BlackRock Smll Cos Portfolio Update
October 19 2020 - 11:55AM
UK Regulatory
TIDMBRSC
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 Three One Three Five
month months year years 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: GBP752.0m
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
1. Includes net revenue of 4.82p
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 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).
3. Includes current year revenue.
4. 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.
5. 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
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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.
END
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October 19, 2020 12:55 ET (16:55 GMT)
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