Portfolio Update

BLACKROCK SMALLER COMPANIES TRUST PLC (LEI: 549300MS535KC2WH4082)
 

All information is at 31 December 2018 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*	-4.5	-17.6	-13.5	23.7	40.8
Share price*	-1.6	-16.4	-8.0	20.6	31.1
Numis ex Inv Companies + AIM Index	-5.4	-15.2	-18.1	6.2	4.0

*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):	1,298.63p
Net asset value Capital only(debt at fair value):	1,291.27p
Net asset value incl. Income(debt at par value)1:	1,317.88p
Net asset value incl. Income(debt at fair value)1:	1,310.52p
Share price	1,200.00p
Discount to Cum Income NAV (debt at par value):	8.9%
Discount to Cum Income NAV (debt at fair value):	8.4%
Net yield4:	2.3%
Gross assets2:	£675.7m
Gearing range as a % of net assets:	0-15%
Net gearing including income (debt at par):	2.9%
2018 Ongoing charges ratio (actual)3	0.7%
2018 Ongoing charges ratio (restated)3:	0.8%
2018 Ongoing charges ratio (including performance fees)3	1.0%
Ordinary shares in issue5:	47,879,792

1. includes net revenue of 19.25p

2. includes current year revenue

3. As reported in the Annual Financial Report for the year ended 28 February 2018, the ongoing charges ratio is calculated as a percentage of net assets and using operating expenses, excluding performance fees, finance costs and taxation. As announced on 17 April 2018, with effect from 1 March 2018 the Company’s management fee arrangements have changed. Under the new fee basis BlackRock receives an annual fee which is calculated based on 0.60% in respect of the first GBP 750 million of the Company's total assets less current liabilities, reducing to 0.50% thereafter. The performance fee has been removed. This will impact the Ongoing Charges ratio for the Company. The restated Ongoing Charges Ratio for the year to 28 February 2018 had the new fee arrangements been in place for the full year is estimated to have been 0.77% on this basis.

4. 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 final dividend of 16.00 pence per share, (announced on 27 April 2018, ex-dividend on 17 May 2018) and the interim dividend of 12.00 pence per share (announced on 29 October 2018 and gone ex-dividend on 8 November 2018)

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

Sector Weightings	% of portfolio
Industrials	30.6
Financials	23.4
Consumer Services	13.7
Health Care	7.5
Basic Materials	6.6
Consumer Goods	6.3
Oil & Gas	6.1
Technology	5.4
Utilities	0.4
	-----
Total	100.0
	=====

Ten Largest Equity Investments
Company	% of portfolio
4imprint Group	2.2
Robert Walters	2.1
IntegraFin	2.0
Zotefoams	2.0
YouGov	1.9
Big Yellow	1.9
Central Asia Metals	1.8
Liontrust Asset Management	1.7
Advanced Medical Solutions	1.7
Diversified Gas & Oil	1.6

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

During December the Company’s NAV per share fell by 4.5% to 1,298.63p on a capital only basis, whilst our benchmark index fell by 5.4%; the FTSE 100 Index fell by 3.6% on a capital only basis.

The market falls that started at the beginning of October continued throughout December as disappointing economic data from around the world sparked further fears of a slowdown in global growth. While in absolute terms the Company’s NAV fell during the month, we were able to outperform the benchmark. The falls during December were not as focussed in growth shares, which were the hardest hit in prior months, while we also had a number of positive updates from a number of companies in our portfolio.

Shares in Diversified Gas & Oil rallied after the company issued a trading update, announcing that 2018 results would be “materially ahead” of current market expectations. Management highlighted the strong performance of recent acquisitions and the progress made with asset integration. The company is focused on growth both organically and through acquisitions of mature, low risk wells, enhancing operations and driving efficiencies to increase profitability. Stock Spirits, a leading producer of premium brand spirits and liqueurs that are principally sold in Eastern Europe rallied after reporting solid results showing a period of strong growth, particularly in Poland. Shares in the UK investment platform AJ Bell, which we purchased at the IPO (Initial Public Offering) during December made a strong start and Integrafin, another fast-growing investment platform, also made a positive contribution during the month. Other notable contributors included Zotefoams and recruiter Robert Walters.

Fashion brand Superdry fell after the company issued a profit warning, highlighting that unseasonably warm weather during November and December had impacted sales of cold weather-related products, for example hooded jumpers and coats, which the company is heavily reliant on. Earnings within the business have been more volatile than anticipated and dependant on the weather while the consumer environment remains challenged. We had been reducing the holding and consequently the relative impact on performance was limited. We have subsequently fully exited the position.

Our current view is that the recent period of volatility has been more of a correction than the start of a sustained period of GDP (Gross Domestic Product) weakness. Whilst this has been a long cycle there are few of the traditional signs we would expect ahead of a recession, with the banking sector remaining well capitalised. As is often the case during these periods of heighted risk and market nervousness, optically expensive growth businesses that have performed well tend to be the first shares to suffer the falls. However one of our investment criteria is balance sheet strength, so should uncertainty persist we would expect investors to shelter in financially strong businesses. We do however recognise that elevated levels of volatility may persist as economic uncertainty increases and the range of possible outcomes remains wide. As noted in recent announcements, gearing has therefore been reduced and remains below historical average levels.

24 January 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.