BlackRock Throgmorton Trust Plc - Portfolio Update

BLACKROCK THROGMORTON TRUST PLC (LEI: 5493003B7ETS1JEDPF59)
 

All information is at 31 August 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	-0.1	3.0	17.5	69.1	120.9
Share price	-1.7	1.6	25.2	73.2	124.0
Benchmark*	-0.3	-0.4	3.5	30.4	58.0

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:	607.08p
Net asset value incl. income:	613.88p
Share price	544.00p
Discount to cum income NAV	11.4%
Net yield1:	1.7%
Total Gross assets2:	£448.9m
Net market exposure as a % of net asset value3:	109.8%
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 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 2018 interim dividend declared on 26 July 2018 and paid on 29 August 2018, together with 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 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 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	31.1
Financials	21.5
Consumer Services	17.9
Technology	9.5
Health Care	7.9
Consumer Goods	7.7
Basic Materials	3.2
Oil & Gas	1.0
Net current assets	0.2
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Total	100.0
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Market Exposure (Quarterly)
	30.11.17 %	28.02.18 %	31.05.18 %	31.08.18 %
Long	116.9	119.6	115.9	119.4
Short	6.3	8.4	10.0	9.6
Gross exposure	123.2	128.0	125.9	129.0
Net exposure	110.6	111.2	105.9	109.8

   

Ten Largest Investments
Company	% of Total Gross Assets
Ascential	3.2
Dechra Pharmaceuticals	3.0
Fever-Tree Drinks	2.9
Bodycote	2.8
Hiscox	2.7
SSP	2.5
4imprint Group	2.4
Robert Walters	2.4
Workspace Group	2.3
YouGov	2.2

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

During August the Company’s NAV per share fell by 0.1%* to 613.88p, outperforming our benchmark, the Numis Smaller Companies plus AIM (excluding Investment Companies) Index, which fell by 0.3%*; the large cap FTSE 100 Index fell by 3.3%* (all performance figures are in sterling terms with income reinvested).

August was a challenging month for UK equities with Brexit fears, escalating trade tensions and disorder in Emerging Markets clouding the outlook for global growth. This was also a month where the Company was on the wrong end of a couple of disappointing updates, notably CVS Group and Hill & Smith. Despite these stock specific “set backs” and a negative market backdrop, the Company was still able to outperform the benchmark during August due to some strong stock specific updates elsewhere in the portfolio, as discussed below. 

Performance during the month was driven by the long book whilst short positions in aggregate were a modest detractor.

Shares in small-cap wine producer Chapel Down rose on expectations of a good harvest given exceptional weather conditions this year, and also on news that respected wine industry players are buying into the company. Insurance provider Hiscox delivered positive interim results, beating expectations and provided a positive outlook statement, reinforcing our conviction in the long term investment case. 4imprint Group continued to rise following strong results announced in July, while the strength of the US dollar provides a further benefit to a business which generates almost all of its revenues in the US. We also saw a very strong performance from Xero, an Australian listed accounting software business which we’ve discussed in previous communications. Other notable contributors included premium mixer supplier Fever-Tree which continued to be in demand during the month and e-learning provider Learning Technologies.

The Company suffered two stock specific disappointments during the month. First, Hill & Smith fell after the company reported a fall in first half profits as a result of short-term project delays in the UK’s road programme. The second was CVS Group, a UK veterinary practice business, which fell in response to reporting a small miss against full year expectations on the back of severe weather earlier in the year, but more importantly some recently acquired practices performing below expectations. The second point is the one that matters and the most undermining to our investment case built in part on CVS’s management’s continued ability to leverage their network to acquire strategically. We spoke with CVS’s management on the day to gain a better understanding of the issues, and they believe these issues have been resolved with application of tighter controls. Whilst disappointing, we still believe CVS remain well placed to further consolidate the highly fragmented UK veterinary market whilst also benefiting from structural growth in veterinary spending.

In terms of portfolio activity, we’ve added new positions in Boku and Craneware, whilst increasing our exposure to existing holdings in Howden joinery, Impax Asset Management, Bodycote and Robert Walters. Overall, no real change to portfolio positioning.

*Source: BlackRock as at 31 August 2018

18 September 2018

ENDS

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