Throgmorton Trust Regulatory News (THRG)

BlackRock Throgmorton Trust Plc - Portfolio Update

PR Newswire

London, March 22

The information contained in this release was correct as at 28 February 2021. Information on the Company’s up to date net asset values can be found on the London Stock Exchange Website at:

https://www.londonstockexchange.com/exchange/news/market-news/market-news-home.html. 

BLACKROCK THROGMORTON TRUST PLC (LEI: 5493003B7ETS1JEDPF59) 

All information is at 28 February 2021 and unaudited.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 2020 interim dividend declared on 23 July 2020 and paid on 26 August 2020, together with the 2020 final dividend declared on 10 February 2021 and due to be paid on 01 April 2021.

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).

1.These percentages reflect portfolio exposure gained from both the equity holdings and exposure through contracts for differences where relevant.

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

During February the Company returned 2.7%1, while its benchmark, the Numis Smaller Companies plus AIM (excluding Investment Companies) Index, returned 4.6%1. The long book rose during the month but lagged the benchmark, while the short book modestly detracted (both on a gross basis).

After a strong start to the month, notably buoyed by the reporting season where many of our holdings delivered very positive updates, the Company’s performance then ebbed towards the end of the month as bond yields rose and growth shares fell back. The rise in sterling weighed on some of our UK listed businesses that generate a high proportion of their earnings from overseas, whilst several our short positions continued to squeeze higher. The valuations of many shares currently in vogue in the “reopening trade” continues to perplex us considering the high multiple of full year 2019 profits many now trade on, in addition to rising debts and share counts, but we have maintained our discipline over position sizing. Conversely many growth shares have de-rated in the month, especially after big profit upgrades, and so now look incredibly attractive to us. Therefore, February has proved an opportunity to add to positions.

As mentioned, results season has generally been very supportive of our investment cases. Many of the top contributors for the month are in response to strong specific updates. The largest contributor was MoonPig, which followed its successful IPO (Initial Public Offering) with a strong trading update at the end of the month revealing continued growth in all key revenue drivers: customer growth, order frequency and order value. We have continued to add to the position. Electrocomponents also delivered a strong update as the recovery in their end markets and their ongoing share gains is powering accelerated growth. Shares in Ergomed continued to push higher following its January trading update which highlighted positive trading in its pharmacovigilance and its Clinical Research Organisation, which continued into year end and as a result 2020 full year earnings will be ahead of expectations.

Encouragingly, there were no negative stock specific news flow which drove the largest detractors during the month, so the underlying cause was the ongoing rotation away from growth shares that had performed well into reopening beneficiaries, regardless of the underlying businesses fundamentals. This is evidenced with the three largest detractors, namely Games Workshop, Gamma Communications and IntegraFin, which we think have only suffered in the very short-term for no other reason than they’ve been such great performers to date so have succumbed to some profit taking. The fundamentals for all three remain very strong and we retain high conviction in these positions.

There has been much discussion about rising bond yields and rising discount rates for equities. We maintain our view that any rise in inflation will be tolerated by central bankers so we do not expect material rises in policy rates. To the extent that rising long-term yields in bond markets start to impinge on recovery prospects we would expect central banks to intervene – a message that has already started to seep out. Consequently, we don’t expect higher rates to be an enduring phenomenon. Perhaps more importantly, there is nothing we’ve seen to make us change course or lose conviction in our investment cases, and for the most part trading and outlooks were extremely strong through the fourth quarter results. The recent market wobble has allowed us to add to these holdings at good prices. Many of our UK growth companies, both domestic and international, have now de-rated in February given a higher profit outlook while investors have sought out reopening plays instead. This has created some really attractive price dislocations, enabling us to continue to add to the likes of Gamma Communications, Games Workshop and Pets At Home.

We think the portfolio is in great shape and are positive on positioning. We have been busy engaging with the management teams of our investments during results season and engaging with several upcoming IPOs. Our main takeaway from February has been the strength of reporting and the strong outlook for profit growth. This is positive as it underpins long-term share price returns and gives us reassurance that we are on the right track. In that sense February now looks a great source of opportunity and we look forward with confidence to the rest of the year. 

1Source: BlackRock as at 28 February 2021

22 March 2021

ENDS

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