Portfolio Update

The information contained in this release was correct as at 31 July 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 31 July 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	6.8	10.5	18.5	-13.8	28.7
Share price	10.2	15.5	27.6	-14.0	29.8
Benchmark*	5.9	9.1	13.2	-9.3	24.5

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):	1,645.39p
Net asset value Capital only (debt at fair value):	1,696.10p
Net asset value incl. Income (debt at par value)1:	1,668.72p
Net asset value incl. Income (debt at fair value)1:	1,719.43p
Share price:	1,600.00p
Discount to Cum Income NAV (debt at par value):	4.1%
Discount to Cum Income NAV (debt at fair value):	6.9%
Net yield2:	2.6%
Gross assets3:	£855.5m
Gearing range as a % of net assets:	0-15%
Net gearing including income (debt at par):	10.6%
Ongoing charges ratio (actual)4:	0.7%
Ordinary shares in issue5:	47,099,792

1. Includes net revenue of 23.33p
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 30.0 Financials 19.7 Consumer Discretionary 16.4 Basic Materials 12.9 Technology 6.2 Consumer Staples 3.2 Real Estate 2.9 Health Care 2.7 Telecommunications 2.6 Communication Services 1.9 Energy 1.5 ----- Total 100.0 ===== Country Weightings % of portfolio United Kingdom 98.6 United States 1.4 ----- Total 100.0 =====

Ten Largest Equity Investments Company	% of portfolio
Hill & Smith	2.8
Gamma Communications	2.6
Workspace Group	2.5
IntegraFin	2.5
Breedon	2.3
Chemring Group	2.2
Bloomsbury Publishing	2.1
Baltic Classifieds Group	2.0
4imprint Group	1.9
Tatton Asset Management	1.9

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

During July the Company’s NAV per share rose by 6.8% to 1,719.43p on a total return basis, while our benchmark index returned 5.9%. For comparison the large cap FTSE 100 Index underperformed small and mid-caps, returning 2.5%.1

The UK equity market rose during July, with the more domestic small and mid-cap market outperforming the large cap FTSE 100 Index on the back of improving economic data and the outcome of the UK General Election. The UK economy experienced further stabilisation of inflationary pressures with the Consumer Price Index (CPI) remaining steady at 2.0% year-on-year. The service sector experienced a slight increase, while the production and construction sectors saw minor contractions. Retail activity across the UK had a slight uptick, with retail footfall increasing by 1%. GDP estimates remained flat, and the labour market continued to soften, with job adverts down 20% compared to the previous year.

The largest positive contributor during the month was Bloomsbury Publishing which reported strong Q2 performance, which was in line with recently upgraded guidance. Notable bestsellers from Sarah J. Maas and J.K. Rowling continued to drive sales within their consumer division. They also acquired Rowman and Littlefield's academic publishing business, enhancing digital resources and positioning Bloomsbury as a leading US academic publisher. Rosebank Industries, founded by ex-Melrose Industries executives, listed on AIM earlier in the month. The company employs a "Buy, Improve, Sell" strategy, acquiring and enhancing industrial businesses to boost performance before selling them. Investors reacted positively to the listing, with shares in high demand. Hill & Smith, Grafton and Breedon, all rose during the month, with resilient trading against a challenging economic backdrop and more importantly the potential to see strong gains as their end markets begin to recover.

Recruiter Robert Walters revealed a 15% decline in group net fee income compared to Q2 2023, reflecting challenging market conditions. The company's performance was impacted across all regions, with notable declines in the Asia Pacific and UK markets. The firm flagged that market confidence may not significantly improve until 2025, however we view this business as a market leader that will continue to focus on cost discipline through the challenging period and positioning itself for long-term growth. Shares in payments business Boku fell despite the company reporting solid trading in the first half of 2024, driven by increased transaction volumes from existing merchants. Another notable detractor, came from not owning Ascential, which received a bid at a large premium from Informa.

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, 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 (Purchasing Managers Index) 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 and 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  for 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 our 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 31 July 2024

22 August 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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