Temple Bar Investment Trust PLC ($TMPL)

Good morning, and welcome to the Temple Bar Investment Trust plc investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Neil Winward, Frostrow Capital. Good morning, sir.

Good morning to you, Paul, and good morning to you all. Another day, Wednesday, the 11th of March, and we're here for an update on Temple Bar Investment Trust. And today, we have Nick Purves, Co-Portfolio Manager of the Trust, to provide an update. As we know, it resides in the U.K. equity income sector with a market cap approaching about GBP 1.1 billion today. The Redwheel team, headed up by Nick together with Ian Lance, have been managing the assets for just over 5 years now. And in the last 3 and 5 years, they top over the period in the peer group in NAV and share price total return terms. Of course, we're living in what seems like a parallel universe at the moment. So a very tough 10 days all around for everyone in financial markets, and it's not much fun reading the newspapers. However, we do prefer to think of the current shakeout certainly for Temple Bar, I believe, as an opportunity and a very good opportunity for those investors looking at their allocation in their portfolios at this time and considering U.K. equity income investment. The company very recently announced its last interim dividend for the financial year at 3.75p, bringing a total of 15p per share for 2025, a dividend yield of 4% on today's share price with the Board having the ambition to grow that dividend in real terms from here. So I'm just going to hand over to Nick now. But before we do, obviously, Q&A coming up at the end, I think we're looking at a presentation of around 25 or 30 minutes, looking to wrap up by midday. So Nick, if I can hand over to you at this point. Thank you.

Great. Thank you, team. Thank you for the kind introduction. As Neil says, we've had the honor of looking after the Temple Bar Investment Trust for just over 5 years now. And we have been able to deliver some good returns for the Trust, roughly doubling the index return over that 5-year period. And of course, that 5-year period in and of itself actually quite a strong period for the index. And there have undoubtedly been some good stock selections in there. There's nothing to doubt about that. But we -- I think we would be the first to say that there was an element of good fortune to the extent that the starting period at the time that we took on the trust in October, November 2020, you'll remember that COVID uncertainty was -- continued to be very, very high, and investors' appetite for risk was very low at that point. And what that meant was, of course, that some of the valuations in the stock market were at very, very low levels. So I suppose what I'm trying to say is that we've been fortunate within that 5-year period to the extent that at the start of it, we had a very, very attractive opportunity set. And we were able to buy into what we've always thought to be some pretty reasonable businesses at very, very low valuations. Not only is the Trust share price appreciated pretty markedly over that period, but also the fund's dividend has been able to grow strongly. Now what you can't see in that was the fact that in the pre-COVID period, the dividend was below today's level, but higher than obviously the Trust was able to deliver in 2021. So just as a matter of record, in 2019, the Trust paid a dividend of just over 10p per share. And yes, it was uncomfortable, obviously, and unfortunate that, that dividend had to be cut in 2020 and 2021. But it's very satisfying to be able to say that we've been able to restore that original dividend and more over the last 5 years or so. And for calendar 2025, the Trust paid a dividend of around 15p, 1-5, per share, although that does include an element of capital in there. So the revenue dividend was around 12p per share, let's say, about 20% up on the pre-COVID level and obviously, a significant level of growth from the levels from the dividend paid out in 2021. As the Trust performed well, so the discount on the shares has narrowed. As you can see from this chart here, the discount has ranged between what was pretty consistently sitting between 5% and 10% in the post-COVID period. But in the last 12, 15 months or so, that discount has narrowed very dramatically. And indeed, actually, the Trust trades at a small premium today. We have to say the Board have been very diligent and have been actively managing that discount over time. And where they have felt that the discount has become too great, they have been prepared to buy back stock, which, of course, as shareholders is something you would want to hear because obviously, if the Trust can buy back stock at a discount to NAV, that is value enhancing for the shareholders who choose not to sell. So over that period, the shares in issue have declined by around 10%, that sort of number. And actually, it's good to be able to say also the Trust being at a small premium today has actually been recently issuing some shares. We show here the largest share price movers in 2025. And you can see on the left-hand side of the table there, a good number of the largest movers last year were in the financial space. So that would be both banks and insurance companies, and you have 2 insurance companies in there, NN, which is a Dutch insurance company and Aviva in the U.K. Financials as a group have continued to perform very well in 2025, and as you can see there, saw very significant share price appreciation. We have been operating -- we have seen -- it's been a good environment for, well, banks generally. You'll be aware, obviously, that interest rates have risen over the last few years, and that allows the bank's net interest margins to expand. It's also been a period in which credit losses or loan losses have been low. And the combination of those 2 factors acts as a real kicker to bank profitability. So bank profitability generally has been very strong. And this is a time when actually valuations, at least to start off with, were very, very low. So you could buy into a lot of the -- a good number of these companies 1 and certainly 2 years ago at what we would call mid-single-digit price earnings ratio. So you'd have to pay to buy the shares, let's say, 6 or 7x the annual profits that the companies generate. And obviously, that is a low valuation. So that has set the scene, if you like, for a strong share price appreciation within the financial sector. Another company, perhaps I'd highlight would be Johnson Matthey. I don't know if you know it, but it's basically a chemicals company based in the U.K. It announced last year that it was selling one of its divisions, which accounted for about 20% of the overall group profits for around 2/3 of the then market capitalization or market value of the business. It's unsurprising, therefore, that the share price went up very dramatically on the announcement of the disposal. It's always important, the Temple Bar portfolio owns around -- consists of just over 35 stocks. There will always be things that go wrong on you. Of course, there will. And in 2025, the largest detractor from the Trust investment return by far was WPP, the advertising agency. And you can see that, that more than halved during the 12-month period. And I think it's important and it's always important for fund managers to talk about the things that have gone wrong because perhaps they can actually provide a more interesting insight to you, the investor, into fund management behavior. So why has WPP gone wrong? And what are we doing about it? Well, the first thing is to say really we're not going to go through this slide in too much detail. But when something goes wrong on you, the first thing that we do with fund managers is to reevaluate. We don't act in haste. We reevaluate. And what we're doing essentially is testing the original assumptions that we made when we bought the business and trying to put them into the context of the new environment in which the company finds itself. Now the problems at WPP were, I think -- we absolutely think it is fair to say there are probably 3 elements to it. One is probably the advertising cycle, where we are in the advertising cycle. Obviously, advertising spend across the advertising industry is not the same year in, year out. You get good periods and bad years, good periods and bad periods. And 2025 has been a difficult period for the advertising companies generally. More than that, there are clearly secular forces at work. Obviously, the rapid emergence of AI and its capabilities within the stock market is something that is of significant interest to shareholders, investors generally at the current time. And it is likely that the continuing emergence of AI is going to very profoundly change the nature of some industries and the profit pool that is available to the companies in those industries. And it may well be that advertising agencies are negatively impacted by the emergence of AI over time. It's impossible, of course, to quantify at this stage how damaging or not it might be to agency profits. The third element is undoubtedly the company itself. The company itself has made mistakes. It delivered last year, 2025, a revenue decline of about 5% to 6%, is forecasted to do another 5% to 6% revenue decline in 2026. But if there's any comfort to be drawn, it's the fact that it operates, obviously, there are other agencies with whom it competes who continue to report healthy levels of growth. And that gives us comfort that the -- whilst not downplaying the challenges that the company faces, we feel that a large part of this is company specific. And actually, once the operations of the business are improved, then the company can start to deliver revenue growth again. And this is corroborated effectively in our minds by a meeting with the new CEO, a lady called Cindy Rose, who is setting about simplifying and restructuring the business and returning it to growth over time. So we recognize that the industry has got more difficult. We recognize that there are secular forces at work. We recognize that WPP itself has not perhaps been managed certainly to its capabilities. But we think when we place all of that in the context of today's share price, and we think about the potential for improved performance could come from a reorientation of the business, we think that there is significant value in the shares today. So we've actually, in this case, added to the shareholdings in the company having retested the assumptions. The second example I was going to give you actually, again, perhaps this is topical given what's going on in the Middle East today is BP. And I'm not going to give you a sort of lengthy description of why we hold BP. I'm just trying to give shareholders a flavor of the sorts of things that we're looking for when we're investing in companies. What we are looking for essentially is reasonable businesses, companies which by virtue of the industry in which they operate, the market position that they have within that industry can deliver profit growth over time, not necessarily each and every year. Obviously, some companies operate in cyclical industries, and they'll have good years and bad years. But what we're looking for is companies where we can feel very confident that in 3 to 5 years' time, the profits will be significantly higher than they are today. So we're looking for -- let's say, reasonable businesses that can grow over time, not each and every year, but over time. But where the market -- the stock market for one reason or another, has got a downer on the company at this particular point in time and therefore, is ascribing a low valuation to the shares. And we would say that despite the share price rise we've seen in the last week or so, given the events in the Middle East and obviously the rising oil price, we would say that BP is a good example of a company that is materially undervalued versus its profit and cash flow potential. Let me just throw a few numbers at you. So BP today is capitalized at around $100 billion. Last year, the company generated around $8 billion of free cash flow for a free cash flow yield of 8%, divided by 100%, which in and of itself actually is not particularly attractive. We would normally look for more than that. But the kicker we think is that the company is significantly underperforming its potential. And we think that actually in a reasonable time frame, in the next 2 to 3 years, that $8 billion -- by virtue of steps the company is taking to improve its operations, we think the $8 billion can become $14 billion. And of course, $14 billion on a $100 billion market cap is a cash P/E of around 6 to 7x, much, much more attractive. And if the company can deliver $14 billion of profit in 2 years' time, we think that's worth around $150 billion in the stock market, which will give you about a 50% return from where we're sitting today. And an obvious question perhaps is, how on earth do you price a company like BP, given that obviously, it sells energy and the price of energy is flying around all over the place. We try to make -- first thing to say is we don't know where the energy price is going to be tomorrow, in a week's time or in a year's time. So we, therefore, try and price these companies or value these companies using conservative levels of energy prices. So in the case of oil, we price or value energy companies at $70 Brent. Now obviously, today, we're significantly more than that. And all other things being equal, that $14 billion will probably be closer to $20 billion. But we want to ensure that we're using conservative assumptions so that if things don't pan out as we hope, perhaps that gives you some form of downside protection as far as the valuation is concerned. So recent transactions. Recent transactions, again, of course, I won't go through all of this. I'm just trying to give a flavor of how we're thinking and the sorts of companies that we're looking for. New positions, I would probably highlight Diageo, the drinks company, which has fallen very -- as some of you might know, has fallen very dramatically over the last few years. Diageo, the drinks company got to around GBP 40 a share in 2022. Today, it's trading at around GBP 15 to GBP 16 a share. So you can see the share price has fallen by around 60%. Our view is that at GBP 40 a share, the company was overvalued. It was generating about GBP 1.60 of earnings for a price earnings ratio at GBP 40 or about 25x earnings, so an earnings yield of 4%. That's valuation in our mind is too high. It's a steady, pretty reasonable business, but it hasn't got much in the way of growth. Today, those earnings have fallen. It's no longer 160p of earnings, about 120p of earnings today. The share price today is GBP 15 to GBP 16, as I said already. For a price earnings ratio of around 13x, that is much more attractive. That is much more what we are looking for. Now I don't think we're not jumping up and down and saying we think this company is extremely undervalued, but we certainly think it is undervalued and therefore, worthy of shareholder capital. And then I'd probably highlight Comcast in the U.S., which is basically a telephony, broadband media company. It owns Sky in the U.K., for example, if you're familiar with that, trading on a price earnings ratio of around 8x and offering an attractive dividend yield with some -- again, what we would say is some reasonable growth prospects going forward. So a good example of a company, not going to set the world alight, but it's a perfectly reasonable business and grows profits over time and it's trading at a low valuation in the stock market. We've been selling out of -- in the second column from the left, we've been selling down some financials. You probably expect that following some very strong performance. And we've been reducing the Trust holding to the mining stocks, mining, Barrick Gold, Newmont Mining and Valterra Platinum. You're probably aware that precious metal prices have performed extremely strongly over the last 12 months or so. That has obviously manifested itself in higher share prices for the mining companies, and we have taken advantage of that and sold them down because we no longer think those companies are being undervalued by the stock market. I've talked about WPP and the fact that we've added to the existing position and then the reduction to the existing positions on the right there. That's pretty much -- I mean, that's dominated by financials. Barclays, Hana and Woori are actually Korean banks. You won't be familiar with those, I imagine. But they actually -- they have appreciated by between 80% and 100% in the 12 months that the Trust has owned them. So we've taken some money out of those. TotalEnergies has obviously responded very well to the rising oil price. And in Anglo American, which is effectively now a copper miner, we've also reduced the position there. I'm sure a good number of you've got questions surrounding the current volatility that we are seeing. And we often get asked how are we responding to it? And I think the answer that we often give is that we're not really doing anything. I mean we're holding fast in our investment discipline is what we are doing. We have -- I think the message that we would give to all clients is that volatility is uncomfortable. It's scary. It creates uncertainty. There are no guarantees in this world. No one can tell you that it's all going to be okay because no one ultimately knows. But what you can say is that basically volatility is part and parcel of investing in equities. And it's the price that you pay effectively, taking on that volatility, accepting that volatility is the price that you pay in order to access the higher returns that equities have given you over time. And of course, we're not just trying to give you the equity market return. We're trying to give you more than the equity market return. But I'm afraid that, that does come with volatility, and it's important to understand and accept that in advance. I hope that this chart is helpful in that regard. We're lucky enough to have one client. We've looked after their money for 25 years. And in that 25-year period, GBP 100 invested in the index is now worth around GBP 470 for 370% return. The fund that we manage has actually turned that GBP 100 into GBP 900. So we've more than doubled the index return over that period. What's fascinating is, of course, is that, that hasn't been a consistent track record. There's been significant volatility within that 25-year period. And I think there are 9 instances in which the funds drew down or fell by 10% or more. And of course, a 10% fall feel very uncomfortable at the time. And of course, when you get volatility, it's tempting to run for the hills, but we would absolutely advise you against that because what is incredible is that if you take that 25-year track record and you remove the 12 best months for the fund from that 25-year track record, that return of 800% becomes a return of 150%, just extraordinary. And the strong message there is that, unfortunately, you cannot time the market because what tends to happen is the best months, the biggest rises in the market tend to come after a period of volatility when you can get these enormous relief rallies. We saw it coming out of the financial crisis in 2008, 2009. We saw it coming out of the Eurozone debt crisis in 2011. We saw it coming out of COVID. We saw it coming out of the Liberation Day tariffs last year. And we could well see it as and when there's some resolution to the problems in the Middle East. And so I think the message we want to give you is sometimes put down the newspaper, accept volatility is part and parcel of equity investing and absolutely do not let it drive short-term decision-making. I'm going to wrap it up reasonably quickly now. But it's simply to say, to show this is how the portfolio is structured sectorially at the current time. And we would argue that 2 things. One is that the Trust's portfolio is reasonably well diversified. The biggest sector is actually in financials, it's just over 25%. This sector split was put together at the end of February, actually, the number is now lower than that because we have continued to take money out of financials. And you can see some obviously healthy positions in energy, staples, communication services. I suppose the message we're trying to give is that, one, we think that each of these areas of the market is, for one reason or another, being underpriced by investors. And number two, you've got a healthy level of diversification because, again, none of us know what's around the corner. Whatever sector you're invested in, there's always a risk that you're wrong. And therefore, it's important to make sure that you have a good spread of exposures from a sector perspective. This is the top 15 holdings in the portfolio. Again, of course, I'm not going to go through them all, although I'm very happy to take any questions that you have on any of the individual names. But the message we're just trying to get across is that, again, it's a broad spread of businesses, which, in our view, are modestly valued and thereby, you, as shareholders, should benefit from the growth in the profits that the companies are able to deliver over time and obviously, the nice -- the dividends that they pay along the way. But actually, it's a group of companies which are by virtue of -- they are a group of reasonable businesses by virtue of the market positions that they have in the industries in which they operate, they should be able to deliver that growth over time. I think wrapping up in a way, we just want to continue to highlight that the U.K. market had a good year last year. The U.K. market was up 24% last year. The Trust was able to do better than that. And actually, it was the first year in a number of years where actually the U.K. market and other regional markets, by the way, in Europe have managed to outperform the U.S. market. As you probably know, investors generally have been very U.S. focused, we would argue slightly myopic over the last few years, focusing pretty much entirely on U.S. equities and particularly within U.S. equities, growth equities. So obviously, concentrating particularly on the Magnificent 7, the big technology companies. And I suppose the point we're trying to make is that despite the fact that the S&P actually lagged last year, not significantly, but it certainly lagged. We think the valuations in the U.S. continue to be high. And of course, none of it -- again, I keep saying it, but none of us can see what's around the corner. But what we can say with a good deal of confidence is that if you look at the lesson of history, lesson of history would tell you that starting valuation is the best determinant of future return. So you buy an asset with a low valuation, you should expect to receive a high return over time. You buy an asset with a high valuation, you should expect to receive a lower return. So all we would say from today's starting point is despite the recent underperformance, actually, the valuation attached to U.S. equities continues to be high when placed in a historical context. This is basically a measure of market cap to GDP or economic output. And you can see that U.S. valuations continue to be high at a time when other markets of the world, and the U.K. absolutely included in that, continue to stand at significant discounts. And of course, remember that we're not buying the market. We're trying to cherry pick stocks within the market that are actually even more attractively priced than the U.K. market is overall. So where do we end up? Well, today, despite the fact that actually the Trust has performed well over the last few years, the price to earnings ratio, you can see on the left there, of the Trust is around 11x today, and the dividend yield is around 4%. The U.K. index is trading on a price-to-earnings ratio of 14x. So the Trust is at a significant discount to the U.K. index. And the global index is now trading -- because it's so heavily dominated by the U.S. market, is now trading on a price earnings ratio of well over 20x. So we would say despite the recent performance of the Trust, it continues to trade at a significant discount to the wider U.K. market and around a 50% discount to the global index. And if we are correct, and starting valuation continues to be the primary driver of medium- to long-term returns, then we would say that from today's starting point, the Trust continues to be set up well to deliver good returns into the future. And I'm happy now to hand over for any questions.

Fantastic, Nick. Thank you very much indeed for the presentation. [Operator Instructions] And perhaps let's start with the first one, [ Ashley. ] You retain a significant allocation of non-U.K. stocks and the universe of potential opportunities is significant. Can you please explain how you're able to effectively identify the best opportunities and if the due diligence and ongoing monitoring process differ from that of the U.K. stock selection?

So I can probably take the last question first. Does our approach or does the due diligence process for an overseas stock anywhere different from the U.K. stock? Absolutely not. And you probably would expect me to say that, but it absolutely is the case. We look for exactly the same things in the companies and the process that we apply is also identical. The Trust has the ability to invest -- we have the ability to invest 30% of the Trust's asset in overseas market. And that is flexibility that we absolutely welcome and take advantage of to its full extent. Why is it valuable? It's valuable to us because we -- I think a couple of -- there are basically 2 reasons. One is that it allows us to diversify away risk. So if we think, I mean, we've talked about -- let's talk about energy companies. If we think energy companies are attractively valued. And broadly, we do think they are attractively valued. Remind yourself that before the events of the last week, there was an enormous amount of cynicism and skepticism surrounding the outlook for energy prices and also the energy companies themselves. So we think energy is undervalued. If you want to invest in energy in the U.K. market, as far as the big integrators are concerned, your only choices really are Shell and BP. And the challenge is you like the energy sector, you want a reasonable chunk of the Trust's money within that sector, but you've only got access to 2 stocks. That creates a problem because you need to make sure that you can diversify away sufficiently stock-specific risk. You'll remember in April 2010, the Macondo well in BP blew up in the Gulf of Mexico. And that incident cost BP shareholders about $50 billion to $60 billion, half the share price in short order. So there's always what we would say is unanalyzable stock-specific risk. And it's very helpful if we can basically spread that stock-specific risk by taking a sector that we like and having the flexibility to buy international exposures within that sector. So obviously, you can see that we've held TotalEnergies within the Temple Bar portfolio. And the second reason that it's very useful is because it does allow us -- it enables us to get exposure to sectors that perhaps aren't actually available to U.K. investors.

Fantastic. Next question I get from [ Ashley. ] You've touched on this in one of your slides, Nick, but perhaps if there's any further color you can add. Two stocks recently highlighted as fund detractors, WPP and Macy's, both of which may be considered to have long-term structural challenges. Taking these examples of your process and your willingness to invest in hold stocks at times of discomfort, what would you need to see in order to reconsider those value trends?

Yes. Well, I mean, it's a great question. So I think the term value trap broadly is used to describe companies which are lowly valued and therefore, potentially screen as attractive. But where the -- normally, the secular challenges facing the business are so strong that it basically means that the company can't grow its profits over time. So I think -- obviously, we work very hard to try and avoid investing in these companies. We conduct enormous amounts of due diligence to try and give ourselves assurance that the companies in which we're investing can grow their profits over time. We will make mistakes. We will make mistakes. Of course, we will because unfortunately, the future ultimately is unknowable. When it comes to -- in the case of WPP, I'll talk -- I think WPP is actually slightly separate from Macy's. WPP, I think if the -- I said earlier that what gave us comfort in WPP is that others in the industry. So I'm going talk about Publicis, Omnicom has just taken over Interpublic in the U.S., even Havas, all the other agencies are actually growing their revenues at the current time. Now that's not to say that AI is not having a negative impact on the industry. All it says is that for the moment, anyway, those companies are dealing with it and managing it and continuing to prosper. If it turned out, let's pretend we're sitting here in 12 months' time, and all of those other agencies are now seeing negative growth. And it doesn't -- however well the business is being managed, the industry is going backwards, then I think we would reappraise and say, "Yes, okay, we probably got this wrong. May be we need to review and possibly exit the position." Macy's, the question is absolutely correct. I mean, Macy's does face a secular challenge -- I mean, we would say, actually, by the way. Macy's, by the way, is a U.S. -- I don't -- I hesitate to call department store because that has such a bad connotation in the U.K. But it's basically the U.S. department store retailer. We would say actually, all retailers face secular challenges. All retailers have had to deal with massive changes in consumer behavior over the last 10 years or so. And by and large, they have proven to be pretty adaptable. We think actually that they -- I mean, I'll give you some numbers of Macy's. We bought Macy's around $14 a share. It went up to about $22 a share last year. And then I think so far this year, it's fallen down now about $19, $18 a share, so it's fallen so far this year, although the Trust has still made a healthy profit on its investment. I think what attracts us about Macy's, a, there's a new management team who are turning it around and actually, the initial signs have been pretty good, restoring it to like-for-like sales growth, getting the business actually operating to its potential. There is also -- the market capitalization of Macy's is about $4 billion to $5 billion. It's actually got a property portfolio, freehold property portfolio value between $5 billion to $10 billion sitting on its balance sheet. So there are strong arguments to suggest that the business could actually be liquidated as a profit. The company was subject to a bid in 2024 at $24 a share. Obviously, that is a premium to where we are today basically for an opco/propco operator who is looking to break the business up and realize the value that's in the property portfolio. So we feel there's some sort of backstop there. So if, let's say, it turns out that the management are unable to improve the operations of the business and actually -- so far, actually the signs are that they are doing a good job, then we feel that a bidder is likely to reemerge and next time around, the management will probably find it difficult to push them away. So we think that's why we continue to stick with Macy's.

Super. Next question from Jason. With the current events, what tweaks are you looking to do either to reduce exposure or areas you're looking to increase sector exposure as the market allows?

So I think it's very important to say we don't -- we have to be flexible and we have to adapt to conditions as conditions change. Obviously, the outlook is constantly changing. Investors' interpretation of the outlook is constantly changing. Investors generally, as you know, are driven by their emotion, the cliche of excessive fear and greed is absolutely alive. And we just have to be ready to respond to that. And I think where we see significant volatility and a marked change in share prices, then we will act. The events of last week, I know it feels -- I know the last week or so has felt very uncomfortable. But actually, what happened in the stock market probably hasn't been dramatic enough or it hasn't been dramatic enough in our view to prompt a wholesale change of strategy within the portfolio. But as and when things do get to that stage, obviously, we will move. We are naturally contrarian. So we obviously have been selling financials in the last few months, we've been selling financials and buying energy because financials have done very well. And pre the Iran situation, energy was very unpopular. So obviously, we're selling what's done well to buy what's unpopular. Now if that flips on its head and the stock market starts to discount energy prices, which are too high in our view and unsustainable, then we'll become sellers of energy, and we may start to buy some of the financials back if the share price moves down are sufficiently dramatic. We're not there yet. So I suppose the short answer is we just have to be flexible and deal with an evolving situation as it comes.

A bit of a follow-on actually really from that question. Given the highlighted strong performance in financials last year, is there a particular sector today that excites you and offer similar prospects of re-rating, which I think you just touched on unless there's anything further to add then.

Yes. I don't think -- I mean, financials did offer an exceptional opportunity. I mean you were able 2 years ago to buy -- I always use the example of Barclays Bank. You were able to buy Barclays Bank on a price earnings ratio of 5x. So flip that, it has an earnings yield of 20. In the beginning of 2024, so 2 years ago, as I said, Barclays share price was GBP 1.50. It just reported over 30p of earnings in respect to 2023. So as I said, P/E of 5, it was trading for 0.5x its tangible asset value, the value of the assets on its balance sheet. It had about a GBP 20 billion market cap. Two years ago, the company said that for '24, '25 and '26, it would return GBP 10 billion to shareholders. So that's 50% of the then market capitalization. And the point I'm trying to make is they were exceptionally undervalued. Now do we see a sector that has those characteristics today? No, we don't, is the honest answer. But obviously, we can still find stocks which are undervalued and can -- I've talked about the price earnings or the P/E on the portfolio or the valuation of the portfolio price earnings ratio of 11 versus the U.K. market of 14x. So we can still deploy shareholders' money, in our view, in undervalued stocks. But we don't see in any sector today the extreme undervaluation that you saw 2 to 3 years ago.

Super. One from Ed here. Smith & Nephew, a sum of the parts play, its P/E ratio is not exactly low.

No. It's not sum of the parts play. The company is not -- sorry, performance has improved in the last 12 months or so. And actually, again, the Trust has made a good return on its investment. It was bought for below GBP 11 a share, and it trades today at around GBP 13 a share. It was pretty lowly rated because actually the company's operational performance has not been good for some time. There's some real signs now actually that the performance of the company really is improving from an operational perspective. It's just reported its 2025 results. It delivered 6% sales growth, higher level of growth than that in its operating profit. It set out a 3-year target of compound sales growth of 7% and again, more than that in operating profit terms, 9% to 10% per annum, I think that it is. And so what we would say is that, yes, although you're absolutely right to identify optically, the price earnings ratio doesn't look as attractive as other stocks in the portfolio, the company's performance is improving. And actually, the outlook for profit growth is pretty good at the current time.

Great. Just a finance question because we come through to come back towards time. David, thank you. In the manager's experience, has there ever been a time when it's been difficult to source ideas at prices that is comfortable with the strategy? Or does the market always throw up these opportunities?

That's a good question. I think any fund manager that says to you that the opportunity set is exactly the same over time. That's just not the case. I've already talked about how the exceptional opportunity that existed in financials 2 years ago and the fact that we don't think a similar opportunity exists today. Yes, there are -- I mean, again, we have to deal with the situation as it evolves. I think if you went back 10 years ago, we would say prior -- just prior to the Brexit vote because obviously, the Brexit vote in 2016, we were managing the Trust then. But the Brexit vote in 2016, that created volatility and opportunity. But we had a period running into that where actually we were finding it quite hard. And I think we were deploying money, clients' money at higher valuations than we normally would. But it's not the situation today. And I suppose all we can do is report back to shareholders as and when that becomes a problem.

The last question we've got here from Simon. Actually, the question, is the optimism over valuation upside in DGE partly cautioned by the need to pay down debt, the balance sheet that's clearly overgeared, which cutting the dividend should allow them to achieve, do you assume any volume growth in spirits [indiscernible] improving price?

Great question again. So I think the question has absolutely focused on volume and how important volume growth is for any business. It's ultimately -- it's probably the measure that gives the best indicates that the underlying health of the business is how much is growing its volumes because ultimately, simply growing sales through price increases is not sustainable. So volumes in Diageo have been relatively flat for a long period of time. And actually, more recently, and this is not just Diageo, this is the other alcoholic drinks manufacturers as well, have actually been in decline. And I think volumes are declining at around 2% per annum at the current time. So not dramatic necessarily, but a significant headwind to profits growth. And of course, it's a $20 million question as to whether Dave Lewis, who's the new CEO. Dave Lewis, for those of you who's not familiar, was a very capable CEO who actually turned around Tesco. I think it was -- I can't remember which year it was. And he started in Diageo in the autumn, and he is now setting to work to try and basically restore the health of the business. One part of that is absolutely as the question implies, is getting balance sheet debt down. Net debt to EBITDA, which is probably the best measure of balance sheet health, we're standing at around 3.5x at the current time. That's not dramatically too high, but it is too high. It probably needs to come down to 2.5 to 3x, that sort of ratio. So he has announced some disposals already in order to try and get the debt down. He may well announce some more. Disposals are good, obviously, because they get the debt down, but they are dilutive to earnings because obviously, you're selling a profit stream when you make the disposal. Obviously, his mission is to get volumes growing again. And we are hopeful that he can. At the interim results, the company has got a tuning around just now since interim results. He describes a whole series of things that the company is doing wrong, overly complex, overly costed. It's focused on the wrong brands. It's been putting prices up too high. It probably runs too diverse a brand portfolio. And we have to -- ultimately, again, we don't know. But if there's anyone that can restore Diageo to volume growth, then it's probably Dave Lewis. But let's see. It will be interesting to see.

Fantastic, Nick. That concludes the Q&A, and thank you for covering all those questions you can. Of course, any further questions come in, the team will be able to review those and publish responses on the Investor Meet Company platform. Just before redirecting you to provide your feedback, which is particularly important to the team. Neil, if I could just come back to you for a few closing comments, please, that would be great.

Yes. Look, thanks, everyone, for joining today. Just to very briefly say, as you've heard from Nick, the managers have roughly doubled the index return in the last 5 years by buying businesses at low valuations. And the U.K. market has had a good year in 2025 and actually outperformed the U.S. market for the first time in quite a while. But the U.K. market is still at an attractive discount to the U.S. So expectation is that this continues. And of course, as Nick said, volatility is part of this. But if you're able to accept that volatility, we very much welcome you as shareholders. And if you are looking for the fund, just so it's absolutely clear, the ticker under the London Stock Exchange is TMPL LN. And if you're looking for the shares on some retail investment platform, it's all available. If you're doing a search, it's under Investment Trusts. And the sector is U.K. Equity Income and the manager is Redwheel. There, you will find Temple Bar Investment Trust. Thank you for joining.

Fantastic. Nick, thanks again for updating investors. Could I please ask investors not to close the session and should be automatically redirected to provide your feedback. This will only take a few moments to complete and is greatly valued by the company. On behalf of Temple Bar Investment Trust PLC, we'd like to thank you for attending today's presentation. That concludes today's session and good morning to you.