Last checked at 19 Oct 2020 17:55
BlackRock Smaller Companies Trust Plc - Portfolio UpdateBlackRock Smaller Companies Trust Plc - Portfolio Update
PR Newswire
London, October 19
The information contained in this release was correct as at 30 September 2020. 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 September 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* | -2.7 | 2.2 | -5.4 | -2.2 | 37.7 |
| Share price* | -0.8 | -4.4 | -11.6 | -1.9 | 38.8 |
| Numis ex Inv Companies + AIM Index | -1.2 | 7.1 | -4.6 | -13.7 | 9.0 |
*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): | 1,392.76p |
| Net asset value Capital only (debt at fair value): | 1,373.83p |
| Net asset value incl. Income (debt at par value)1: | 1,397.58p |
| Net asset value incl. Income (debt at fair value)1: | 1,378.64p |
| Share price: | 1,220.00p |
| Discount to Cum Income NAV (debt at par value): | 12.7% |
| Discount to Cum Income NAV (debt at fair value): | 11.5% |
| Net yield4: | 2.7% |
| Gross assets2: | £752.0m |
| Gearing range as a % of net assets: | 0-15% |
| Net gearing including income (debt at par): | 5.4% |
| Ongoing charges ratio (actual)3: | 0.7% |
| Ordinary shares in issue5: | 48,829,792 |
Includes net revenue of 4.82p
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 ordinary shares held in treasury.
| Sector Weightings | % of portfolio |
| Industrials | 27.2 |
| Financials | 20.3 |
| Consumer Services | 15.7 |
| Consumer Goods | 11.4 |
| Technology | 10.3 |
| Health Care | 6.1 |
| Basic Materials | 5.0 |
| Oil & Gas | 1.6 |
| Telecommunications | 1.3 |
| Materials | 1.1 |
| ----- | |
| Total | 100.0 |
| ===== | |
| Country Weightings | % of portfolio |
| United Kingdom | 98.0 |
| United States | 1.0 |
| Singapore | 0.6 |
| France | 0.4 |
| ----- | |
| Total | 100.0 |
| ===== |
| Ten Largest Equity Investments | |
| Company | % of portfolio |
| YouGov | 2.5 |
| Pets at Home | 2.1 |
| Avon Rubber | 2.0 |
| Watches of Switzerland | 2.0 |
| Games Workshop | 1.9 |
| IntegraFin | 1.9 |
| Impax Asset Management | 1.9 |
| Ergomed | 1.8 |
| Breedon | 1.8 |
| Treatt | 1.7 |
Commenting on the markets, Roland Arnold, representing the Investment Manager noted:During September the Company’s NAV per share fell by -2.7%1 to 1,392.76p, underperforming our benchmark index which fell -1.2%1; for comparison the FTSE 100 Index fell by -1.6%1 (all calculations are without income reinvested).
Equity markets fell in September on the back of rising geopolitical risks and concerns over a second wave of COVID-19, with infections in several countries (most notably in Europe) rising during the month. As seen in many other countries, tighter restrictions were once again imposed in the UK to curb the spread of the virus. These included the ‘rule of six’ and reduced operating hours for the already fragile hospitality sector. Brexit made headlines with the Government’s controversial Internal Markets Bill which provoked an intense row with the EU. As a result, concerns of a “no-deal Brexit” once again came to the fore and this coupled with softer domestic data led to sterling weakness.
During the month the portfolio benefited from a number of positive updates from key holdings; however, weakness in some of our more domestically focussed holdings detracted from performance. In addition, a number of recent strong performers gave back some of their recent gains; a combination of these factors resulted in the Company’s NAV per share underperforming the benchmark. Relative performance was also impacted by not owning William Hill, the largest position in our benchmark, which received a bid from the US company Caesar’s Entertainment. This impacted relative performance by -47 basis points (and represented the single largest detractor in the month). Having performed well since providing a positive trading update in July, shares in YouGov gave back some of this recent strong performance despite there being no change to the outlook for the business. Shares in The Pebble Group fell in response to mixed results which highlighted the strength in the promotional services Facilisgroup business, while Brand Addition remained challenged during the first half of the year. Elsewhere our pub stocks, JD Wetherspoons and Youngs, were impacted by the increased restrictions imposed by the Government.
The largest positive contributor was Pets at Home, which performed well after issuing a positive trading update which highlighted strong sales momentum ahead of expectations, as customer shopping habits saw a return to normal in addition to the reinstatement of services and procedures within the veterinary and retail operations. The company said it had delivered double-digit like-for-like sales growth in the second quarter and now expect full year profits to be ahead of market expectations. Shares in Ergomed rose in response to strong interim results which showed continued revenue growth of 14.8%, with the order book up 22% since the beginning of the year, providing high visibility into the second half and beyond. Shares in Games Workshop once again contributed positively to performance. The tabletop game manufacturer reported trading which continues to be ahead of expectations, driven by growth in its online channel, with retail stores also recovering since reopening. Whilst the long-term and ongoing impact of the pandemic remains unclear, the board declared its dividend payment, in line with the company’s policy to distribute surplus cash.
The current environment continues to present a number of challenges as the outlook remains highly uncertain and investors are inconsistent on how they are pricing coronavirus risks. The smaller end of the market remains very narrow and, in our opinion, continues to inconsistently value risk. This can be seen in valuations of the winners which have continued to stretch, while the losers compress. This has also been evident in a number of cases where share prices have become completely detached from fundamentals, and we can point to a number of examples where investment cases are playing out, but the share price is telling a different story; and this disconnect certainly cannot last forever. We must all remind ourselves that in the short-term share prices are driven by supply and demand (investor sentiment), however, in the long-term it is company earnings that will drive share prices.
We therefore remain confident 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 investments 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 30 September 2020
19 October 2020
ENDS
Latest information is available by typing www.blackrock.co.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.