Throgmorton Trust Regulatory News (THRG)

The information contained in this release was correct as at 31 October 2023.  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 31 October 2023 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 2022 final dividend declared on 10 February 2023 and paid on 31 March 2023, together with the Interim Dividend declared on 07 July 2023 paid on 29 August 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 6,945,267 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).

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

The Company returned -6.9% in October, while the Numis Smaller Companies plus AIM (excluding Investment Companies) Index, benchmark returned -7.0%.1

October provided a difficult backdrop with the US 10-year yield hitting more than 5% for the first time in 16 years, with sentiment challenged by rates, geopolitical conflict, and mixed earnings. This contributed to broad market falls, with the UK small & mid cap universe performing worse than both UK large cap stocks, and global equities more broadly, despite stable earnings and UK macro data points in-line with expectations. The underperformance of UK mid-caps versus large caps continues, even reaching an unprecedented 40% in October, and with the forward price to earnings multiple below 10x this marks a 12-year low and isn’t too far from an all-time low, so arguably a significant amount of bad news is already priced into this universe. Against the backdrop of market weakness, particularly in UK small & mid-caps, the short book made a positive return while the long book marginally detracted for performance during the period.

The largest contributor to performance during the month was YouGov, which rallied sharply (reversing its recent losses) after delivering in-line results and confirming full year expectations. Shares in Qiniteq Group rose after the company reiterated full year guidance, reporting significant organic revenue growth, record first half order intake of £950m and improving margins. Shares in Computacenter outperformed the falling market during the month, following the impressive H1 results reported in September. The company also provided their Q3 trading update at the end of October which highlighted continued strength in both the US and Germany, with a strong pipeline for Q4, which is the company’s largest quarter.

Many of the detractors were UK mid-cap companies that fell in the risk off environment as opposed to any stock specific news. However, one company that did indeed fall on a negative stock development was our biggest detractor - SIG – which delivered a profit warning as trading conditions in its end markets remain challenging. This was always a higher risk purchase for us as we have bought into the medium-term profit potential for a business turnaround under a new management team that we know well and hold in high regard (the CEO successfully turned around BSS and Grafton). A near-term set back in profits is clearly unhelpful and doesn’t improve sentiment but also doesn’t change the recovered earnings potential in our view, strengthen by our interactions with management. We think the turnaround, if executed, points to significant upside so we have retained our position and have added tactically. The second biggest detractor was Grafton Group, which fell, no doubt in part due to SIG but also broader UK mid-cap malaise. Similarly, Oxford Instruments was the third biggest detractor as the shares continued to de-rate through the month (following the month end the company delivered a positive update in early November and the share prices has since rebounded).

In summary, October was another challenging month, but one that should be viewed in the broader context of market turbulence from geo-political conflicts and rising bond yields. The last couple of months have certainly presented their challenges, but we continue to feel confident in the portfolio’s positioning, overall balance, and the increasing role that stock specifics are having. We are also pleased that the short book is providing more protection for the Company in periods of relative market turbulence. We retain the strong view that there are many significant mis-pricings in the market, particularly within UK mid-cap stocks, now at 12-year low valuations, despite generally robust earnings and strong balance sheets and indeed exciting long-term growth prospects. As stated in recent updates, we are optimistic in the prospects for holdings within the portfolio, but we remind ourselves that the backdrop remains volatile (October is a prime example of this), and this is reflected in the gross and net which are around 115% and 108% respectively.

1Source: BlackRock as at 31 October 2023

23 November 2023

ENDS

Latest information is available by typing www.blackrock.com/uk/thrg on the internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV terminal). Neither the contents of the Manager’s website nor the contents of any website accessible from hyperlinks on the Manager’s website (or any other website) is incorporated into, or forms part of, this announcement.