Portfolio Update

BLACKROCK SMALLER COMPANIES TRUST PLC (LEI: 549300MS535KC2WH4082)
 

All information is at 31 December 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*	8.8	14.5	29.7	47.2	87.9
Share price*	9.2	24.1	42.7	78.1	122.6
Numis ex Inv Companies + AIM Index	7.1	11.9	18.8	15.7	33.1

*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):	1,684.88p
Net asset value Capital only (debt at fair value):	1,674.81p
Net asset value incl. Income (debt at par value)1:	1,705.91p
Net asset value incl. Income (debt at fair value)1:	1,695.85p
Share price	1,712.00p
Premium to Cum Income NAV (debt at par value):	0.4%
Premium to Cum Income NAV (debt at fair value):	1.0%
Net yield2:	1.9%
Gross assets3:	£897.8m
Gearing range as a % of net assets:	0-15%
Net gearing including income (debt at par):	2.0%
2019 Ongoing charges ratio4:	0.7%
Ordinary shares in issue5:	48,554,792

1. includes net revenue of 21.03p.

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 final dividend of 19.20 pence per share, (announced on 03 May 2019, ex-dividend on 16 May 2019) and the interim dividend of 12.8 pence per share (announced on 5 November 2019, ex-dividend on 14 November 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 1,438,731 shares held in treasury.

Sector Weightings	% of portfolio
Industrials	32.8
Financials	20.8
Consumer Services	18.2
Consumer Goods	9.2
Health Care	6.1
Technology	5.2
Basic Materials	4.1
Oil & Gas	3.0
Telecommunications	0.6
	-----
Total	100.0
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Ten Largest Equity Investments
Company	% of portfolio
4imprint Group	2.6
YouGov	2.4
IntegraFin	2.2
Avon Rubber	1.8
Johnson Service Group	1.7
Watches of Switzerland	1.6
Workspace Group	1.6
Bovis Homes Group	1.5
Central Asia Metals	1.4
Oxford Instruments	1.4

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

During December the Company’s NAV per share rose by 8.8%¹ to 1,684.88p on a capital only basis, whilst our benchmark index, Numis ex Inv Companies + AIM Index, returned 7.1%¹; the FTSE 100 Index rose by 2.7%¹ (all calculations are on a capital only basis).

Equity markets continued to rise through to the end of 2019, responding positively to the signs of progress on US/China trade and furthermore by the outcome of the UK General Election, where Boris Johnson’s Conservative party secured a strong majority in Parliament. Unsurprisingly Sterling continued to rise on the back of the result of the election, leading to domestic businesses and UK small & mid-cap companies outperforming during the month.

While UK domestics drove the market higher during the month, the Company’s outperformance came from a broad range of businesses rather than a basket of sterling earners. For example, 4imprint, which generates almost 100% of its earnings from the US, was a top contributor to performance. The largest contributor to performance during the month was specialist sustainable investing fund manager, Impax Asset Management. The shares rallied in response to strong full year results that were ahead of expectations, as investor demand for sustainable products continues build traction. Watches of Switzerland reported strong interim results with upgrades, whilst also announcing the acquisition of four new showrooms. Shares in The Pebble Group rose following its IPO (Initial Public Offering) during the month, and also  benefitted from some of our more domestic holdings including Renew and Ibstock.

Of the largest detractors to performance, a number were domestic facing businesses that we do not own, which simply received a post-election boost, for example, Dunelm and Frasers Group (previously Sports Direct). Importantly, and as we have alluded to in recent reports, the result of the election does not change our view on many of these businesses and we will not be chasing any sterling led rallies. Shares in AB Dynamics, the manufacturer of testing products for the automotive industry, fell in response to full year results which although highlighted strong profit growth, warned of margin constraints in their business and challenges facing their customers in the automotive industry.

The significant Conservative majority in the General Election should begin to remove the cloud that has been hanging over the UK equity market. As a result of the increased stability in Government, the political risk premium is certainly eroding and we would expect this to clear the way for fundamentals to be the key driver to returns.  In the mid to long-term, this outcome could result in increased business confidence, and subsequently result in a return/uptick in corporate spending. However, while the UK is undoubtably in better position post the election, the path to Brexit remains complicated. Meanwhile US/China trade negotiations, which we believe will be a far more significant driver of equity markets, may cause further volatility. We therefore remain focussed on bottom-up company fundamentals, with a bias towards high quality market leading global businesses, which are operating in attractive end markets and run by strong management teams.

¹Source: BlackRock as at 31 December 2019

23 January 2020
 

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.