CHAIRMAN’S STATEMENT
Performance
During the year the total return on the net assets of Temple Bar was 27.9%*,
outperforming the total return of the FTSE All Share Index of 19.2%. While it
is always welcome to report on good performance over the year the Board
attaches greater significance to the longer term performance and in this
context I am pleased to report that on the same basis Temple Bar continues to
outperform its benchmark over ten years.
Dividend
There have been three interim dividend payments during the year each of 11.0p
per share and the directors are now recommending a final dividend payment for
the year ended 31 December 2019 of 18.39p per share to be paid on 31 March
2020 to those shareholders on the register as at 13 March 2020. The
ex-dividend date for this payment is 12 March 2020. If approved, this would
give an increase in the total dividend payment for the year of 10.0%. In spite
of this significant increase the dividend is fully covered by this year’s
earnings and has not required recourse to the Company’s significant revenue
reserves. Shareholders will note that the final dividend is lower than that
paid in the previous year, reflecting the rebalancing exercise between the
size of the final and interim dividends that was highlighted during the year.
This will be the 36th consecutive year in which the Company has raised its
annual dividend payment, such consistency being reflected in Temple Bar’s
status as one of The Association of Investment Companies’ ‘Dividend
Heroes’.
Gearing
At the year end, gearing (calculated net of cash and related liquid assets)
was 8.0%*. The Company’s £38m 5.5% debenture stock matures in April 2021.
During the year the Board will carefully consider all the available options
for managing the Company’s borrowings going forward.
Culture and Purpose
It is a new requirement for all companies to set out their culture and
purpose. It is perhaps more difficult for a conventional investment trust such
as Temple Bar to articulate these matters given certain unique factors, such
as an absence of any employees. Our defined purpose is relatively simple; it
is to deliver attractive long term returns from a diversified portfolio of
predominantly UK listed investments. Board culture promotes a desire for
strong governance and long term investment, mindful of the interests of all
stakeholders.
The Board
As highlighted in my Statement last year, Sir Richard Jewson will be retiring
from the Board at the AGM and will not, therefore, be seeking re-election. Sir
Richard has provided outstanding service to the Board over the 19 years that
he has served, particularly in his capacity as Senior Independent Director and
Chairman of the Audit and Risk Committee. We will greatly miss his wise
counsel and wish him the very best for the future. Lesley Sherratt will
succeed Sir Richard as Senior Independent Director and Chairman of the Audit
and Risk Committee.
In October 2019 we appointed Sonita Alleyne and Shefaly Yogendra to the Board
pursuant to the refreshment process to which I referred last year and both
have already made strong contributions to Board discussion. It was very
unfortunate that in January this year Sonita felt compelled to resign from the
Board due to a conflict of interest in allowable investment categories between
Temple Bar and one of her other portfolio positions.
The Board does not believe that long service should automatically render a
director to be considered as non-independent. However, in recognition of the
importance attached to tenure in the various corporate governance codes it has
been agreed that a director will ordinarily serve on the Board for a maximum
of nine years. This month I will have been on the Board for nine years and
accordingly under normal circumstances I would be looking to stand down.
However, a significant percentage of the Board has only recently been
appointed, and indeed following Sonita’s resignation we will have to appoint
another new director. Therefore, in the interests of optimising Board balance
in terms of experience it has been proposed that I should continue to serve
for a further three years.
Every year the Board undertakes a thorough evaluation of each director,
including myself as Chairman. In addition, in line with best practice in this
regard, all directors are subject to annual re-election by shareholders.
Secretary
Our company secretary, Martin Slade, will be retiring from this position after
the AGM. Martin has provided the Company with exemplary secretarial services
for over 26 years. He has kindly agreed to act as a consultant for the next 12
months to provide an orderly transfer of responsibilities. The Board would
like to express its sincere thanks for everything Martin has done for the
Company over this period and to wish him a long and happy retirement.
Share Capital Management
Temple Bar’s shares traded at a modest discount throughout most of the year
but at the year end they stood at a small premium of 0.9%*. The Board is
prepared to undertake share buy backs if the discount widens excessively,
either in absolute terms or relative to the Company’s peer group. While no
share repurchases took place during the year, the Board nonetheless recommends
that the existing authorities to issue new ordinary shares and to repurchase
shares in the market for cancellation or to hold in Treasury be continued.
Accordingly, it is seeking approval from shareholders to renew the share issue
and repurchase authorities at the forthcoming annual general meeting.
Investment Policy
As signaled in my statement last year, the Board consulted with shareholders
as to whether they would support the Trust declining to invest in companies
whose very business model was arguably unethical. Feedback suggested there was
little support for this measure among shareholders, so at the present time the
Board is not proposing to change policy in this regard. Shareholders should
note, however, that the Manager does not invest in certain categories of
stock, such as companies involved in cluster munitions.
.
Annual General Meeting
The AGM this year will be held at the offices of our Manager at Woolgate
Exchange, 25 Basinghall Street, London EC2V 5HA on Monday 30 March 2020 at
11am. Please note that this is a different building to that where the AGM was
held last year.
In addition to the formal business of the meeting the portfolio manager will,
as usual, make a presentation reviewing the past year and commenting on the
outlook. He will also be available to answer questions, as will the directors.
Shareholders who are unable to attend are encouraged to use their proxy votes.
Auditor
Regulations on compulsory auditor rotation mean that Ernst & Young LLP, the
Company’s auditor, is stepping down to be replaced, following an audit
tender, by BDO LLP. Ernst & Young LLP has audited the Company since 2003 and I
should like to record our thanks for its service to the Company over this
period.
Outlook
The current year has not started well for value investors, with January seeing
a return of investors’ appetite for momentum stocks. Time will tell whether
this situation will continue for an extended period. Nonetheless, with our
experienced, well-resourced management team we believe that Temple Bar is well
placed to generate significant returns for shareholders over the longer term.
_____________
Arthur Copple
Chairman
*Alternative Performance Measure – please see glossary of terms
Twenty Largest Investments
as at 31 December 2019
Company Industry Place of listing Valuation £’000 % of portfolio
Capita Industrials UK 85,282 7.8
GlaxoSmithKline Healthcare UK 74,573 6.9
Travis Perkins Industrials UK 71,010 6.5
Royal Dutch Shell Oil & Gas UK 56,336 5.2
BP Oil & Gas UK 47,458 4.4
Grafton Group Industrials UK 46,474 4.3
Tesco Consumer Services UK 41,843 3.9
Barclays Financials UK 41,234 3.8
Royal Bank of Scotland Financials UK 39,654 3.6
SIG Industrials UK 35,371 3.3
HSBC Holdings Financials UK 29,698 2.7
Kingfisher Consumer Services UK 29,150 2.7
Forterra Industrials UK 29,005 2.7
easyJet Consumer Services UK 28,486 2.6
Marks & Spencer Consumer Services UK 27,561 2.5
TP ICAP Financials UK 24,236 2.2
Citigroup Financials USA 23,411 2.2
Lloyds Banking Group Financials UK 21,680 2.0
Land Securities Group REIT Financials UK 21,473 2.0
McCarthy & Stone Consumer Services UK 20,027 1.8
793,962 73.1
Statement of Comprehensive Income
For the year ended 31 December 2019
2019 (unaudited) 2018 (audited)
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment income 39,750 - 39,750 37,258 - 37,258
Other operating income 51 - 51 26 - 26
39,801 - 39,801 37,284 - 37,284
Profit/(losses) on investments
Profit/(losses) on investments held at fair value through profit or loss - 188,920 188,920 - (131,528) (131,528)
Total Income/(loss) 39,801 188,920 228,721 37,284 (131,528) (94,244)
Expenses
Management fees (1,555) (2,244) (3,799) (1,503) (2,168) (3,671)
Other expenses (585) (533) (1,118) (559) (1,427) (1,986)
Profit/(loss) before finance costs and tax 37,661 186,143 223,804 35,222 (135,123) (99,901)
Finance costs (1,966) (2,976) (4,942) (1,962) (2,968) (4,930)
Profit/(loss) before tax 35,695 183,167 218,862 33,260 (138,091) (104,831)
Tax (172) - (172) (161) - (161)
Profit/(loss) for the year 35,523 183,167 218,690 33,099 (138,091) (104,992)
Earnings per share (basic & diluted) 53.12p 273.90p 327.02p 49.50p (206.50p) (157.00p)
The total column of this statement represents the Statement of Comprehensive
Income prepared in accordance with IFRS. The supplementary revenue return and
capital return columns are both prepared under guidance issued by the
Association of Investment Companies. All items in the above statement derive
from continuing operations.
No operations were acquired or discontinued during the year.
The Company does not have any income or expense that is not included in profit
for the year. Accordingly, the
profit for the year is also the Total Comprehensive Income for the Year, as
defined in IAS1 (revised).
Statement of Changes in Equity
for the year ended 31 December 2019 (unaudited)
Ordinary Share Capital Capital Retained Total
share premium reserves reserves earnings equity
capital account realised unrealised
£’000 £’000 £’000 £’000 £’000 £’000
Balance at 1 January 2018 16,719 96,040 642,322 147,845 33,440 936,366
Unclaimed dividends - - - - 51 51
Profit/(loss) for the year - - 29,890 (167,981) 33,099 (104,992)
Dividends paid to equity shareholders - - - - (29,243) (29,243)
Balance at 31 December 2018 16,719 96,040 672,212 (20,136) 37,347 802,182
Unclaimed dividends - - - - 8 8
Profit for the year - - (4,912) 188,079 35,523 218,690
Dividends paid to equity shareholders - - - - (35,757) (35,757)
Balance at 31 December 2019 16,719 96,040 667,300 167,943 37,121 985,123
Statement of Financial Position
as at 31 December 2019
31 December 2019 (unaudited) 31 December 2018 (audited)
£’000 £’000 £’000 £’000
Non-current assets Investments held at fair value through profit or loss 1,085,844 905,125
Current assets
Cash and cash equivalents 11,149 9,005
Receivables 3,245 3,231
14,394 12,236
Total assets 1,100,238 917,361
Current liabilities
Payables (1,066) (1,208)
Total assets less current liabilities 1,099,172 916,153
Non-current liabilities
Interest bearing borrowings (114,049) (113,971)
Net assets 985,123 802,182
Equity attributable to equity holders
Ordinary share capital 16,719 16,719
Share premium 96,040 96,040
Capital reserves 835,243 652,076
Retained revenue earnings 37,121 37,347
Total equity attributable to equity holders 985,123 802,182
Net asset value per share 1,473.13p 1,199.56p
Statement of Cash Flows
for the year ended 31 December 2019
2019 (unaudited) £’000 £’000 2018 (audited) £’000 £’000
Cash flows from operating activities
Profit/(loss) before tax 218,862 (104,831)
Adjustments for:
(Gains)/losses on investments (188,920) 131,528
Finance costs 4,942 4,930
Purchases of investments (152,237) (513,298)
Sales of investments 160,040 512,712
Dividend income (39,465) (36,728)
Interest income (313) (545)
Dividends received 39,578 36,115
Interest received 336 1,365
Decrease in receivables – 25
Increase/(decrease) in payables 106 (199)
Overseas withholding tax suffered (172) (161)
(176,105) 135,744
Net cash flows from operating activities 42,757 30,913
Cash flows from financing activities
Unclaimed dividends Equity dividends paid Interest paid on borrowings 8 (35,757) (4,864) 51 (29,243) (4,877)
Net cash flows from financing activities (40,613) (34,069)
Net decrease/(increase) in cash and cash equivalents 2,144 (3,156)
Cash and cash equivalents at the start of the year 9,005 12,161
Cash and cash equivalents at the end of the year 11,149 9,005
Notes
1. The figures set out above are prepared on the same basis as set out in the
previous year’s annual accounts and are derived from the audited accounts of
Temple Bar Investment Trust Plc for the year ended 31 December 2018 and the
unaudited accounts for the year ended 31 December 2019. The 2019 accounts will
be sent to shareholders shortly.
2. The financial information contained in this announcement does not
constitute full accounts within the meaning of Section 434 of the Companies
Act 2006. The 2019 accounts, on which the report of the auditors is expected
to be unqualified, will be filed with the Registrar of Companies in due
course. The audited accounts for the year ended 31 December 2018 on which the
report of the auditors was unqualified and did not contain a statement under
Section 498 of the Companies Act 2006, have been filed with the Registrar of
Companies.
19 February 2020
Contact: Alastair Mundy
Telephone 020 7597 2000
Investec Fund Managers Limited
Glossary of Terms
Discount
The amount by which the market price per share of an investment trust is lower
than the net asset value per share. The discount is normally expressed as a
percentage of the net asset value per share.
Net Gearing
In accounting terms, gearing is the amount of a company’s total borrowings
divided by its share capital. Net gearing adjusts this amount by any cash and
cash equivalents. High gearing means a proportionately large amount of debt,
which may be considered more risky for equity holders. However, gearing also
entails tax advantages. In investment analysis, a highly geared company is one
where small changes in sales produce big swings in profits. Also known as
leverage.
The gearing ratio as at 31 December 2019 is calculated as the ratio of the
Trust’s net assets of £985,123,000 (2018: £801,182,000), divided by a sum
of the total assets of £1,100,238,000 (2018: £ 917,361,000) less current
liabilities of £1,066,000 (2018: £1,208,000), less cash and cash equivalents
(including gilts) of £ 27,927,000 (2018: £ 33,521,000).
Premium
The amount by which the market price per share of an investment trust exceeds
the net asset value per share. The premium is normally expressed as a
percentage of the net asset value per share.
Return on Net Asset Value
As at 31 December 2019, the difference between the Trust's opening and closing
NAV stood at £182,941,000 (2019: £985,123,000; 2018: £802,182,000); adding
the dividend paid in the current year of £35,757,000 results in a total
return of £ 218,698,000 for the purposes of this calculation. Dividing this
return by the opening NAV of the Trust results in the return of 27.9%.
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