Final Results
Temple Bar Investment Trust plc
Final Results Announcement for the year ended 31 December 2013
Chairman's statement
Performance
I am pleased to report on another year of good returns for our shareholders.
The total return on the net assets of Temple Bar in 2013 was 31.4%, which
compares with a total return for the FTSE All Share Index of 20.8%. Temple Bar
continues significantly to outperform its benchmark over both 5 and 10 year
periods. The total dividend has been increased by 3% and the share price
reached a record high during the year.
The investment portfolio is constructed to deliver both capital and income
growth but at certain points in the market cycle the balance of returns between
capital and income may vary. During 2013 the portfolio manager struggled to
identify a sufficient number of attractive investment opportunities in the
higher yielding sector of the market in which Temple Bar traditionally invests.
The revenue account was also hampered by a change in the accounting treatment
of our bond holdings which resulted in a decline in our distributable income.
As a consequence, revenue on the portfolio declined by 7.4% compared with the
prior year. The Board is comfortable that this short term decline in the
relative yield of the portfolio is secondary to the more important objective of
delivering superior total returns over the longer term. The immediate impact of
this strategy is a shortfall on the 2013 revenue account, such that a small
part of the proposed dividend for the current year will be financed from
revenue reserves. The Board, however, believes that one of the great benefits
of an investment trust vehicle is the ability to make use of accumulated
revenue reserves in order to smooth dividend payments over the longer term.
The Board is, therefore, recommending a final dividend of 22.65p, to produce a
total dividend for the year of 37.75p, an increase of 3%. The dividend will be
payable on 31 March 2014 to shareholders on the register at 14 March 2014. The
shares become ex-dividend on 12 March 2014. This is the 30th consecutive year
in which the dividend has been increased.
Gearing
In September 2013 the Company completed a £50m private placement loan with the
Prudential Insurance Company of America. The loan, which covers a fixed 15 year
period until 2028, was concluded at a coupon of 4.05%. It may seem somewhat
incongruous for the Company to have taken out a new borrowing facility at the
same time that the portfolio manager has highlighted a lack of attractive
investment opportunities in the market. I should, therefore, emphasise that an
important factor in taking out this additional loan was to secure attractive
long term fixed rate funding for the purposes of pursuing the Company's
investment objectives over a significant period given, in particular, the
prognosis for future interest rate increases. In addition, the new loan forms
part of the Board's approach to the Company's overall debt management in the
context of its two existing debenture stocks, which expire in 2017 and 2021
respectively. The 4.05% loan contains certain financial covenants which might,
if breached, require it to be repaid ahead of the scheduled repayment date in
2028.
At the year end, gearing (calculated net of cash and related liquid assets) was
2.0%
Share Issues and Repurchases
The Directors have authority to issue new ordinary shares for cash and to
repurchase shares in the market. During the year the Company issued 2,771,881
new ordinary shares for a total consideration of £32,590,335 at prices
representing a premium to the prevailing net asset value. This demonstrates the
continued attractiveness of Temple Bar's shares and has the benefit of keeping
the share price premium within acceptable limits. No shares were repurchased
during the year. The Board believes that its policy of share issuance and, if
required, share repurchases, has helped to reduce premium/discount volatility
and recommends that these authorities be kept in place. Accordingly it is
seeking approval from shareholders to renew the share issue and repurchase
authorities at the forthcoming Annual General Meeting.
Alternative Investment Fund Managers Directive
The Alternative Investment Fund Managers Directive was enacted in July 2013
although the Company has until 22 July 2014 to comply fully with its
requirements. This European Union legislation is an attempt to prevent some of
the issues which have occurred as a result of perceived poor oversight of
certain aspects of the asset management industry. It requires the Company to
appoint an Alternative Investment Fund Manager (AIFM) and a depositary. The
depositary will be responsible for overseeing the Company's custody and cash
management operations. The Board has agreed in principle to appoint Investec
Fund Managers Limited as the Company's AIFM and HSBC as depositary. Further
announcements will be made in due course. It is regretted that these
obligations will add a modest amount to the Company's cost base.
Retail Distribution Review (RDR)
The Board believes that, following the introduction of RDR at the beginning of
the reporting year, investment advisors are increasingly likely to favour,
inter alia, those investment trusts which offer a strong investment
performance, relatively low ongoing charges and good liquidity in their shares.
Temple Bar is well placed to benefit on all these criteria and it is hoped that
the Company will continue to be seen as an attractive investment vehicle for
both advisors and for underlying retail investors.
Electronic Communications
At the AGM this year the Board is proposing an ordinary resolution that will,
if passed, enable the Company to send or supply documents to shareholders in
electronic form such as by email or by means of its website. The intention in
so doing is to save printing and postage costs by restricting hard copy
documents to those shareholders who positively elect to receive them.
Annual General Meeting
Our AGM will be held at Woolgate Exchange, 25 Basinghall Street, London EC2V
5HA on 24 March 2014 at 11.00 a.m. and I would encourage shareholders to
attend. In addition to the formal business of the meeting the portfolio
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
alongside the Directors. Shareholders who are unable to attend the AGM in
person are encouraged to use their proxy vote.
Outlook
Strong equity markets limited the investment opportunities in 2013. It is very
possible that, with investor sentiment high, but the future still looking
uncertain, 2014 may bring more volatility and hence more opportunity.
John Reeve
Chairman
12 February 2014
Twenty Largest Investments
as at 31 December 2013
Company Super Sector Place of Valuation % of
Primary portfolio
listing 31 December
2013
£'000
UK Treasury 2.25% 2014 Fixed Interest UK 82,915 9.32
HSBC Financials UK 68,340 7.68
Royal Dutch Shell Oil & Gas UK 66,688 7.50
Vodafone Telecommunications UK 65,510 7.37
GlaxoSmithKline Health Care UK 65,109 7.32
Signet Jewelers Consumer Services USA 52,664 5.92
BP Oil & Gas UK 44,141 4.96
Grafton Group Industrials UK 42,315 4.76
BT Telecommunications UK 33,312 3.75
British American Tobacco Consumer Goods UK 27,297 3.07
SIG Industrials UK 25,842 2.91
Unilever Consumer Goods UK 23,740 2.67
QinetiQ Industrials UK 23,519 2.65
Royal Bank of Scotland Financials UK 20,023 2.25
Direct Line Insurance Financials UK 18,433 2.07
Centrica Utilities UK 15,233 1.71
Avon Products Consumer Goods USA 14,879 1.67
Carnival Consumer Goods UK 14,581 1.64
Kingspan Industrials UK 14,240 1.60
Chemring Industrials UK 13,010 1.46
731,791 82.28
Statement of Comprehensive Income
for the year ended 31 December 2013
2013 2012
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment 26,064 - 26,064 28,164 - 28,164
income
Other operating 10 - 10 3 - 3
income
26,074 - 26,074 28,167 - 28,167
Gains on
investments
Gains on - 164,732 164,732 - 72,438 72,438
investments
held at fair
value through
profit or loss
Total income 26,074 164,732 190,806 28,167 72,438 100,605
Expenses
Management fees (1,141) (1,711) (2,852) (890) (1,334) (2,224)
Other expenses (569) (1,154) (1,723) (580) (448) (1,028)
Profit before 24,364 161,867 186,231 26,697 70,656 97,353
finance costs
and tax
Finance costs (2,090) (3,163) (5,253) (1,824) (2,753) (4,577)
Profit before 22,274 158,704 180,978 24,873 67,903 92,776
tax
Tax - - - - - -
Profit for the 22,274 158,704 180,978 24,873 67,903 92,776
year
Earnings per 36.17p 257.72p 293.89p 41.39p 113.00p 154.39p
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.
There are no minority interests.
Statement of Changes in Equity
for the year ended 31 December 2013
Ordinary Share
share premium Capital Retained Total
capital account reserves earnings equity
£'000 £'000 £'000 £'000 £'000
Balance at 1 14,925 14,442 462,510 30,163 522,040
January 2012
Profit for the - - 67,903 24,873 92,776
year
Issue of share 213 7,663 - - 7,876
capital
Dividends paid to - - - (21,501) (21,501)
equity
shareholders
Balance at 31 15,138 22,105 530,413 33,535 601,191
December 2012
Unclaimed - - - 29 29
dividends
Profit for the - - 158,704 22,274 180,978
year
Issue of share 693 31,897 - - 32,590
capital
Dividends paid to - - - (22,718) (22,718)
equity
shareholders
Balance at 31 15,831 54,002 689,117 33,120 792,070
December 2013
Statement of Financial Position
as at 31 December 2013
31 December 2013 31 December 2012
£'000 £'000 £'000 £'000
Non-current assets 889,385 634,503
Investments held at fair value
through profit or loss
889,385 634,503
Current assets
Receivables 4,087 2,826
Cash at bank 14,139 28,063
18,226 30,889
Total assets 907,611 665,392
Current liabilities
Payables (1,836) (744)
Total assets less current 905,775 664,648
liabilities
Non-current liabilities
Interest bearing borrowings (113,705) (63,457)
Net assets 792,070 601,191
Equity attributable to equity
holders
Ordinary share capital 15,831 15,138
Share premium 54,002 22,105
Capital reserves 689,117 530,413
Retained earnings 33,120 33,535
792,070 601,191
Total equity 792,070 601,191
Net asset value per share 1,250.84p 992.86p
Statement of Cash Flows
for the year ended 31 December 2013
2013 2012
£'000 £'000 £000 £'000
Cash flows from operating
activities
Profit before tax 180,978 92,776
Adjustments for:
Purchases of investments¹ (351,220) (120,275)
Sales of investments¹ 261,070 136,258
(90,150) 15,983
Gains on investments (164,732) (72,438)
Financing costs 5,253 4,577
Operating cash flows before (68,651) 40,898
movements in working capital
Increase in accrued income (332) (1)
(Increase)/decrease in (929) 1,327
receivables
Increase in payables 779 140
Net cash flows from operating (69,133) 42,364
activities before and after
income tax
Cash flows from financing
activities
Proceeds from issue of new 32,590 7,876
shares
50,000 -
Proceeds from issue of 4.05%
Private Placement Loan (118) -
Issue costs relating to 4.05% 29 -
Private Placement Loan
(4,574) (4,559)
Unclaimed dividends
Interest paid on borrowings
Equity dividends paid (22,718) (21,501)
Net cash arising from/(used 55,209 (18,184)
in) financing activities
Net (decrease)/increase in (13,924) 24,180
cash at bank
Cash at bank at the start of 28,063 3,883
the year
Cash at bank at the end of 14,139 28,063
the year
¹ Purchases and sales of investments are considered to be operating activities
of the Company, given its purpose, rather than investing activities.
Notes
i. 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 2012 and
31 December 2013. The 2013 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 2013 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 2012 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.
12 February 2014
Contact: Alastair Mundy
Telephone 020 7597 2000
Investec Asset Management Limited
Monday, 20th May 2024
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