Portfolio Update

BLACKROCK SMALLER COMPANIES TRUST PLC (LEI: 549300MS535KC2WH4082)
 

All information is at 31 January 2020 and unaudited.
Performance at month end is calculated on a capital only basis

	One month %	Three months %	One  year %	Three  years %	Five  years %
Net asset value*	2.0	17.0	26.2	44.8	89.7
Share price*	0.4	17.5	32.7	71.5	108.7
Numis ex Inv Companies + AIM Index	-2.2	8.9	10.4	11.1	30.9

*performance calculations based on a capital only NAV with debt at par, without income reinvested. Share price performance calculations exclude income reinvestment.

Sources:  BlackRock and Datastream

At month end
Net asset value Capital only (debt at par value):	1,719.12p
Net asset value Capital only (debt at fair value):	1,704.52p
Net asset value incl. Income (debt at par value)1:	1,742.43p
Net asset value incl. Income (debt at fair value)1:	1,727.83p
Share price	1,718.00p
Discount to Cum Income NAV (debt at par value):	1.4%
Discount to Cum Income NAV (debt at fair value):	0.6%
Net yield2:	1.9%
Gross assets3:	£920.4m
Gearing range as a % of net assets:	0-15%
Net gearing including income (debt at par):	5.7%
2019 Ongoing charges ratio4:	0.7%
Ordinary shares in issue5:	48,829,792

1. includes net revenue of 23.32p.

2. Yield calculations are based on dividends announced in the last 12 months as at the date of release of this announcement, and comprise of the final dividend of 19.20 pence per share, (announced on 03 May 2019, ex-dividend on 16 May 2019) and the interim dividend of 12.8 pence per share (announced on 5 November 2019, ex-dividend on 14 November 2019).

3. includes current year revenue.

4. As reported in the Annual Financial Report for the year ended 28 February 2019 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 shares held in treasury.

Sector Weightings	% of portfolio
Industrials	33.0
Financials	21.6
Consumer Services	18.0
Consumer Goods	9.6
Health Care	5.7
Technology	5.1
Basic Materials	3.9
Oil & Gas	2.4
Telecommunications	0.7
	-----
Total	100.0
	=====

Ten Largest Equity Investments
Company	% of portfolio
IntegraFin	2.5
4imprint Group	2.3
YouGov	2.2
Avon Rubber	2.0
Johnson Service Group	1.8
Watches of Switzerland	1.8
Breedon	1.6
IG Design Group	1.6
Team 17	1.6
Impax Asset Management	1.5

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

During January the Company’s NAV per share rose by 2.0% to 1,719.12p on a capital only basis, whilst our benchmark index, Numis ex Inv Companies + AIM Index, fell by 2.2%¹; the FTSE 100 Index fell by 3.4%¹ (all calculations are on a capital only basis).

Equity markets had a challenging January, despite a strong start at the beginning of the month. Signs of progress in de-escalating global trade disputes were soon overshadowed by rising Gulf tensions after President Trump ordered a U.S. airstrike that killed Maj. Gen. Qasem Soleimani. Meanwhile the fast-spreading coronavirus hit markets globally over concerns that the disease would impact China’s economic growth. The final day of January marked the UK’s last day as a member of the EU, however, there continue to be many hurdles to overcome as the UK now seeks to renegotiate trading relationships.

Despite the volatile market backdrop, the portfolio benefitted from a number of positive trading updates from several of our holdings. Shares in Team17 rallied after the video game developer provided a positive trading update, with upgrades to profit guidance. This is the fifth upgrade to forecasts in the last 12 months. The company has continued to perform well, with multiplayer games seeing particularly strong sales. Meanwhile the future looks promising, with a number of new titles scheduled to be launched in the forthcoming year, further adding to the group’s growing portfolio. Avon Rubber was a beneficiary of increasing global tensions, along with the wider defence sector, and the company also reported a positive start to the year. IntegraFin reported its best ever first quarter (to 31 December) of inflows during the month, with data from Fundscape showing Transact as having the highest net inflows of all advisor platforms. The portfolio also benefitted from positive trading updates from asset manager, Liontrust, which continues to see strong inflows, and Games Workshop, which reported strong results with upgrades. 

The largest detractor was clothing brand Joules, which fell after the company warned that profits would fall significantly below expectations after a challenging Christmas trading period. Despite reporting surging revenues and profits for 2019, shares in Equals Group also fell heavily in response to downgrades to forward guidance due to challenging market conditions ahead, as a result of record low currency volatilities. Elsewhere, Dalata Hotel Group and Premier Miton also detracted from performance during the month.

Following a period of political uncertainty in the UK and aversion from UK equities, hopes are rising that investors will no longer shun the UK market. As a result of the increased stability in Government, the political risk premium is certainly eroding and we would expect this to clear the way for fundamentals to be the key driver to returns.  In the mid-to-long-term, progress around the UK’s trade negotiations could result in increased business confidence and subsequently a return/uptick in corporate spending, which should be positive for corporate profitability. However, it is important to remember that the UK’s future trading relationships with the EU and the rest of the world remains uncertain.

Meanwhile, there are many other factors that have the potential to fuel market volatility, most notably, the ongoing US/China trade negotiations or, more recently, the outbreak of the fast-spreading coronavirus. At this time we do not see any cause to change portfolio positioning materially, however, we continue to monitor any developments and analyse potential impacts on the companies within our portfolio. We remain focused on bottom-up company fundamentals, with a bias towards high-quality market leading global businesses, which are operating in attractive end markets and which are run by strong management teams. The recent results season has been positive for many of our holdings and this provides us with confidence in the performance of the businesses that we own and the portfolio’s positioning as we move into 2020.

¹Source: BlackRock as at 31 January 2020

21 February 2020

ENDS
 

Latest information is available by typing www.blackrock.co.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.