REG-BlackRock Smaller Companies Trust Plc: Portfolio Update

Blackrock Smaller Companies TrustAnnouncement

21/06/2024 18:15

The information contained in this release was correct as at 31 May 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 May 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      Three     Five      
                   %           %              year     years     years    
                                              %        %         %        
 Net asset value  7.8         13.4           16.5     -12.2     24.0      
 Share price      8.2         15.0           18.4     -17.2     20.3      
 Benchmark*       6.4         11.8           12.5     -11.7     20.8      

 

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):      1,605.59p   
 Net asset value Capital only (debt at fair value):     1,659.57p   
 Net asset value incl. Income (debt at par value) 1 :   1,622.55p   
 Net asset value incl. Income (debt at fair value) 1 :  1,676.53p   
 Share price:                                           1,498.00p   
 Discount to Cum Income NAV (debt at par value):        7.7%        
 Discount to Cum Income NAV (debt at fair value):       10.6%       
 Net yield 2 :                                          2.8%        
 Gross assets 3 :                                       £833.7m     
 Gearing range as a % of net assets:                    0-15%       
 Net gearing including income (debt at par):            10.5%       
 Ongoing charges ratio (actual) 4 :                     0.7%        
 Ordinary shares in issue 5 :                           47,099,792  
                                                                    

 

 
1. Includes net revenue of 16.96p 
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 payment
date 27 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              18.4            
 Consumer Discretionary  17.8            
 Basic Materials         11.5            
 Technology              6.2             
 Consumer Staples        3.2             
 Health Care             3.0             
 Telecommunications      2.6             
 Real Estate             2.4             
 Energy                  1.9             
 Communication Services  1.8             
                         -----           
 Total                   100.0           
                         =====           
                                         
                                         
 Country Weightings      % of portfolio  
 United Kingdom          98.1            
 United States           1.5             
 Ireland                 0.4             
                         -----           
 Total                   100.0           
                         =====           
                                         
                                           

 

 Ten Largest Equity Investments  % of portfolio  
  Company                                        
 Gamma Communications            2.6             
 Hill & Smith                    2.5             
 IntegraFin                      2.4             
 4imprint Group                  2.3             
 Breedon                         2.3             
 Chemring Group                  2.1             
 Bloomsbury Publishing           2.1             
 Workspace Group                 2.1             
 Baltic Classifieds Group        1.9             
 Tatton Asset Management         1.7             
                                                 
                                                 
                                                 

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

During May the Company’s NAV per share retuned 7.8% to 1,676.53p on a total
return basis, outperforming our benchmark index which returned 6.4%. For
comparison the large cap FTSE 100 index underperformed small & mid-caps,
returning 2.1%.1

 

UK equities made a positive return during May, with small and mid-caps
outpacing large caps, driven by takeover activity, a brighter macroeconomic
outlook, and expectations of more buybacks and IPOs. UK inflation dropped to
2.3% year-on-year, hitting its lowest level since summer 2021. Additionally,
the surprise announcement of a UK general election in July could finally lift
the political cloud that has been hanging over the UK market for a number of
years.

 

The largest positive contributor was textile service provider Johnson Service
Group. The company reported 8.9% revenue growth in the first quarter, with its
hotel, restaurant, and catering division (HORECA) having a positive impact.
Meanwhile, the general downward trend in energy costs since the end of 2023
has been beneficial and the business’s strategy of locking in forward energy
prices leaves the business well set to improve operating margins further from
here. Future PLC was another positive contributor as markets reacted to 2024
interim results that suggested some form of stability had returned to their
end markets. UK revenue grew by 3%, driven by a 30% increase in its insurance
comparison subsidiary, Go.Compare and solid performance from Future’s B2B
offering. IntegraFin, the operator of the Transact investment platform,
reported a 13% year on year increase in funds under direction, which rose to
£61bn as at the end of March 2024. Net inflows onto the platform rose by 4%
during the year, with advisers using the platform also growing at the same
rate to 7,900.

 

The largest detractor to performance during May came from not owning Keywords
Studios, the video games service provider, as the company agreed to accept a
£2bn buyout offer from the Swedish private equity investor, EQT Group.
Macfarlane Group was another detractor. The company reported a ‘challenging
start to 2024’ with first quarter sales and profits below the same period in
2023 amidst continued weak consumer demand and price deflation. TT Electronics
fell after reporting ongoing destocking, notably in its shorter-cycle
components products in North America. However, considering a book-to-bill
ratio still greater than 1x and having just navigated their toughest year on
year comparable period with comps easing from here we feel somewhat reassured,
and then of course there is the valuation which stands at 7.5x p/e for 2024
and 6.8x for 2025.

 

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 are improving. This
backdrop gives confidence that the earnings outlook for our businesses is
broadly supportive for an earnings recovery. At the same time, the
announcement of the UK General Election in July could be just what our market
needs to finally end this persistent investor aversion from the UK and stem
the outflows from UK small & mid-caps, which saw their first month of inflows
in April in almost three years. In this scenario, we could see an environment
where small & mid-caps, and in particular the holdings in this trust, 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.

 

21 June 2024
 

     1Source: BlackRock as at 31 May 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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