BlackRock Throgmorton Trust plc (LON:THRG) has provided the following portfolio update.
All information is at 31 May 2020 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 | 6.8 | -8.5 | -2.4 | 11.2 | 57.4 |
| Share price | 5.3 | -6.1 | 5.7 | 34.1 | 84.6 |
| Benchmark* | 4.3 | -10.2 | -12.1 | -14.5 | 4.3 |
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: | 547.83p |
| Net asset value incl. income: | 551.87p |
| Share price | 554.00p |
| Premium to cum income NAV | 0.4% |
| Net yield1: | 1.8% |
| Total Gross assets2: | £461.3m |
| Net market exposure as a % of net asset value3: | 116.6% |
| Ordinary shares in issue4: | 83,588,462 |
| 2019 ongoing charges (excluding performance fees)5,6: | 0.6% |
| 2019 ongoing charges ratio (including performance fees)5,6,7: | 1.8% |
1. Calculated using the 2019 interim dividend declared on 23 July 2019 and paid on 28 August 2019, 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 |
| Industrials | 31.3 |
| Financials | 19.4 |
| Consumer Services | 18.8 |
| Consumer Goods | 12.0 |
| Technology | 7.7 |
| Health Care | 6.3 |
| Basic Materials | 2.4 |
| Telecommunications | 2.4 |
| Net current liabilities | -0.3 |
| —– | |
| Total | 100.0 |
| ===== | |
| Market Exposure (Quarterly) | ||||
| 31.08.19 % | 30.11.19 % | 29.02.20 % | 31.05.20 % | |
| Long | 109.1 | 103.2 | 119.3 | 118.6 |
| Short | 11.2 | 7.4 | 8.9 | 2.1 |
| Gross exposure | 120.3 | 110.6 | 128.2 | 120.7 |
| Net exposure | 97.9 | 95.8 | 110.4 | 116.6 |
| Ten Largest Investments | |
| Company | % of Total Gross Assets |
| IntegraFin | 2.9 |
| YouGov | 2.9 |
| Games Workshop | 2.7 |
| Breedon | 2.7 |
| Serco Group | 2.6 |
| Dechra Pharmaceuticals | 2.5 |
| Watches of Switzerland | 2.5 |
| Gamma Communications | 2.4 |
| Avon Rubber | 2.3 |
| Future | 2.2 |
Commenting on the markets, Dan Whitestone, representing the Investment Manager noted:
During the month the Company returned 6.8%1 (net of fees), outperforming our benchmark which returned 4.3%1. The long book continued to perform well during the month, generating c.7%, while the short book modestly detracted. The short book has been particularly volatile recently, and our expectation of this was why we decided to take advantage of the material share price falls in March to start locking in profits and to reduce the portfolio’s overall short exposure in April.
Whilst markets rose in May, the portfolio benefitted from some strong stock and industry specific updates which aided performance and more importantly added support to some of the arguments we have put forward recently regarding the acceleration in digital transformation we expect to occur. Not only has this benefitted the Company recently, but the scale and speed of these industrial trends are the most powerful we as a team believe we’ve witnessed in our professional careers, so the long-term outlook for some of our holdings we believe is particularly compelling.
A number of the largest contributors to performance were companies benefitting from the digital migration. For example, Future (a media company that migrates print assets to online) delivered strong results, and one of our US holdings, Chegg (an online educational platform) delivered an emphatic “beat and raise” with revenue growth and subscriber additions both accelerating to c.35%, comfortably ahead of forecasts, illustrating Chegg’s strong position in the virtual education operating environment. Away from the theme of digital transformation, shares in Games Workshop, the creator of the Warhammer miniatures game continued to recover.
Turning to the month’s top detractors, the biggest detractor was from our long position in Countryside Properties, which delivered a disappointing update reflecting a sharp slowdown in land sales. Breedon was also a detractor, albeit it was a top contributor last month, so we attribute the recent give back in performance to nothing other than some profit taking. Given the markets continual rise during May, most of the largest detractors to performance were positions that we do not own that rallied through the month, often from a position of material share price weakness, and we would generalise these as shares or industries we don’t think have attractive long-term futures so we are not interested in pursuing them for short-term positioning reasons. We acknowledge that should the rally in some of these types of shares persist, that could be a drag on our relative performance, but we believe it is much better we stick to companies and industries we think have fantastic long-term futures due to the inherent strength and differentiation of their business models or the secular trends they are exposed to, or indeed in some cases leading.
In summary, May was another strong month for the Company, in absolute and relative terms, and while this has been a challenging period for equity markets in absolute terms, we are ahead of the benchmark on both a calendar and financial year to date basis. We really believe that during the month of May we have seen some really remarkable company statements supporting some of our high conviction views about changing industry dynamics. These do suggest that the level of industry change is probably accelerating at this time, and so we think that there are some important themes that should deliver well for the Company over the coming quarters and years. In terms of COVID-19, the improving newsflow on the virus and the easing of restrictions has the potential to benefit depressed sectors like Consumer Services and Financials. There has been a lot of disruption here and so we will have to be particularly vigilant in distinguishing between short-term share price movements against the real outlook for the businesses cash earnings. Overall though, we feel enthused by the positive developments in some key industries as this suggests that the virus crisis may actually have acted as a catalyst for change and one which will benefit the portfolio in due course. As a result, we have continued to add risk back to the portfolio, increasing both the net and gross positions during the month. We thank shareholders for their ongoing support.
1Source: BlackRock as at 31 May 2020
To learn more about the BlackRock Throgmorton Trust plc please follow this link: blackrock.com/uk/thrg
