BlackRock Throgmorton Trust made a strong start to its financial year, returning 9.6%

BlackRock Throgmorton Trust plc (LON:THRG) has provided the following portfolio update.

All information is at 31 December 2020 and unaudited.

To learn more about the BlackRock Throgmorton Trust plc please follow this link:

Performance at month end is calculated on a cum income basis

Net asset value9.623.013.238.6104.5
Share price12.230.512.969.2129.5

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:740.02p
Net asset value incl. income:746.56p
Share price765.00p
Premium to cum income NAV2.5%
Net yield1:1.3%
Total Gross assets2:£660.9m
Net market exposure as a % of net asset value3:120.5%
Ordinary shares in issue4:88,530,000
2020 ongoing charges (excluding performance fees)5,6:0.60%
2020 ongoing charges ratio (including performance fees)5,6,7:1.60%

1. Calculated using the 2020 interim dividend declared on 23 July 2020 and paid on 26 August 2020, together with the 2019 final dividend declared on 06 February 2020 and paid on 27 March 2020.
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 0 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 2019.
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 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
Consumer Services18.7
Consumer Goods11.0
Health Care6.8
Basic Materials2.6
Net current liabilities                                -0.7
Country Weightings% of Total Assets
United Kingdom88.0
United States6.9

Market Exposure (Quarterly)

Gross exposure128.2120.7123.4122.3
Net exposure110.4116.6118.6118.6

Ten Largest Investments

Company% of Total Gross Assets8
Games Workshop3.6
Gamma Communications2.7
Watches of Switzerland2.6
Impax Asset Management2.3
Pets at Home2.2
Dechra Pharmaceuticals2.0

8These percentages reflect portfolio exposure gained from both equity holdings and exposure through contracts for difference where relevant.

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

The Company has made a strong start to its financial year, returning 9.6%1 (net of fees) and outperforming its benchmark which returned 8.4%1. Performance during the month was driven by the long book, while the short book was broadly flat, which is a creditable outcome against a market which rose sharply.

Stock markets rose in December, although not at the fast rate of November, and some of the underlying style rotations that were a particularly extreme feature of last month were much less pronounced in December. During the month the rates of COVID-19 infections further accelerated, including the announcement of a new more virulent strain. There were increased levels of restrictions on people and businesses globally, but particularly across UK and Europe. However, stock markets were not negatively affected, which we ascribe to the high levels of faith in the vaccination programmes that are expected to drastically improve the virus situation by Easter. On Brexit, there were swings in negotiations during December, but finally an agreement was reached at the very end of the month. This is a positive step towards a return to normality for the UK after so many years of uncertainty, and we think it gives a particularly positive outlook for UK investments.

Positive contributors to performance came from a broad range of companies during the month. The largest positive contributor was IMI Mobile, a leading player in communications software, which soared after the company agreed to a takeover approach from US listed IT giant, Cisco Systems. We were very excited by the long-term secular growth prospects for this company, so we are sorry to see it go, but understand the strategic rationale. Another secular growth area we like is e-learning, and our second biggest contributor was from Learning Technologies Group (LTG) which announced the acquisition of privately-owned eThink Education. This earnings-enhancing deal follows the recent acquisitions of OpenLMS and eCreators as LTG seek to consolidate their position in the attractive but fragmented market of open-source learning management, where the systems can be highly customised to the end user. It was also pleasing to see both YouGov and Games Workshop in the top contributors during December, with both sharply reversing the decline from last month’s rotation, vindicating our decision to add to both in November’s sell-off. In the case of Games Workshop, we were rewarded with another upgrade to revenues and profits on the back of continued strong trading.

The largest detractor during the month was Avon Rubber. The shares fell on the disappointing news that some US Army body armour contracts would not be signed as quickly as anticipated, which will therefore result in revenues being delayed. While the delay is disappointing, we continue believe in the long-term attractions of the business and recent steps taken to increase its focus on the protection business. Many of the other detractors to performance during the month were simply companies that we do not own which benefited from the value rally, which continued during the month.

The agreement of a Brexit trade deal is a reassuring development that allows investors to regain confidence in the future of investing in the UK. On that level we think it improves, or at least removes a potential negative from, the outlook for all investments. The removal of this uncertainty should have a net positive impact for valuations of UK Plc which have been depressed for some time. This dynamic gives us added confidence in the return potential from the UK market, and for the portfolio. However, it is worth reiterating, as we have done in the past, that this does not structurally change our views how to make key investments and the positioning of the portfolio – which has always been driven by research to identify specific company and industry dynamics rather than timing macro events. Therefore, we will not be making any significant strategic changes, but we are reassured that the outlook has been clarified. When combined with the conviction in the outlook for our particular holdings we are positive about the outlook for returns for UK Plc and specifically for the Company in 2021, and this is reflected in the portfolio’s current net exposure, which is now c.120%.

1Source: BlackRock as at 31 December 2020

1 February 2021

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