Temple Bar Investment Trust Plc
Temple Bar Investment Trust Plc ("Temple Bar" the "Trust" or the "Company") is
pleased to present its unaudited half-year results for the six months ended 30
June 2024.
This Announcement is not the Company's Half-Year Report & Accounts. It is an
abridged version of the Company's full Half-Year Report & Accounts for the six
months ended 30 June 2024. The full Half-Year Report & Accounts, together with a
copy of this announcement, will also shortly be available on the Company's
website: www.templebarinvestments.co.uk where up to date information on the
Company, including daily NAV, share prices and fact sheets, can also be found.
The Company's Half-Year Report & Accounts is also being published in hard copy
format.
The Company's Half Year Report & Accounts for the six months ended 30 June 2024
has been submitted to the UK Listing Authority, and will shortly be available
for inspection on the National Storage Mechanism (NSM):
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
For further information please contact: Mark Pope, Frostrow Capital LLP 020 3008
4913.
Summary of Results
Six months Year to Six months
to 30 June 31 December to 30 June
2024 2023 2023
£000 £000 £000
NAV total return, with debt at 13.1% 12.3% 3.4%
fair value1,2
Share price total return1,2 11.0% 12.5% 2.5%
FTSE All-Share Index3 7.4% 7.9% 2.6%
Net asset value per share with 275.4p 248.0p 231.2p
debt at book value
Net asset value per share with 280.1p 252.2p 236.8p
debt at fair value1
Share price 259.0p 238.0p 221.5p
Discount of share price to NAV (7.5%) (5.6%) (6.5%)
per share with debt at fair
value1
Dividends per share 5.00p 9.60p 4.60p
Dividend yield1 3.8% 4.0% 4.1%
Net gearing with debt at book 8.4% 9.8% 10.2%
value
Ongoing charges1 0.62% 0.56% 0.53%
1Alternative Performance Measure. See glossary for definition and more
information.
2 Source: Morningstar.
3 Source: Redwheel.
Temple Bar - The investment case
Temple Bar is differentiated by an investment approach that focuses on companies
whose stock market value is at a significant discount to the fair or intrinsic
value of the business. The portfolio is selected through deep fundamental
analysis by an experienced, well-resourced management team.
The Trust offers a competitive income yield and the Board and Portfolio Manager,
Redwheel, support a progressive dividend policy.
Recent returns have been strong as the undervaluation of many UK shares has been
realised either through corporate takeovers or by companies buying back their
own shares.
Despite the strong returns that the Trust has enjoyed over the last eighteen
months, Redwheel believes that the portfolio of stocks continues to look very
undervalued, and this bodes well for future returns.
Think value investing, think Temple Bar.
Chairman's Statement
Performance
The total return of the FTSE All-Share Index was +7.4% in the half-year. I am
pleased to report that the Trust's Net Asset Value ("NAV") per share total
return was +13.1%, and that the share price total return was +11.0%, both
outperforming the Index by a significant margin reflecting strong stock
selection by your Portfolio Manager in market conditions that have been
supportive of their value investing approach. Performance over one and three
years has also been strong, both on a relative and absolute basis, with a NAV
per share total return over the periods of +22.9% and +33.9% and a share price
total return of +21.8% and +36.7% compared to a total return from the FTSE All
-Share Index of +13.0% and +23.9%. Further details regarding the Trust's
performance can be found in the Portfolio Manager's Report.
Discount
Since the period end due, in part, to the Trust's strong performance, no shares
have been repurchased and the Trust's discount stood at 4.7% as at 19 August
2024.
As at the half-year end the discount of the Trust's share price to the NAV per
share stood at 7.5% compared to 5.6% at the beginning of the period. We were
active buyers of our own shares, purchasing 4,096,723 shares into Treasury in
the period at a cost of £9.7m. These buybacks address the short-term imbalance
between supply and demand for the Trust's shares and enhance the NAV per share
for continuing shareholders.
Dividend
The Trust's revenue performance in the period was strong, with an increase in
revenue earnings per share of c.35% compared to the previous half year. This has
enabled your Board to declare an increased second interim dividend of 2.75 pence
per share (2023: second interim dividend of 2.3 pence per share). The second
interim dividend will be payable on 27 September 2024 to shareholders on the
register of members on 23 August 2024. Theassociated ex-dividend date is 22
August 2024. This follows the payment of a first interim dividend of 2.5 pence
per share on 28 June 2024.
Outlook
The UK stock market enjoyed a positive first half of the year, supported by an
increase in M&A activity and in companies buying back their own shares; both a
reflection of the perceived value offered by current valuation levels.
With the election of a new government in a landslide result, the UK offers the
increasingly rare attraction of political stability. Combined with the continued
appealing valuations offered by UK equities, particularly when compared with the
valuations seen in certain overseas markets and sectors, the outlook for UK
equities is positive.
Your Board believes that notwithstanding the shorter-term uncertainties
surrounding the extent and pace of interest rate cuts, UK equities continue to
offer attractive returns and that our value strategy promises to reward
shareholders accordingly.
Richard Wyatt
Chairman
20 August 2024
Ten Largest Investments
As at 30 June 2024
Primary
place of Valuation % of
Company Industry Listing £'000 portfolio
Royal Dutch Shell Energy UK 58,799 6.9%
NatWest Group Financials UK 55,153 6.5%
BP Energy UK 49,284 5.8%
ITV Communications UK 43,669 5.1%
Barclays Financials UK 43,091 5.0%
TotalEnergies Energy France 42,639 5.0%
Aviva Financials UK 38,474 4.5%
Anglo American Materials UK 38,107 4.5%
NN Group Financials Netherlands 35,533 4.2%
Marks & Spencer Group Consumer Staples UK 35,489 4.1%
440,238 51.6%
Portfolio Manager's Report
How do you describe your approach to investing?
We are value investors. This means that we invest the Trust's assets in
companies whose stock market value is at a significant discount to the fair or
intrinsic value of the business. Investing in undervalued companies provides two
benefits. First, it provides investors with a margin of safety if events don't
unfold in a way that investors would have hoped and second, they can expect to
receive an excess investment return as and when this undervaluation is corrected
by the stock market.
How would you describe the investment backdrop in the first half of the year?
In a word: constructive. Interest rates in the US, the UK and Europe rose very
significantly in 2022 and 2023 to cool the inflationary effects of the strong
post pandemic recovery and Russia's invasion of Ukraine . The concern had been
that these rate rises would result in a significant slowdown in growth and
possibly a recession. Whilst the future is always uncertain, it so far looks as
if it hasn't been the case. Although GDP growth was sluggish in both Europe and
the UK in 2023, in the UK particularly we have seen some acceleration in recent
months. The US economy grew at a healthy rate last year and that growth has
continued into this year. Meanwhile, inflation rates have continued to fall and
in the UK are now in line with the Bank of England target of 2%. As a result,
stock markets are now looking forward to interest rate cuts later in 2024
although the pace of these is uncertain. A resilient economy and the prospect of
falling interest rates are normally good for investor sentiment and the first
half of 2024 has not been an exception to this rule. Most of the major equity
markets have therefore delivered attractive returns so far in 2024.
Turning to the financial year, how has the portfolio performed and what were the
major winners and losers?
The Trust's portfolio performed well in the first six months of the year,
building on the solid gains enjoyed in 2023. The Trust enjoyed particularly
strong returns from NatWest Group, Barclays, ITV, Anglo American and the Dutch
insurer, NN Group. Each of these five companies added a per cent or more to the
Trust's total return in the six months. Performance was negatively impacted by a
further fall in the share price of Capita.
The banks, NatWest and Barclays, continue to benefit from the recent pick up in
net interest margins (itself a function of rising interest rates) and a benign
loan loss cycle and both reported a strong set of results in February. This
coupled with low starting valuations propelled share prices upward. In both
cases, the companies started the year with a market valuation of less than 5x
last year's earnings, an earnings yield of more than 20%. The share prices of
both companies rose by around 40% in the first half of the year.
ITV rose by around 30% in the six months. Although the advertising cycle
continues to be weak, it appears to have stabilised, and this at a time when the
shares look to be significantly undervalued. This was illustrated by the
announcement that the company had agreed to sell its share of the Britbox
International joint venture for £255m, which at the time constituted around 10%
of the company's market valuation; this even though the joint venture
contributed little in the way of profit to the group. The company also announced
that the proceeds would be used to repurchase shares. At the current valuation a
share buyback of this scale is very value enhancing for those shareholders that
decide not to sell. Accordingly, the shares rose by around 15% on the day of the
announcement, highlighting that shares where stock market expectations are low
and sentiment is negative can be very sensitive to good news.
Anglo American rose on the back of a £31bn all-share bid from BHP and although
the bid came to nothing, it served to highlight the undervaluation of the
group's copper assets. Anglo American has been beset by operational problems and
this had caused its share price to fall quite dramatically in the final months
of 2023. To repel the bid from BHP, the management of Anglo American announced a
simplification strategy that should create value for shareholders. If this
strategy is unsuccessful then there is a reasonable likelihood that the company
will once again become the subject of bid interest.
NN Group reported a strong set of results in which it increased its target for
capital generation, upped its dividend by 15% and announced further share
buybacks. The company has strong capital ratios and even today offers a 7%
historic dividend yield and is valued at less than 7x the level of capital
generated in 2023.
At a capital markets day in June, Capita announced that the expected date at
which the company would start to generate free cash flow for shareholders would
be further delayed. The company has been a very poor investment for the Trust
and continues to face significant challenges. However, should the company be
capable of hitting its revised financial targets then the shares would offer
exceptional value. Some might question why it is that the Trust continues to
hold onto shares in a company that has serially disappointed. Our answer is that
we believe that companies should always be appraised through the lens of today
and that we should remove the emotional baggage and evaluate businesses as if we
were looking at them for the first time. If the shares appear to be undervalued
based on the information that is available today, then in our view, they warrant
a continued position in the Trust's portfolio.
How has the Trust's portfolio changed in the first half of the 2024?
The Trust established a position in the Dutch bank ABN Amro in the six months
under review. This company has come a long way since the depths of the financial
crisis when it had to be nationalised by the government. Today the company is a
strongly capitalised, conservatively run, retail bank with more than half of its
loans in the Dutch mortgage market. The company is managed in the best interests
of its shareholders and has returned around one third of its market value in
dividends and share buybacks in the last three years. It is valued at around
0.6x its tangible equity value, less than 6x historic earnings and offers a well
-covered 2024 expected dividend yield of over 7%. The purchase was funded by the
sale of the Trust's holding in Citigroup. Citigroup had performed well for the
Trust but is now significantly more highly valued than ABN Amro. In addition, a
large portion of its profits also come from its investment bank and unsecured
lending in the US. Its mix of lending is therefore higher risk.
The Trust also established a position in Direct Line Insurance, one of the UK's
leading insurance companies, spanning Motor, Home, Pet and Travel Insurance.
Although it is a low growth business, which operates in a competitive industry,
from the time of its floatation (in 2012) up until 2022, the business had
generated a relatively stable return for its shareholders. In 2022, however, the
company badly underestimated the level of claims inflation that it would see,
with the result that it was effectively under-pricing its insurance and writing
loss making contracts, in turn driving a halving of the share price. The company
now has a new management team which has set about trying to restore the
company's fortunes. Despite the hiccups of the last two years, we believe that
the longer-term earnings power of the business is broadly unaffected, and we
therefore viewed the significant fall in the share price as an overreaction.
Shortly after purchasing the shares, the company was the subject to a takeover
approach from Ageas, the Belgian insurance company. Whilst this approach came to
nothing, it suggested that the company's shares are indeed undervalued.
The UK stock market continues to be compared negatively with other major equity
markets. Should this be a source of concern for the Trust's shareholders?
We have for some time talked of the significant undervaluation of many listed UK
shares, most likely caused by persistent selling by valuation insensitive
investors, often to fund the purchase of more expensively priced overseas
equities. We are often asked what the catalyst will be for an improvement in UK
valuations. Our view has been that either UK listed companies need to take
matters into their own hands by using internally generated cashflows to retire
cheap equity or overseas corporate buyers are likely to step into the void.
There are now signs that both are happening as a large portion of UK listed
companies are buying back and there has been a marked increase in the level of
takeover interest in UK companies. Both forces, have the potential to drive
significant value creation for those who exercise the patience to remain
invested in the UK and we believe that this is already being reflected in the
Trust's investment returns.
Could you provide your views on the increased level of takeover and bid activity
in the UK , particularly on names held in the portfolio?
So far in 2024, we have indeed seen quite a dramatic pick up in the number of
takeover bids for UK listed companies. In the absence of new companies coming to
the UK market, this raises questions about the long-term health of the UK
market; however, in the short term it is a significant positive for the
Company's shareholders. So far in 2024, the Trust has received takeover bids for
four of its investments (Direct Line, Anglo American, Currys and IDS Group -
formally Royal Mail). These offers, which have all driven significant value for
the Trust's shareholders, have been at premiums of between 40% and 60% to the
prevailing share prices and yet not one of the four bids succeeded. This is
interesting in that it demonstrates just how undervalued some of the holdings in
the Trust's portfolio had become. It is not unreasonable to expect further
takeover bids for portfolio holdings in the future.
Following the recent elections in the UK and France , and also the US
Presidential election in November, how do you think politics will impact both
the UK market and markets globally in the remainder of 2024?
Share prices (and therefore stock markets) are ultimately driven by the outlook
for corporate profits and accordingly favour stable governments who espouse
business friendly policies. In the UK , the new Labour government is looking to
implement policies that are designed to increase the attractiveness of the UK to
overseas investors and will want to be seen as business friendly. With five
years of relative stability ahead, it wouldn't be a surprise to see the UK
market perform relatively well in the coming months. In France , no party has
gained an outright majority in the parliament, and this is likely to crimp the
more extreme tendencies of both the left and the right. Likewise in the US,
whoever wins the presidential election, it is unlikely to have a significant
effect on US corporate profitability.
How is the portfolio currently positioned and what is your outlook for the year
ahead?
Despite the strong returns that the Trust has enjoyed over the last eighteen
months, we believe that its portfolio of stocks continues to look very
undervalued. We are fond of saying that stock market history has shown, quite
conclusively, that the best predictor of future investment returns is starting
valuation. Stocks that are lowly valued are priced to deliver attractive
returns, while those that are richly priced are priced to deliver disappointing
returns. In our opinion, today's most attractive valuations continue to be found
in sectors such as banks, insurance, energy, media and consumer cyclicals.
Whilst the profitability of these companies is closely tied to the economy and
can be volatile, we believe that investors in these companies are being
handsomely rewarded for taking on this additional volatility. The Trust's
portfolio in aggregate is valued at around just 8x this year's expected earnings
and whilst many are taking a dim view of UK economic prospects, it is important
to remember that we buy companies and not economies. The companies in which the
Trust is invested mostly generate the majority of their profits from overseas
and are sound, conservatively run businesses with good balance sheets and
capable management teams.
Ian Lance and Nick Purves
RWC Asset Management LLP
20 August 2024
Interim Management Report
The important events that have occurred during the period under review, the key
factors influencing the financial statements and the principal risks and
uncertainties for the remaining six months of the financial year are set out in
the Chairman's Statement and the Portfolio Manager's Report.
The principal risks facing the Company are unchanged, and are not expected to
change materially in the remaining six months of the financial year, since the
date of the Annual Report and Financial Statements for the year ended 31
December 2023 and continue to be as set out in that report on pages 35 to 37 and
note 20 to the financial statements beginning on page 87.
Risks faced by the Company include, but are not limited to: investment strategy
risk, loss of investment team or portfolio manager, income risk - dividend,
share price risk, reliance on the Portfolio Manager and other service providers,
compliance with laws and regulations, cyber security, and global risks (e.g.
climate risk, a pandemic), market price risk, interest rate risk, liquidity
risk, credit risk and currency risk.
The Board has in place a robust process to identify, assess and monitor the
principal risks and uncertainties and also to identify and evaluate newly
emerging risks. The Board, through the Audit and Risk Committee, regularly
reviews all risks to the Company, including emerging risks, which are identified
by a variety of means, including advice from the Company's professional
advisors, the Association of Investment Companies (the "AIC"), and Directors'
knowledge of markets, changes and events. No new or emerging risks have been
identified.
Related Party Transactions
During the first six months of the current financial year, no transactions with
related parties have taken place which have materially affected the financial
position or the performance of the Company.
Going Concern
The Directors believe, having considered the Company's investment objective,
risk management policies, capital management policies and procedures, and the
nature of the portfolio and the expenditure projections, that the Company has
adequate resources, an appropriate financial structure and suitable management
arrangements in place to continue in operational existence for the foreseeable
future.
The Directors confirm to the best of their knowledge that:
●the condensed set of financial statements contained within this Half-Year
Report has been prepared in accordance with Accounting Standard IAS 34, `Interim
Financial Reporting', as adopted in the UK , and gives a true and fair view of
the assets, liabilities, financial position and return of the Company; and,
●the Half-Year Report includes a fair review of the information required by
4.2.7R and 4.2.8R of the UK Listing Authority Disclosure Guidance and
Transparency Rules.
In order to provide these confirmations, and in preparing these financial
statements, the Directors are required to:
●select suitable accounting policies and then apply them consistently;
●make judgements and accounting estimates that are reasonable and prudent;
●state whether applicable IFRS have been followed, subject to any material
departures disclosed and explained in the financial statements; and
●prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business; and the
Directors confirm that they have done so.
The Half-Year Report was approved by the Board on 20 August 2024 and the above
responsibility statement was signed on its behalf by:
Richard Wyatt
Chairman
Statement of Comprehensive Income
For the six months ended 30 June 2024 (unaudited)
30 June 30 June
Year
2024 2023
ended 31
(unaudited) (unaudited)
December
2
023
(
audited)
Revenue Capital Total Revenue Capital Total
Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
£'000 £'000 £'000
Total Income 6 23,886 - 23,886 18,743 - 18,743
32,422 - 32,422
Profit on 5 - 73,724 73,724 - 9,039 9,039
- 62,826 62,826
investments
Currency exchange - (120) (120) - (103) (103)
- (143) (143)
losses
Total income 23,886 73,604 97,490 18,780 8,936 27,716
32,422 62,683 95,105
Expenses
Portfolio (548) (822) (1,370) (580) (870) (1,450)
(1,103) (1,654) (2,757)
Management fees
Other expenses (708) (365) (1,073) (473) (89) (562)
(1,068) (721) (1,789)
Profit before 22,630 72,417 95,047 17,727 7,977 25,704
30,251 60,308 90,559
finance costs and
tax
Finance costs (562) (843) (1,405) (561) (842) (1,403)
(1,123) (1,685) (2,808)
Profit before tax 22,068 71,574 93,642 17,166 7,135 24,301
29,128 58,623 87,751
Tax (1,061) - (1,061) (572) - (572)
(926) - (926)
Profit for the 21,007 71,574 92,581 16,594 7,135 23,729
28,202 58,623 86,825
period
Earnings per 7.3p 24.9p 32.2p 5.4p 2.3p 7.7p
9.3p 19.4p 28.7p
share
The total column of this statement represents the Statement of Comprehensive
Income, prepared in accordance with IFRS. The supplementary revenue and capital
columns are both prepared under guidance published by the AIC.
All items in the above statement derive from continuing operations.
Statement of Changes in Equity
For the six months ended 30 June 2024 (unaudited)
Ordinary Share Capital Retained Total
share premium
capital account reserves earnings equity
Notes £'000 £'000 £'000 £'000 £'000
Balance at 1 16,719 96,040 595,294 12,651 720,704
January 2024
Profit for the - - 71,574 21,007 92,581
period
Cost of shares - - (9,707) - (9,707)
bought back for
treasury
Dividends paid to 7 - - - (14,375) (14,375)
equity shareholders
Balance at 30 June 16,719 96,040 657,161 19,283 789,203
2024
Balance at 1 16,719 96,040 600,206 13,381 726,346
January 2023
Profit for the - - 7,135 16,594 23,729
period
Cost of shares - - (36,131) - (36,131)
bought back for
treasury
Dividends paid to 7 - - - (14,797) (14,797)
equity shareholders
Balance at 30 June 16,719 96,040 571,210 15,178 699,147
2023
Statement of Financial Position
As at 30 June 2024 (unaudited)
30 June 2024 31 December 30 June 2023
(unaudited) 2023 (audited) (unaudited)
Notes £'000 £'000 £'000
Non-current assets
Investments 5 848,880 776,875 767,285
Current assets
Investments 5 4,202 13,713 -
Cash and cash 8,508 4,275 3,823
equivalents
Receivables 5,989 2,979 5,340
Total assets 867,579 797,842 776,448
Current liabilities
Payables (3,614) (2,394) (2,575)
Total assets less 863,965 795,448 773,873
current liabilities
Non-current
liabilities
Interest bearing 8 (74,762) (74,744) (74,726)
borrowings
Net assets 789,203 720,704 699,147
Equity attributable
to equity holders
Ordinary share 9 16,719 16,719 16,719
capital
Share premium 96,040 96,040 96,040
Capital reserves 657,161 595,294 571,210
Revenue reserves 19,283 12,651 15,178
Total equity 789,203 720,704 699,147
attributable to
equity holders
NAV per share 10 275.4 248.0p 231.2p
NAV per share with 10 280.1 252.2p 236.8p
debt at fair value1
1Alternative Performance Measures - See glossary of terms for definition and
more information.
Statement of Cash Flows
For the six months ended 30 June 2024 (unaudited)
Year ended
31 December
30 June 2024 30 June 2023 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Cash flows from operating
activities
Profit before tax 93,642 24,301 87,751
Adjustments for:
Gains on investments (73,724) (9,039) (62,826)
Finance costs 1,405 1,403 2,808
Dividend income (23,663) (18,716) (32,278)
Interest income (223) (64) (144)
Dividends received 22,005 15,814 32,037
Interest received 387 37 (97)
Decrease/(increase) in 293 (181) 38
receivables
(Decrease)/increase in (658) (101) 584
payables
Overseas withholding tax (1,061) (572) (1,229)
suffered
Net cash flows from 18,403 12,882 26,644
operating activities
Cash flows from investing
activities
Purchases of investments (47,238) (24,791) (137,215)
Sales of investments 58,567 54,206 197,110
Net cash flows from 11,329 29,415 59,895
investing activities
Cash flows from financing
activities
Equity dividends paid (14,375) (14,797) (28,932)
Interest paid on (1,386) (1,386) (2,773)
borrowings
Shares bought back for (9,738) (35,531) (63,799)
treasury
Net cash flows used in (25,499) (51,714) (95,504)
financing activities
Net increase/(decrease) in 4,233 (9,417) (8,965)
cash and cash equivalents
Cash and cash equivalents 4,275 13,240 13,240
at the start of the period
Cash and cash equivalents 8,508 3,823 4,275
at the end of the period
Notes to the Financial Statements
1. Significant Accounting Policies
1.a General information
Temple Bar Investment Trust Plc is a company limited by shares, incorporated and
domiciled in the UK . Its registered office and principal place of business is at
25 Southampton Buildings, London WC2A 1AL, UK . Its shares are listed on the
London Stock Exchange.
These condensed interim financial statements were approved for issue on 20
August 2024. These condensed interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2023 were approved by the
board of directors on 3 April 2024 and delivered to the Registrar of Companies.
The report of the auditors on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement under section 498
of the Companies Act 2006.
These financial statements have not been audited.
1.b Basis of Preparation
This condensed consolidated interim financial report for the half-year reporting
period ended 30 June 2024 has been prepared in accordance with the Disclosure
Guidance and Transparency Rules of the Financial Conduct Authority and
Accounting Standard IAS 34, `Interim Financial Reporting', as adopted in the UK .
The accounting policies adopted are consistent with those of the previous
financial year and corresponding interim reporting period.
2. Going Concern
The Directors have made an assessment of the Company's ability to continue as a
going concern and are satisfied that the Company has adequate resources to
continue in operational existence for 12 months from the date when these
financial statements were approved.
In making this assessment, the Directors have considered a wide variety of
emerging and current risks to the Company, as well as mitigation strategies that
are in place. The Directors are not aware of any material uncertainties that may
cast significant doubt on the Company's ability to continue as a going concern,
having taken into account the liquidity of the Company's investment portfolio
and the Company's financial position in respect of its cash flows and borrowing
facilities. Therefore, the financial statements have been prepared on a going
concern basis.
3. Significant Accounting Judgements, Estimates and Assumptions
The preparation of the Company's financial statements requires the Directors to
make judgements, estimates and assumptions that affect the reported amounts
recognised in the financial statements and disclosure of contingent liabilities.
However, uncertainty about these assumptions and estimates could result in
outcomes that could require a material adjustment to the carrying amount of the
asset or liability affected in future periods. The area requiring the most
significant judgment is recognition and classification of unusual or special
dividends received as either revenue or capital in nature. The estimates and
underlying assumptions are reviewed on an ongoing basis.
4. Segmental Reporting
The Directors are of the opinion that the Company is engaged in a single segment
of business being investment business.
5. Investments Held at Fair Value Through Profit or Loss
(a) Investment portfolio summary
Six months ended 30 June 2024
Quoted Debt
equities securities Total
£'000 £'000 £'000
Opening cost at the beginning of 733,313 13,652 746,965
the period
Opening unrealised appreciation at 43,562 61 43,623
the beginning of the period
Opening fair value at the beginning 776,875 13,713 790,588
of the period
Purchases at cost 41,109 8,024 49,133
Sales - proceeds (42,916) (17,447) (60,363)
Realised gain/(loss) on sale of 16,769 (19) 16,750
investments
Change in unrealised 57,043 (69) 56,974
appreciation/(depreciation)
Closing fair value at the end of 848,880 4,202 853,082
the period
Closing cost at end of the period 748,275 4,210 752,485
Closing unrealised 100,605 (8) 100,597
appreciation/(depreciation) at the
end of the period
Closing fair value at the end of 848,880 4,202 853,082
the period
(b) Fair value of financial instruments
IFRS 13 requires an entity to classify fair value measurements using a fair
value hierarchy that reflects the significance of the inputs used in making the
measurements. The fair value hierarchy has the following classifications:
Level 1 - valued using quoted prices in active markets for identical
investments.
Level 2 - valued using other significant observable inputs (including quoted
prices for similar investments, interest rates, prepayments, credit risk, etc).
There are no level 2 financial assets.
Level 3 - valued using significant unobservable inputs (including the Company's
own assumptions in determining the fair value of investments). There are no
level 3 financial assets.
All of the Company's investments are in quoted securities actively traded on
recognised stock exchanges, with their fair value being determined by reference
to their quoted bid prices at the reporting date and have therefore been
determined as Level 1.
There were no transfers between levels in the period and as such no
reconciliation between levels has been presented.
30 June 31 December 30 June
2024 2023 2023
Level 1 Level 1 Level 1
As at £'000 £'000 £'000
Financial assets
Quoted equities 848,880 776,875 767,285
Debt securities 4,202 13,713 -
Total investments 853,082 790,588 767,285
6. Income
Six months Six months Year
ended
ended ended 31
December
30 June 30 June 2023
2024 2023
(unaudited)
(unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total Revenue
Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
£'000 £'000
Income from
investments
UK dividends 14,051 - 14,051 12,989 - 12,989 23,085
- 23,085
Overseas 9,612 - 9,612 5,727 - 5,727 9,193
- 9,193
dividends
Interest on fixed 133 - 133 27 - 27 84
- 84
income securities
23,796 - 23,796 18,743 - 18,743 32,362
- 32,362
Other Income
Deposit interest 90 - 90 37 - 37 60
- 60
23,886 - 23,886 18,780 - 18,780 32,422
- 32,422
7. Dividends
The fourth interim dividend relating to the year ended 31 December 2023 of 2.5
pence per ordinary share was paid during the six months ended 30 June 2024.
A first interim dividend relating to the year ending 31 December 2024 of 2.5
pence per share was paid on 28 June 2024.
A second interim dividend of 2.75 pence per share will be paid on 27 September
2024 to shareholders registered on 23 August 2024. In accordance with IFRS, this
dividend has not been recognised in these financial statements. The ex-dividend
date for this payment is 22 August 2024.
8. Interest-bearing borrowings
The Company's financial instruments, are included in the Statement of Financial
Position at fair value or amortised cost, which is an approximation of fair
value, with the exception of interest-bearing borrowings which are shown at book
value.
The interest-bearing borrowings do not have prices quoted on an active market
but their fair values, as shown in the below table, are based on observable
inputs. As such they have been classified as Level 2 instruments in line with
prior periods.
30 June 2024 31 December 2023 30 June 2023
Carrying Fair Carrying Fair Carrying Fair
value value value value value value
£'000 £'000 £'000 £'000 £'000 £'000
Interest
-bearing
borrowings:
4.05%
03/09/2028
Private 49,865 46,800 49,849 47,291 49,833 44,025
Placement Loan
2.99%
24/10/2047
Private 24,897 14,722 24,895 15,163 24,893 13,990
Placement Loan
74,762 61,522 74,744 62,454 74,726 58,015
9. Share Capital
30 June 31 December 30 June
2024 2023 2023
Number Number Number
As at 1 January 290,612,881 317,822,386 317,822,386
Purchase of shares into treasury (4,096,723) (27,209,505) (15,364,821)
As at period end:
- In circulation 286,516,158 290,612,881 302,457,565
- In Treasury 47,847,667 43,750,944 31,906,260
- Listed 334,363,825 334,363,825 334,363,825
Nominal Value of 5p ordinary shares 16,719 16,719 16,719
During the period, the Company bought back ordinary shares at a cost of
£9,707,000 (Year ended 31 December 2023: £63,535,000; Six months ended 30 June
2023: £36,131,000).
10. Net asset value ("NAV") per share
The NAV per share is based on the net assets attributable to the equity
shareholders of £789,203,000 (31 December 2023: £720,704,000; 30 June 2023:
£699,147,000) and 286,516,158 (31 December 2023: 290,612,881; 30 June 2023:
302,457,565) shares being the number of shares in issue at the period end.
The NAV per share with debt at fair value is based on the net assets
attributable to the equity shareholders, adjusted for the difference between the
debt at carrying value and fair value as shown in note 8, and the number of
shares in issue at the period end. Adjusting for debt at fair value resulted in
an increase in net assets of £13,240,000 or 4.6p per share (31 December 2023:
increase of £12,290,000 or 4.2p per share; 30 June 2023: increase of £16,711,000
or 5.6p per share).
Glossary of Terms
AIC
The Association of Investment Companies.
Benchmark
A comparative performance index.
Discount or Premium of share price to NAV per share*
A description of the difference between the share price and the net asset value
per share. The size of the discount or premium is calculated by subtracting the
share price from the net asset value per share and is usually expressed as a
percentage (%) of the net asset value per share. If the share price is higher
than the net asset value per share the result is a premium. If the share price
is lower than the net asset value per share, the shares are trading at a
discount.
Fixed Interest
Fixed-interest securities, also known as bonds, are loans usually taken out by a
government or company which normally pay a fixed rate of interest over a given
time period, at the end of which the loan is repaid.
FTSE All-Share Index
A comparative index that tracks the market price of the UK's leading companies
listed on the London Stock Exchange. Covering around 600 companies, including
investment trusts, the name FTSE is taken from the Financial Times and the
London Stock Exchange, who are its joint owners.
FTSE 350 Index
A comparative index that tracks the market price of the UK's 350 largest
companies, by market value, listed on the London Stock Exchange.
Liquidity
The ease with which an asset can be purchased or sold at a reasonable price for
cash.
Market Capitalisation
The total value of a company's equity, calculated by the number of shares
multiplied by their market price.
NAV (`Net Asset Value') per share
The value of total assets less liabilities, with debenture and loan stocks at
book value. Book value is the amount borrowed less the current loan arrangement
fee debtor. The net asset value per share is calculated by dividing this amount
by the number of ordinary shares outstanding.
NAV per share with debt at fair value
The value of total assets less liabilities, with debentures and loan stocks at
fair value. The net asset value per share is calculated by dividing this amount
by the number of ordinary shares outstanding.
Ongoing charges*
Ongoing charges are calculated on an annualised basis. This figure excludes any
portfolio transaction costs and financing costs. It may vary from period to
period. The calculation below is in line with AIC guidelines.
Six months to
30 June 2024
£000
Investment management fee 1,370
Administrative expenses 949
Total 2,319
Average total net asset value throughout the period 751,299
Ongoing charges 0.62%
* Alternative Performance Measure.
Net asset value (NAV) per share total return with debt at fair value*
The theoretical total return on shareholders' funds per share, reflecting the
change in NAV with debt at fair value assuming that dividends paid to
shareholders were reinvested at NAV with debt at fair value at the time the
shares were quoted ex-dividend. A way of measuring investment management
performance of investment trusts which is not affected by movements in
discounts/ premiums.
Six months to
30 June 2024
(p)
Opening NAV with debt at fair value 252.2
Increase in NAV 32.4
Less dividends paid (4.8)
Adjustment for movement in fair value of debt 0.3
Closing NAV with debt at fair value 280.1
% increase in NAV with debt at fair value 12.9%
% Impact of reinvesting dividends 0.2%
NAV per share % total return with debt at fair value 13.1%
Share price total return*
Return to the investor on mid-market prices assuming that all dividends paid
were reinvested at the share price at the time the shares were quoted ex
-dividend.
Six months to
30 June 2024
(p)
Opening share price 238.0
Increase in share price 25.8
Less: dividends paid (4.8)
Closing share price 259.0
% increase in share price 10.8%
% Impact of reinvesting dividends 0.2%
Share price total return 11.0%
Value Investing
An investment strategy that aims to identify under-valued yet good quality
companies with strong cash flows and robust balance sheets, putting an emphasis
on financial strength.
Dividend Yield*
A measure of the income return earned on an investment. In the case of a share
the yield expresses the annual dividend payment as the percentage of the market
price of the share. In the case of a bond the running yield (or flat or current
yield) is the annual interest payable as a percentage of the current market
price. The redemption yield (or yield to maturity) allows for any gain or loss
of capital which will be realised at the maturity date.
* Alternative Performance Measure.
For and on behalf of
Frostrow Capital LLP, Secretary
20 August 2024
- ENDS -
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incorporated into, or forms part of, this announcement.
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