Final Results
Chairman's Statement
The total return on the net assets of Temple Bar during 2008 was -24.7%, which
compares with a total return for the FTSE All-Share Index of -29.9%. The return
achieved comprises underlying relative portfolio outperformance somewhat offset
by the capital gearing of the Trust. While it is never pleasant to report
negative returns, particularly of such severity, it should be noted that, after
an extraordinarily difficult year, our fund manager's five year record against
the benchmark index remains clearly in positive territory.
Despite the weakness of the UK equity market, the portfolio generated a
significant increase in income. The Board is recommending a final dividend of
22.34p, to produce a total increase of 6% for the year. This dividend will be
payable on 31 March 2009 to shareholders on the register at 13 March 2009. This
is the 25th consecutive year in which the dividend has been increased. The
revenue reserve, after adjusting for the proposed final dividend for 2008, is £
17.0m, having increased by £1.4m during the year. This is likely to prove an
important asset over the next few years against a backdrop of falling dividends
in the UK equity market.
Post-tax earnings increased by 6.5%; the proposed dividend was more than
covered by net earnings generated on the portfolio during the year.
At the year end, capital gearing, defined as gross assets divided by net
assets, was 118%. A number of investment companies have recently encountered
difficulties with their borrowing covenants. Our two debentures, which have a
nominal value of £63m, have fixed coupons and are not repayable until 2017 and
2021. The covenants on these debentures are such that our net assets would have
to fall below the £63m nominal value of the debt before these would be
breached.
New Director
I am delighted to confirm that David Webster was appointed as an additional
director of the Company with effect from the beginning of this year. He brings
with him a wealth of experience, notably in retailing where he was formerly the
chairman of Safeway plc, and currently, where he is chairman of
InterContinental Hotels Group plc. I have no doubt that in the coming years
David will add great value to the Board's discussions.
Outlook
After a year which was the second worst for the UK equity market since the
1920s and which included the bankruptcy of a major American investment bank,
the effective nationalisation of some UK banks and large US financial
institutions and the virtual demise of a number of major car manufacturers, it
is a brave person who provides an investment outlook with any great level of
confidence.
A number of bubbles have burst in the last twelve months, most notably those of
corporate credit, commodities, property and private equity, leaving many
investors heavily scarred. These burst bubbles created forced sellers of most
asset classes as many investors with significant losses were highly leveraged.
It is impossible to know when this forced selling will end (or how much of it
has already been achieved) and quite how cheap certain assets may become before
they bottom.
The Temple Bar portfolio is managed on a long term basis and although the short
term economic outlook is poor, it is important to remember that ownership of
equity confers the right to a long term stream of a company's dividends. Even
if we assume the average company makes no profits whatsoever in the next few
years, this affects the discounted cash flow value of a company by a
surprisingly small amount. Therefore, a bear market 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. At this
delicate stage in the cycle, our fund manager continues to believe that
selectivity is superior to wide diversification and, therefore, the portfolio
remains highly concentrated.
Equity valuations are currently low but the risk of an overshoot to even lower
valuations is still quite possible given the ongoing dislocations in the
financial system.
A number of companies across a spread of sectors have already cut their
dividends and further cuts must be expected. On current forecasts, the revenue
we expect to receive this year will not fully cover an unchanged dividend.
However, the Board is prepared to utilise part of the significant revenue
reserve to supplement the total dividend for the year.
Discount to Net Asset Value
The price of Temple Bar shares ended the year at a small discount to their
underlying net asset value adjusted for the market value of the Company's debt,
having also traded at a premium for periods of the year. This was a positive
development in a year when discounts widened significantly in the investment
trust market and probably reflects a combination of the perceived stability of
the dividend payments as well as recognition of the good long term performance
of Temple Bar relative to the UK Growth & Income Sector.
In December, following a sustained period during which the shares traded at a
premium to their net asset value, 250,000 new shares were issued to a market
participant at a 2% premium to net asset value. A further 200,000 shares were
similarly issued at a premium on 12 February 2009.
The manager continues to communicate closely with representatives of both
current and potential new shareholders. Our smaller investors remain informed
via a monthly fact sheet and detailed manager commentaries. These can be found
on the Company's website, www.templebarinvestments.co.uk.
VAT on Management Fees
As shareholders may be aware from my previous statements, VAT is no longer
charged on investment management fees following a ruling by the European Court
of Justice in October 2007. Negotiations with the manager, paralleling those
with the Revenue authorities, are continuing with respect to reclaiming past
VAT payments. Recoverable amounts will be reflected in the accounts in
proportion to the original basis of allocation of expenses between income and
capital applicable to each year in respect of which a recovery is made.
Articles of Association
The directors are proposing that the existing Articles of Association are
replaced with new articles which reflect changes in the law brought about by
the implementation of the Companies Act 2006. The directors do not believe that
these changes will have a material impact on the activities of the Company as
they largely relate to administrative matters.
Annual General Meeting
The annual general meeting will be held at 2 Gresham Street, London EC2V 7QP on
Monday 30 March 2009 at 11.00am. In addition to the formal business of the
meeting our manager, Alastair Mundy, will provide a review of the past year and
comment on the outlook. There will be an opportunity for shareholders to meet
the directors at the conclusion of the AGM. I look forward to meeting as many
of you as are able to attend. Shareholders who are unable to attend are
encouraged to use their proxy votes.
John Reeve
Chairman
17 February 2009
TWENTY LARGEST INVESTMENTS
As at 31 December 2008
Total
Valuation Assets
31 December Less current
Company 2008 Liabilities
£'000 %
BP 39,247 9.29
Royal Dutch Shell 38,519 9.12
Vodafone 37,158 8.80
GlaxoSmithKline 36,576 8.66
Unilever 27,702 6.56
HSBC 25,720 6.09
AstraZeneca 22,793 5.40
BT 12,350 2.92
British American 11,982 2.84
Tobacco
Centrica 11,208 2.65
Wetherspoon (JD) 8,524 2.02
Travis Perkins 8,045 1.90
Paddy Power 7,141 1.69
Signet 6,637 1.57
Wolseley 6,556 1.55
Lloyds TSB Group 6,551 1.55
International 6,144 1.45
Personal Finance
Aviva 5,711 1.35
Legal & General 5,606 1.33
Charter 5,528 1.31
International
329,698 78.05
All securities in any one company are treated as one investment.
Consolidated income statement
for the year ended 31 December 2008
2008 2007
Revenue Capital Revenue Capital
return return Total return return Total
£'000 £'000 £'000 £'000 £'000 £'000
INVESTMENT INCOME 22,923 - 22,923 20,989 - 20,989
Other operating income 595 - 595 1,535 - 1,535
Total income 23,518 - 23,518 22,524 - 22,524
LOSSES ON INVESTMENTS
Losses on fair value - (134,284) (134,284) - (37,522) (37,522)
through profit or loss
assets
23,518 (134,284) (110,766) 22,524 (37,522) (14,998)
EXPENSES
Management fees (624) (937) (1,561) (890) (1,335) (2,225)
Other expenses (449) (1,062) (1,511) (442) (1,165) (1,607)
Profit/(loss) before 22,445 (136,283) (113,838) 21,192 (40,022) (18,830)
finance costs and tax
Finance costs (1,831) (2,745) (4,576) (1,831) (2,747) (4,578)
PROFIT/(LOSS) BEFORE TAX 20,614 (139,028) (118,414) 19,361 (42,769) (23,408)
Tax - - - - - -
PROFIT/(LOSS) FOR THE 20,614 (139,028) (118,414) 19,361 (42,769) (23,408)
YEAR
EARNINGS PER SHARE 35.33p (238.27)p (202.94)p 33.19p (73.31)p (40.12)p
(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 2008
Ordinary Share
share premium Capital Retained Total
capital account reserve earnings equity
£'000 £'000 £'000 £'000 £'000
BALANCE AT 1 JANUARY 14,585 5,083 489,510 25,950 535,128
2007
CHANGES IN EQUITY FOR
2007
Profit for the year - - (42,769) 19,361 (23,408)
14,585 5,083 446,741 45,311 511,720
Dividends paid to - - - (17,380) (17,380)
equity shareholders
BALANCE AT 31 14,585 5,083 446,741 27,931 494,340
DECEMBER 2007
CHANGES IN EQUITY FOR
2008
Profit for the year - - (139,028) 20,614 (118,414)
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
Consolidated balance sheet
as at 31 December 2008
31 December 2008 31 December 2007
£'000 £'000 £'000 £'000
NON-CURRENT ASSETS 404,467 554,576
Investments held at fair value
through profit or loss
CURRENT ASSETS
Cash and cash equivalents 14,347 3,412
Other receivables 4,059 2,808
18,406 6,220
TOTAL ASSETS 422,873 560,796
CURRENT LIABILITIES
Other payables (465) (3,084)
TOTAL ASSETS LESS CURRENT 422,408 557,712
LIABILITIES
NON-CURRENT LIABILITIES
Interest bearing borrowings (63,388) (63,372)
NET ASSETS 359,020 494,340
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS
Ordinary share capital 14,647 14,585
Share premium 6,533 5,083
Capital reserve 307,713 446,741
Retained earnings 30,127 27,931
359,020 494,340
TOTAL EQUITY 359,020 494,340
NET ASSET VALUE PER SHARE 612.76p 847.33p
Consolidated cash flow statement
for the year ended 31 December 2008
2008 2007
£'000 £'000 £000 £'000
CASH FLOWS FROM OPERATING
ACTIVITIES
Loss before tax (118,414) (23,408)
Adjustments for:
Purchases of investments¹ (184,030) (182,309)
Sales of investments¹ 199,855 169,316
15,825 (12,993)
Losses on investments 134,284 37,522
Financing costs 4,576 4,578
Operating cash flows before 36,271 5,699
movements in working capital
(Decrease)/increase in receivables (1,251) 1,527
(Decrease)/increase in payables (2,619) 2,379
NET CASH FLOW FROM OPERATING 32,401 9,605
ACTIVITIES BEFORE AND AFTER INCOME
TAX
CASH FLOWS FROM FINANCING
ACTIVITES
Proceeds from issue of new shares 1,512 -
Interest paid on borrowings (4,558) (4,559)
Bank interest paid (2) (4)
Equity dividends paid (18,418) (17,380)
NET CASH USED IN FINANCING (21,466) (21,943)
ACTIVITIES
NET DECREASE IN CASH AND CASH 10,935 (12,338)
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT THE 3,412 15,750
BEGINNING OF THE YEAR
CASH AND CASH EQUIVALENTS AT THE 14,347 3,412
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 30 March 2009 that a final dividend of 22.34p per ordinary share be
paid on 31 March 2009 to shareholders on the Register at the close of business
on 13 March 2009.
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 2007 and 31 December 2008. The 2008 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 254 of the Companies
Act 1985. The 2008 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 2007 on which the
report of the auditors was unqualified and did not contain a statement
under either Section 237(2) or 237(3) of the Companies Act 1985, have been
filed with the Registrar of Companies.
17 February 2009
Contact: Alastair Mundy
Telephone 020 7597 2000
Investec Investment Management Limited
Friday, 10th January 2025
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