BlackRock Smaller Companies Trust Plc - Portfolio Update

The information contained in this release was correct as at 31 January 2025.  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 31 January 2025 and unaudited.
Performance at month end is calculated on a Total Return basis based on NAV per share with debt at fair value
 

 

Sources:  BlackRock and Deutsche Numis

*With effect from 15 January 2024 the Numis Smaller Companies plus AIM (excluding Investment Companies) Index to Deutsche Numis Smaller Companies plus AIM (excluding Investment Companies).

 

 

At month end

 

1. Includes net revenue of 26.48p
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 dividend of 27.00 pence per share (announced on 14 May 2024, ex-date on 23 May 2024, and paid 24 June 2024) and Interim dividend of 15.50 pence per share (announced on 25 October 2024, ex-date on 31 October 2024, and paid on 04 December 2024)
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 29 February 2024.
5. Excludes 4,653,731 ordinary shares held in treasury.

 

 

Commenting on the markets, Roland Arnold, representing the Investment Manager noted:

During January the Company’s NAV per share returned -0.6% to 1,533.20p on a total return basis, while our benchmark index, the Deutsche Numis Smaller Companies plus AIM (excluding Investment Companies) Index, returned 1.0%. For comparison the large-cap FTSE 100 Index rose by 6.2%.1

 

UK stock markets ended the month up, however January was another month of small and mid-cap underperformance in the UK with the FTSE All-Share gaining 5.5% while the FTSE 250 rose by 1.8%. UK inflation data showed that headline consumer prices rose 2.5% year-on-year in December, down from 2.6%, and core inflation slowed to 3.2% in December from 3.5% in November. The International Monetary Fund increased their forecasts for UK economic growth in 2025 to 1.6% as the UK Chancellor, Rachel Reeves, re-iterated her pledge to go ‘further and faster’ to deliver economic growth. Reeves also announced government plans to push for greater infrastructure investment, announcing support for the expansion of both Heathrow and Gatwick airports.

 

Early in the month, volatility spiked, most notably in the US, following fears that DeepSeek’s less expensive AI (Artificial Intelligence) model may poses a threat to US technology companies’ dominance. Recent stock market outperformance has pushed US shares to their most expensive level relative to government bonds since the dot.com bubble over 20 years ago, sparking concerns over the fragility of this outperformance.

 

Central Bank decisions were in focus as a widely anticipated 25bps cut came from the European Central Bank just hours after Eurostat reported that the Eurozone economy did not grow at all in the fourth quarter of 2024. The Federal Reserve held rates following three consecutive cuts as inflation remains persistent and the effects of President Trump’s policy decisions remained unclear, solidifying the already scaled back expectations of much lower rates through 2025.

 

2025 appears to have got off to a very challenging start for the UK small-cap market. The selling pressure on domestic equites has continued, against a backdrop of outflows from UK small and mid-cap funds, and market moves feel less about the fundamentals of what you own and more about profit taking and broad-based selling where there is sufficient liquidity. Ingredients manufacturer, Treatt, for example, fell during the month, giving back some of its strong share price moves from December. At the end of January, the company provided a positive trading update, confirming that Q1 trading was running in line with expectations and highlighting its positive start to the second quarter, with a robust pipeline and order intake. Gamma Communications fell despite reporting strong trading for FY24, showing excellent cash conversion. However, the company also announced the large acquisition of STARFACE in Germany, which the market took negatively resulting in the shares drifting lower on the news. The third largest detractor was Ithahca Energy, a recent addition to our benchmark, which has rallied through January, and the portfolio was underweight.

 

LED lighting supplier, Luceco, reported strong sales growth in the final quarter of 2024 with upgrades, reflecting strong demand for its products, positive effect of product mix and operational efficiencies. Recent acquisitions are integrating well and the business is well placed to accelerate in 2025. Promotional product provider, 4imprint, rallied from its recent one year low after releasing an upbeat trading update, with group revenue expected to be above analyst forecasts.  While new customer orders were a challenge, customer retention remained strong, as did existing customer order count and value. IntergraFin, the operator of the Transact investment platform, rose in response to a solid first quarter trading update which highlighted continued strong net inflows onto the platform. Investment in digitalisation has ensured that the platform continues to attract new advisers and despite some volatility in flow activity around the UK budget, net flows returned to normal levels in November and December.

 

As previously discussed, the budget was not the clearing event that we as a team had hoped for. However, while the impact on growth, debt, inflation and interest rates is incrementally more negative in the near term, some of the potential benefits from investments could come through further out. Importantly, we do still believe that the Budget was an important milestone to get past in order for the UK SMID (small and mid-cap) market to make any progress. Certain announcements, notably National Insurance, will put pressure on profit margins of many domestic businesses into next year and companies will have to adjust to the new cost base, hiring intentions may change and companies without pricing power are going to feel the squeeze.

 

We also continue to keep a close eye on inflation and UK unemployment, both of which remain at acceptable levels, but are likely to move as companies respond to National Insurance increases. Finally, and importantly, the valuation of UK SMID companies is attractive on a historic basis. As we move through this near-term noise, the opportunity presented by the UK small and mid-cap market will present itself, and maybe we will finally see investors looking to allocate back to what has historically been an outperforming asset class.   

 

We thank shareholders for your ongoing support.

 

     1Source: BlackRock as at 31 January 2025

 

21 February 2025

ENDS
 

Latest information is available by typing www.blackrock.com/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.