BlackRock Smaller Companies NAV outperformed its benchmark in November


BlackRock Smaller Companies Trust plc (LON:BRSC) has announced its latest portfolio update.

All information is at 30 November 2022 and unaudited.

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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
Net asset value8.01.6-21.78.320.3
Share price7.11.7-28.9-7.817.7
Numis ex Inv Companies + AIM Index6.0-0.2-

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
  1. Includes net revenue of 20.43p
  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 final ex-dividend of 22.00 pence per share (announced on 29 April 2022, ex-date on 12 May 2022, and pay date 17 June 2022), and an interim dividend of 14.50 pence per share (announced on 3 November 2022, ex-dividend on 10 November 2022, and payable 9 December 2022).
  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 2022.
  5. Excludes 1,163,731 ordinary shares held in treasury.
Ten Largest Equity Investments
% of portfolio
4imprint Group3.2
Watches of Switzerland3.0
CVS Group2.9
Gamma Communications2.6
Spirent Communications2.1
Qinetiq Group2.1
Bloomsbury Publishing2.1
Auction Technology1.9
Impax Asset Management1.9

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

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