prospects to increase their profits (and share prices) materially in time. Our short book which has not been that effective until recent weeks is now really starting to build momentum and we see more progress to come. We continue to believe the best value in the market today remains in well-financed companies with enduring long term organic growth prospects that will use this period to enhance their position to win more share. To that end, we believe we own many of these in our long book, and while we wait for this to play-out we take comfort from the increasing number of company buybacks we are witnessing as Management teams retire their equity at current valuations. This dynamic seems much healthier to us than recent times, and it gives us some faith that we can protect capital and make money with the short book, while storing up the potential for substantial upside in the long book in due course.  We thank shareholders for your ongoing support.

¹Source: BlackRock as at 30 June 2022

26 July 2022

ENDS

Latest information is available by typing www.blackrock.com/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.