Portfolio Update

The information contained in this release was correct as at 28 February2023.  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 28 February2023 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	-1.0	1.1	-13.0	9.4	18.1
Share price	-1.0	2.1	-15.9	-0.5	16.1
Numis ex Inv Companies + AIM Index	0.4	4.3	-7.5	17.2	12.0

Sources:  BlackRock and Datastream

At month end

Net asset value Capital only (debt at par value):	1,527.00p
Net asset value Capital only (debt at fair value):	1,575.01p
Net asset value incl. Income (debt at par value)1:	1,553.39p
Net asset value incl. Income (debt at fair value)1:	1,601.40p
Share price:	1,380.00p
Discount to Cum Income NAV (debt at par value):	11.2%
Discount to Cum Income NAV (debt at fair value):	13.8%
Net yield2:	2.6%
Gross assets3:	£828.0m
Gearing range as a % of net assets:	0-15%
Net gearing including income (debt at par):	6.3%
Ongoing charges ratio (actual)4:	0.7%
Ordinary shares in issue5:	48,829,792

1. Includes net revenue of 26.39p
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 final ex-dividend of 22.00 pence per share (announced on 29 April 2022, ex-date on 12 May 2022, and pay date 17 June 2022), and an interim dividend of 14.50 pence per share (announced on 3 November 2022, ex-dividend on 10 November 2022, and paid 9 December 2022).
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 2022.
5. Excludes 1,163,731 ordinary shares held in treasury.

Sector Weightings % of portfolio Industrials 34.9 Consumer Discretionary 20.0 Financials 13.7 Technology 7.7 Basic Materials 5.9 Consumer Staples 4.9 Energy 4.1 Health Care 3.4 Telecommunications 2.8 Communication Services 1.1 Real Estate 0.8 Utilities 0.7 ----- Total 100.0 ===== Country Weightings % of portfolio United Kingdom 98.5 United States 0.9 Ireland 0.6 ----- Total 100.0 =====

Ten Largest Equity Investments Company	% of portfolio
Gamma Communications	2.8
4imprint Group	2.7
CVS Group	2.6
Watches of Switzerland	2.2
Oxford Instruments	1.9
Impax Asset Management	1.7
Ergomed	1.7
Next Fifteen Communications	1.6
Bloomsbury Publishing	1.6
Qinetiq Group	1.6

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

During February the Company’s NAV per share fell by -1.0% to 1,601.40p on a total return basis, while our benchmark index rose 0.4%. For comparison the large cap FTSE 100 Index returned 1.8%.¹

Despite a positive start during the first half of February, strong economic data saw equity markets fall back towards the end of the month as investors digested a likely more hawkish stance from major central banks that rates will need to remain higher for longer. The UK equity market remained more resilient than many other global developed markets, finishing the month in positive territory despite the late sell-off. The Federal Reserve (the Fed) went on to deliver a 25bps hike and asserted “it is only the early stage” of the disinflation process. The Bank of England hiked interest rates by 50bps as expected but signalled it was closer to pausing. This move was matched by the European Central Bank as the Euro area fourth quarter GDP (Gross Domestic Product) data showed a marked slowing of growth in the second half of the year and outright contraction in the four largest European economies. Energy prices continued to roll over with European benchmark natural gas prices below €50 versus peaks above €300 last year. Unemployment in the UK remained stable and wage growth was also strong on a year-on-year basis. Both headline and core inflation remined high and consumer confidence in February saw an uptick, further supporting the narrative of an improving economic outlook.

Shares in Watches of Switzerland fell in response to Q3 volumes that some felt fell short of expectations, despite management not giving quarterly guidance and reiterating their confidence in the full year. We continue to like the industry dynamics as waitlists continue to lengthen as customers remain intent on buying luxury watches, and Rolex have recently announced some moves that may increase production to help satisfy this demand. The company has a net cash balance sheet, and we are confident that there will be further opportunity for M&A during the year. Kin and Carta fell after the company warned that macro headwinds were resulting in more cautious spending from their clients and elongating sales cycles. Shares in veterinary group CVS were weak despite the company reporting solid growth and reiterating full year guidance.

On the positive side, the largest positive contributor during the month was food wholesale business, Kitwave. The company reported impressive full year results, with more than 30% rise in full year revenue, thanks to recovering end markets and strong performance of recent acquisitions. Management remain confident in the opportunity set for the business given the synergies that have been realised from previous acquisitions and the highly fragmented structure of the UK wholesale market. Shares in Pebble Group continued to rise after issuing a strong trading update in January which highlighted that its full year results will be at least in line with current market expectations. Other notable contributors during the month included Baltic Classifieds and Impax Asset Management, which have both seen their share prices rise in recent weeks, having been weak during January 2023.

Equity markets have experienced a high degree of volatility since the beginning of the year, however this was in line with our expectations and therefore our outlook remains unchanged. We believe 2023 will see continuation of recent themes of uncertainty: Russia/Ukraine war, China, supply chains and inflation. However, we expect to see an end to interest rate rises and we think inflation is peaking. Generally speaking, financial conditions are not too stretched; corporates and consumers are reasonably well capitalised, and banks have plenty of capital. As such the path of employment will dictate the consumer outlook but we continue to expect the trough to be shallower than in previous recessions.

Industrial activity is likely to decline as excess inventory works through the system but given major markets such as automotive and aerospace were already seeing choked demand through supply chain issues, again we expect a shallower trough. Housebuilding and RMI (Repair, Maintenance and Improvement) will have a tough H1, but given the rapid re-pricing of mortgages post the brief Truss premiership, the outlook isn’t as bad as it was in September 2022. Valuations have corrected quickly and looking back it appears all consumer orientated stocks overshot to the downside during the chaotic period around the Truss budget.

  ¹Source: BlackRock as at 28 February 2023

30 March 2023

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.