Blackrock Smaller Companies Trust plc (LON:BRSC) has provided the following portfolio update:
All information is at 30 November 2020 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 capital only basis
| One month % | Three months % | One year % | Three years % | Five years % | |
| Net asset value* | 11.3 | 9.5 | 1.3 | 8.3 | 51.0 |
| Share price* | 13.1 | 20.7 | -5.4 | 15.8 | 54.3 |
| Numis ex Inv Companies + AIM Index | 11.0 | 10.5 | 2.2 | -4.5 | 20.6 |
*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): | 1,568.18p |
| Net asset value Capital only (debt at fair value): | 1,550.57p |
| Net asset value incl. Income (debt at par value)1: | 1,569.53p |
| Net asset value incl. Income (debt at fair value)1: | 1,551.92p |
| Share price: | 1,484.00p |
| Discount to Cum Income NAV (debt at par value): | 5.5% |
| Discount to Cum Income NAV (debt at fair value): | 4.4% |
| Net yield2: | 2.2% |
| Gross assets3: | £836.0m |
| Gearing range as a % of net assets: | 0-15% |
| Net gearing including income (debt at par): | 5.4% |
| Ongoing charges ratio (actual)4: | 0.7% |
| Ordinary shares in issue5: | 48,829,792 |
- Includes net revenue of 1.35p
- Yield calculations are based on dividends announced in the last 12 months as at the date of release of this announcement, and comprise the second interim dividend of 19.7 pence per share (announced on 3 June 2020, ex-dividend on 11 June 2020) and the first interim dividend of 12.8 pence per share (announced on 5 November 2020, ex-dividend on 12 November 2020, pay date 2 December 2020).
- Includes current year revenue.
- As reported in the Annual Financial Report for the year ended 29 February 2020 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 | 26.9 |
| Financials | 18.9 |
| Consumer Services | 15.6 |
| Consumer Goods | 12.8 |
| Technology | 10.9 |
| Health Care | 5.9 |
| Basic Materials | 5.6 |
| Telecommunications | 1.2 |
| Oil & Gas | 1.1 |
| Materials | 1.1 |
| —– | |
| Total | 100 |
| ===== |
| Ten Largest Equity Investments Company | % of portfolio |
| Watches of Switzerland | 2.3 |
| YouGov | 2.2 |
| Grafton Group | 1.9 |
| IG Design Group | 1.9 |
| Pets at Home | 1.9 |
| Team 17 | 1.8 |
| CVS Group | 1.8 |
| Breedon | 1.8 |
| Ergomed | 1.8 |
| Impax Asset Management | 1.7 |
Commenting on the markets, Roland Arnold, representing the Investment Manager noted:
During November the Company’s NAV per share rose by 11.3%1 to 1,568.18p, outperforming our benchmark index which returned 11.0%1; for comparison the FTSE 100 Index rose by 12.4%1 (all calculations on a capital only basis).Equity markets rallied during November as positive COVID-19 vaccine results showing better than expected efficacy from three candidates (Pfizer/BioNTech, Moderna and Oxford/AstraZeneca), sparked one of the sharpest rotations away from growth and into value shares on record. The rotation saw many of the biggest losers this year making the greatest gains during November, resulting in UK and European indices outperforming other developed equity markets. After several uncertain days, markets also received a boost from the outcome of the US election, which saw Joe Biden’s Democrats win the White House but the Republicans hold the senate, arguably the most market friendly result.
Equity market moves during November were heavily driven by the rotation from growth stocks into more value orientated areas of the market, a rotation which also drove much of the Company’s NAV performance for the month. However, despite this headwind to our growth bias style, actions taken earlier in the year to diversify the portfolio, and some positive updates from companies that continue to successfully navigate this challenging year, resulted in outperformance. IG Design Group reported sales ahead of expectations as people have not held back on Christmas preparations (decorations, gift packaging and crackers), despite the unprecedented challenges of 2020. Meanwhile the company has seen strong demand for its craft kits as families have embraced many ‘at home activities’ during the year. Our holding in Central Asia metals rallied with the mining sector and strengthening copper price. The shares also benefited from the announcement that the company would resume payment of its interim dividend, which was deferred earlier this year). Shares in Pebble Group rose in response to a positive trading update, which confirmed that the group is on track to meet full year expectations for the year ending December 2020. Its Facilisgroup business has continued to perform well during the pandemic, while its Brand Addition business has continued to improve since flagging weakness in September.
Many of the largest detractors during November were simply the strongest performers of recent months giving back some of their gains as investors sold winners to buy into the value rally. This impacted our holdings in YouGov and Games Workshop. Importantly, underlying trading in both businesses remains strong and we do not see any fundamental change to the investment case for either simply because of the announcement of successful COVID-19 vaccines. Both companies remain very attractive and we are excited by the opportunities that we see ahead for these businesses, and we have used share price volatility to add to our holdings.
The ongoing COVID-19 pandemic along with the US Presidential Election and Brexit trade negotiations have been key sources of volatility in recent months, and resolution on these three issues has, and will remain key for equity markets to return to some level of rational behaviour. At the time of writing, a number of countries have begun to administer the vaccine to the most vulnerable individuals, and therefore, despite further mandated restrictions, stock markets are now focused on how quickly the world can return to something approximating normality. Whilst the news of workable vaccines is clearly positive for markets and global economies, we remain mindful that any programme of mass vaccination will take many months to implement, and therefore we may see further volatility from third/fourth waves of the virus and lockdowns.
Politics never leaves us, and whilst the US election result has provided the hope of a more balanced global political environment, attention is now shifting to Brexit. From our perspective any form of clarity is positive for UK equities over the medium to long-term. Given how under-owned the UK market is and the discount it trades at compared with other global markets, we see any conclusion as having the potential to drive flows into UK equities regardless of whether we have a negotiated deal or we leave without one. The negotiations have in one form or another been going on for years, giving companies ample time to prepare their businesses for a no deal Brexit. We therefore see the risk of unexpected business disruption as relatively muted at an individual company level. Whilst there will undoubtedly be some sectors that are more exposed than others, we remain firmly of the belief that strong companies will prevail, regardless of the result of the negotiations. We continue to believe that smaller companies in particular will be able to react and adapt fastest to whatever form Brexit takes.
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 heightened volatility, such as this, have proven to be excellent investment opportunities.
1Source: BlackRock as at 30 November 2020
To learn more about the BlackRock Smaller Companies Trust plc please follow this link: blackrock.com/uk/brsc
23 December 2020
