Portfolio Update

BLACKROCK SMALLER COMPANIES TRUST PLC (LEI: 549300MS535KC2WH4082)
 

All information is at 30 September 2019 and unaudited.
Performance at month end is calculated on a capital only basis

	One month	Three months	One  year	Three  years	Five  years
Net asset value*	0.9	-0.6	-6.6	34.3	66.7
Share price*	-2.1	-4.4	-3.8	47.9	76.7
Numis ex Inv Companies + AIM Index	1.2	-1.9	-10.0	6.8	17.1

*performance calculations based on a capital only NAV with debt at par, without income reinvested. Share price performance calculations exclude income reinvestment.

Sources:  BlackRock and Datastream

At month end
Net asset value Capital only (debt at par value):	1,471.94p
Net asset value Capital only (debt at fair value):	1,458.39p
Net asset value incl. Income (debt at par value)1:	1,498.32p
Net asset value incl. Income (debt at fair value)1:	1,484.77p
Share price	1,380.00p
Discount to Cum Income NAV (debt at par value):	7.9%
Discount to Cum Income NAV (debt at fair value):	7.1%
Net yield2:	2.3%
Gross assets3:	£767.1m
Gearing range as a % of net assets:	0-15%
Net gearing including income (debt at par):	3.4%
2019 Ongoing charges ratio4:	0.7%
Ordinary shares in issue5:	47,879,792

1. includes net revenue of 26.38p.

2. Yield calculations are based on dividends announced in the last 12 months as at the date of release of this announcement and comprise of the interim dividend of 12 pence per share (announced on 29 October 2018, ex-dividend on 8 November 2018) and the final dividend of 19.20 pence per share, (announced on 3 May 2019, ex-dividend on 16 May 2019).

3. includes current year revenue.

4. As reported in the Annual Financial Report for the year ended 28 February 2019 the Ongoing Charges Ratio (OCR) was 0.7%. The OCR is calculated as a percentage of net assets and using operating expenses, excluding performance fees, finance costs and taxation.

5. excludes 2,113,731 shares held in treasury.

Sector Weightings	% of portfolio
Industrials	30.7
Financials	21.8
Consumer Services	15.8
Consumer Goods	9.3
Health Care	6.9
Technology	5.3
Basic Materials	5.1
Oil & Gas	4.3
Telecommunications	0.8
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Total	100.0
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Ten Largest Equity Investments
Company	% of portfolio
4imprint Group	2.6
YouGov	2.3
IntegraFin	2.1
Fuller Smith & Turner – A Shares	1.8
Johnson Service Group	1.8
Big Yellow	1.7
Polar Capital Holdings	1.6
Avon Rubber	1.6
Workspace Group	1.6
Central Asia Metals	1.5

Commenting on the markets, Roland Arnold, representing the Investment Manager noted:

During September the Company’s NAV per share rose by 0.9%¹ to 1,471.94p, whilst our benchmark index,  Numis ex Inv Companies + AIM Index, returned 1.2%¹; the FTSE 100 Index rose by 2.8%¹ (all calculations are on a capital only basis).

The UK market rose in September, helped by signs of easing US-China trade tensions and positive surprises in economic data. Despite market rises, September was a volatile month, with a sharp rotation in market leadership, away from growth shares and into value shares. Performance during the month therefore lagged the market as a number of our holdings in growth companies that have performed very well in the financial year to date were impacted by the rotation.

Of the largest five detractors to performance during the month, we would attribute all but one to falling as a result of the market rotation described above; all these stocks had performed very strongly in recent months. The largest detractor, which fell for stock specific reasons, was our holding in Advanced Medical Solutions. The shares fell after the company reported a fall in profits, despite growing revenues, as a result of rising costs in planned R&D (Research & Development) activity. In addition, and as previously mentioned, sales of its Liquiband product in the US fell due to customer destocking and competitor activity, however management expect this to recover next year.

On the positive side, Workspace Group recovered some of the share price falls from the previous month and 4imprint continued to rise, having reported strong results back in July. Shares in video game developer, Team17, which we purchased at IPO (Initial Public Offering) in May, rose after the company reported strong interim results during the month. Earnings and revenues grew by 36% and 48% respectively, while management commented on the positive outlook and confidence in meeting expectations for the full year which will be second-half weighted.

In summary, the rotation away from growth and into value shares created a challenging environment for the portfolio during the month given our style bias towards quality and growth. In the year to date the portfolio has delivered strong absolute and relative performance by focussing on financially strong companies with strong market positions that we believe can continue to thrive regardless of the economic environment. However, as is often the case during style reversals similar to that which occurred during September, those businesses that have performed well tend to be the first to suffer. Importantly, we have been through these events many times in the past, and while painful in the short-term, we do not feel compelled to change portfolio positioning as we remain confident in the outlook for the companies in our portfolio. In the coming weeks we believe that the rotation away from growth will present us with opportunities to add to some of our long-term core holdings at attractive valuations, as has been the case after similar rotations in recent years.

¹Source: BlackRock as at 30 September 2019

5 November 2019

ENDS
 

Latest information is available by typing www.blackrock.co.uk/brsc 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.