Portfolio Update

The information contained in this release was correct as at 31 December 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 31 December2022 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	-1.4	13.1	-34.7	-3.9	17.8
Share price	-0.3	15.8	-38.3	-10.2	34.7
Benchmark*	-1.2	6.9	-21.9	-1.7	0.1

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:	606.00p
Net asset value incl. income:	617.52p
Share price	593.00p
Discount to cum income NAV	4.0%
Net yield1:	1.8%
Total Gross assets2:	£624.7m
Net market exposure as a % of net asset value3:	104.1%
Ordinary shares in issue4:	101,158,864
2022 ongoing charges (excluding performance fees)5,6:	0.54%
2022 ongoing charges ratio (including performance fees)5,6,7:	0.54%

1. Calculated using the 2022 interim dividend declared on 20 July 2022 and paid on 26 August 2022, 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 2,051,000 shares held in treasury.
5. The Company’s ongoing charges are calculated as a percentage of average daily net assets and using the management fee and all other operating expenses, excluding performance fees, finance costs, direct transaction charges, VAT recovered, taxation and certain other non-recurring items for the year ended 30 November 2022.
6. With effect from 1 August 2017 the base management fee was reduced from 0.70% to 0.35% of gross assets per annum. The Company’s ongoing charges are calculated as a percentage of average daily net assets and using the management fee and all other operating expenses, including performance fees, but excluding finance costs, direct transaction charges, VAT recovered, taxation and certain other non-recurring items for the year ended 30 November 2022.
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	32.3
Consumer Discretionary	21.7
Financials	14.0
Technology	6.2
Health Care	4.7
Consumer Staples	4.1
Telecommunications	2.9
Energy	2.2
Basic Materials	1.1
Information Technology	1.0
Real Estate	0.4
Communication Services	0.3
Net Current Assets	9.1
	-----
Total	100.0
	=====
Country Weightings	% of Total Assets
United Kingdom	93.8
United States	3.1
France	2.0
Australia	0.6
Netherlands	0.5
	-----
Total	100.0
	=====

Market Exposure (Quarterly)
	28.02.22 %	31.05.22 %	31.08.22 %	30.11.22 %
Long	121.8	104.8	102.0	105.8
Short	2.3	3.3	4.1	2.5
Gross exposure	124.1	108.1	106.1	108.3
Net exposure	119.5	101.5	97.9	103.3

Ten Largest Investments
Company	% of Total Gross Assets
Oxford Instruments	3.3
4imprint Group	3.1
WH Smith	2.9
Gamma Communications	2.9
RS Group	2.9
CVS Group	2.8
Ergomed	2.8
Watches of Switzerland	2.7
Diploma	2.7
YouGov	2.6

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

The Company returned -1.4% during December, modestly underperforming the Company’s benchmark, the Numis Smaller Companies plus AIM (excluding Investment Companies) Index, which fell -1.2%. Financial markets and macro data remained volatile as markets continue to be driven by inflation statistics and any indications of slowing the pace of monetary tightening from central banks. Equity markets fell globally in December. Federal Reserve (Fed) minutes which contained a dot plot that remained ahead of current market pricing for the Fed funds rate through 2023 was the immediate cause of the market sell off, somewhat exacerbated by low levels of liquidity ahead of the holiday season. Company news flow in the month however continued to support many of our positions as evidenced by some of our top contributors below.

Games Workshop was the largest contributor on the news that they are in the late stages of negotiating a deal with Amazon to develop a TV series starring Henry Cavill, best known for playing Superman, but who is also an avid Warhammer fan. The terms of any deal are not yet known, but aside from the revenues generated from licensing, the real question for us is what halo impact this might have on sales within the core business in the coming years. This deal marks another important staging post for the company’s strategy to monetise its unique IP (intellectual property) more broadly. In the five years to FY2022, licensing has grown fourfold. The second largest contributor to performance was a short in a UK electrical retailer, which fell after a poor set of numbers led to large downgrades to consensus forecasts. The Company’s non-UK businesses in particular are weakening from falling demand and higher competition pressuring sales and margins. One of very few holdings in the portfolio with exposure to the energy markets, Hunting, was the third largest contributor to performance after the company reported strong trading in 2022 with upgrades to guidance for next year.

Turning to detractors, Watches of Switzerland gave up much of the previous month’s gains after a strong set of results. One feature of the results was a larger than expected inventory build, which caused some debate in the market after a succession of retailer inventory issues at other companies in 2022. Post results, we had a good meeting with management, who highlighted that 1) over two thirds of revenues come from wait list products; 2) that demand remained extremely strong, with waitlists continuing to extend; and 3) with limited obsolescence risk and with most SKUs (stock keeping unit) in the inventory seeing price rises, aging inventory has gone up in value not down! Furthermore, our work suggests that the large inventory build in the half was merely a normalisation from an abnormally low number in 2021. Days inventory on the balance sheet remains at a lower level than for any period pre-pandemic.  Our meeting also reminded us of the long-term opportunity for market share gains within this highly attractive category and several new ways Watches of Switzerland were becoming more closely entwined with their key brand partners. We used the weakness to add to the position.

Other detractors to performance we feel were predominantly victims of the market sell-off which took place during the month, many of which had been top performers in November such as Auction Technology, Leslie’s and Impax Asset Management.  In the case of Leslie’s however, despite delivering strong Q4 results, they delivered a more cautious outlook for 2023. We’ve retained the position as we think the guidance is conservative, and Leslie’s commands a dominant position as an omnichannel specialist retailer of swimming pool products and services where around 80% of their sales are tied to maintenance affording a degree of protection.

Markets continue to try and triangulate between inflation data, central bank policy and underlying economic activity levels. All three remain uncertain and the market remains very sensitive in reaction to perceived changes in each variable. We therefore expect volatility to remain elevated as a result. However, we remain of the view that inflation has peaked and will continue to fall from here across developed economies and therefore are cautiously optimistic that this will be reflected by a moderate Fed response in time. Leading indicators we track continue to fall. To take one example from the UK, wholesale gas prices are now at a level where it is estimated that the governments energy guarantee would cost £1-2bn vs the £25bn expected when the scheme was put in place. This number will be volatile but is indicative of the easing of some of the most severe pressures felt in Q3 2022. We also continue to have meetings with companies who cite easing supply chains and lower levels of input inflation in 2023 compared to 2022. Many of our spending data tools are showing us that consumption has held up well over the holiday period in both the US and UK. We are also watching the opening up of China closely for signs of its impact on the world economy as the prospects for higher demand are offset by potential for short term supply chain issues or the chance of a new COVID variant.

The gross of the Company remains c.105% with the net around 102%. We thank shareholders for their ongoing support.

¹Source: BlackRock as at 31 December 2022

26 January 2023

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.