BlackRock Smaller Companies Trust plc (LON:BRSC) has announced its latest portfolio update.
All information is at 31 July 2022 and unaudited.
To learn more about the BlackRock Smaller Companies Trust plc please follow this link: blackrock.com/uk/brsc
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 | 9.6 | -5.5 | -20.2 | 19.2 | 32.1 |
| Share price | 12.4 | -5.1 | -26.6 | 10.7 | 34.0 |
| Numis ex Inv Companies + AIM Index | 4.8 | -6.6 | -16.0 | 15.3 | 13.5 |
Sources: BlackRock and Datastream
At month end
| Net asset value Capital only (debt at par value): | 1,632.23p |
| Net asset value Capital only (debt at fair value): | 1,655.20p |
| Net asset value incl. Income (debt at par value)1: | 1,655.54p |
| Net asset value incl. Income (debt at fair value)1: | 1,678.52p |
| Share price: | 1,450.00p |
| Discount to Cum Income NAV (debt at par value): | 12.4% |
| Discount to Cum Income NAV (debt at fair value): | 13.6% |
| Net yield2: | 2.4% |
| Gross assets3: | £877.9 |
| Gearing range as a % of net assets: | 0-15% |
| Net gearing including income (debt at par): | 1.0% |
| Ongoing charges ratio (actual)4: | 0.7% |
| Ordinary shares in issue5: | 48,829,792 |
- Includes net revenue of 23.31p
- 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 13.0 pence per share (announced on 2 November 2021, ex-dividend on 11 November 2021, and pay date 2 December 2021), and 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).
- Includes current year revenue.
- As reported in the Annual Financial Report for the year ended 28 February 2022 the Ongoing Charges Ratio (OCR) was 0.7%. The OCR is calculated as a percentage of net assets and using operating expenses, excluding performance fees, finance costs and taxation.
- Excludes 1,163,731 ordinary shares held in treasury.
| Sector Weightings | % of portfolio |
| Industrials | 29.9 |
| Consumer Discretionary | 21.6 |
| Financials | 12.8 |
| Technology | 9.6 |
| Consumer Staples | 6.2 |
| Energy | 5.8 |
| Basic Materials | 5.4 |
| Health Care | 4.5 |
| Telecommunications | 2.4 |
| Real Estate | 1.2 |
| Utilities | 0.6 |
| —– | |
| Total | 100 |
| ===== |
| Country Weightings | % of portfolio |
| United Kingdom | 99.5 |
| United States | 0.5 |
| —– | |
| Total | 100 |
| ===== | |
Ten Largest Equity Investments
| Company | % of portfolio |
| CVS Group | 2.6 |
| 4imprint Group | 2.5 |
| Gamma Communications | 2.4 |
| Watches of Switzerland | 2.1 |
| Treatt | 2.1 |
| Auction Technology | 2.1 |
| Qinetiq Group | 2.0 |
| Oxford Instruments | 2.0 |
| Ergomed | 2.0 |
| Spirent Communications | 2.0 |
Commenting on the markets, Roland Arnold, representing the Investment Manager noted:
During July the Company’s NAV per share rose by 9.6%1 to 1,678.52p on a total return basis (with debt at fair value), while our benchmark index returned 4.8%1; in a sharp change from the trend witnessed throughout 2022, UK large caps underperformed during the month with the FTSE 100 Index returning 3.7%1 on a total return basis.Investor sentiment took a more positive turn during the month in response to softer data which could be suggesting that inflation is nearing the peak and therefore central banks could begin taking their foot off of the pedal in terms of rate-rises. This prompted a recovery in equity markets after heavy year-to-date losses. Growth stocks rallied and outperformed value stocks, and as a result small and mid-caps outperformed large caps for the first time this year. However, there is still plenty of ground to make up and year-to-date value has still comfortably outperformed growth.
While the market environment was certainly beneficial to the portfolio during the month, what was more pleasing to see was positive company updates being rewarded with corresponding positive share price reactions. The largest positive contributor to performance was US focused marketer of promotional products, 4imprint, which rallied in response to a large upgrade as a result of significant growth in order counts and order values. The company is the largest player in the large US market despite having less than 4% market share and the positive momentum looks set to continue with a further upgrade being announced in August (post month end). Shares in YouGov have been weak this year despite no deterioration in trading, and it was therefore encouraging to see the shares rebound in response to management’s comments confirming that the business remains on track to meet expectations because of positive performance across all its divisions. Serica Energy rose after rejecting an approach from energy investment firm Kistos which is looking to strengthen its position in the North Sea.
The largest detractor was Alliance Pharma which provided a disappointing trading update, highlighting weakness in its recent acquisition as a result of a tougher operating environment and increased competition. The next three largest detractors to performance were shares in the benchmark that rose with the market that we do not own that do not meet our quality investment criteria. Shares in On The Beach continued their downward trend against the challenging outlook for the consumer and travel & leisure businesses, sectors which we remain underweight at total portfolio level.
Recent inflation data, commentary from central banks and the subsequent market reaction has been encouraging, however, the environment remains extremely challenging. We are therefore sticking to our core beliefs and focusing 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 and the divergence between share prices and company earnings during 2022; historically these periods have been followed by strong returns for the strategy and presented excellent investment opportunities. We thank shareholders for their ongoing support and look forward to providing further confirmation of the investment cases that we are exposed to within the portfolio in the coming months.
1Source: BlackRock as at 31 July 2022
To learn more about the BlackRock Smaller Companies Trust plc please follow this link: blackrock.com/uk/brsc
