Chairman's Statement
Performance
For a number of years, conditions in global investment markets have caused the contrarian/value investment style to underperform. While all investment styles are cyclical, this period of weak performance by the value investment style has been unduly protracted, in part because of central bank action to maintain interest rates at unprecedentedly low levels. There are now emerging signs that that this period is drawing to a close and I am pleased to report that the latter part or 2016 has begun to see the value investment style, central to Temple Bar's investment process, returning to favour. In terms of the Temple Bar portfolio this manifested itself in out-performance relative to its benchmark index during the year. The total return on the net assets of Temple Bar in 2016 was 20.4% which compares with a total return of the FTSE All Share Index of 16.8%. In the longer term Temple Bar continues to outperform its benchmark over both five and ten year periods.
By any conventional yardstick 2016 bore witness to some extraordinary outcomes on the political front, significantly shaping the direction of markets.
Dividend
There have been three interim dividend payments during the year each of 8.09p per share and the directors are now recommending a final dividend payment for the year ended 31 December 2016 of 16.18p per share to be paid on 31 March 2017 to those shareholders on the register as at 10 March 2017. The ex-dividend date for this payment is 9 March 2017. If approved this would give an increase in the total dividend payment for the year as a whole of 2% and would be the 33rd consecutive year in which the Company has raised its annual dividend payment.
Gearing
In recent years the Company's fixed long term borrowings have largely been offset by a fairly high cash or near cash position on the portfolio while the portfolio manager patiently waited for more interesting investment opportunities to appear. The position was unchanged throughout most of 2016 such that at the year end, gearing (calculated net of cash and related liquid assets, including our investment in a UK short dated gilt) was 2.4%
Share Capital Management
Shareholders may recall that discounts in the UK Equity Income sector generally widened during the course of 2015. This trend was continued into 2016 as discounts in the sector increased further. Temple Bar was not immune to this process; at the year end its discount stood at 5.8%. I reiterate my observation from last year that the Board is prepared to undertake share buy backs if the discount widens both in absolute terms and relative to the Company's peer group. While no share repurchase took place during the year, the Board therefore 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.
The Board
The Board remained unchanged throughout the year but in January 2017 Nick Lyons was appointed as an additional director. I am delighted to welcome Nick to the Board and I am confident that with his wealth of experience, particularly in the financial sector, he will make a valuable contribution to the Company in the coming years.
Every year the Board undertakes a thorough evaluation of each director, including myself as Chairman. In line with best practice in this regard, all directors are subject to annual re-election by shareholders.
Savings Scheme
Towards the end of the year, having received notice from the Administrator that it did not wish to continue in that role, the Board took the difficult decision that the most sensible course of action was to close the Savings Scheme, almost 30 years after it was first established. It was clear that the ever-increasing amount of regulation involved with the management and administration of schemes of this nature meant that finding a cost effective alternative service provider was not possible. It was therefore decided to offer existing investors in the Scheme the option, amongst others, of transferring their investment in Temple Bar to a share dealing platform with similar characteristics managed by Equiniti, the outgoing Administrator.
Annual General Meeting
The AGM this year will be held at 2 Gresham Street, London EC2V 7QP on Monday 27 March 2017 at 11am. Please note this is a change in the address of the meeting from that of the past few years. 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 alongside the directors. Shareholders who are unable to attend are encouraged to use their proxy votes.
Outlook
The dramatic political events of 2016, together with their unpredictable impact on investment markets, indicate that any form of forecasting is fraught with risk. At the very least it is clear that a combination of Brexit and a change in the US Administration is likely to cause continuing uncertainties, potentially leading to a slowdown in economic activity in the UK. The portfolio manager will continue to seek to invest in companies that are undervalued by the market and where the potential for improvement exists irrespective of shorter term uncertainties.
John Reeve
Chairman
17 February 2017
Twenty Largest Investments
as at 31 December 2016
| Company | Industry | Place of listing | Valuation £'m | % of portfolio |
| HSBC Holdings | Financials | UK | 75.133 | 7.72 |
| UK Treasury 1.00% 2017 | Fixed Interest | UK | 68.356 | 7.02 |
| GlaxoSmithKline | Health Care | UK | 65.428 | 6.72 |
| Royal Dutch Shell | Oil & Gas | UK | 59.191 | 6.08 |
| BP | Oil & Gas | UK | 51.272 | 5.27 |
| Grafton Group | Industrials | UK | 41.333 | 4.25 |
| Barclays | Financials | UK | 38.402 | 3.95 |
| Lloyds Banking Group | Financials | UK | 34.772 | 3.57 |
| WM Morrison Supermarkets | Consumer Services | UK | 28.454 | 2.92 |
| SIG | Industrials | UK | 28.131 | 2.89 |
| Royal Bank of Scotland | Financials | UK | 27.682 | 2.84 |
| Tesco | Consumer Services | UK | 24.892 | 2.56 |
| Marks & Spencer | Consumer Services | UK | 24.565 | 2.52 |
| CitiGroup | Financials | USA | 23.202 | 2.38 |
| Centrica | Utilities | UK | 20.769 | 2.13 |
| Travis Perkins | Industrials | UK | 19.476 | 2.00 |
| BT Group | Telecommunications | UK | 19.365 | 1.99 |
| Drax | Utilities | UK | 18.843 | 1.94 |
| Best Buy | Consumer Services | USA | 18.540 | 1.91 |
| British American Tobacco | Consumer Goods | UK | 18.383 | 1.89 |
| 706.189 | 72.55 |
Statement of Comprehensive Income
For the year ended 31 December 2016
| 2016 | 2015 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Investment income | 34,069 | - | 34,069 | 31,243 | - | 31,243 | |
| Other operating income | 5 | - | 5 | 10 | - | 10 | |
| 34,074 | 34,074 | 31,253 | 31,253 | ||||
| Profit/(losses) on investments | |||||||
| Profit/(losses) on investments held at fair value through profit or loss | - | 128,792 | 128,792 | - | (31,615) | (31,615) | |
| Total income | 34,074 | 128,792 | 162,866 | 31,253 | (31,615) | (362) | |
| Expenses | |||||||
| Management fees | (1,380) | (1,990) | (3,370) | (1,374) | (1,980) | (3,354) | |
| Other expenses | (633) | (1,039) | (1,672) | (581) | (1,282) | (1,863) | |
| Profit/(loss) before finance costs and tax | 32,061 | 125,763 | 157,824 | 29,298 | (34,877) | (5,579) | |
| Finance costs | (2,645) | (4,012) | (6,657) | (2,635) | (4,000) | (6,635) | |
| Profit/(loss) before tax | 29,416 | 121,751 | 151,167 | 26,663 | (38,877) | (12,214) | |
| Tax | (163) | - | (163) | - | - | - | |
| Profit/(loss) for the year | 29,253 | 121,751 | 151,004 | 26,663 | (38,877) | (12,214) | |
Earnings per share (basic & diluted) | 43.74p | 182.06p | 225.80p | 39.87p | (58.14p) | (18.27p) | |
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 net profit for the year. Accordingly, the net 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 2016
| Ordinary | Share | ||||
| share | premium | Capital | Retained | Total | |
| capital | account | reserves | earnings | equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 1 January 2015 | 16,719 | 96,040 | 652,304 | 34,381 | 799,444 |
| Unclaimed dividends | - | - | - | 35 | 35 |
| (Loss)/Profit for the year | - | - | (38,877) | 26,663 | (12,214) |
| Dividends paid to equity shareholders | - | - | - | (31,510) | (31,510) |
| Balance at 31 December 2015 | 16,719 | 96,040 | 613,427 | 29,569 | 755,755 |
| Unclaimed dividends | - | - | - | 24 | 24 |
| Profit for the year | - | - | 121,751 | 29,253 | 151,004 |
| Dividends paid to equity shareholders | - | - | - | (26,843) | (26,843) |
Balance at 31 December 2016 | 16,719 | 96,040 | 735,178 | 32,003 | 879,940 |
Statement of Financial Position
as at 31 December 2016
| 31 December 2016 | 31 December 2015 | |||
| £'000 | £'000 | £'000 | £'000 | |
| Non-current assets Investments held at fair value through profit or loss | 973,353 | 855,625 | ||
| Current assets | ||||
| Receivables | 4,266 | 2,722 | ||
| Cash and cash equivalents | 17,340 | 12,262 | ||
| 21,606 | 14,984 | |||
| Total assets | 994,959 | 870,609 | ||
| Current liabilities | ||||
| Payables | (1,169) | (1,074) | ||
| Interest bearing borrowings | (25,000) | - | ||
| Total assets less current liabilities | 968,790 | 869,535 | ||
| Non-current liabilities | ||||
| Interest bearing borrowings | (88,850) | (113,780) | ||
| Net assets | 879,940 | 755,755 | ||
| Equity attributable to equity holders | ||||
| Ordinary share capital | 16,719 | 16,719 | ||
| Share premium | 96,040 | 96,040 | ||
| Capital reserves | 735,178 | 613,427 | ||
| Retained earnings | 32,003 | 29,569 | ||
| 879,940 | 755,755 | |||
| Total equity | 879,940 | 755,755 | ||
| Net asset value per share | 1,315.84p | 1,130.14p | ||
Statement of Cash Flows
for the year ended 31 December 2016
| 2016 £'000 £'000 | 2015 £'000 £'000 | |||
| Cash flows from operating activities | ||||
| Profit/(Loss) before tax | 151,167 | (12,214) | ||
| Adjustments for: | ||||
| (Gains)/losses on investments | (128,792) | 31,615 | ||
| Financing costs | 6,657 | 6,635 | ||
| Purchases of investments | (335,164) | (360,358) | ||
| Sales of investments | 346,228 | 346,899 | ||
| Dividend income | (32,841) | (29,919) | ||
| Interest income | (1,233) | (1,334) | ||
| Dividend received | 32,078 | 30,662 | ||
| Interest received | 1,683 | 1,344 | ||
| Decrease in receivables | (1,231) | (219) | ||
| Increase in payables | 95 | 10 | ||
| Overseas withholding tax suffered | (163) | - | ||
| (112,683) | 25,335 | |||
| Net cash flows from operating activities before and after income tax | 38,484 | 13,121 | ||
| Cash flows from financing activities | ||||
| Issue costs relating to 4.05% Private Placement Loan Unclaimed dividends Interest paid on borrowings | - 24 (6,587) | (24) 35 (6,585) | ||
| Equity dividends paid | (26,843) | (31,510) | ||
| Net cash used in financing activities | (33,406) | 38,084 | ||
| Net increase/(decrease) in cash and cash equivalents | 5,078 | (24,963) | ||
| Cash and cash equivalents at the start of the year | 12,262 | 37,225 | ||
| Cash and cash equivalents at the end of the year | 17,340 | 12,262 | ||
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 years ended 31 December 2015 and 31 December 2016. The 2016 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 2016 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 2015 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.
16 February 2017
Contact: Alastair Mundy
Telephone 020 7597 2000
Investec Fund Managers Limited
