REG-BlackRock Smaller Companies Trust Plc: Portfolio Update

Blackrock Smaller Companies TrustAnnouncement

Mon 16:00

The information contained in this release was correct as at 31 May 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 31 May 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  6.5         3.7            -8.6     -7.2      24.5      
 Share price      6.1         4.3            -10.6    -3.8      17.3      
 Benchmark*       7.3         6.4            1.1      1.1       38.9      

 

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):      1,409.19p   
 Net asset value Capital only (debt at fair value):     1,473.13p   
 Net asset value incl. Income (debt at par value) 1 :   1,424.01p   
 Net asset value incl. Income (debt at fair value) 1 :  1,487.95p   
 Share price:                                           1,296.00p   
 Discount to Cum Income NAV (debt at par value):        9.0%        
 Discount to Cum Income NAV (debt at fair value):       12.9%       
 Net yield 2 :                                          3.4%        
 Gross assets 3 :                                       £678.5m     
 Gearing range as a % of net assets:                    0-15%       
 Net gearing including income (debt at par):            7.0%        
 Ongoing charges ratio (actual) 4 :                     0.8%        
 Ordinary shares in issue 5 :                           42,759,792  

 
1. Includes net revenue of 14.82p
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 7,233,731 ordinary shares held in treasury.
 

 

                         
 Sector Weightings       % of portfolio  
 Industrials             29.0            
 Financials              24.2            
 Consumer Discretionary  13.1            
 Basic Materials         12.4            
 Consumer Staples        6.4             
 Real Estate             5.5             
 Health Care             3.7             
 Technology              3.7             
 Energy                  1.1             
 Telecommunications      0.9             
                         -----           
 Total                   100.0           
                         =====           
                                         
 Country Weightings      % of portfolio  
 United Kingdom          97.6            
 United States           2.4             
                         -----           
 Total                   100.0           
                         =====           
                                         
                                           

 

 Ten Largest Equity Investments  % of portfolio  
  Company                                        
 XPS Pensions                    2.9             
 IntegraFin                      2.7             
 Breedon                         2.6             
 Boku                            2.4             
 Tatton Asset Management         2.2             
 Great Portland Estates          2.2             
 Alpha Group International       2.0             
 Hill & Smith                    2.0             
 Alfa Financial Software         1.9             
 Ibstock                         1.9             
                                                 
                                                 

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

During May the Company’s NAV per share rose 6.5% to 1487.95p on a total
return basis, while our benchmark index returned 7.3%. For comparison the
large cap FTSE 100 index rose by 3.8%.

 

May was a strong month for global financial markets, marked by a rebound in
risk sentiment and easing geopolitical tensions as investors priced out the
likelihood of a global downturn. The Federal Reserve maintained its policy
rate, citing persistent uncertainty. Chair Powell reiterated a cautious stance
stemming from the ‘dual threat’ of persistent inflation and rising
unemployment data. U.S. Treasuries also came under pressure; a Moody’s
downgrade and concerns over the fiscal outlook pushed the 30-year yield to an
intraday high of 5.15%.

 

In contrast, the Bank of England cut rates again, citing progress on domestic
disinflation, with twelve-month CPI falling to 2.6% in March from 2.8% in
February and a slowing of wage growth expected over the rest of the year. This
also reflects the Bank’s growing concern over the secondary impact of U.S.
tariffs on UK export performance and broader financial stability, as they
signalled further gradual cuts to come.  However, optimism around monetary
easing was short-lived as data revealed that inflation surprised to the upside
in April, rising to 3.5% YoY—driven by regulated price hikes in water, gas
and electricity alongside wage increases—marking the first time inflation
exceeded 3% since March 2024.

 

The Trust’s NAV lagged the strong market rally during May due to a
combination of stock specific disappointments and in some cases, shares in the
portfolio which simply failed to keep up with the strength of the broader
market. The largest detractor was Bloomsbury Publishing. Despite reporting
full year results showing positive revenue growth, the shares fell on concerns
over it’s Academic and Professional division which saw a 10% organic revenue
decline due to budgetary pressures in the UK and US academic markets impacting
sales. The shares have been a strong contributor over a number of years, with
multiple upgrades helped by notable bestsellers from Sarah J. Maas and J.K.
Rowling driving sales within their consumer division. However, as a result of
the weaker outlook within its Academic division we have reduced the position
size in the portfolio. Ashtead Technology struggled as UK oil and gas
companies operating in the North Sea have come under pressure from regulatory
uncertainties, project delays and high taxes. The stock was dragged down by
concerns over global recession risk and the impact this may have on offshore
energy projects, where their equipment is exposed. We feel the market treating
Ashtead as a pure oil and gas play, and ignoring the significant opportunity
and order book that sits in the renewable energy market. Tatton Asset
Management was the third largest detractor despite no stock specific newsflow,
and the shares simply unable to keep pace with the strength of the broader
market.

 

Chemring benefitted from continued outperformance of the Aerospace & Defence
sector through the month, driven higher by expectations for the upcoming NATO
summit in June. The company has since reported a sharp rise in interim profits
with a record order book, reiterating full year guidance. Shares in digital
payments business Boku, rallied in May on no stock specific newsflow and
limited liquidity. Alpha Group International shares rose following a takeover
approach from U.S.-based Corpay Inc, which the company later dismissed, but
shares performed strongly after the news. 

 

We are 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 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;
negotiating with 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 Q2. Finally,
there is the valuation argument. This is the deepest and longest period of
underperformance of UK SMID vs large we have seen in over 40 years. After the
underperformance since the budget, the Midcap is now 45% down relative to the
FTSE100. With the weakening of the US$ 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.

 

30 June 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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