BlackRock Throgmorton Trust remain reassured with performance of the portfolio

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

All information is at 30 June 2024 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 Deutsche Numis

*With effect from 15 January 2024 the Numis Smaller Companies plus AIM (excluding Investment Companies) Index changed to the Deutsche Numis Smaller Companies plus AIM (excluding Investment Companies).

1. Calculated using the Interim Dividend declared on 07 July 2023 paid on 29 August 2023, together with the Final Dividend declared on 05 February 2024 paid on 28 March 2024

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 12,138,000 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 2023.

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 2023.

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).

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

The Company returned -4.0% in June, while its benchmark, the Deutsche Numis Smaller Companies +AIM (excluding Investment Companies) Index returned -3.2%.¹

Markets were mixed in June, with US indices, on the face of it making positive returns, but this belies another period of narrowing stock market leadership. Indeed, the S&P 500 Equal Weighted Index fell by 0.7%, the Russell 2000 fell by over 1%, and both the UK large cap and mid-cap indices fell between 1% and 2%.

The macro environment remained volatile, with several mixed data points to digest coming out of the US. However, the economic backdrop in the UK continues to improve, with further increases in consumer confidence (multi-year highs), ASDA Income tracker at 3-year high, and with elevated savings rates the consumer has money to spend should they wish. The small retracement in the UK doesn’t seem to us to be data driven, and therefore more likely to reflect something of a holding pattern in the weeks leading into the General Election. The subsequent Labour victory we see as broadly supportive for the UK, particularly for small and mid-caps.

Contributors during the month were spread across a range of companies in various industries, which demonstrates the breadth of positioning within the portfolio. Tatton Asset Management was the largest positive contributor in June. The company reported strong full-year results in June, showing double digit growth in net inflows, as well as growth in clients and IFAs resulting in record AUM for their financial year. Flexible office space provider Workspace rose after reporting stable occupancy at 90% across its estate along with continued rental growth of 8%. The group’s portfolio NAV fell slightly as macro uncertainty and elevated interest rates continued to weigh on property values. However, with the shares trading at circa 30% discount to net asset value and the prospect of falling interest rates amidst an improving economic backdrop we think the potential for NAV growth and re-rating is significant. Another notable contributor was from the recent IPO of Raspberry Pi, a low-cost manufacturer of single board computers which we think has an interesting growth opportunity in industrial end markets driven by IoT (Internet of Things).

The most disappointing detractor was from YouGov, the data products, analytics and marketing business, which delivered a large profit warning citing numerous issues. This is an incredibly disappointing update from a company we have owned for over 10 years. To come so soon after a large US acquisition and management change will always elevate fears, but what we found particularly unsettling was just how quickly (and sharply) trading had deteriorated, only a few weeks after management told us it was improving and their high confidence in their visibility for the full year. In keeping with our disciplines regarding the severity of changes in investment thesis we have sold our position entirely. The only consolation was we had reduced the position ahead of this warning, but a frustrating development nonetheless. Our holding in Zotefoams fell on no stock specific news, just giving back a little of its recent strong gains. Shares in Next 15 also fell after warning of a challenging trading environment impacting the first four months of the year.  

Despite the modest underperformance in the month, we remained reassured with the performance of the portfolio during the difficult period, with June proving a very different month to navigate than May. As mentioned above, we see Labour’s victory in the General Election as a positive for our universe. Despite nothing radical in Labour’s plans, what we should get as a minimum is a period of political stability, which on a relative basis could be crucial when the rest of the world is becoming more uncertain, and particularly given the discounted valuations that many UK small & mid-caps trade on. One area that we would call out is Labour’s housing framework which we think is the most comprehensive and supportive for addressing the long-term issues of supply and planning, so could be a material positive for our positioning in housebuilders and brick manufacturers, both areas we have been adding to. The net of the portfolio is around 112% while the gross is around 116%.

We thank shareholders for your ongoing support.

¹Source: BlackRock as at 30 June 2024

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