BlackRock Smll Cos Portfolio Update

 
TIDMBRSC 
 
The information contained in this release was correct as at 31 December2022. 
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 December 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     Three     One    Three      Five 
                                          month    months    year    years     years 
                                              %         %       %        %         % 
 
Net asset value                            -1.0      11.6   -26.4     -1.7      14.8 
 
Share price                                 0.3      12.5   -34.3    -15.3      15.8 
 
Numis ex Inv Companies + AIM Index         -1.2       6.9   -21.9     -1.7       1.1 
 
Sources:  BlackRock and Datastream 
 
At month end 
 
Net asset value Capital only (debt at par value):                             1,498.30p 
 
Net asset value Capital only (debt at fair value):                            1,544.71p 
 
Net asset value incl. Income (debt at par value)1:                            1,521.60p 
 
Net asset value incl. Income (debt at fair value)1:                           1,568.01p 
 
Share price:                                                                  1,356.00p 
 
Discount to Cum Income NAV (debt at par value):                                   10.9% 
 
Discount to Cum Income NAV (debt at fair value):                                  13.5% 
 
Net yield2:                                                                        2.7% 
 
Gross assets3:                                                                  £812.5m 
 
Gearing range as a % of net assets:                                               0-15% 
 
Net gearing including income (debt at par):                                        2.7% 
 
Ongoing charges ratio (actual)4:                                                   0.7% 
 
Ordinary shares in issue5:                                                   48,829,792 
 
 1. Includes net revenue of 23.30p 
 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                                                          33.9 
 
Consumer Discretionary                                               19.9 
 
Financials                                                           14.1 
 
Technology                                                            8.3 
 
Consumer Staples                                                      5.4 
 
Basic Materials                                                       5.0 
 
Energy                                                                4.9 
 
Health Care                                                           3.9 
 
Telecommunications                                                    2.7 
 
Real Estate                                                           0.8 
 
Utilities                                                             0.6 
 
Communication Services                                                0.5 
 
                                                                    ----- 
 
Total                                                               100.0 
 
                                                                    ===== 
 
 
 
 
Country Weightings                                         % of portfolio 
 
United Kingdom                                                       99.2 
 
United States                                                         0.8 
 
                                                                    ----- 
 
Total                                                               100.0 
 
                                                                    ===== 
 
 
 
 
Ten Largest Equity Investments                             % of portfolio 
Company 
 
4imprint Group                                                        2.9 
 
CVS Group                                                             2.8 
 
Gamma Communications                                                  2.7 
 
Watches of Switzerland                                                2.4 
 
Qinetiq Group                                                         2.0 
 
Ergomed                                                               2.0 
 
Spirent Communications                                                1.9 
 
Oxford Instruments                                                    1.9 
 
Bloomsbury Publishing                                                 1.9 
 
Impax Asset Management                                                1.8 
 
 
Commenting on the markets, Roland Arnold, representing the Investment Manager 
noted: 
 
During December the Company's NAV per share fell by -1.0% to 1,568.01p on a 
total return basis (with debt at fair value), while our benchmark index fell by 
-1.2%. For comparison the large cap FTSE 100 Index returned -1.5%. 
 
Equity markets fell in December as investors priced in expectations of higher 
for longer interest rates. The Federal Reserve, the Bank of England and the 
European Central Bank, all hiked rates by 50bps during the month. In the UK the 
base rate is now 3.5%, which after 8 increases in 2022, is 3.25% higher than 
where it started the year.  Central bankers continue to take a relatively 
hawkish stance highlighting, whilst goods inflation may be easing, that supply 
side pressures, notably tight labour markets, are keeping services inflation at 
elevated levels. 
 
In China, the government announced a relaxation to the contentious zero-COVID 
policy and signalled a shift in focus from battling COVID-19 to stabilising the 
economy. Whilst bulls are encouraged by the likely rebound in demand this 
should have as China reopens, it has simultaneously led to concerns that 
surging infections will lead to temporary labour shortages and further supply 
chain disruptions. 
 
While markets sold off during the month and small & mid-caps appeared to bear 
the brunt of the pain, particularly within the more growth orientated stocks, 
the Company was able to marginally outperform thanks to positive trading 
updates from our holdings. Energy services provider Hunting rose after the 
company announced robust trading in 2022 with upgrades to guidance for 2023 as 
a result of a strong sales book which will be monetised in the coming years. 
Online travel agent, On the Beach, rallied after reporting a return to profit 
for the full year to September 2022. The company pointed to success being 
driven by investments made in brand, technology and customer proposition over 
the last 12 months. Despite the ongoing challenges facing the travel industry 
in 2023 as a result of the cost of living crisis, management feel confident in 
their position due to the foundations that they have laid over the last year. 
Games Workshop contributed to the Company's performance, where its positive 
returns were the result of the company's announcement of a potential deal with 
Amazon to develop a new TV series with the Warhammer franchise. 
 
A key feature during the month of December was the reversal in many of the best 
performing shares from November, as many gave back gains during the market 
sell-off, for example Watches of Switzerland, Auction Technology Group and 
Impax Asset Management. Shares in Serica Energy slumped after the company 
reported disappointing drilling results from its North Eigg well off the coast 
of Scotland. This latest disappointment added pressure to the shares, which 
have been impacted recently by the UK Governments increased windfall tax 
legislation. 
 
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 inventory works through the system 
but given major markets such as automotive and aerospace were 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 Prime Minister Truss, the 
outlook isn't as bad as it was in September. 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. 
 
We expect to see M&A (Mergers & Acquisitions) picking up through the course of 
the year as management teams shift the focus away from returning excess cash 
flow to deploying it. 
 
We are not out of the woods yet. In the face of a likely tough reporting 

season, we could very easily see another sell off. Therefore, gearing within 
the portfolio remains low and we are keeping our powder dry for the time being. 
However, with oil and gas prices lower year-on-year, China re-opening, US$ 
weakening, shipping / logistics / factory gate prices dropping, much of the 
inflation pressure of last year could become deflationary during the course of 
this year. 
 
Against this difficult backdrop, we remind ourselves that many equity markets 
(Europe, UK) are structurally under owned and could benefit as sentiment turns 
and investors begin to reduce these underweights. We remain focused on 
bottom-up company specific analysis to identify high quality, nimble 
businesses, operated by entrepreneurial management teams, with strong market 
positions and resilient cash-flows. These are the types of businesses that we 
believe will be best placed to manage and thrive in the current environment. 
Historically these periods have been followed by strong returns for the 
strategy and presented excellent investment opportunities. 
 
     1Source: BlackRock as at 31 December 2022 
 
26 January 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. 
 
 
 
END 
 
 

(END) Dow Jones Newswires

January 26, 2023 12:10 ET (17:10 GMT)