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
year
%
|
Three
years
%
|
Five
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
|
|
|
-
Includes
net revenue of 22.54p
-
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).
-
Includes
current year revenue.
-
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.
-
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
Company
|
% of portfolio
|
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.