BlackRock Throgmorton Trust Plc - Portfolio Update

BLACKROCK THROGMORTON TRUST PLC (LEI: 5493003B7ETS1JEDPF59)
 

All information is at 31 July 2018 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	0.6	7.7	20.4	66.5	123.5
Share price	-0.7	5.3	29.1	78.5	135.8
Benchmark*	0.3	1.1	4.6	27.9	60.8

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 five year period indices have been blended to reflect this.

At month end
Net asset value capital only:	608.08p
Net asset value incl. income:	616.94p
Share price	556.00p
Discount to cum income NAV	9.9%
Net yield1:	1.6%
Total Gross assets2:	£451.2m
Net market exposure as a % of net asset value3:	107.6%
Ordinary shares in issue4:	73,130,326
2017 ongoing charges* (excluding performance fees)5,6:	0.9%
2017 ongoing charges* ratio (including performance fees)5,6,7:	2.2%

*Ongoing Charges: The management fee rate reductions, as detailed in the notes below, will impact management fees in 2017 and onwards.   The impact of the new fee arrangements, assuming the same level of performance from the manager and assuming all other charges remain the same, would be to reduce the level of Ongoing Charges borne by the Company.
1. Calculated using the 2017 interim dividend declared on 24 July 2017 and the 2017 final dividend declared on 12 February 2018 and paid on 29 March 2018.
2. Includes current year revenue and excludes gross exposure through contracts for difference.
3. Long positions less short positions as a percentage of net asset value.
4. Excluding 7,400,000 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 2017.
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 arrangements for the Company have changed.  The annual performance fee is now 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 fees (comprising the base management fee of 0.35% and a potential  performance fee of 0.90%) will therefore fall to 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
Financials	22.8
Consumer Services	16.8
Technology	8.6
Health Care	7.7
Consumer Goods	7.3
Basic Materials	3.4
Oil & Gas	1.0
Net current assets	0.1
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Total	100.0
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Market Exposure (Quarterly)
	31.08.17 %	30.11.17 %	28.02.18 %	31.05.18 %
Long	115.3	116.9	119.6	115.9
Short	5.8	6.3	8.4	10.0
Gross exposure	121.1	123.2	128.0	125.9
Net exposure	109.5	110.6	111.2	105.9

   

Ten Largest Investments
Company	% of Total Gross Assets
Ascential	3.2
Dechra Pharmaceuticals	2.8
Fever-Tree Drinks	2.7
Hiscox	2.6
SSP	2.4
Robert Walters	2.3
Bodycote	2.3
Workspace Group	2.3
4imprint Group	2.2
CVS Group	2.1

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

During July the Company’s NAV per share rose by 0.6%* to 616.94p on a cum income basis, outperforming our benchmark index which rose by 0.3%*; the FTSE 100 Index rose 1.5%* (all performance figures are in sterling terms with income reinvested).

The Company continued to deliver outperformance over the benchmark during July, with both the long and short book contributing positively. Within the long book a number of holdings responded well to positive trading updates, whilst in the short book the Company continued to benefit from stock specific successes.

Shares in 4imprint rose after the company delivered better than expected results for the first half of the year. Investment in brand marketing has resulted in a strong increase in new customers, exceeding management’s expectations, and the outlook for the second half of the year looks positive. Shares in SSP Group responded well to a positive third quarter trading update showing strong like-for-like sales growth helped by the continued rise in air travel. Self-help initiatives, for example in procurement disciplines and range rationalisation continue to drive improvements in gross margins, resulting in further upgrades. Other notable contributors included Draper Esprit, Lonza and Advanced Medical Solutions which all performed well in response to positive company specific updates.

Our short position in a UK technology company, where we have significant concerns about the company’s ability to monetise its product offering, was among the top contributors during the month. This company remains heavily loss making with significant cash burn, and its shares subsequently fell by more than 20% in July.

The largest detractor was cyber security business Sophos, which fell after the company disappointed the market with lower than expected billings growth. After a prolonged period of consistent “beat and raise” updates, two of the last three updates have been disappointing. We have been reducing the position earlier in the year, and have reduced further this month in response to another disappointment in the company’s renewal rate which challenges our investment thesis. The second largest detractor was from Ascential, which fell on the news of a slowdown in one of its recently acquired business, despite beating results at every line at a group level. We’ve discussed the moving parts with Management at some length on their roadshow and it remains one of our larger holdings.

Our view on the current environment, the economic cycle and therefore the Company’s positioning hasn’t changed. Towards the end of the month the market experienced a mini reversal which saw a number of our holdings give back some recent performance. These events often create opportunities for us to add to our holdings in companies, where we see significant runways of earnings growth, at more attractive prices. We therefore took the opportunity during the month to add to Hiscox, Bodycote and Howden Joinery.

*Source: BlackRock as at 31 July 2018

17 August 2018

ENDS

Latest information is available by typing www.blackrock.co.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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