Portfolio Update

The information contained in this release was correct as at 31 October 2023.  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 October 2023 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	-5.9	-7.9	-4.8	4.7	8.6
Share price	-7.2	-9.8	-5.9	-4.5	0.1
Numis ex Inv Companies + AIM Index	-7.0	-10.7	-5.9	1.4	0.4

Sources:  BlackRock and Datastream

At month end

Net asset value Capital only (debt at par value):	1,283.11p
Net asset value Capital only (debt at fair value):	1,339.83p
Net asset value incl. Income (debt at par value)1:	1,315.85p
Net asset value incl. Income (debt at fair value)1:	1,372.58p
Share price:	1,166.00p
Discount to Cum Income NAV (debt at par value):	11.4%
Discount to Cum Income NAV (debt at fair value):	15.1%
Net yield2:	3.5%
Gross assets3:	£704.4m
Gearing range as a % of net assets:	0-15%
Net gearing including income (debt at par):	10.3%
Ongoing charges ratio (actual)4:	0.70%
Ordinary shares in issue5:	48,252,292

1. Includes net revenue of 32.74p
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 15.00 pence per share (announced on 26 October 2023, ex-dividend on 2 November 2023, and payable on 4 December 2023) and the final dividend of 25.50 pence per share (announced on 05 May 2023, ex-date on 18 May 2023, and paid 27 June 2023).
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 1,741,231 ordinary shares held in treasury.

Sector Weightings % of portfolio Industrials 33.1 Consumer Discretionary 20.4 Financials 13.8 Technology 8.5 Basic Materials 8.2 Consumer Staples 4.5 Energy 3.3 Telecommunications 2.6 Health Care 2.4 Communication Services 1.9 Real Estate 1.3 ----- Total 100.0 ===== Country Weightings % of portfolio United Kingdom 98.2 United States 1.1 Ireland 0.7 ----- Total 100.0 =====

Ten Largest Equity Investments Company	% of portfolio
4imprint Group	2.9
Gamma Communications	2.7
Hill & Smith	2.2
QinetiQ	2.1
CVS Group	2.1
Workspace Group	2.1
Chemring Group	2.0
Moneysupermarket.com	1.9
Bloomsbury Publishing	1.8
Breedon	1.8

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

During October the Company’s NAV per share fell by -5.9% to 1,372.58p on a total return basis, while our benchmark index fell by -7.0%. For comparison the large cap FTSE 100 index fell by -3.7%.1

Equity markets fell in October as geopolitical conflict and the prospect of higher-for-longer interest rates continued to weigh on market sentiment. The UK economy showed positive growth as month-on-month (MoM) GDP grew by 0.2% after retracting last month. Meanwhile, inflation proved persistent as the September figures showed the annual rate stuck at 6.7%, as lower prices in food and drink were offset by higher energy prices. UK retail sales showed signs of easing while employment remains resilient with the unemployment rate dropping to 4.2%. The Bank of England (BoE) Governor Bailey commented on how wage growth is still uncomfortably strong and has yet to respond to the BoE’s 14 back-to-back interest rate hikes. Though inflation is far lower than this time last year, stickier-than-thought price pressure remain a concern for the UK economy.

The largest positive contributor during the month was long-term core holding, YouGov. The shares have come off in recent months as the market was becoming increasingly concerned that the business would start to see slowing growth. However, during October the company reported that full year profits had increased by 77% year-on-year (YoY) despite the challenging macroeconomic backdrop and as a result the shares rallied. Qiniteq Group share price rose after the company reiterated full year guidance, reporting significant organic revenue growth, record first half order intake of £950m and improving margins. The attractive valuations of UK small & mid-cap companies continued to generate interest from opportunistic private equity money during the month, as Kin and Carta surged after it announced it had received a £230m cash offer from Apax Partners.

The largest detractor was the recently listed B2B payments business, CAB Payments, which fell after the company downgraded its full year revenue guidance, citing volatility in African currencies causing a drag on margins and trading volumes. XP Power fell during the month after warning that profits would be below expectations as customers have been deferring shipments into 2024, while the challenging backdrop in China has also weighed on demand. As stated in our update for September, Alfa Financial Software’s share price fell at the beginning of October in response to the news that the potential bid from US private equity group, Thomas H Lee Partners (THL), would not materialise.

Since the end of 2021, rising interest rates have been weighing on the valuations of long-duration, higher growth shares in the stock market. As a result, UK small & mid-cap companies have continued to underperform large cap companies and we are now in the deepest and longest cycle of underperformance in recent history; worse than the Global Financial Crisis, COVID, Brexit, Tech sell-off or Black Monday. Against this backdrop, the question remains, what is the catalyst for this trend to change? Unfortunately, there is no simple answer. While there are many headwinds to the UK SMID (small & mid cap) market; economic uncertainty, political uncertainty, the structural flow issues in the UK market, and the risk of more pervasive inflation, to name a few, we remind ourselves and take comfort in the fact that many of our holdings continue to deliver against their objectives. Furthermore, we believe we are closer to the end of monetary tightening and at some point, we are confident that investors will decide the balance of probabilities is in favour of the opportunities, that the risks are more than adequately priced in, and that an increased allocation to UK small and mid-cap companies is warranted.

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 October 2023

23 November 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.

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