Portfolio Update

The information contained in this release was correct as at 30 June 2024.  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 2024 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	-4.0	6.0	12.9	-16.7	21.2
Share price	-3.1	11.2	17.8	-19.2	14.0
Benchmark*	-3.2	5.0	10.0	-13.5	17.6

Sources:  BlackRock and Deutsche Numis

*With effect from 15 January 2024 the Numis Smaller Companies plus AIM (excluding Investment Companies) Index changed to the Deutsche Numis Smaller Companies plus AIM (excluding Investment Companies).

At month end

Net asset value Capital only (debt at par value):	1,537.00p
Net asset value Capital only (debt at fair value):	1,589.61p
Net asset value incl. Income (debt at par value)1:	1,556.75p
Net asset value incl. Income (debt at fair value)1:	1,609.36p
Share price:	1,452.00p
Discount to Cum Income NAV (debt at par value):	6.7%
Discount to Cum Income NAV (debt at fair value):	9.8%
Net yield2:	2.9%
Gross assets3:	£802.7m
Gearing range as a % of net assets:	0-15%
Net gearing including income (debt at par):	12.8%
Ongoing charges ratio (actual)4:	0.7%
Ordinary shares in issue5:	47,099,792

1. Includes net revenue of 19.75p
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 Interim dividend of 15.00 pence per share (announced on 26 October 2023, ex-date on 02 November 2023, and paid 04 December 2023) and the final dividend of 27.00 pence per share (announced on 14 May 2024, ex-date on 23 May 2024, and paid 24 June 2024).
3. Includes current year revenue.
4. The Company’s ongoing charges are calculated as a percentage of average daily net assets and using the management fee and all other operating expenses excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation and certain non-recurring items for year ended 28 February 2023.
5. Excludes 2,893,731 ordinary shares held in treasury.

Sector Weightings % of portfolio Industrials 31.2 Financials 19.2 Consumer Discretionary 16.2 Basic Materials 12.2 Technology 6.6 Consumer Staples 3.3 Health Care 2.8 Real Estate 2.7 Telecommunications 2.6 Communication Services 1.7 Energy 1.5 ----- Total 100.0 ===== Country Weightings % of portfolio United Kingdom 98.1 United States 1.6 Ireland 0.3 ----- Total 100.0 =====

Ten Largest Equity Investments Company	% of portfolio
Hill & Smith	2.6
Gamma Communications	2.6
Breedon	2.4
Workspace Group	2.4
IntegraFin	2.4
4imprint Group	2.1
Chemring Group	2.1
Bloomsbury Publishing	2.1
Baltic Classifieds Group	2.0
Tatton Asset Management	1.9

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

During June the Company’s NAV per share retuned -4.0% to 1,609.36p on a total return basis, while our benchmark index returned -3.2%. For comparison the large cap FTSE 100 Index outperformed small & mid-caps, returning -1.1%.1

Despite market volatility during the month, economic data from the UK continued to show gradual improvements. Inflation fell to the Bank of England's (BoE) 2% target for the first time in three years, leading to speculation about potential rate cuts later in the year. The BoE, however, maintained its current policy, awaiting further economic data before making any changes, which was unsurprising heading into the UK General Election in early July. Meanwhile, both businesses and consumers in the UK remained in a strong position, with business confidence continuing to rise and the ASDA Income tracker hitting a three-year high. Even with a backdrop of gradual improvement, the UK equity market weakened during June, with small & mid-caps continuing to lag larger companies, likely a pre-election market reaction as opposed to any negative sentiment towards the market. The subsequent Labour victory should provide a period of relative political stability, which we see as broadly supportive for the UK and in particular small and mid-caps.

The largest positive contributor in the month was XPS Pensions, which reported a strong fiscal year ending March 31, 2024. Revenue rose 12% to £173.5 million, and adjusted EBITDA increased 13% to £48.5 million. All business divisions grew, and strategic achievements included market share expansion, successful acquisition integration, and new service launches. With reduced net debt and a positive outlook, XPS is well-positioned for future growth in the pensions sector. Shares in Workspace rose after the company reported strong full-year results. Key highlights included a 5.9% rise in net rental income and improved occupancy and rent per sq. feet. CEO Graham Clemett noted robust demand for flexible office spaces in London. The company advanced its development pipeline, refurbishing Salisbury House and opening a suburban London location in Wimbledon, setting the stage for continued growth. Tatton Asset Management was another top contributor, with strong growth in Assets Under Influence (AUI) leading to the company upgrading its growth target to £30 billion AUI by 2029.

The largest detractor was data analytics business, YouGov. The company issued a profit warning during the month, with the company highlighting numerous issues, but most concerning is the slowdown in its data products business, which has been its highest growth and margin area, Furthermore, the recent deal to buy CPS, took the company from a net cash to a net debt position. We had been reducing the holding in recent months and have now fully exited the position. Next 15 Group's share price fell significantly as their trading statement indicated a higher-than-normal weighting to the second half of the fiscal year as customers take longer to make investment decisions. The third largest detractor in June, was John Wood Group, a share that we do not own, but that rose having received several bids from Dubai-based engineering group, Sidara.

In summary, and as we have highlighted for a long period of time now, the current valuation of the UK market, and in particular UK small and mid-cap companies, is about as attractive as we have ever seen. Meanwhile, the economic backdrop is certainly improving. Unemployment remains low, balance sheets remain strong, inflation is falling, consumer confidence and PMIs are improving. This backdrop gives confidence that the earnings outlook for our businesses is broadly supportive for an earnings recovery. Meanwhile, Labour’s victory in the General Election could now mark the end of the persistent investor aversion from the UK and stem the outflows from UK small & mid-caps. Labour’s business friendly policies and some much-needed stability in government, should provide a more positive backdrop for businesses to start investing with some level of certainty and investors to once again look to the UK market for an attractive return. In this scenario, we could see an environment where small and mid-caps, and in particular the holdings in this portfolio, could move a long way on limited liquidity.

As ever, we remain focused on the micro, industry level change and stock specific analysis and the opportunities we are seeing today in our universe are as exciting as ever. Historically, periods of heightened volatility have been followed by strong returns for the strategy and presented excellent investment opportunities.

We thank shareholders for your ongoing support.

1Source: BlackRock as at 30 June 2024

25 July 2024

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.

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