BlackRock Smaller Companies Trust plc (LON:BRSC) has announced its latest portfolio update.
All information is at 30 November 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 | 8.0 | 1.6 | -21.7 | 8.3 | 20.3 |
| Share price | 7.1 | 1.7 | -28.9 | -7.8 | 17.7 |
| Numis ex Inv Companies + AIM Index | 6.0 | -0.2 | -17.5 | 6.7 | 5.3 |
Sources: BlackRock and Datastream
At month end
| Net asset value Capital only (debt at par value): | 1,523.11p |
| Net asset value Capital only (debt at fair value): | 1,562.81p |
| Net asset value incl. Income (debt at par value)1: | 1,543.54p |
| Net asset value incl. Income (debt at fair value)1: | 1,583.24p |
| Share price: | 1,352.00p |
| Discount to Cum Income NAV (debt at par value): | 12.4% |
| Discount to Cum Income NAV (debt at fair value): | 14.6% |
| Net yield2: | 2.7% |
| Gross assets3: | £823.2m |
| Gearing range as a % of net assets: | 0-15% |
| Net gearing including income (debt at par): | 0.4% |
| Ongoing charges ratio (actual)4: | 0.7% |
| Ordinary shares in issue5: | 48,829,792 |
| Ten Largest Equity Investments Company | % of portfolio |
| 4imprint Group | 3.2 |
| Watches of Switzerland | 3.0 |
| CVS Group | 2.9 |
| Gamma Communications | 2.6 |
| Ergomed | 2.1 |
| Spirent Communications | 2.1 |
| Qinetiq Group | 2.1 |
| Bloomsbury Publishing | 2.1 |
| Auction Technology | 1.9 |
| Impax Asset Management | 1.9 |
Commenting on the markets, Roland Arnold, representing the Investment Manager noted:
During November the Company’s NAV per share rose by 8.0% to 1,583.24p on a total return basis (with debt at fair value), while our benchmark index rose by 6.0%.1 For comparison the large cap FTSE 100 Index returned 7.1%.1
Equity markets surged in November and continued their recovery from last month’s lows, reacting positively to hopes that central banks will respond to signs inflation may be peaking and shift towards an easing in monetary policy. November proved a busy month for the UK economy, with its largest rate hike since 1989, a government budget, and CPI hitting a 41-year high. The Autumn Statement brought a budget of £55 billion in tax rises and a dramatic reversal in many of the policies announced in the “mini-budget”. The market deemed the new budget sufficient to help stabilise public finances and the pound rallied for the remainder of the month.
Outperformance during the month was helped by the strong rebound in equity markets, while positive trading in some of our core holdings also added to relative performance. The largest positive contributor was Watches of Switzerland which reported better than expected Q2 trading, with demand for luxury watches continuing to exceed supply and waitlists continuing to extend. Management remains confident in the outlook as a result of the unique dynamics of the luxury watch market and continue to invest in their pipeline of expansionary projects to fuel future growth. 4imprint, the US focused direct marketer of promotional products, continues to reap the benefits of the investments in marketing that it made during COVID, with new customer acquisitions, existing customer retention and order values running ahead of expectations. Other key contributors were within financials, notably Tatton Asset Management and Impax Asset Management. Both companies have continued to generate positive net inflows despite the challenging market backdrop which we think reflects their market leading positions in Model Portfolio Solutions (Tatton) and Sustainable Investing (Impax).
Shares in Restore fell in response to a downgrade on both rising interest costs and the slowing IT recycling market. The company has however, continued to see positive momentum across the other areas of the business, and in September it secured its largest ever contract win with the BBC. Inevitably we will see more downgrades across the market as analyst forecasts catch up with the increasing cost of debt. Shares in Pets at Home were weak after the company reported falling profits as a result of rising freight and energy costs. The structural growth in pet spend remains a positive tailwind for the business, however the company has seen downgrades as a result of the mix shift away from higher margin accessories which were a key growth driver for the company during the “lockdown puppy” boom of the COVID pandemic, while the outlook for discretionary spending continues to look challenged.
The coming months are likely to remain highly uncertain, with heightened volatility as investors continue to focus on the path for monetary policy, inflation data, the oil price and geopolitics. The political environment is likely to remain a key driver of short-term swings in the currency, which will have the potential to drive outsized sector level moves. As a result we are continuing to keep gearing in the Company low at this time, in order to protect shareholders from the ongoing volatility, however we remain prepared to put capital to work when we feel the time is right. While the macro environment is likely to present its fair share of challenges for lots of companies, it is important to remember that the effects of the challenging environment will not be felt evenly. 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. Historically these periods have been followed by strong returns for the strategy and presented excellent investment opportunities. We thank shareholders for your 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 30 November 2022
21 December 2022
To learn more about the BlackRock Smaller Companies Trust plc please follow this link: blackrock.com/uk/brsc
