BlackRock Smaller Companies Trust Plc Portfolio Update

 
TIDMBRSC 
 
The information contained in this release was correct as at 31 December 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 December 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   Three  Five 
                                    %          %             year  years  years 
                                                             %     %      % 
Net asset value                     8.3        6.5           0.8   -4.5   31.0 
Share price                         5.7        11.4          5.2   -14.4  29.9 
Numis ex Inv Companies + AIM Index  8.5        6.9           3.2   -3.3   24.0 
 
Sources:  BlackRock and Datastream 
 
At month end 
 
Net asset value Capital only (debt at par value):    1,468.79p 
Net asset value Capital only (debt at fair value):   1,514.77p 
Net asset value incl. Income (debt at par value)1:   1,491.33p 
Net asset value incl. Income (debt at fair value)1:  1,537.31p 
Share price:                                         1,382.00p 
Discount to Cum Income NAV (debt at par value):      7.3% 
Discount to Cum Income NAV (debt at fair value):     10.1% 
Net yield2:                                          2.9% 
Gross assets3:                                       £788.4m 
Gearing range as a % of net assets:                  0-15% 
Net gearing including income (debt at par):          7.6% 
Ongoing charges ratio (actual)4:                     0.7% 
Ordinary shares in issue5:                           48,202,292 
 
 1. Includes net revenue of 22.54p 
 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 paid 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 1,791,231 ordinary shares held in treasury. 
 
Sector Weightings       % of portfolio 
Industrials             33.3 
Consumer Discretionary  19.4 
Financials              16.4 
Basic Materials         8.6 
Technology              7.9 
Consumer Staples        4.1 
Energy                  2.9 
Telecommunications      2.5 
Real Estate             2.1 
Health Care             1.5 
Communication Services  1.3 
                        ----- 
Total                   100.0 
                        ===== 
 
Country Weightings  % of portfolio 
United Kingdom      98.4 
United States       1.0 
Ireland             0.6 
                    ----- 
Total               100.0 
                    ===== 
 
Ten Largest Equity Investments  % of portfolio 
Company 
Gamma Communications            2.5 
Workspace Group                 2.3 
Hill & Smith                    2.2 
Chemring Group                  2.1 
4imprint Group                  2.1 
CVS Group                       2.1 
YouGov                          2.1 
Watches of Switzerland          1.9 
Bloomsbury Publishing           1.9 
Breedon                         1.9 
 
Commenting on the markets, Roland Arnold, representing the Investment Manager 
noted: 
During December the Company's NAV per share rose by 8.3% to 1,537.31p on a total 
return basis, while our benchmark index returned 8.5%. For comparison the large 
cap FTSE 100 Index lagged small & mid-caps for a second consecutive month, 
returning 3.9%. 
 
December proved to be a strong end to 2023, with equity markets reacting to 
continued falls in inflation, further normalisation in the jobs market, and the 
narrative of central bank pivots. This resulted in further decline in US 10-year 
treasury rate from 4.95% to 3.88% in one month, and a broad rally for equity 
markets. In the US the Federal Reserve (Fed), in its last meeting of the year, 
sent a signal that it would begin cutting interest rates in 2024. Although the 
US payrolls data in November painted a picture of a labour market gradually 
cooling, wage growth was still too high to be consistent with inflation falling 
back to the Fed's 2% policy target and the unemployment rate ticked lower. In 
addition, though the US Consumer Price Index (CPI) for November largely matched 
expectations, it showed that core services inflation was proving to be sticky. 
The European Central Bank (ECB) and the Bank of England (BOE) signalled that 
interest rate cuts remained some way off. In Europe, policymakers stuck to the 
script of policy being set at sufficiently restrictive levels for as long as 
necessary. In the UK, inflation plummeted to a two-year low of 3.9%, markets 
predicted BOE interest rate cuts in 2024. 
 
The attractive valuations of UK companies continued to catch the eyes of 
strategic buyers through December, with bowling alley operator Ten Entertainment 
being the latest target. The company soared after receiving a bid from US 
private equity group, Trive Capital. Similarly, our holding in GlobalData caught 
the attention of private equity group, Inflexion, which is acquiring a 40% stake 
in GlobalData's Healthcare operation. The deal will net the company £434m, which 
will be used to fund further acquisitions. Shares in IntegraFin, operator of the 
UK investment platform Transact, rose in response to solid full year results, 
demonstrating the strength of its platform and ability to take market share 
against a challenging backdrop. 
 
The strength of the market rally during December created a headwind to 
performance, with a number of the largest detractors to performance coming from 
shares in the benchmark that we do not own that outperformed; Paragon, Carnival 
and Smart Metering Systems, were all up between 25%-45%. While there will always 
be periods where shares that we don't own (rightly or wrongly) rally, it is 
particularly frustrating when the largest three relative detractors fall into 
this bucket. Shares in digital payments business Boku, underperformed the market 
during December. There was no negative news flow that impacted the shares, and 
post month end the shares have rebounded. 
 
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-caps have continued to underperform large caps 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. The 
fourth quarter of 2023 saw markets reflect the expectation of rate cuts in 2024 
in response to easing inflation data. However, as we have entered 2024, the 
backup in bond yields has led to a volatile start to the year in equity markets. 
 
Against this backdrop, the question remains, what is the catalysts for this 
trend to change? Unfortunately, there is no simple answer. While there are many 
headwinds to the UK SMID market; economic uncertainty, political uncertainty, 
the structural flow issues in the UK market, 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 Midcaps 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 December 2023 
 
22 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. 
 
 
This information was brought to you by Cision http://news.cision.com 
 
 
END
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