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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.
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’.
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.
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.
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.
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.
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.
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.
*Alternative Performance Measure – please see glossary of terms
Twenty Largest Investments
as at 31 December 2019
|Company||Industry||Place of listing||Valuation
|% of portfolio|
|Royal Dutch Shell||Oil & Gas||UK||56,336||5.2|
|BP||Oil & Gas||UK||47,458||4.4|
|Royal Bank of Scotland||Financials||UK||39,654||3.6|
|Marks & Spencer||Consumer Services||UK||27,561||2.5|
|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|
Statement of Comprehensive Income
For the year ended 31 December 2019
|2019 (unaudited)||2018 (audited)|
|Other operating income||51||-||51||26||-||26|
|Profit/(losses) on investments|
|Profit/(losses) on investments held at fair value through profit or loss||-||188,920||188,920||-||(131,528)||(131,528)|
|Profit/(loss) before finance costs and tax||37,661||186,143||223,804||35,222||(135,123)||(99,901)|
|Profit/(loss) before tax||35,695||183,167||218,862||33,260||(138,091)||(104,831)|
|Profit/(loss) for the year||35,523||183,167||218,690||33,099||(138,091)||(104,992)|
Earnings per share (basic & diluted)
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)
1 January 2018
|Profit/(loss) for the year||-||-||29,890||(167,981)||33,099||(104,992)|
|Dividends paid to equity shareholders||-||-||-||-||(29,243)||(29,243)|
31 December 2018
|Profit for the year||-||-||(4,912)||188,079||35,523||218,690|
|Dividends paid to equity shareholders||-||-||-||-||(35,757)||(35,757)|
31 December 2019
Statement of Financial Position
as at 31 December 2019
|31 December 2019
|31 December 2018
Investments held at fair value through profit or loss
|Cash and cash equivalents||11,149||9,005|
|Total assets less current liabilities||1,099,172||916,153|
|Interest bearing borrowings||(114,049)||(113,971)|
|Equity attributable to equity holders|
|Ordinary share capital||16,719||16,719|
|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
|Cash flows from operating activities|
|Profit/(loss) before tax||218,862||(104,831)|
|(Gains)/losses on investments||(188,920)||131,528|
|Purchases of investments||(152,237)||(513,298)|
|Sales of investments||160,040||512,712|
|Decrease in receivables||–||25|
|Increase/(decrease) in payables||106||(199)|
|Overseas withholding tax suffered||(172)||(161)|
|Net cash flows from operating activities||42,757||30,913|
|Cash flows from financing activities|
Equity dividends paid
Interest paid on borrowings
|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|
19 February 2020
Contact: Alastair Mundy
Telephone 020 7597 2000
Investec Fund Managers Limited
Glossary of Terms
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.
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).
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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