BlackRock Smaller Companies Trust plc (LON:BRSC) has provided the following portfolio update.
All information is at 31 May 2020 and unaudited.
Performance at month end is calculated on a capital only basis
| One month % | Three months % | One year % | Three years % | Five years % | |
| Net asset value* | 5.1 | -11.9 | -9.6 | -2.5 | 32.1 |
| Share price* | -2.0 | -13.5 | -9.1 | 3.1 | 39.3 |
| Numis ex Inv Companies + AIM Index | 4.2 | -10.6 | -14.0 | -19.4 | -5.0 |
*performance calculations based on a capital only NAV with debt at par, without income reinvested. Share price performance calculations exclude income reinvestment.
Sources: BlackRock and Datastream
| At month end | |
| Net asset value Capital only (debt at par value): | 1,364.42p |
| Net asset value Capital only (debt at fair value): | 1,342.76p |
| Net asset value incl. Income (debt at par value)1: | 1,388.66p |
| Net asset value incl. Income (debt at fair value)1: | 1,367.01p |
| Share price | 1,284.00p |
| Discount to Cum Income NAV (debt at par value): | 7.5% |
| Discount to Cum Income NAV (debt at fair value): | 6.1% |
| Net yield2: | 2.5% |
| Gross assets3: | £747.7m |
| Gearing range as a % of net assets: | 0-15% |
| Net gearing including income (debt at par): | 8.7% |
| 2019 Ongoing charges ratio4: | 0.7% |
| Ordinary shares in issue5: | 48,829,792 |
- includes net revenue of 24.24p.
- 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 12.8 pence per share (announced on 5 November 2019, ex-dividend on 14 November 2019)and the second interim dividend of 19.7 pence per share (announced on 3 June 2020, ex-dividend on 11 June 2020).
- includes current year revenue.
- As reported in the Annual Financial Report for the year ended 28 February 2019 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 shares held in treasury.
| Sector Weightings | % of portfolio |
| Industrials | 30.1 |
| Financials | 20.4 |
| Consumer Services | 17.5 |
| Consumer Goods | 11.1 |
| Technology | 6.7 |
| Health Care | 6.0 |
| Basic Materials | 4.7 |
| Oil & Gas | 1.9 |
| Materials | 0.9 |
| Telecommunications | 0.7 |
| —– | |
| Total | 100.0 |
| ===== |
| Ten Largest Equity Investments | |
| Company | % of portfolio |
| Avon Rubber | 2.4 |
| YouGov | 2.2 |
| Games Workshop | 2.0 |
| IntegraFin | 1.8 |
| Breedon | 1.7 |
| Stock Spirits Group | 1.7 |
| 4imprint Group | 1.7 |
| IG Design Group | 1.5 |
| Treatt | 1.4 |
| Calisen Plc | 1.4 |
Commenting on the markets, Roland Arnold, representing the Investment Manager noted:
During May the Company’s NAV per share rose by 5.1%1 to 1,364.42p, outperforming our benchmark index, Numis ex Inv Companies + AIM Index, which returned 4.2%1; for comparison the FTSE 100 Index rose by 3.0%1 (all calculations are on a capital only basis).
Equity markets continued to rise during May in response to signs that the worst of the coronavirus may have passed, with the number of daily new deaths globally falling by half from the peak in April. Countries around the world continued to announce measures to gradually reduce lockdown restrictions, a positive for a number of industries that have seen demand completely halted in recent months. Meanwhile governments continued to provide unprecedented support to economies both directly through furlough schemes, and indirectly through central bank policy.
May saw a market rotation towards value, which isn’t a favourable backdrop for our quality growth investment style. However, some positive stock specific successes during the month ensured that the portfolio outperformed its benchmark. The largest contributor to performance was Games Workshop, the creator of the Warhammer miniatures game, which continued to rise following the positive trading update in April. Stock Spirits rose after the company reported strong underlying revenue growth, benefitting from their off-trade channel, which represents c.85% of the business, as consumers shifted to drinking at home during the lockdown period. Shares in Avon Rubber performed well on the back of positive half year results demonstrating the business’s resilience during the coronavirus crisis. The company delivered strong organic revenue and profit growth during the first 6 months of the year, and their long-term contracts provide a high level of earnings visibility for the remainder of the year.
The largest detractor to performance was Countryside Properties, which fell in response to a weak trading update, highlighting a significant fall in profits as a result of coronavirus restrictions. Other notable detractors included brick manufacturer, Forterra, and recruiter, Robert Walters, which both gave back some of their strong share price performance from April, despite no stock specific newsflow or change to the investment case for either.
As time passes newsflow around the virus is becoming more upbeat and we are certainly seeing signs of economies returning to normal, or perhaps we should say returning to the ‘new normal’. However, the outlook for the global economy has never been more uncertain. There is no historical parallel to current events. Even the Global Financial Crisis of 2008 was at its heart a banking crisis, something investors had seen before, COVID-19 is something very different and we will be discussing the implications and impacts on a variety of industries for many months to come. Our immediate outlook is that volatility remains high as COVID-19 continues to dominate global events, but we must not allow the focus on COVID-19 to let us overlook some of the other issues that can and will drive volatility; Brexit, US / China relations or the coming US election.
The impact of COVID-19 is unpredictable, unavoidable and unprecedented. But it will get better. And this provides us with confidence in our strategy on a medium-term view. Market volatility presents us with a fantastic investment opportunity. The Company’s investment strategy is focussed on quality growth investment opportunities in smaller companies, a style that has demonstrably worked for the long-term, and historically periods of sudden underperformance, such as this, have proven to be excellent investment opportunities.
1Source: BlackRock as at 31 May 2020
To learn more about the BlackRock Smaller Companies Trust plc please follow this link: blackrock.com/uk/brsc
