Portfolio Update

The information contained in this release was correct as at 30June2022.  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 30 June 2022 and unaudited.
Performance at month end is calculated on a Total Return basis based on NAV per share with debt at fair value
 

	One month %	Three months %	One  year %	Three  years %	Five  years %
Net asset value	-12.0	-17.7	-24.8	9.4	24.4
Share price	-12.7	-20.7	-32.4	-4.6	21.0
Numis ex Inv Companies + AIM Index	-9.4	-12.3	-19.0	10.1	11.1

Sources:  BlackRock and Datastream

At month end

Net asset value Capital only (debt at par value):	1,490.17p
Net asset value Capital only (debt at fair value):	1,512.52p
Net asset value incl. Income (debt at par value)1:	1,508.90p
Net asset value incl. Income (debt at fair value)1:	1,531.24p
Share price:	1,290.00p
Discount to Cum Income NAV (debt at par value):	14.5%
Discount to Cum Income NAV (debt at fair value):	15.8%
Net yield2:	2.7%
Gross assets3:	£821.3
Gearing range as a % of net assets:	0-15%
Net gearing including income (debt at par):	1.0%
Ongoing charges ratio (actual)4:	0.7%
Ordinary shares in issue5:	48,829,792

1. Includes net revenue of 18.73p
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 13.0 pence per share (announced on 2 November 2021, ex-dividend on 11 November 2021, and pay date 2 December 2021), and the final ex-dividend of 22.00 pence per share (announced on 29 April 2022, ex-date on 12 May 2022, and pay date 17 June 2022).
3. Includes current year revenue.
4. As reported in the Annual Financial Report for the year ended 28 February 2022 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 ordinary shares held in treasury.

Sector Weightings % of portfolio Industrials 29.7 Consumer Discretionary 21.8 Financials 12.9 Technology 9.3 Consumer Staples 6.1 Energy 6.0 Basic Materials 5.2 Health Care 4.6 Telecommunications 2.5 Real Estate 1.3 Utilities 0.6 ----- Total 100.0 ===== Country Weightings % of portfolio United Kingdom 99.4 United States 0.6 ----- Total 100.0 =====

Ten Largest Equity Investments Company	% of portfolio
CVS Group	2.8
Gamma Communications	2.5
Treatt	2.2
Qinetiq Group	2.1
Auction Technology	2.1
Watches of Switzerland	2.0
4imprint Group	2.0
Spirent Communications	1.9
Oxford Instruments	1.9
Bloomsbury Publishing	1.9

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

During June the Company’s NAV per share fell by -12.0%¹ to 1,531.24p on a total return basis (with debt at fair value), while our benchmark index fell -9.4%¹; for comparison UK large caps continued to outperform during the month with the FTSE 100 Index falling -5.5%¹ on a total return basis.

Equities fell in June as tightening monetary policy from central banks and mounting fears of recession sent shockwaves through markets, with UK small & mid-caps being once again disproportionately impacted. The Federal Reserve raised rates by 75bps, the largest hike since 1994, the Bank of England raised rates a further 25bps to 1.25%, the Swiss National Bank announced a surprise 50bps hike from -0.75% to -0.25%, and the European Central Bank announced it would halt asset purchases. The tightening and easing of COVID-19 restrictions in China added to volatility. The month began with mass testing in Shanghai and Beijing creating negative sentiment early in the period. This was followed by some relaxation of restrictions later in the month which provided some relief for risk assets.

Share prices and earnings continued to move in different directions during the month, as investors generally ignored positive statements and continued to sell. For example, YouGov fell back having been strong in the prior month and Watches of Switzerland continued to fall despite the company providing a strong update in May. Not all consumer shares are the same, and whilst we, like many investors, have chosen to reduce our exposure to the sector, many shares are now discounting scenarios we see as too pessimistic. Watches of Switzerland has attractive industry dynamics where demand for luxury watches far outweighs the restricted supply leading to multi-year waiting lists which provide a level of revenue visibility that is unusual for a retailer. Shares in oil services group Hunting fell after the company guided to full year profits that were below analysts’ expectations. Management did however highlight a positive outlook for the industry, with many expecting this to be a multi-year upcycle.

Significant positive contributions in the month came from stocks that we didn’t own which performed relatively worse than the benchmark (for example John Wood Group, Boohoo and Hammerson). Other top stock contributors included telecoms testing business, Spirent Communications, and oil & gas business, Serica Energy.

The ongoing conflict between Russia and Ukraine remains a source of uncertainty just as the world appeared to be emerging from the challenges caused by COVID-19 over the past two years. It goes without saying the situation remains extremely fluid with little clarity on how things will play out, but it is likely that market volatility will remain high as ultimately, the range of outcomes has significantly widened. In the medium-term, the conflict adds further inflationary pressures, and it brings with it questions over the path for monetary policy. Despite the new challenges that have emerged we have not significantly changed portfolio positioning. We feel that the best investments in the current environment are similar to those held during the COVID-19 pandemic; high quality, nimble businesses, operated by entrepreneurial management teams, with strong market positions and resilient cash-flows. Our view on consumer spending has moderated in recent months given the increasing inflationary pressures that are faced by households. As a result, we have been reducing some holdings at the margin, and we will use the proceeds to add to some of our highest conviction holdings that we feel have been oversold in the recent sell-off. Whilst the confusing and chaotic backdrop brings challenges, we believe the businesses we invest in have the capability to rise above the short-term noise. We thank shareholders for your ongoing support and look forward to providing further confirmation of the investment cases that we are exposed to within the portfolio in the coming months.

¹Source: BlackRock as at 30 June 2022

22 July 2022

ENDS
 

Latest information is available by typing www.blackrock.com/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.