BlackRock Throgmorton has published results for the year ended 30 November 2014 that show the company’s net asset value return marginally behind that of the Numis Smaller Companies excluding AIM (excluding Investment Companies) Index; the NAV returned -1.1%, the Index -0.6%. The share price return though was -5.7%, reflecting a widening of BlackRock Throgmorton’s discount. The full year dividend was increased by 10% to 4.4p, paid from earnings totalling 5.19p.
The managers’ report goes into the major contributors to the fund’s performance in some detail and so, for expediency, we reproduce this below:
“Individually the largest detractor from relative performance during the year came from our holding in Blinkx, a provider of web based video clips which was out of favour throughout the year. The company indicated that revenue growth had slowed from the high levels previously achieved; forecasts were cut and the shares fell sharply. We sold our holding.
Several other stocks performed poorly, including Xaar, which had been one of our best performers. Xaar has struggled partly because the scale and speed of its previous success was impossible to replicate, but also because competitors are launching printheads that are also good and attractively priced. We reduced our position, recognising the greater risks near term. Ithaca Energy suffered as the oil price fell; it has debt but its oil production is significant and growing, and some of it is hedged at higher oil prices than currently prevail. Shares in ITE fell sharply given its exposure to Russia and the former Soviet Union where it generates most of its revenues from the exhibitions it organises. We sold our holding. All of these stocks were held in both the long only and the CFD portfolios.
We had some excellent performers during the year, notably Hutchison China Meditech, Optimal Payments, Workspace, CVS Group and Avon Rubber. Hutchison China Meditech develops, manufactures and markets a range of prescription and over-the-counter botanical based pharmaceutical products. Revenues, all of which arise in China, continue to grow well. The company also has a drug research and development business which is focused mainly on developing therapies in oncology. Some of the clinical results that they are seeing are very encouraging.
Optimal Payments announced strong results and management remain confident. Workspace has experienced strong demand for its flexible office space, most of which is located on the periphery of Central London. Occupancy and rents have continued to improve and the yield at which the portfolio is valued has fallen increasing the capital value of the properties. We still see scope for further improvement on all fronts. CVS own and operate veterinary surgeries around the UK. It is a well run business which has improved its systems, buying and customer care as its scale has grown.
Avon Rubber had strong results, with earnings being upgraded significantly. The company continues to win new contracts both in its protection and defence business and also its milking equipment business. Still relatively small in market capitalisation terms it is very international, a reflection on its ability to provide what its customers really need.
Detracting from these gains was a lack of exposure to companies receiving bid approaches, notably CSR, Synergy Health and New Britain Palm Oil. We have had very little benefit from bids within the portfolio during the year.
Sector allocation benefited from our lack of holdings in the non-life insurance sector; companies selling annuities suffered following the Chancellor’s budget announcement that individuals would no longer be required to convert their pension funds into annuities. Our lack of holdings in the oil services sector was a major benefit although partly offset by being slightly overweight oil producers.
Overall during the year the CFD portfolio lost 1.3% of opening shareholders’ funds. All of this was on the long side with the major contributors being our holdings, or former holdings, in Blinkx, Xaar, Aveva and ITE. Our short CFD book made money during the year with several good contributors especially from short positions in outsourcers and retailers. ”
THRG : Throgmorton hit by widening discount