Portfolio Update

The information contained in this release was correct as at 31 August 2023.  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 August 2023 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	-2.5	-1.2	2.1	4.5	7.2
Share price	-2.9	-4.2	0.9	-5.5	11.3
Benchmark*	-2.4	-0.6	-3.2	10.6	-0.3

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:	598.70p
Net asset value incl. income:	608.11p
Share price	559.00p
Discount to cum income NAV	8.1%
Net yield1:	2.1%
Total Gross assets2:	£600.6m
Net market exposure as a % of net asset value3:	108.2%
Ordinary shares in issue4:	98,765,572
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 final dividend declared on 10 February 2023 and paid on 31 March 2023, together with the Interim Dividend declared on 07 July 2023 to be paid on 1 Sept 2023.

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 4,444,292 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	30.9
Consumer Discretionary	25.7
Financials	14.7
Technology	8.0
Basic Materials	5.3
Health Care	4.6
Telecommunications	3.1
Consumer Staples	3.1
Communication Services	2.1
Real Estate	1.0
Energy	1.0
Net Current Assets	0.5
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Total	100.0
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Country Weightings	% of Total Assets
United Kingdom	95.2
United States	2.6
Australia	0.9
France	0.7
Ireland	0.7
Switzerland	0.4
Sweden	-0.5
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Total	100.0
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Market Exposure (Quarterly)
	30.11.22 %	28.02.23 %	31.05.23 %	31.08.23 %
Long	105.8	110.3	111.7	112.7
Short	2.5	2.3	3.6	4.5
Gross exposure	108.3	112.6	115.3	117.2
Net exposure	103.3	108.0	108.1	108.2

Ten Largest Investments
Company	% of Total Gross Assets
4imprint Group	3.2
Gamma Communications	3.1
Breedon	3.0
CVS Group	3.0
Grafton Group	3.0
WH Smith	2.9
Ergomed	2.8
YouGov	2.5
Oxford Instruments	2.5
Rotork	2.4

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

The Company returned -2.5% in August, marginally behind the Numis Smaller Companies plus AIM (excluding Investment Companies) benchmark which returned -2.4%.

Markets weakened during August on the back of increased concerns for the growth outlook for China, as well as the usual interplay between macro data points and its projected impact on monetary policy. Indeed, for all the macro volatility, this was a month where there were lots of significant stock specific events for the Trust.

The largest positive contributor to performance was 4imprint, which rallied after another strong beat and raise. This is a company that has consistently delivered better than expected results, winning share in its highly fragmented end market, whilst also growing the revenues from their existing customer base through high service levels and product innovation. SIG delivered in-line results and reiterated their full year guidance.  The shares rallied strongly as many expected a warning. SIG’s new and highly credible Management team delivered a positive longer-term message about their confidence in improving margins and the levers they have to pull to achieve this. This, combined, with a recovery in end markets, could in our view lead to substantial upside in earnings versus consensus forecasts, so we have continued to add to the position. Hill & Smith rose sharply in response to reporting better than expected trading during the first 6 months of the year with upgrades to full year guidance.

The biggest was Watches of Switzerland (WOSG), which fell sharply on the news that Rolex were acquiring Bucherer, a privately held luxury watch retailer and competitor of WOSG. For Rolex to break tradition and make its first foray into distribution, the stock market has rightly questioned whether this signals a complete change in strategic direction for Rolex (with implications for watch allocations to distributors, or capex and growth ambitions for Bucherer), or whether it really is as simple as Rolex themselves claim, that they are acquiring a 100 year old Swiss partner to secure ownership as opposed to it falling into the hands of a competitor or Private equity firm. This move changes the market structure of the luxury watch industry and as such there are many questions/fears but none of these are likely to be answered in the next 18 months. We’ve spoken with the Management of WOSG twice since the news broke, who themselves have had extensive dialogue with the highest levels within Rolex, and they reiterate their view (as directed by Rolex) that this doesn’t impact their strategy or growth ambitions, Rolex claim Bucherer’s operations will remain independent, and in fact WOSG now have the longest ever project pipeline with Rolex. We’ve moderated the position to take into account this evolution in investment case, but with a net cash balance sheet, and a valuation of about 11x current year’s earnings and a free cash flow yield of over 7% we still retain a meaningful position. YouGov fell on in-line results, albeit results that showed a slowing in growth and Management commented on some slower customer decision making. We’ve retained the position as see lots of potential but haven’t added to the position, preferring to wait for the next update to reassess. Other notable detractors were mainly shares that we do not own that outperformed the market, for example EMIS Group.

The development in Watches of Switzerland is certainly frustrating but despite this single stock setback and the negative market backdrop, we take comfort in the broad strength across the majority of holdings in the portfolio that continue to trade extremely well. We continue to feel confident in the Company’s positioning, overall balance, and also the increasing role stock specifics are having. We are also pleased that the short book is providing protection in periods of relative market turbulence. We retain the strong view that there are many significant mis-pricings in the market, and we continue to see lots of exciting opportunities. Despite our optimism in the prospects for holdings within the portfolio, we remind ourselves that the backdrop remains volatile, and this is reflected in the gross and net which remain around 116% and 107% respectively.

1Source: BlackRock as at 31 August 2023

29 September 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.

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