REG-Temple Bar Investment Trust Plc: Half-year Report
21/08/2024 07:15
Temple Bar Investment Trust Plc
Temple Bar Investment Trust Plc (“Temple Bar” the “Trust” or the
“Company”) is pleased to present its unaudited half-year results for the
six months ended 30 June 2024.
This Announcement is not the Company’s Half-Year Report & Accounts. It is an
abridged version of the Company’s full Half-Year Report & Accounts for the
six months ended 30 June 2024. The full Half-Year Report & Accounts, together
with a copy of this announcement, will also shortly be available on the
Company’s website: www.templebarinvestments.co.uk where up to date
information on the Company, including daily NAV, share prices and fact sheets,
can also be found. The Company's Half-Year Report & Accounts is also being
published in hard copy format.
The Company's Half Year Report & Accounts for the six months ended 30 June
2024 has been submitted to the UK Listing Authority, and will shortly be
available for inspection on the National Storage Mechanism (NSM):
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
For further information please contact: Mark Pope, Frostrow Capital LLP 020
3008 4913.
Summary of Results
Six months Year to Six months
to 30 June 31 December to 30 June
2024 2023 2023
£000 £000 £000
NAV total return, with debt at fair value 1,2 13.1% 12.3% 3.4%
Share price total return 1,2 11.0% 12.5% 2.5%
FTSE All-Share Index 3 7.4% 7.9% 2.6%
Net asset value per share with debt at book value 275.4p 248.0p 231.2p
Net asset value per share with debt at fair value 1 280.1p 252.2p 236.8p
Share price 259.0p 238.0p 221.5p
Discount of share price to NAV per share with debt at fair value 1 (7.5%) (5.6%) (6.5%)
Dividends per share 5.00p 9.60p 4.60p
Dividend yield 1 3.8% 4.0% 4.1%
Net gearing with debt at book value 8.4% 9.8% 10.2%
Ongoing charges 1 0.62% 0.56% 0.53%
1 Alternative Performance Measure. See glossary for definition and more
information.
2 Source: Morningstar.
3 Source: Redwheel.
Temple Bar – The investment case
Temple Bar is differentiated by an investment approach that focuses on
companies whose stock market value is at a significant discount to the fair or
intrinsic value of the business. The portfolio is selected through deep
fundamental analysis by an experienced, well-resourced management team.
The Trust offers a competitive income yield and the Board and Portfolio
Manager, Redwheel, support a progressive dividend policy.
Recent returns have been strong as the undervaluation of many UK shares has
been realised either through corporate takeovers or by companies buying back
their own shares.
Despite the strong returns that the Trust has enjoyed over the last eighteen
months, Redwheel believes that the portfolio of stocks continues to look very
undervalued, and this bodes well for future returns.
Think value investing, think Temple Bar.
Chairman’s Statement
Performance
The total return of the FTSE All-Share Index was +7.4% in the half-year. I am
pleased to report that the Trust’s Net Asset Value (“NAV”) per share
total return was +13.1%, and that the share price total return was +11.0%,
both outperforming the Index by a significant margin reflecting strong stock
selection by your Portfolio Manager in market conditions that have been
supportive of their value investing approach. Performance over one and three
years has also been strong, both on a relative and absolute basis, with a NAV
per share total return over the periods of +22.9% and +33.9% and a share price
total return of +21.8% and +36.7% compared to a total return from the FTSE
All-Share Index of +13.0% and +23.9%. Further details regarding the Trust’s
performance can be found in the Portfolio Manager’s Report.
Discount
Since the period end due, in part, to the Trust’s strong performance, no
shares have been repurchased and the Trust’s discount stood at 4.7% as at 19
August 2024.
As at the half-year end the discount of the Trust’s share price to the NAV
per share stood at 7.5% compared to 5.6% at the beginning of the period. We
were active buyers of our own shares, purchasing 4,096,723 shares into
Treasury in the period at a cost of £9.7m. These buybacks address the
short-term imbalance between supply and demand for the Trust’s shares and
enhance the NAV per share for continuing shareholders.
Dividend
The Trust’s revenue performance in the period was strong, with an increase
in revenue earnings per share of c.35% compared to the previous half year.
This has enabled your Board to declare an increased second interim dividend of
2.75 pence per share (2023: second interim dividend of 2.3 pence per share).
The second interim dividend will be payable on 27 September 2024 to
shareholders on the register of members on 23 August 2024. The associated
ex-dividend date is 22 August 2024. This follows the payment of a first
interim dividend of 2.5 pence per share on 28 June 2024.
Outlook
The UK stock market enjoyed a positive first half of the year, supported by an
increase in M&A activity and in companies buying back their own shares; both a
reflection of the perceived value offered by current valuation levels.
With the election of a new government in a landslide result, the UK offers the
increasingly rare attraction of political stability. Combined with the
continued appealing valuations offered by UK equities, particularly when
compared with the valuations seen in certain overseas markets and sectors, the
outlook for UK equities is positive.
Your Board believes that notwithstanding the shorter-term uncertainties
surrounding the extent and pace of interest rate cuts, UK equities continue to
offer attractive returns and that our value strategy promises to reward
shareholders accordingly.
Richard Wyatt
Chairman
20 August 2024
Ten Largest Investments
As at 30 June 2024
Primary
place of Valuation % of
Company Industry Listing £’000 portfolio
Royal Dutch Shell Energy UK 58,799 6.9%
NatWest Group Financials UK 55,153 6.5%
BP Energy UK 49,284 5.8%
ITV Communications UK 43,669 5.1%
Barclays Financials UK 43,091 5.0%
TotalEnergies Energy France 42,639 5.0%
Aviva Financials UK 38,474 4.5%
Anglo American Materials UK 38,107 4.5%
NN Group Financials Netherlands 35,533 4.2%
Marks & Spencer Group Consumer Staples UK 35,489 4.1%
440,238 51.6%
Portfolio Manager’s Report
How do you describe your approach to investing?
We are value investors. This means that we invest the Trust’s assets in
companies whose stock market value is at a significant discount to the fair or
intrinsic value of the business. Investing in undervalued companies provides
two benefits. First, it provides investors with a margin of safety if events
don’t unfold in a way that investors would have hoped and second, they can
expect to receive an excess investment return as and when this undervaluation
is corrected by the stock market.
How would you describe the investment backdrop in the first half of the year?
In a word: constructive. Interest rates in the US, the UK and Europe rose very
significantly in 2022 and 2023 to cool the inflationary effects of the strong
post pandemic recovery and Russia’s invasion of Ukraine. The concern had
been that these rate rises would result in a significant slowdown in growth
and possibly a recession. Whilst the future is always uncertain, it so far
looks as if it hasn’t been the case. Although GDP growth was sluggish in
both Europe and the UK in 2023, in the UK particularly we have seen some
acceleration in recent months. The US economy grew at a healthy rate last year
and that growth has continued into this year. Meanwhile, inflation rates have
continued to fall and in the UK are now in line with the Bank of England
target of 2%. As a result, stock markets are now looking forward to interest
rate cuts later in 2024 although the pace of these is uncertain. A resilient
economy and the prospect of falling interest rates are normally good for
investor sentiment and the first half of 2024 has not been an exception to
this rule. Most of the major equity markets have therefore delivered
attractive returns so far in 2024.
Turning to the financial year, how has the portfolio performed and what were
the major winners and losers?
The Trust’s portfolio performed well in the first six months of the year,
building on the solid gains enjoyed in 2023. The Trust enjoyed particularly
strong returns from NatWest Group, Barclays, ITV, Anglo American and the Dutch
insurer, NN Group. Each of these five companies added a per cent or more to
the Trust’s total return in the six months. Performance was negatively
impacted by a further fall in the share price of Capita.
The banks, NatWest and Barclays, continue to benefit from the recent pick up
in net interest margins (itself a function of rising interest rates) and a
benign loan loss cycle and both reported a strong set of results in February.
This coupled with low starting valuations propelled share prices upward. In
both cases, the companies started the year with a market valuation of less
than 5x last year’s earnings, an earnings yield of more than 20%. The share
prices of both companies rose by around 40% in the first half of the year.
ITV rose by around 30% in the six months. Although the advertising cycle
continues to be weak, it appears to have stabilised, and this at a time when
the shares look to be significantly undervalued. This was illustrated by the
announcement that the company had agreed to sell its share of the Britbox
International joint venture for £255m, which at the time constituted around
10% of the company’s market valuation; this even though the joint venture
contributed little in the way of profit to the group. The company also
announced that the proceeds would be used to repurchase shares. At the current
valuation a share buyback of this scale is very value enhancing for those
shareholders that decide not to sell. Accordingly, the shares rose by around
15% on the day of the announcement, highlighting that shares where stock
market expectations are low and sentiment is negative can be very sensitive to
good news.
Anglo American rose on the back of a £31bn all-share bid from BHP and
although the bid came to nothing, it served to highlight the undervaluation of
the group’s copper assets. Anglo American has been beset by operational
problems and this had caused its share price to fall quite dramatically in the
final months of 2023. To repel the bid from BHP, the management of Anglo
American announced a simplification strategy that should create value for
shareholders. If this strategy is unsuccessful then there is a reasonable
likelihood that the company will once again become the subject of bid
interest.
NN Group reported a strong set of results in which it increased its target for
capital generation, upped its dividend by 15% and announced further share
buybacks. The company has strong capital ratios and even today offers a 7%
historic dividend yield and is valued at less than 7x the level of capital
generated in 2023.
At a capital markets day in June, Capita announced that the expected date at
which the company would start to generate free cash flow for shareholders
would be further delayed. The company has been a very poor investment for the
Trust and continues to face significant challenges. However, should the
company be capable of hitting its revised financial targets then the shares
would offer exceptional value. Some might question why it is that the Trust
continues to hold onto shares in a company that has serially disappointed. Our
answer is that we believe that companies should always be appraised through
the lens of today and that we should remove the emotional baggage and evaluate
businesses as if we were looking at them for the first time. If the shares
appear to be undervalued based on the information that is available today,
then in our view, they warrant a continued position in the Trust’s
portfolio.
How has the Trust’s portfolio changed in the first half of the 2024?
The Trust established a position in the Dutch bank ABN Amro in the six months
under review. This company has come a long way since the depths of the
financial crisis when it had to be nationalised by the government. Today the
company is a strongly capitalised, conservatively run, retail bank with more
than half of its loans in the Dutch mortgage market. The company is managed in
the best interests of its shareholders and has returned around one third of
its market value in dividends and share buybacks in the last three years. It
is valued at around 0.6x its tangible equity value, less than 6x historic
earnings and offers a well-covered 2024 expected dividend yield of over 7%.
The purchase was funded by the sale of the Trust’s holding in Citigroup.
Citigroup had performed well for the Trust but is now significantly more
highly valued than ABN Amro. In addition, a large portion of its profits also
come from its investment bank and unsecured lending in the US. Its mix of
lending is therefore higher risk.
The Trust also established a position in Direct Line Insurance, one of the
UK’s leading insurance companies, spanning Motor, Home, Pet and Travel
Insurance. Although it is a low growth business, which operates in a
competitive industry, from the time of its floatation (in 2012) up until 2022,
the business had generated a relatively stable return for its shareholders. In
2022, however, the company badly underestimated the level of claims inflation
that it would see, with the result that it was effectively under-pricing its
insurance and writing loss making contracts, in turn driving a halving of the
share price. The company now has a new management team which has set about
trying to restore the company’s fortunes. Despite the hiccups of the last
two years, we believe that the longer-term earnings power of the business is
broadly unaffected, and we therefore viewed the significant fall in the share
price as an overreaction. Shortly after purchasing the shares, the company was
the subject to a takeover approach from Ageas, the Belgian insurance company.
Whilst this approach came to nothing, it suggested that the company’s shares
are indeed undervalued.
The UK stock market continues to be compared negatively with other major
equity markets. Should this be a source of concern for the Trust’s
shareholders?
We have for some time talked of the significant undervaluation of many listed
UK shares, most likely caused by persistent selling by valuation insensitive
investors, often to fund the purchase of more expensively priced overseas
equities. We are often asked what the catalyst will be for an improvement in
UK valuations. Our view has been that either UK listed companies need to take
matters into their own hands by using internally generated cashflows to retire
cheap equity or overseas corporate buyers are likely to step into the void.
There are now signs that both are happening as a large portion of UK listed
companies are buying back and there has been a marked increase in the level of
takeover interest in UK companies. Both forces, have the potential to drive
significant value creation for those who exercise the patience to remain
invested in the UK and we believe that this is already being reflected in the
Trust’s investment returns.
Could you provide your views on the increased level of takeover and bid
activity in the UK, particularly on names held in the portfolio?
So far in 2024, we have indeed seen quite a dramatic pick up in the number of
takeover bids for UK listed companies. In the absence of new companies coming
to the UK market, this raises questions about the long-term health of the UK
market; however, in the short term it is a significant positive for the
Company’s shareholders. So far in 2024, the Trust has received takeover bids
for four of its investments (Direct Line, Anglo American, Currys and IDS Group
– formally Royal Mail). These offers, which have all driven significant
value for the Trust’s shareholders, have been at premiums of between 40% and
60% to the prevailing share prices and yet not one of the four bids succeeded.
This is interesting in that it demonstrates just how undervalued some of the
holdings in the Trust’s portfolio had become. It is not unreasonable to
expect further takeover bids for portfolio holdings in the future.
Following the recent elections in the UK and France, and also the US
Presidential election in November, how do you think politics will impact both
the UK market and markets globally in the remainder of 2024?
Share prices (and therefore stock markets) are ultimately driven by the
outlook for corporate profits and accordingly favour stable governments who
espouse business friendly policies. In the UK, the new Labour government is
looking to implement policies that are designed to increase the attractiveness
of the UK to overseas investors and will want to be seen as business friendly.
With five years of relative stability ahead, it wouldn’t be a surprise to
see the UK market perform relatively well in the coming months. In France, no
party has gained an outright majority in the parliament, and this is likely to
crimp the more extreme tendencies of both the left and the right. Likewise in
the US, whoever wins the presidential election, it is unlikely to have a
significant effect on US corporate profitability.
How is the portfolio currently positioned and what is your outlook for the
year ahead?
Despite the strong returns that the Trust has enjoyed over the last eighteen
months, we believe that its portfolio of stocks continues to look very
undervalued. We are fond of saying that stock market history has shown, quite
conclusively, that the best predictor of future investment returns is starting
valuation. Stocks that are lowly valued are priced to deliver attractive
returns, while those that are richly priced are priced to deliver
disappointing returns. In our opinion, today’s most attractive valuations
continue to be found in sectors such as banks, insurance, energy, media and
consumer cyclicals. Whilst the profitability of these companies is closely
tied to the economy and can be volatile, we believe that investors in these
companies are being handsomely rewarded for taking on this additional
volatility. The Trust’s portfolio in aggregate is valued at around just 8x
this year’s expected earnings and whilst many are taking a dim view of UK
economic prospects, it is important to remember that we buy companies and not
economies. The companies in which the Trust is invested mostly generate the
majority of their profits from overseas and are sound, conservatively run
businesses with good balance sheets and capable management teams.
Ian Lance and Nick Purves
RWC Asset Management LLP
20 August 2024
Interim Management Report
The important events that have occurred during the period under review, the
key factors influencing the financial statements and the principal risks and
uncertainties for the remaining six months of the financial year are set out
in the Chairman’s Statement and the Portfolio Manager’s Report.
The principal risks facing the Company are unchanged, and are not expected to
change materially in the remaining six months of the financial year, since the
date of the Annual Report and Financial Statements for the year ended 31
December 2023 and continue to be as set out in that report on pages 35 to 37
and note 20 to the financial statements beginning on page 87.
Risks faced by the Company include, but are not limited to: investment
strategy risk, loss of investment team or portfolio manager, income risk –
dividend, share price risk, reliance on the Portfolio Manager and other
service providers, compliance with laws and regulations, cyber security, and
global risks (e.g. climate risk, a pandemic), market price risk, interest rate
risk, liquidity risk, credit risk and currency risk.
The Board has in place a robust process to identify, assess and monitor the
principal risks and uncertainties and also to identify and evaluate newly
emerging risks. The Board, through the Audit and Risk Committee, regularly
reviews all risks to the Company, including emerging risks, which are
identified by a variety of means, including advice from the Company’s
professional advisors, the Association of Investment Companies (the
“AIC”), and Directors’ knowledge of markets, changes and events. No new
or emerging risks have been identified.
Related Party Transactions
During the first six months of the current financial year, no transactions
with related parties have taken place which have materially affected the
financial position or the performance of the Company.
Going Concern
The Directors believe, having considered the Company’s investment objective,
risk management policies, capital management policies and procedures, and the
nature of the portfolio and the expenditure projections, that the Company has
adequate resources, an appropriate financial structure and suitable management
arrangements in place to continue in operational existence for the foreseeable
future.
The Directors confirm to the best of their knowledge that:
· the condensed set of financial statements contained within this Half-Year
Report has been prepared in accordance with Accounting Standard IAS 34,
‘Interim Financial Reporting’, as adopted in the UK, and gives a true and
fair view of the assets, liabilities, financial position and return of the
Company; and,
· the Half-Year Report includes a fair review of the information required by
4.2.7R and 4.2.8R of the UK Listing Authority Disclosure Guidance and
Transparency Rules.
In order to provide these confirmations, and in preparing these financial
statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· state whether applicable IFRS have been followed, subject to any material
departures disclosed and explained in the financial statements; and
· prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business; and the
Directors confirm that they have done so.
The Half-Year Report was approved by the Board on 20 August 2024 and the above
responsibility statement was signed on its behalf by:
Richard Wyatt
Chairman
Statement of Comprehensive Income
For the six months ended 30 June 2024 (unaudited)
30 June 2024 (unaudited) 30 June 2023 (unaudited) Year ended 31 December 2023 (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Total Income 6 23,886 – 23,886 18,743 – 18,743 32,422 – 32,422
Profit on investments 5 – 73,724 73,724 – 9,039 9,039 – 62,826 62,826
Currency exchange losses – (120) (120) – (103) (103) – (143) (143)
Total income 23,886 73,604 97,490 18,780 8,936 27,716 32,422 62,683 95,105
Expenses
Portfolio Management fees (548) (822) (1,370) (580) (870) (1,450) (1,103) (1,654) (2,757)
Other expenses (708) (365) (1,073) (473) (89) (562) (1,068) (721) (1,789)
Profit before finance costs and tax 22,630 72,417 95,047 17,727 7,977 25,704 30,251 60,308 90,559
Finance costs (562) (843) (1,405) (561) (842) (1,403) (1,123) (1,685) (2,808)
Profit before tax 22,068 71,574 93,642 17,166 7,135 24,301 29,128 58,623 87,751
Tax (1,061) – (1,061) (572) – (572) (926) – (926)
Profit for the period 21,007 71,574 92,581 16,594 7,135 23,729 28,202 58,623 86,825
Earnings per share 7.3p 24.9p 32.2p 5.4p 2.3p 7.7p 9.3p 19.4p 28.7p
The total column of this statement represents the Statement of Comprehensive
Income, prepared in accordance with IFRS. The supplementary revenue and
capital columns are both prepared under guidance published by the AIC.
All items in the above statement derive from continuing operations.
Statement of Changes in Equity
For the six months ended 30 June 2024 (unaudited)
Ordinary share Share premium Capital Retained Total
capital account reserves earnings equity
Notes £’000 £’000 £’000 £’000 £’000
Balance at 1 January 2024 16,719 96,040 595,294 12,651 720,704
Profit for the period – – 71,574 21,007 92,581
Cost of shares bought back for treasury – – (9,707) – (9,707)
Dividends paid to equity shareholders 7 – – – (14,375) (14,375)
Balance at 30 June 2024 16,719 96,040 657,161 19,283 789,203
Balance at 1 January 2023 16,719 96,040 600,206 13,381 726,346
Profit for the period – – 7,135 16,594 23,729
Cost of shares bought back for treasury – – (36,131) – (36,131)
Dividends paid to equity shareholders 7 – – – (14,797) (14,797)
Balance at 30 June 2023 16,719 96,040 571,210 15,178 699,147
Statement of Financial Position
As at 30 June 2024 (unaudited)
30 June 2024 31 December 30 June 2023
(unaudited) 2023 (audited) (unaudited)
Notes £’000 £’000 £’000
Non-current assets
Investments 5 848,880 776,875 767,285
Current assets
Investments 5 4,202 13,713 –
Cash and cash equivalents 8,508 4,275 3,823
Receivables 5,989 2,979 5,340
Total assets 867,579 797,842 776,448
Current liabilities
Payables (3,614) (2,394) (2,575)
Total assets less current liabilities 863,965 795,448 773,873
Non-current liabilities
Interest bearing borrowings 8 (74,762) (74,744) (74,726)
Net assets 789,203 720,704 699,147
Equity attributable to equity holders
Ordinary share capital 9 16,719 16,719 16,719
Share premium 96,040 96,040 96,040
Capital reserves 657,161 595,294 571,210
Revenue reserves 19,283 12,651 15,178
Total equity attributable to equity holders 789,203 720,704 699,147
NAV per share 10 275.4 248.0p 231.2p
NAV per share with debt at fair value 1 10 280.1 252.2p 236.8p
1 Alternative Performance Measures – See glossary of terms for definition
and more information.
Statement of Cash Flows
For the six months ended 30 June 2024 (unaudited)
Year ended
31 December
30 June 2024 30 June 2023 2023
(unaudited) (unaudited) (audited)
£’000 £’000 £’000
Cash flows from operating activities
Profit before tax 93,642 24,301 87,751
Adjustments for:
Gains on investments (73,724) (9,039) (62,826)
Finance costs 1,405 1,403 2,808
Dividend income (23,663) (18,716) (32,278)
Interest income (223) (64) (144)
Dividends received 22,005 15,814 32,037
Interest received 387 37 (97)
Decrease/(increase) in receivables 293 (181) 38
(Decrease)/increase in payables (658) (101) 584
Overseas withholding tax suffered (1,061) (572) (1,229)
Net cash flows from operating activities 18,403 12,882 26,644
Cash flows from investing activities
Purchases of investments (47,238) (24,791) (137,215)
Sales of investments 58,567 54,206 197,110
Net cash flows from investing activities 11,329 29,415 59,895
Cash flows from financing activities
Equity dividends paid (14,375) (14,797) (28,932)
Interest paid on borrowings (1,386) (1,386) (2,773)
Shares bought back for treasury (9,738) (35,531) (63,799)
Net cash flows used in financing activities (25,499) (51,714) (95,504)
Net increase/(decrease) in cash and cash equivalents 4,233 (9,417) (8,965)
Cash and cash equivalents at the start of the period 4,275 13,240 13,240
Cash and cash equivalents at the end of the period 8,508 3,823 4,275
Notes to the Financial Statements
1. Significant Accounting Policies
1.a General information
Temple Bar Investment Trust Plc is a company limited by shares, incorporated
and domiciled in the UK. Its registered office and principal place of business
is at 25 Southampton Buildings, London WC2A 1AL, UK. Its shares are listed on
the London Stock Exchange.
These condensed interim financial statements were approved for issue on 20
August 2024. These condensed interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2023 were approved by
the board of directors on 3 April 2024 and delivered to the Registrar of
Companies. The report of the auditors on those accounts was unqualified, did
not contain an emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
These financial statements have not been audited.
1.b Basis of Preparation
This condensed consolidated interim financial report for the half-year
reporting period ended 30 June 2024 has been prepared in accordance with the
Disclosure Guidance and Transparency Rules of the Financial Conduct Authority
and Accounting Standard IAS 34, ‘Interim Financial Reporting’, as adopted
in the UK.
The accounting policies adopted are consistent with those of the previous
financial year and corresponding interim reporting period.
2. Going Concern
The Directors have made an assessment of the Company’s ability to continue
as a going concern and are satisfied that the Company has adequate resources
to continue in operational existence for 12 months from the date when these
financial statements were approved.
In making this assessment, the Directors have considered a wide variety of
emerging and current risks to the Company, as well as mitigation strategies
that are in place. The Directors are not aware of any material uncertainties
that may cast significant doubt on the Company’s ability to continue as a
going concern, having taken into account the liquidity of the Company’s
investment portfolio and the Company’s financial position in respect of its
cash flows and borrowing facilities. Therefore, the financial statements have
been prepared on a going concern basis.
3. Significant Accounting Judgements, Estimates and Assumptions
The preparation of the Company’s financial statements requires the Directors
to make judgements, estimates and assumptions that affect the reported amounts
recognised in the financial statements and disclosure of contingent
liabilities. However, uncertainty about these assumptions and estimates could
result in outcomes that could require a material adjustment to the carrying
amount of the asset or liability affected in future periods. The area
requiring the most significant judgment is recognition and classification of
unusual or special dividends received as either revenue or capital in nature.
The estimates and underlying assumptions are reviewed on an ongoing basis.
4. Segmental Reporting
The Directors are of the opinion that the Company is engaged in a single
segment of business being investment business.
5. Investments Held at Fair Value Through Profit or Loss
(a) Investment portfolio summary
Six months ended 30 June 2024
Quoted Debt
equities securities Total
£’000 £’000 £’000
Opening cost at the beginning of the period 733,313 13,652 746,965
Opening unrealised appreciation at the beginning of the period 43,562 61 43,623
Opening fair value at the beginning of the period 776,875 13,713 790,588
Purchases at cost 41,109 8,024 49,133
Sales – proceeds (42,916) (17,447) (60,363)
Realised gain/(loss) on sale of investments 16,769 (19) 16,750
Change in unrealised appreciation/(depreciation) 57,043 (69) 56,974
Closing fair value at the end of the period 848,880 4,202 853,082
Closing cost at end of the period 748,275 4,210 752,485
Closing unrealised appreciation/(depreciation) at the end of the period 100,605 (8) 100,597
Closing fair value at the end of the period 848,880 4,202 853,082
(b) Fair value of financial instruments
IFRS 13 requires an entity to classify fair value measurements using a fair
value hierarchy that reflects the significance of the inputs used in making
the measurements. The fair value hierarchy has the following classifications:
Level 1 – valued using quoted prices in active markets for identical
investments.
Level 2 – valued using other significant observable inputs (including quoted
prices for similar investments, interest rates, prepayments, credit risk,
etc). There are no level 2 financial assets.
Level 3 – valued using significant unobservable inputs (including the
Company’s own assumptions in determining the fair value of investments).
There are no level 3 financial assets.
All of the Company’s investments are in quoted securities actively traded on
recognised stock exchanges, with their fair value being determined by
reference to their quoted bid prices at the reporting date and have therefore
been determined as Level 1.
There were no transfers between levels in the period and as such no
reconciliation between levels has been presented.
30 June 31 December 30 June
2024 2023 2023
Level 1 Level 1 Level 1
As at £’000 £’000 £’000
Financial assets
Quoted equities 848,880 776,875 767,285
Debt securities 4,202 13,713 –
Total investments 853,082 790,588 767,285
6. Income
Six months ended Six months ended Year ended
30 June 2024 (unaudited) 30 June 2023 (unaudited) 31 December 2023 (unaudited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Income from investments
UK dividends 14,051 – 14,051 12,989 – 12,989 23,085 – 23,085
Overseas dividends 9,612 – 9,612 5,727 – 5,727 9,193 – 9,193
Interest on fixed income securities 133 – 133 27 – 27 84 – 84
23,796 – 23,796 18,743 – 18,743 32,362 – 32,362
Other Income
Deposit interest 90 – 90 37 – 37 60 – 60
23,886 – 23,886 18,780 – 18,780 32,422 – 32,422
7. Dividends
The fourth interim dividend relating to the year ended 31 December 2023 of 2.5
pence per ordinary share was paid during the six months ended 30 June 2024.
A first interim dividend relating to the year ending 31 December 2024 of 2.5
pence per share was paid on 28 June 2024.
A second interim dividend of 2.75 pence per share will be paid on 27 September
2024 to shareholders registered on 23 August 2024. In accordance with IFRS,
this dividend has not been recognised in these financial statements. The
ex-dividend date for this payment is 22 August 2024.
8. Interest-bearing borrowings
The Company’s financial instruments, are included in the Statement of
Financial Position at fair value or amortised cost, which is an approximation
of fair value, with the exception of interest-bearing borrowings which are
shown at book value.
The interest-bearing borrowings do not have prices quoted on an active market
but their fair values, as shown in the below table, are based on observable
inputs. As such they have been classified as Level 2 instruments in line with
prior periods.
30 June 2024 31 December 2023 30 June 2023
Carrying Fair Carrying Fair Carrying Fair
value value value value value value
£’000 £’000 £’000 £’000 £’000 £’000
Interest-bearing borrowings:
4.05%
03/09/2028
Private Placement Loan 49,865 46,800 49,849 47,291 49,833 44,025
2.99%
24/10/2047
Private Placement Loan 24,897 14,722 24,895 15,163 24,893 13,990
74,762 61,522 74,744 62,454 74,726 58,015
9. Share Capital
30 June 31 December 30 June
2024 2023 2023
Number Number Number
As at 1 January 290,612,881 317,822,386 317,822,386
Purchase of shares into treasury (4,096,723) (27,209,505) (15,364,821)
As at period end:
– In circulation 286,516,158 290,612,881 302,457,565
– In Treasury 47,847,667 43,750,944 31,906,260
– Listed 334,363,825 334,363,825 334,363,825
Nominal Value of 5p ordinary shares 16,719 16,719 16,719
During the period, the Company bought back ordinary shares at a cost of
£9,707,000 (Year ended 31 December 2023: £63,535,000; Six months ended 30
June 2023: £36,131,000).
10. Net asset value (“NAV”) per share
The NAV per share is based on the net assets attributable to the equity
shareholders of £789,203,000 (31 December 2023: £720,704,000; 30 June 2023:
£699,147,000) and 286,516,158 (31 December 2023: 290,612,881; 30 June 2023:
302,457,565) shares being the number of shares in issue at the period end.
The NAV per share with debt at fair value is based on the net assets
attributable to the equity shareholders, adjusted for the difference between
the debt at carrying value and fair value as shown in note 8, and the number
of shares in issue at the period end. Adjusting for debt at fair value
resulted in an increase in net assets of £13,240,000 or 4.6p per share (31
December 2023: increase of £12,290,000 or 4.2p per share; 30 June 2023:
increase of £16,711,000 or 5.6p per share).
Glossary of Terms
AIC
The Association of Investment Companies.
Benchmark
A comparative performance index.
Discount or Premium of share price to NAV per share*
A description of the difference between the share price and the net asset
value per share. The size of the discount or premium is calculated by
subtracting the share price from the net asset value per share and is usually
expressed as a percentage (%) of the net asset value per share. If the share
price is higher than the net asset value per share the result is a premium. If
the share price is lower than the net asset value per share, the shares are
trading at a discount.
Fixed Interest
Fixed-interest securities, also known as bonds, are loans usually taken out by
a government or company which normally pay a fixed rate of interest over a
given time period, at the end of which the loan is repaid.
FTSE All-Share Index
A comparative index that tracks the market price of the UK’s leading
companies listed on the London Stock Exchange. Covering around 600 companies,
including investment trusts, the name FTSE is taken from the Financial Times
and the London Stock Exchange, who are its joint owners.
FTSE 350 Index
A comparative index that tracks the market price of the UK’s 350 largest
companies, by market value, listed on the London Stock Exchange.
Liquidity
The ease with which an asset can be purchased or sold at a reasonable price
for cash.
Market Capitalisation
The total value of a company’s equity, calculated by the number of shares
multiplied by their market price.
NAV (‘Net Asset Value’) per share
The value of total assets less liabilities, with debenture and loan stocks at
book value. Book value is the amount borrowed less the current loan
arrangement fee debtor. The net asset value per share is calculated by
dividing this amount by the number of ordinary shares outstanding.
NAV per share with debt at fair value
The value of total assets less liabilities, with debentures and loan stocks at
fair value. The net asset value per share is calculated by dividing this
amount by the number of ordinary shares outstanding.
Ongoing charges*
Ongoing charges are calculated on an annualised basis. This figure excludes
any portfolio transaction costs and financing costs. It may vary from period
to period. The calculation below is in line with AIC guidelines.
Six months to
30 June 2024
£000
Investment management fee 1,370
Administrative expenses 949
Total 2,319
Average total net asset value throughout the period 751,299
Ongoing charges 0.62%
* Alternative Performance Measure.
Net asset value (NAV) per share total return with debt at fair value*
The theoretical total return on shareholders’ funds per share, reflecting
the change in NAV with debt at fair value assuming that dividends paid to
shareholders were reinvested at NAV with debt at fair value at the time the
shares were quoted ex-dividend. A way of measuring investment management
performance of investment trusts which is not affected by movements in
discounts/ premiums.
Six months to
30 June 2024
(p)
Opening NAV with debt at fair value 252.2
Increase in NAV 32.4
Less dividends paid (4.8)
Adjustment for movement in fair value of debt 0.3
Closing NAV with debt at fair value 280.1
% increase in NAV with debt at fair value 12.9%
% Impact of reinvesting dividends 0.2%
NAV per share % total return with debt at fair value 13.1%
Share price total return*
Return to the investor on mid-market prices assuming that all dividends paid
were reinvested at the share price at the time the shares were quoted
ex-dividend.
Six months to
30 June 2024
(p)
Opening share price 238.0
Increase in share price 25.8
Less: dividends paid (4.8)
Closing share price 259.0
% increase in share price 10.8%
% Impact of reinvesting dividends 0.2%
Share price total return 11.0%
Value Investing
An investment strategy that aims to identify under-valued yet good quality
companies with strong cash flows and robust balance sheets, putting an
emphasis on financial strength.
Dividend Yield*
A measure of the income return earned on an investment. In the case of a share
the yield expresses the annual dividend payment as the percentage of the
market price of the share. In the case of a bond the running yield (or flat or
current yield) is the annual interest payable as a percentage of the current
market price. The redemption yield (or yield to maturity) allows for any gain
or loss of capital which will be realised at the maturity date.
* Alternative Performance Measure.
For and on behalf of
Frostrow Capital LLP, Secretary
20 August 2024
- ENDS -
Neither the contents of the Company’s website nor the contents of any
website accessible from hyperlinks on this announcement (or any other website)
is incorporated into, or forms part of, this announcement.
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