BlackRock Throgmorton outperforms multiple indexes (LON:THRG)

BlackRock Throgmorton Trust plc (LON:THRG) has announced its latest portfolio update.

All information is at 30 April2023 and unaudited.

To learn more about the BlackRock Throgmorton Trust plc please follow this link: blackrock.com/uk/thrg

Performance at month end is calculated on a cum income basis

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.

1. Calculated using the 2022 interim dividend declared on 20 July 2022 and paid on 26 August 2022, together with the 2022 final dividend declared on 10 February 2023 and paid on 31 March 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 2,431,916 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).

Market Exposure (Quarterly)

Ten Largest Investments

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

The Company rose by 4.0% in April, outperforming the benchmark, the Numis Smaller Companies +AIM excluding Investment Companies Index, which returned 2.9%.¹

During April, markets recovered some of the losses of March as the impact of US bank failures continued to dominate headlines. First Republic became the latest casualty and was sold to JP Morgan (via FDIC receivership) at the end of the month. We continue to monitor the impact these failures may have on credit tightening and any corresponding impact on the real economy, as we triangulate between third party data in addition to probing companies in our interactions with them. So far, the majority of corporate news-flow in UK small and medium sized companies has been encouraging, where many companies continue to show broad based strength in earnings relative to low expectations. In many ways this is a continuation of the theme of the last nine months, with lots of headline macro concerns offset by broadly positive corporate news flow amongst our investments as demand holds up better than feared and companies continue to win share.

The surge in M&A (mergers & acquisitions) activity in the UK small & mid-cap market was a key driver of performance during April. The biggest contributor to performance was Dechra Pharmaceuticals which announced it had received a possible cash offer from EQT for a c.50% premium to its closing share price, albeit only a modest premium to where they raised money only a few months ago to acquire a pipeline of veterinary drugs which will accelerate growth in FY24 and beyond, which the Board would is prepared to recommend. Due to the sensitivities surrounding this, there is little we can comment publicly on now. Veterinary services company CVS Group was another top contributor during the month, with the shares rising off the back of the Dechra bid. Another holding in the portfolio, Numis Corporation, also received a cash bid during the month, with Deutsche Bank offering a 72% premium.

The biggest detractor during the month was Breedon, which despite delivering a very strong Q1 update in April, fell on the back of a technical situation where IHT (Inheritance Tax) funds needed to sell their shares ahead of Breedon joining the main market on 17th May. Breedon had recently announced they were delisting from AIM and joining the FTSE 250 Index. We have used this weakness to continue to add to our position. Shares in both Diploma and 4imprint both fell despite no negative stock specific newsflow.

Overall, April was another difficult month to navigate but the portfolio has continued to show promise, with generally a strong set of results across the long book, helped by some stock specific wins in the short book. Very few of the detractors are in response to specific negative developments and generally are where the market is concerned over the very short term at the expense of the medium to long term, and this we view as opportunity rather than a threat. Moreover, we have long argued that there remains compelling value in UK mid-caps, and considering recent bids and continued bid speculation, we think Private Equity agree and are armed with significant dry powder to take advantage. A challenge for us will be to ensure we don’t let the significant disconnect of valuations from strong fundamentals and runway of cashflow growth enable others to realise the inherent value on offer in our home market, denying us of compelling future returns just for a cash bid today. We have continued to take advantage of the valuations disconnect that we see in UK mid-cap shares, and the Company’s net is now around 109%.

¹Source: BlackRock as at 30 April 2023

To learn more about the BlackRock Throgmorton Trust plc please follow this link: blackrock.com/uk/thrg