Final Results
Chairman's Statement
The total return on the net assets of Temple Bar during 2009 was 45.0%, which
compares with a total return for the FTSE All-Share Index of 30.1%. The return
achieved comprises underlying relative portfolio outperformance boosted by the
capital gearing of the Trust. In share price terms the full extent of this
benchmark outperformance was diluted by a widening of the discount shortly
before the year end, reducing the share price total return for the year to
31.3%. The discount widening was common to the growth and income sector as a
whole, possibly reflecting investors' greater appetite for higher risk asset
classes. It is pleasing to report that the fund manager's record against the
benchmark is very satisfactory over the past five years.
Although the UK equity market recovered significantly from its lows, many
companies decided to cut or omit dividends during the year. This impacted
significantly on the level of dividends received by the Company. However, much
of this shortfall was made good by the income generated from a decision to move
into corporate bonds and also by the refund from HMRC of a significant amount
of VAT. As a consequence, total income received, including the VAT refund, was
only 2.0% lower than in 2008. This drove a reduction of post-tax earnings of
2.9% to £20.017m.
The Board is recommending a final dividend of 23.0p, to produce a total
increase of 2.0% for the year. This dividend will be payable on 31 March 2010
to shareholders on the register at 12 March 2010. This is the 26th consecutive
year in which the dividend has been increased.
Because of the VAT rebate, which I cover in greater detail below, the 2009
dividend has been covered by revenue generated during the year. Retained
earnings of £655,000 for the year have been added to the revenue reserve. The
revenue reserve represents 156% of the total 2009 dividend.
At the year end, capital gearing, defined as gross assets divided by net
assets, was 113%. However, currently cash and other similar assets plus a
short-dated bond portfolio are offsetting virtually all of this gearing.
Awards
I am pleased to report that Temple Bar was the recipient during the year of two
prestigious awards, namely the winner of the best investment trust in the UK
Growth & Income sector from both Moneywise and Investment Week magazines. The
fund manager is to be congratulated on these achievements which reflect Temple
Bar's excellent long term track record.
VAT rebate
I reported at the interim stage that Temple Bar had received a repayment of £
1.856m from HMRC for VAT paid on management fees in previous periods for which
it is permissible to claim. Such amount was credited to the capital and revenue
accounts pro rata to the allocation policies applicable at the relevant times.
Since the half year a further repayment of £628,000 has been received
representing the simple interest arising on the VAT paid on management fees.
This has been allocated in full to the revenue account. In total, therefore,
Temple Bar received during the year a recovery of VAT and interest of £2.484m
of which £0.88m is attributable to capital and £1.604m to the revenue account.
Furthermore, the Trust has taken the necessary measures to preserve its
position in respect of a possible claim against HMRC for compound interest but
the legal process on this matter will probably run for a number of years before
there is a definitive outcome.
International Investment
Shareholders may be aware that Temple Bar currently has the ability to invest
up to 10% of its portfolio in listed international equities in developed
economies. Over the past couple of years this facility has progressively been
utilised. In certain situations it is helpful to maximise the number of value
opportunities upon which to base an investment decision. For the time being the
board is content to preserve the present 10% limit but the position will be
kept under review over the medium term.
Field Walton
After 27 years loyal and diligent service on the board Field Walton has decided
to stand down as a director at the forthcoming AGM. Field has been an
outstanding servant of the Company over that time. His forthright and
perceptive views will be sorely missed by all his colleagues on the board,
particularly his tendency to challenge the conventional wisdom. We shall
greatly miss Field's wise counsel and wish him well for the future. In due
course we may seek to recruit an additional director, bearing in mind the
objective of optimising the mix of skills and experience on the board as a
whole.
Articles of Association
At the Annual General Meeting it is proposed that the Company adopt new
Articles of Association. These latest amendments to the current Articles
reflect the changes in company law brought about by those elements of the
Companies Act 2006 which came into effect on 1 October 2009.
Annual General Meeting
The annual general meeting will be held at 2 Gresham Street, London EC2V 7QP on
Monday 29 March 2010 at 11 a.m. I look forward to meeting as many of you as are
able to attend. In addition to the formal business of the meeting the fund
manager, Alastair Mundy, will make a presentation reviewing the past year and
commenting on the outlook. He will also be available to answer any questions.
Outlook
I highlighted last year that `bear markets can generate some very attractive
opportunities, provided the companies in which we invest have balance sheets
strong enough to withstand a serious economic downturn and franchises durable
enough to produce good returns over the longer term'. Certain of the shares on
the portfolio performed spectacularly over the year and the manager decided to
take some profits. He believes the easier money has been made on the most
cyclical parts of the portfolio but that a number of holdings, while likely to
remain volatile, still offer good long term value. He also believes that many
of the largest stocks in the market remain cheap and that their dividend yields
and strong balance sheets make them attractive investments.
The manager has provided the board with a number of scenarios for revenue over
the next five years. There are many variables which contribute to a wide range
of possible outcomes. Under a number of scenarios the revenue reserve is large
enough to support the dividend until revenue generated on the portfolio
naturally covers the dividend. Because of the highly concentrated portfolio,
the greatest risk factor is that of further dividend cuts amongst our largest
holdings. Clearly, great uncertainties exist and the Board believes that the
scope for dividend increases over the next few years is, at best, likely to be
limited.
Our manager and his experienced team stuck to their contrarian investment
principles in their darkest hour and their long term performance illustrates
the merits of a well articulated and consistently implemented process. While
they constantly search for new investment ideas, new opportunities are
currently thin on the ground. However, history tells us that patience has its
rewards.
John Reeve
Chairman
23 February 2010
TWENTY LARGEST INVESTMENTS
as at 31 December 2009
Company Valuation Net Appreciation/ Valuation Total Equity
yield as
31 purchases (depreciation) 31 assets at 31
December / December December
less 2009*
2008 (sales) 2009 current
liabilities
£'000 £'000 £'000 £'000 % %
HSBC 25,720 13,766 8,952 48,438 8.75 2.91
BP 39,247 - 5,564 44,811 8.10 6.07
GlaxoSmithKline 36,576 2,467 1,751 40,794 7.37 4.55
Royal Dutch Shell 38,519 - 1,944 40,463 7.31 7.89
Vodafone 37,158 - 1,272 38,430 6.94 5.47
Unilever 27,702 - 7,246 34,948 6.32 3.23
Signet Jewelers 6,637 1,756 15,456 23,849 4.31 -
AstraZeneca 22,793 - 817 23,610 4.27 4.38
Travis Perkins 8,045 (4,891) 15,393 18,547 3.35 -
British American 11,982 - 1,475 13,457 2.43 4.44
Tobacco
Nationwide - 7,056 5,994 13,050 2.36 **8.15
BT 12,350 - (28) 12,322 2.23 2.52
Charter 5,528 - 6,567 12,095 2.19 2.91
International
Centrica 11,208 - 633 11,841 2.14 4.41
H&R Block - 7,737 2,912 10,649 1.92 2.65
Market Vectors ETF - 7,259 1,990 9,249 1.67 0.24
Invensys 5,178 - 3,827 9,005 1.63 0.84
Compass 6,180 - 1,484 7,664 1.38 2.96
Paddy Power 7,141 (6,496) 6,251 6,896 1.25 2.25
Computacenter 2,015 - 3,716 5,731 1.04 3.40
303,979 28,654 93,216 425,849 76.96
All securities in any one company are treated as one investment.
* This ignores the yield on fixed interest holdings where relevant.
** Represents the weighted average running yield of Nationwide securities
Consolidated income statement
for the year ended 31 December 2009
2009 2008
Revenue Capital Revenue Capital
return return Total return return Total
£'000 £'000 £'000 £'000 £'000 £'000
INVESTMENT 20,988 - 20,988 22,923 - 22,923
INCOME
Other operating 1,081 - 1,081 595 - 595
income
22,069 - 22,069 23,518 - 23,518
GAINS/(LOSSES)
ON INVESTMENTS
Gains/(losses) - 131,412 131,412 - (134,284) (134,284)
on investments
held at fair
value through
profit and loss
Total income/ 22,069 131,412 153,481 23,518 (134,284) (110,766)
deficit
EXPENSES
Management fees (660) (990) (1,650) (624) (937) (1,561)
Other expenses (537) (310) (847) (449) (1,062) (1,511)
VAT Refund 976 880 1,856 - - -
Profit/(loss) 21,848 130,992 152,840 22,445 (136,283) (113,838)
before finance
costs and tax
Finance costs (1,831) (2,746) (4,577) (1,831) (2,745) (4,576)
PROFIT BEFORE 20,017 128,246 148,263 20,614 (139,028) (118,414)
TAX
Tax - - - - - -
PROFIT/(LOSS) 20,017 128,246 148,263 20,614 (139,028) (118,414)
FOR THE YEAR
EARNINGS PER 33.98p 217.70p 251.68p 35.33p (238.27)p (202.94)p
SHARE (BASIC &
DILUTED)
The total column of this statement represents the Group's Income Statement
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.
There are no minority interests.
Consolidated statement of changes in equity
for the year ended 31 December 2009
Ordinary Share
share premium Capital Retained Total
capital account reserve earnings equity
£'000 £'000 £'000 £'000 £'000
BALANCE AT 1 14,585 5,083 446,741 27,931 494,340
JANUARY 2008
CHANGES IN EQUITY
FOR 2008
Profit for the - - (139,028) 20,614 (118,414)
year
14,585 5,083 307,713 48,545 375,926
Dividends paid to - - - (18,418) (18,418)
equity
shareholders
Issue of share 62 1,450 - - 1,512
capital
BALANCE AT 31 14,647 6,533 307,713 30,127 359,020
DECEMBER 2008
CHANGES IN EQUITY
FOR 2009
Profit for the - - 128,246 20,017 148,263
year
14,647 6,533 435,959 50,144 507,283
Dividends paid to - - - (19,362) (19,362)
equity
shareholders
Issue of share 93 1,974 - - 2,067
capital
BALANCE AT 31 14,740 8,507 435,959 30,782 489,988
DECEMBER 2009
Consolidated balance sheet
as at 31 December 2009
31 December 2009 31 December 2008
£'000 £'000 £'000 £'000
NON-CURRENT ASSETS 541,611 404,467
Investments held at fair value
through profit or loss
CURRENT ASSETS
Cash and cash equivalents 8,899 14,347
Other receivables 3,462 4,059
12,361 18,406
TOTAL ASSETS 553,972 422,873
CURRENT LIABILITIES
Other payables (580) (465)
TOTAL ASSETS LESS CURRENT 553,392 422,408
LIABILITIES
NON-CURRENT LIABILITIES
Interest bearing borrowings (63,404) (63,388)
NET ASSETS 489,988 359,020
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS
Ordinary share capital 14,740 14,647
Share premium 8,507 6,533
Capital reserve 435,959 307,713
Retained earnings 30,782 30,127
489,988 359,020
TOTAL EQUITY 489,988 359,020
NET ASSET VALUE PER SHARE 831.03p 612.76p
Consolidated cash flow statement
for the year ended 31 December 2009
2009 2008
£'000 £'000 £000 £'000
CASH FLOWS FROM OPERATING
ACTIVITIES
Profit/(Loss) before tax 148,263 (118,414)
Adjustments for:
Purchases of investments¹ (193,313) (184,030)
Sales of investments¹ 187,581 199,855
(5,732) 15,825
Gains/(Losses) on investments (131,412) 134,284
Financing costs 4,577 4,576
Operating cash flows before 15,696 36,271
movements in working capital
Decrease in accrued income and (389) (242)
prepayments
Increase/(decrease) in receivables 984 (1,009)
Increase/(decrease) in payables 114 (2,619)
NET CASH FLOW FROM OPERATING 16,405 32,401
ACTIVITIES BEFORE AND AFTER INCOME
TAX
CASH FLOWS FROM FINANCING
ACTIVITES
Proceeds from issue of new shares 2,067 1,512
Unclaimed distributions 2 -
Interest paid on borrowings (4,558) (4,558)
Bank interest paid (2) (2)
Equity dividends paid (19,362) (18,418)
NET CASH USED IN FINANCING (21,853) (21,466)
ACTIVITIES
NET (DECREASE)/INCREASE IN CASH (5,448) 10,935
AND CASH EQUIVALENTS
Cash and cash equivalents at the 14,347 3,412
start of the year
CASH AND CASH EQUIVALENTS AT THE 8,899 14,347
END OF THE YEAR
¹ Purchases and sales of investments are considered to be operating activities
of the Company, given its purpose, rather than investing activities.
Dividend
The directors will recommend to shareholders at the annual general meeting to
be held on 29 March 2010 that a final dividend of 23.0p per ordinary share be
paid on 31 March 2010 to shareholders on the Register at the close of business
on 12 March 2010.
Notes
i. The figures set out above are derived from the audited consolidated
accounts of Temple Bar Investment Trust Plc and its subsidiaries for the
years ended 31 December 2008 and 31 December 2009. The 2009 accounts will
be sent to shareholders shortly.
ii. The financial information contained in this announcement does not
constitute full accounts within the meaning of section 434 of the Companies
Act 2006. The 2009 accounts, on which the report of the auditors is
unqualified, will be filed with the Registrar of Companies in due course.
The audited accounts for the year ended 31 December 2008 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.
23 February 2010
Contact: Alastair Mundy
Telephone 020 7597 2000
Investec Asset Management Limited
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