Portfolio Update

The information contained in this release was correct as at 31 October 2020.  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 SMALLER COMPANIES TRUST PLC (LEI: 549300MS535KC2WH4082)
 

All information is at 31 October 2020 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*	1.2	3.6	-4.1	-4.7	36.7
Share price*	7.5	7.5	-10.3	2.1	41.6
Numis ex Inv Companies + AIM Index	0.8	5.6	-4.3	-15.4	8.4

*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):	1,408.94p
Net asset value Capital only (debt at fair value):	1,390.90p
Net asset value incl. Income (debt at par value)1:	1,415.69p
Net asset value incl. Income (debt at fair value)1:	1,397.65p
Share price	1,312.00p
Discount to Cum Income NAV (debt at par value):	7.3%
Discount to Cum Income NAV (debt at fair value):	6.1%
Net yield2:	2.5%
Gross assets3:	£760.9m
Gearing range as a % of net assets:	0-15%
Net gearing including income (debt at par):	4.1%
Ongoing charges ratio4:	0.7%
Ordinary shares in issue5:	48,829,792

1. includes net revenue of 6.75p.

2. Yield calculations are based on dividends announced in the last 12 months as at the date of release of this announcement, and comprise the first interim dividend of 12.80 pence per share (announced on 5 November 2019, ex-dividend on 14 November 2019) and the second interim dividend of 19.70 pence per share (announced on 3 June 2020, ex-dividend on 11 June 2020).

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 1,163,731 shares held in treasury.

Sector Weightings	% of portfolio
Industrials	27.4
Financials	19.1
Consumer Services	15.4
Consumer Goods	11.7
Technology	11.4
Health Care	6.3
Basic Materials	5.4
Telecommunications	1.3
Oil & Gas	1.0
Materials	1.0
	-----
Total	100.0
	=====

Country Weightings	% of portfolio
United Kingdom	97.3
United States	1.3
Singapore	0.6
France	0.5
Guernsey	0.3
	-----
Total	100.0
=====
Company	% of portfolio
YouGov	2.7
Watches of Switzerland	2.1
Pets at Home	1.9
Games Workshop	1.9
IntegraFin	1.9
Avon Rubber	1.8
Team 17	1.8
Impax Asset Management	1.8
Treatt	1.7
Breedon	1.7

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

During October the Company’s NAV per share rose by 1.2%¹ to 1,408.94p, outperforming our benchmark index which returned 0.8%¹; for comparison the FTSE 100 Index fell by -4.9%¹ (all calculations on a capital only basis).

Global equity markets fell in October as renewed coronavirus concerns (with further lockdowns imposed across several European countries) and uncertainty in the run up to the US Presidential Election continued to weigh on investor sentiment. However, UK small and mid-caps bucked the trend of their larger peers and finished in positive territory as optimistic messaging around Brexit trade negotiations gave the pound a modest boost thereby helping the more domestic UK small & mid cap market.

We have highlighted in recent announcements the sustained delivery of a number of our core holdings during the pandemic and October saw a continuation of this trend. The largest positive contributor during the month was YouGov, which is also the portfolio’s largest single holding. The company continues to deliver strong revenue growth, with its products and services experiencing high demand as clients are increasingly looking to YouGov’s vast amount of consumer data and market leading analytical tools to help make informed decisions while navigating the current challenging environment. Shares in Watches of Switzerland rose in response to an impressive second quarter trading update which reported better than expected sales, resulting in upgrades to full year guidance. Strong UK domestic demand has more than offset the fall in sales from tourist and airport channels, while momentum in the US business has also seen an acceleration. It is worth noting earnings expectations for the current financial year are now higher than they were pre-COVID-19. Bloomsbury Publishing performed well after the company reported strong interim results with growth across all divisions and resumed its interim dividend. The business is heavily second half weighted, driven by consumer expenditure over the Christmas period and academic titles at the beginning of the academic year, therefore the strong growth of the first half looks well set to accelerate for the full year.

Shares in defence technology business Qinetiq drifted over the month as worries about the outlook for defence spending weighed on the sector. Shares in Next Fifteen Communications gave back some of its recent strong performance as the rotation towards value areas of the market which occurred during October, was somewhat funded by many growth shares that have performed well recently. Importantly, Next Fifteen continues to trade well with the company raising full year guidance with its half-year results.

The ongoing COVID-19 pandemic coupled with political developments in the form of the US Presidential Election and Brexit trade negotiations have been key sources of volatility in recent months, and resolution on these three issues is key for equity markets to return to some level of rational behaviour. At the time of writing, we now have clarity on the likely outcome of the US election, certainty of which was far more important to us than the actual outcome. We have also seen positive results on the development of a vaccine for the coronavirus. While there remain a number of questions, most notably around the implementation of mass vaccinations, the recent trial results remove that left tail risk that no workable vaccine would be efficacious enough to be approved. Finally, regarding Brexit, our view remains that whichever direction Brexit takes isn’t of great importance to the companies in our portfolio over the mid to long-term. Companies have had a long time to implement Brexit contingency plans, and particularly smaller companies, we believe will be able to react and adapt fastest to whatever form Brexit takes.

Therefore, while the outlook remains uncertain, we do believe that the recent developments discussed above provide some of the certainty that the market has been looking for, which in turn should be positive for our strategy as stock specifics reassert themselves as the major return driver. Market volatility presents us with a fantastic investment opportunity. The Company’s investment strategy is focussed on quality growth investments in smaller companies, a style that has demonstrably worked for the long-term, and historically periods of sudden underperformance, such as this, have proven to be excellent investment opportunities.

¹Source: BlackRock as at 31 October 2020

23 November 2020

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.