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Blackrock Smaller Companies Tr (BRSC)

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Friday 20 May, 2022

Blackrock Smaller Companies Tr

Portfolio Update

The information contained in this release was correct as at 30April2022.  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 April 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 -4.6 -8.6 -9.8 24.9 45.5
Share price -6.1 -14.7 -17.5 13.3 49.6
Numis ex Inv Companies + AIM Index -1.6 -5.8 -9.1 21.7 24.7

Sources:  BlackRock and Datastream

At month end

Net asset value Capital only (debt at par value): 1,754.92p
Net asset value Capital only (debt at fair value): 1,766.86p
Net asset value incl. Income (debt at par value)1: 1,787.67p
Net asset value incl. Income (debt at fair value)1: 1,799.61p
Share price: 1,552.00p
Discount to Cum Income NAV (debt at par value): 13.2%
Discount to Cum Income NAV (debt at fair value): 13.8%
Net yield2: 2.3%
Gross assets3: £957.4m
Gearing range as a % of net assets: 0-15%
Net gearing including income (debt at par): 3.7%
Ongoing charges ratio (actual)4: 0.7%
Ordinary shares in issue5: 48,829,792
  1. Includes net revenue of 32.75p
  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 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 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 29.2
Consumer Discretionary 22.2
Financials 14.3
Technology 9.6
Consumer Staples 6.7
Energy 5.4
Basic Materials 5.3
Health Care 3.8
Telecommunications 2.1
Real Estate 1.4
-----
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
Next Fifteen Communications 2.6
Treatt 2.4
CVS Group 2.3
Watches of Switzerland 2.2
Gamma Communications 2.2
Oxford Instruments 2.1
4imprint Group 2.1
YouGov 2.0
Breedon 1.8
Impax Asset Management 1.8

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

During April the Company’s NAV per share fell by -4.6%1 to 1,799.61p on a total return basis (with debt at fair value), while our benchmark index fell -1.6%1; for comparison UK large caps continued to outperform during the month with the FTSE 100 Index rising 0.8%1 on a total return basis.

After a modest rebound in March, equity markets turned negative again in April. Growth stocks continued to see weakness due to concerns that the inflationary environment would negatively impact the economy, with investors continuing to shift towards safe havens assets. Within the UK market there was divergence between the size indices. The large cap FTSE 100 Index outperformed given its heavy weighting of defensive sectors and US Dollar earners. Meanwhile the small & mid-cap indices lagged as a result of its UK domestic and consumer facing business which struggled against the backdrop of the ongoing cost of living crisis.

The broad derating across the market has continued to create challenges for the portfolio as optically our holdings are expensive on a relative basis when compared to the market. However, trading in the majority of our holdings has remained strong and the cheaper areas of our universe, that have held up better during this market sell-off, are simply not businesses that meet our criteria for quality and therefore haven’t been the types of business that we have felt compelled to own. 

Shares in Team17 fell after the company warned (at the end of March) that the closure of platform sales to Russia and Belarus, and uncertainties over releases of two titles from Ukraine based developers, would impact group revenues by c.£4m in FY22. Shares in Impax Asset Management and IntegraFin weakened as the challenging market environment has seen their assets under management fall despite both businesses continuing to see net inflows. Ongoing concerns around the outlook for discretionary consumer spending led to further weakness in Watches of Switzerland.

The largest positive contributor was Oxford Instruments, which provided a positive trading update with upgrades as the company continues to drive growth in attractive end markets. Despite ongoing supply chain disruption and cost inflation the business continues to see margin improvements as a result of improved operational efficiency and their pricing power. Central Asia Metals reported a record year of revenue, profits and free cash flow, and the company increased its final dividend. Elsewhere within Resources, our holding in Gulf Keystone Petroleum continued to benefit from the strength of the oil price.

The ongoing conflict between Russia and Ukraine has 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. 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 here 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 April 2022

20 May 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.


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