REG-BlackRock Smaller Companies Trust Plc: Portfolio Update

Blackrock Smaller Companies TrustAnnouncement

22/05/2025 16:45

The information contained in this release was correct as at 30 April 2025. 
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 30 April 2025 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  2.0         -7.1           -7.5     -14.6     22.8      
 Share price      1.8         -8.5           -8.9     -12.3     8.3       
 Benchmark*       2.6         -4.4           0.3      -7.3      35.0      

 

Sources:  BlackRock and Deutsche Numis

*With effect from 15 January 2024 the Numis Smaller Companies plus AIM
(excluding Investment Companies) Index to Deutsche Numis Smaller Companies
plus AIM (excluding Investment Companies).

 

 

At month end

 Net asset value Capital only (debt at par value):      1,325.64p   
 Net asset value Capital only (debt at fair value):     1,386.85p   
 Net asset value incl. Income (debt at par value) 1 :   1,363.49p   
 Net asset value incl. Income (debt at fair value) 1 :  1,424.70p   
 Share price:                                           1,248.00p   
 Discount to Cum Income NAV (debt at par value):        8.5%        
 Discount to Cum Income NAV (debt at fair value):       12.4%       
 Net yield 2 :                                          3.5%        
 Gross assets 3 :                                       £657.3m     
 Gearing range as a % of net assets:                    0-15%       
 Net gearing including income (debt at par):            8.9%        
 Ongoing charges ratio (actual) 4 :                     0.8%        
 Ordinary shares in issue 5 :                           43,104,792  

  
1. Includes net revenue of 37.85p
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 Interim
dividend of 15.50 pence per share (announced on 25 October 2024, ex-date on 31
October 2024, and paid on 04 December 2024) and final dividend of 28.50 pence
per share (announced on 07 May 2025, ex-date on 15 May 2025, and payment date
26 June 2025).
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 2025. 
5. Excludes 6,888,731 ordinary shares held in treasury.
 

 

                         
 Sector Weightings       % of portfolio  
 Industrials             27.4            
 Financials              23.8            
 Consumer Discretionary  14.7            
 Basic Materials         12.1            
 Consumer Staples        5.6             
 Real Estate             4.9             
 Technology              4.2             
 Health Care             3.9             
 Telecommunications      1.4             
 Energy                  1.2             
 Communication Services  0.8             
                         -----           
 Total                   100.0           
                         =====           
                                         
                                         
 Country Weightings      % of portfolio  
 United Kingdom          97.9            
 United States           2.1             
                         -----           
 Total                   100.0           
                         =====           
                                         
                                           

 

 Ten Largest Equity Investments  % of portfolio  
  Company                                        
 XPS Pensions                    2.9             
 IntegraFin                      2.6             
 Breedon                         2.5             
 Alpha Group International Plc   2.4             
 Bloomsbury Publishing           2.3             
 Tatton Asset Management         2.3             
 Boku                            2.1             
 Great Portland Estates          2.1             
 Chemring Group                  1.9             
 Hill & Smith                    1.9             
                                                 
                                                 

 

Commenting on the markets, Roland Arnold, representing the Investment Manager
noted:

During April the Company’s NAV per share rose 2.0% to 1,424.70p on a total
return basis, while our benchmark index, the Deutsche Numis Smaller Companies
plus AIM (excluding Investment Companies) Index, returned 2.6%. For comparison
the large cap FTSE 100 Index fell by -0.7%.(1)

 

Market turmoil continued through April, which began with significant
volatility following U.S. President Donald Trump's ‘Liberation Day’
announcement of a reciprocal tariff strategy on April 2nd. The S&P 500
experienced its worst day since March 2020 and its best day since 2008, while
the 10-year Treasury yield saw its largest weekly jump since 2001. Equity
markets globally sold off on the day, although the UK stood out as a relative
outperformer. A week later, Trump announced a 90-day pause on tariffs for
non-retaliating countries, leading to a relief rally in global markets.
However, renewed focus on US-China tensions caused further pressure on
markets. The US dollar and Treasuries also subsequently sold off as banks and
investors warned that Donald Trump’s tariffs could tip the US into recession
even as the President stepped back from the initial tariff implementation.

 

The UK economy grew by a faster-than-expected 0.5% in February. Positively,
the UK mortgage market also saw a notable expansion in low-deposit products,
with the increased availability reflecting lender confidence and improving
market liquidity, though borrowing costs remain elevated. UK small and
mid-caps fared better than large caps in April, with the FTSE 250 Index rising
+2.7% given its lower exposure to US tariffs than the FTSE 100 Index. UK
domestics, in particular housebuilding, performed particularly well alongside
property given their defensiveness to tariffs, as well as expectations of a
further rate cut by the Bank of England (BoE) in May.

 

Performance during the month was impacted by a number of factors, some stock
specific and some were factors impacting stocks that we do not own. The
largest detractor was ingredients manufacturer, Treatt, which fell after the
company issued a profit warning as a result of softening US consumer demand,
rising citrus prices and geopolitical uncertainty further weighing on market
conditions. Shares in identity verification software provider, GB Group, fell
after the company warned on their near-term outlook. While full-year trading
had been reasonably strong, tariff related uncertainty raised questions over
future demand for their services as a result of potential delays to its global
customers making investment decisions. Other detractors included companies we
do not own which performed well and make up a reasonable weight in the
benchmark. For example, Alphawave rose on the news of a potential takeover
from Qualcomm and Mitie rallied on results that were ahead of expectations.

 

The largest positive contributor was Youngs Brewery, recovering some of its
recent losses through the month ahead of its full-year results announcement. A
strong trading statement from JD Wetherspoon, also a holding in the portfolio,
early in the month helped provide some momentum to the shares, with recent
trading for the company helped by ‘favourable weather’ and a robust
consumer backdrop. Alpha Group recovered strongly following the initial
‘Liberation Day’ selloff, likely buoyed by its relative defensiveness to
US tariffs. The company also increased its dividend to be paid in May, which
provided further momentum to the shares. The trend of M&A (mergers and
acquisitions) in UK small & mid-caps showed no signs of slowing with shares in
our holding of data analytics business, GlobalData, rising sharply on the news
that the company received two takeover proposals from major private equity
firms ICG Europe Fund and KKR.

 

Whilst the UK Budget did have a negative impact on the UK market, and in
particular, domestic stocks, this has rapidly been reflected in share prices
to the point where we now see value in lots of these names. If anything, our
current view is becoming more positive on the outlook for the UK equity
market. Post Trump’s tariff announcement the 5-year swap rate has contracted
materially, leading to a fall in mortgage rates and increasing competition
between lending banks. Unemployment, whilst rising is still at low levels,
real wage growth remains positive, and the savings ratio in the UK is high.
The Asda Income Tracker published on 22nd April shows 10% annual growth in
household disposable income. Activity in the UK housing market appears to be
recovering, with the recent round of trading statements from the builders and
the suppliers highlighting a recovery in activity. UK property stocks remain
in deep value territory, but again recent updates have shown strength in
lettings, and with yields falling, NAVs appear to have found a floor.

 

We also draw more comfort in the recent actions of the Government. The
recognition that over-regulation is stifling industry and the planning process
has become a problem has been met by a change at the head of the CMA
(Competition and Markets Authority) and the approval of the Lower Thames
Crossing. Instead of talk there has been some real action. Kier Starmer has in
recent times appeared statesman-like; managing Trump well, being forthright on
Ukraine, and making encouraging overtures to Europe. Rachel Reeves is in a
challenging fiscal spot. There can be no doubt of this, but with the potential
changes from a revised Mansion House agreement she may produce buyers of UK
assets.

 

The pace of M&A shows little signs of slowing, with 15 deals in the first
quarter of the year, and this has accelerated since the start of the second
quarter. Finally, there is the valuation argument. This is the deepest and
longest period of underperformance of UK SMID vs large cap we have seen in
over 40 years. After the underperformance since the budget, the mid-cap is now
45% down relative to the FTSE 100 Index. With the weakening of the US dollar
those domestic companies that make up a significant amount of the UK SMID
market will see cost of goods falling, potentially at the same time consumers
start to loosen the purse strings and access the savings they are currently
holding.     

 

With all the uncertainty in the US equity market and investors looking for
other places to allocate money, a stabilising and cheap UK market could be a
valid and attractive alternative.

 

We thank shareholders for your ongoing support.


1Source: BlackRock as at 30 April 2025

 

22 May 2025

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.



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