Portfolio Update

The information contained in this release was correct as at 30 September 2024.  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 September 2024 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	2.6	16.4	-23.2	27.5
Share price	-3.5	2.6	9.7	-31.2	17.1
Benchmark*	-2.1	2.5	14.1	-13.9	22.0

Sources: BlackRock and Deutsche Numis

*With effect from 15 January 2024 the Numis Smaller Companies plus AIM (excluding Investment Companies) Index to Deutsche Numis Smaller Companies plus AIM (excluding Investment Companies).

At month end
Net asset value capital only:	676.68p
Net asset value incl. income:	689.44p
Share price	613.00p
Discount to cum income NAV	11.1%
Net yield1:	2.5%
Total Gross assets2:	£614.3m
Net market exposure as a % of net asset value3:	111.3%
Ordinary shares in issue4:	89,100,255
2023 ongoing charges (excluding performance fees)5,6:	0.54%
2023 ongoing charges ratio (including performance fees)5,6,7:	0.87%

1. Calculated using the Final Dividend declared on 05 February 2024 paid on 28 March 2024, together with the Interim Dividend declared on 24 July 2024 paid on 21 August 2024.

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 14,109,609 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 2023.

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 2023.

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	33.3
Consumer Discretionary	17.8
Financials	17.4
Basic Materials	8.2
Technology	7.1
Telecommunications	3.7
Real Estate	3.2
Consumer Staples	2.1
Health Care	1.5
Communication Services	1.3
Energy	0.5
Net Current Assets	3.9
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Total	100.0
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Country Weightings	% of Total Assets
United Kingdom	92.6
United States	2.8
Ireland	2.4
Australia	1.0
Switzerland	0.5
France	0.5
Canada	0.5
Sweden	-0.3
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Total	100.0
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Market Exposure (Quarterly)
	30.11.23 %	29.02.24 %	31.05.24 %	31.08.24 %
Long	111.3	117.9	114.9	111.7
Short	3.8	3.2	2.3	2.7
Gross exposure	115.1	121.1	117.2	114.4
Net exposure	107.5	114.7	112.6	109.0

Ten Largest Investments
Company	% of Total Gross Assets
Breedon	3.4
IntegraFin	3.0
Grafton Group	3.0
GPE	2.9
Workspace Group	2.8
WH Smith	2.7
Tatton Asset Management	2.6
Rotork	2.6
Oxford Instruments	2.6
Gamma Communications	2.6

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

The Company returned -2.5% in September, while its benchmark, the Deutsche Numis Smaller Companies +AIM (excluding Investment Companies) Index, returned -2.1%.1

UK economic data remains robust and there are clear signs of an inflection in the housing market (mortgage approvals, agreed sales, and house prices all showing strong increases). Frustratingly, rather than focus on the many positives within the UK macroeconomic environment, the new UK Government seems motivated to snatch defeat from the jaws of victory for some ill-conceived political gain, with a drumbeat of negativity about the country's economic prospects and fiscal positioning ahead of October's budget. The uncertainty over this budget has been amplified with endless media leaks or stories on potential areas for tax grabs. This has cast a pall over certain sections of the UK market, particularly those companies whose founders and management teams are sitting on a lot of equity and capital gains they fear may soon be raided hence a wave of founder sell-downs ahead of the budget. The AIM market has been particularly hit over concerns regarding IHT (inheritance tax) relief, whilst scaremongering over potential changes to CGT (capital gains tax) and pension tax relief have seen many SMID (small and mid-cap) shares buffeted by a wave of fresh selling.

Consumer confidence dropped in the latest reading but remains robust and also is a volatile indicator. More positively, household cashflow remains very strong, so high savings rates, strong employment and real wage growth against a backdrop of falling inflation gives plenty cause for optimism. Indeed, aside from the inflection we have seen in the housing market I referenced earlier, we can also observe positive readings from UK Construction PMIs and even Services PMIs (Purchasing Manager’s Index) remain in expansion territory. Whilst we find the Government’s approach disappointing, we don’t think scaremongering and fiscal tinkering will be enough to de-rail the emerging recovery. With an improving housing market, real wage growth and robust consumer and corporate balance sheets, our hope remains that the upcoming budget will be a clearing event as uncertainty is removed and the focus can go back on to an improving economic backdrop.

The largest positive contributor during the month was WH Smith which reported a trading update that saw like-for-like sales improve and an announcement of a share buyback following de-leveraging post recovery from the pandemic. Over 80% of the group's profits now come from its travel retail division where it continues to take market share, and we believe growth should accelerate from here as the company laps relatively easy comps. The second largest contributor was a short in a UK listed Semiconductor business which issued a large profit warning, the second in less than six months, with the company pointing to a change in revenue mix towards long-term contracts with longer revenue recognition cycles. We continue to have concerns over the accounting, capital intensity and weak free cashflow generation remain and so we have maintained our short. The third largest contributor was our long-term holding Gamma Communications. The shares rallied after the company reported interim results showing growth in both revenues and profits, as the business has seen growing demand for its expanded product set that help businesses deal with their increasingly complex communication needs.

TT Electronics was the biggest detractor as the shares fell in response to a profit warning. The company saw slower demand in one division and operational issues in another leading to cost over runs. The result was large negative revisions to forecasts. This is particularly disappointing given the update came so soon after half year results and a supportive meeting with management where we were reassured by management's comments about the strength of the order book and on the new CEO's drive to impose more operational discipline. We have reduced the position but retain a holding as we think neither problem is permanent and the current mid-single digit PE (price to earnings ratio) multiple on depressed profits (and high teens FCF (free cash flow) yield) doesn’t reflect the long-term outlook for the business. Next Fifteen also had a profit warning in the period as a five-year contract with a Middle Eastern client was cancelled after only three years. The company also saw some slowdown in spending from technology clients. As with TT Electronics, we reduced the position but retain a holding as the current mid-single digit PE, teens FCF yield doesn’t reflect the business outlook over a long-term horizon. The third largest detractor was Playtech, a business that we do not own that is a relatively large weighting in the benchmark and performed well therefore hurting relative performance. 

Overall positioning in the portfolio remains unchanged and we have high conviction in our holdings. As mentioned in recent updates, we see particularly compelling opportunities in the UK at present, and have been increasing exposure across a variety of cheap UK domestics including housebuilders, brick manufacturers and RMI (repair, maintenance and improvements) plays. However, we continue to believe that volatility is likely to remain elevated in the coming weeks and months, particularly ahead of the US election and the UK budget. As a result, the net and gross exposure are currently lower than normal levels at around 109% and 112% respectively. Furthermore, our current exposure ensures that we keep some dry powder for us to deploy and introduce new ideas. As the dust settles, we will look to add risk accordingly, across UK domestic and International focused businesses, which we believe look far too cheap for the growth potential that they offer. 

We thank shareholders for your ongoing support.

1Source: BlackRock as at 30 September 2024

21 October 2024

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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