REG-Temple Bar Inv.Tst: Half-year Report
24/09/2020 13:40
Temple Bar Investment Trust PLC
Half-year Report
Chairman’s Statement
Dear Shareholder,
The period under review, as can be seen in the accompanying tables, has been
hugely disappointing. The net asset value of your shares, and their price,
have suffered very significant falls. In addition, the Trust has seen a near
70% fall in its earnings per share. It is in this context that the Board has
decided to replace the current investment managers, Ninety One, with RWC Asset
Management LLP.
Please see below the Stock Exchange announcement detailing the above, which
was issued on 23rd September:
“Change of investment manager
Further to the announcement made on 2 September 2020, the Board is pleased to
announce the proposed change of the Trust’s investment manager to RWC Asset
Management LLP (“RWC”). Temple Bar has today entered into heads of terms
with RWC (the “Heads of Terms”) under which, subject to the satisfaction
of conditions detailed below, RWC will become the Trust’s investment
manager. It is currently anticipated that the appointment of RWC will become
effective on or around the end of October 2020 at which time a further
announcement will be made.
Background
Following the disappointing performance of the Trust in 2020 and the departure
due to ill health of the named fund manager, the Board announced that it would
conduct a review of its management arrangements. The Board chose the services
of Stanhope Consulting (“Stanhope”), initially to conduct an independent
analysis of the performance of the value style both internationally and in the
context of the UK equity market. It is apparent that this style can be
characterised by quite long periods of relative weakness followed by sharp
periods of strong outperformance. The Board concluded that this is not a time
in the cycle of returns to abandon this value style bias. The Board, advised
by Stanhope, then invited investment management proposals from providers
internationally. These were all examined in great detail and after an
exhaustive, multi-stage process, the Board concluded that the investment
proposition from RWC, offering a sustainable value investment style, was in
the current circumstances by far the strongest that they had received.
Investment objective, investment policy, strategy and style
The Trust’s investment objective will remain unchanged; to provide growth in
income and capital to achieve a long-term return greater than the benchmark
FTSE All-Share Index, through investment primarily in UK securities. Likewise,
the investment policy (including investment restrictions) will remain
unchanged.
Temple Bar has for many years had a value investment approach and the Board
has selected RWC for its proven expertise and excellent long-term track record
in this investment discipline, thereby ensuring continuity in the investment
approach for Shareholders.
About the new investment management team
The Trust’s portfolio will be managed by the long-term partnership of Nick
Purves and Ian Lance, each of whom has around 30 years investment experience.
They employ a long-term, value-oriented approach, which takes advantage of
stock market over-reaction to enable them to purchase shares in sound
businesses at a significant discount to their intrinsic value. They have
applied this tried and tested approach in a disciplined manner over many
years, and this has resulted in creating significant added value for their
clients.
Benefits of the proposals
The Board believes that the change in investment manager will provide the
following benefits to Shareholders:
Added value of two highly experienced fund managers, backed by a proven long
term track record: 20 year fund total return of 234 per cent. vs. 122 per
cent. for FTSE All-Share.
Exposure to UK equities which are trading at their greatest discount to World
equities for fifty years and in particular to UK value stocks which are
trading at their greatest ever discount to growth stocks.
Future capital appreciation alongside attractive dividends and steady income
growth, to be delivered by investing in a focused list of sustainable
companies which can grow profits over time, whose finances are strong and
which the new managers believe are significantly under-valued.
Maintained management fee of 0.35 per cent of total assets and competitive
fixed costs mean that the total expense ratio will continue to be one of the
lowest in the sector.
Material contribution, by fee waiver to 30 June 2021, by the incoming
investment manager to offset transition costs.
About RWC
RWC is a specialist, independent investment manager established in 2000 with
circa £13.4 billion (as at 31 August 2020) under management.
The organisation focuses on building strong teams of people who have clear and
disciplined investment processes. RWC further believes in ensuring that its
investment teams have the resources and autonomy that enable them to focus on
the long-term returns for its clients. This is underpinned by the majority of
the organisation being owned by the people who work at RWC.
The RWC UK income and value team have been at RWC for over a decade having
over 60 years experience between the two lead managers. They are market
leading UK value investors and are responsible for over £3 billion of client
assets.
The Heads of Terms
Under the Heads of Terms the formal appointment of RWC as the Trust’s
investment manager is conditional upon the satisfaction of a number of
conditions, including: (i) the negotiation and entering into a form of
Alternative Investment Fund Manager’s Agreement (the “AIFM Agreement”)
with an independent Alternative Investment Fund Manager (“AIFM”) under the
terms of which (and pursuant to a portfolio management agreement to which
Temple Bar will also be a party (the “Portfolio Management Agreement”) the
AIFM will delegate portfolio management to RWC; (ii) all necessary regulatory
approvals; and (iii) the Trust concluding arrangements with Ninety One Fund
Managers UK Limited (“Ninety One”) for the termination of the existing
investment management arrangements.
Under the terms of the proposed Portfolio Management Agreement RWC will be
paid a management fee equal to 0.35 per cent. per annum of the Trust’s total
assets. Furthermore, as Ninety One is contractually entitled to receive the
management fee for the remainder of the notice period which it is currently
serving, RWC has agreed that it will forgo the management fee to which it
would otherwise be entitled to 30 June 2021 in order largely to defray the
fixed costs and expenses incurred by Temple Bar in connection with the
appointment of RWC. It is proposed that RWC’s appointment will be for an
initial term of 18 months and may thereafter be terminated by either party
giving 6 months’ notice. It is proposed that the Portfolio Management
Agreement is capable of summary termination in certain usual circumstances
including in the event that both Nick Purves and Ian Lance cease to be
responsible for the management of the Trust’s assets or otherwise become
incapacitated.
Dividend outlook
Having reviewed the Trust’s income position with RWC, the Board intends to
recommend a total dividend for the current year of 38.5 pence per ordinary
share, with both the third interim dividend and the final dividend recommended
to be 8.25p. This new total dividend, unfortunately, represents a cut of 25
per cent. from the previous level. From this base level, however, the Board
believes that it will be possible to renew dividend growth going forward.
Current projections suggest that there will have to be transfers from reserves
to enable the 2020 and the 2021 dividend to be paid, but thereafter the
dividend should be covered by earnings.
Comments from the Chairman and named fund managers
Arthur Copple, Chairman of Temple Bar, commented “Up until recently Temple
Bar had a long history of providing attractive investment returns. In
selecting RWC as investment manager we aim to reinvigorate the Trust and
return it to its former position as one of the market leaders in the sector.
It is obviously very disappointing for us to announce a fall in the dividend
for the first time in many years, but this has been an especially challenging
year for many dividend paying companies and unfortunately the portfolio of the
Trust has been particularly adversely impacted. We understand how important
dividends are to our Shareholders and this played a large part in our
rationale in selecting RWC as manager. We strongly believe they are well
placed to put Temple Bar back on the path to provide not only a high but
growing dividend over the medium to longer term”.
Nick Purves and Ian Lance, proposed fund managers of Temple Bar, commented
“In our long investing career, we have seen three occasions when dislocation
in the stock market has created the most exceptional opportunities for long
term, value investors; post the technology bubble of the late nineties, coming
out of the global financial crisis and today. We very much look forward to
harnessing these opportunities for the benefit of the Temple Bar
Shareholders.”
Dan Mannix, CEO of RWC Partners, commented “It’s a real privilege to have
been appointed as only the third portfolio manager of Temple Bar in its 94
year history. Our appointment comes at an interesting moment as investors
consider whether there will be a change of leadership in equity markets, and
where to allocate capital in a world of low interest rates and high
valuations. Nick and Ian’s track record of over twenty years is steeped in
sustainable value; they are arguably one of the most experienced portfolio
management partnerships in the industry and have always run money consistently
to this ethos, regardless of wider market sentiment. We are honoured to now
have the opportunity to start building a track record with Temple Bar, at what
feels like a very exciting juncture in the world of true value investing.”
Appendix
Further details of the key individuals
Nick Purves and Ian Lance joined RWC in August 2010 and together manage over
£3 billion of client assets, including the TM RWC Equity Income Fund. After
qualifying as a Chartered Accountant, Nick worked at Schroders for over 16
years. Ian has been working with Nick since 2007, initially at Schroders and
then at RWC. Prior to joining Schroders, Ian was Head of European Equities and
Director of Research at Citigroup and Head of Global Research at Gartmore.
Appointment of AIFM
The Board is also announcing that Link Fund Solutions Limited is expected to
be appointed as the AIFM. They believe that this enhances the trust’s
long-term governance structure and independence.”
Arthur Copple
Chairman
24 September 2020
TEN LARGEST HOLDINGS AS AT 30 JUNE 2020
Company Industry Place of Primary Listing Valuation % of Portfolio
£’000
Travis Perkins Industrials UK 34,569 5.0%
UK Treasury 2% 2020 Fixed Interest UK 32,556 4.7%
UK Treasury 3.75% 2020 Fixed Interest UK 31,581 4.5%
Bayer Healthcare Germany 31,576 4.4%
Grafton Group Industrials UK 28,836 4.1%
IWG Industrials UK 26,238 3.8%
easyJet Consumer Services UK 23,321 3.3%
Rolls-Royce Holdings Industrials UK 23,096 3.3%
American Express Financials USA 22,708 3.3%
Capita Industrials UK 22,312 3.2%
Top Ten Investments 276,793 39.6%
STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 JUNE 2020
(unaudited)
30 June 2020 30 June 2019 31 December 2019 (audited)
(unaudited) (unaudited)
Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000
Investment income 8,142 - 8,142 22,387 - 22,387 39,750 - 39,750
Other operating income 5 - 5 12 - 12 51 - 51
Total Income 8,147 - 8,147 22,399 - 22,399 39,801 - 39,801
(Losses)/profit on investments
(Losses)/profit on investments held at fair value through profit or loss - (381,924) (381,924) - 79,446 79,446 - 188,920 188,920
8,147 (381,924) (373,777) 22,399 79,446 101,845 39,801 188,920 228,721
Expenses
Management fees (514) (727) (1,241) (755) (1,089) (1,844) (1,555) (2,244) (3,799)
Other expenses including dealing costs (297) (1,519) (1,816) (285) (260) (545) (585) (533) (1,118)
(Loss)/profit before finance costs and tax 7,336 (384,170) (376,834) 21,359 78,097 99,456 37,661 186,143 223,804
Finance costs (983) (1,488) (2,471) (983) (1,488) (2,471) (1,966) (2,976) (4,942)
(Loss)/profit before tax 6,353 (385,658) (379,305) 20,376 76,609 96,985 35,695 183,167 218,862
Tax (165) - (165) (96) - (96) (172) - (172)
(Loss)/profit for the period 6,188 (385,658) (379,470) 20,280 76,609 96,889 35,523 183,167 218,690
Earnings per share (basic and diluted) 9.25p (576.70p) (567.45p) 30.33p 114.56p 144.89p 53.12p 273.90p 327.02p
A first interim dividend of 11.0 pence per share in respect of the quarter
ended 31 March 2020 was paid on 30 June 2020.
A second interim dividend of 11.0 pence per share in respect of the quarter
ended 30 June 2020 was declared on 3 September 2020 and is payable on 30
September 2020.
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 Association
of Investment Companies.
All items in the above statement derive from continuing operations.
STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2020
(unaudited)
Ordinary share Share premium Capital Retained Total
capital account reserves earnings equity
£’000 £’000 £’000 £’000 £’000
BALANCE AT 1 JANUARY 2020 16,719 96,040 835,243 37,121 985,123
Unclaimed dividends - - - - -
Loss for the period - - (385,658) 6,188 (379,470)
Dividends paid to equity shareholders - - - (19,654) (19,654)
BALANCE AT 30 JUNE 2020 16,719 96,040 449,585 23,655 585,999
STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2019
(unaudited)
Ordinary share Share premium Capital Retained Total
capital account reserves earnings equity
£’000 £’000 £’000 £’000 £’000
BALANCE AT 1 JANUARY 2019 16,719 96,040 652,076 37,347 802,182
Profit for the period - - 76,609 20,280 96,889
Unclaimed dividends - - - 9 9
Dividends paid to equity shareholders - - - (21,045) (21,045)
BALANCE AT 30 JUNE 2019 16,719 96,040 728,685 36,591 878,035
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020 (unaudited)
30 June 2020 (unaudited) £’000 30 June 2019 (unaudited) £’000 31 December 2019 (audited) £’000
NON-CURRENT ASSETS
Investments held at fair value through profit or loss 698,050 966,271 1,085,844
CURRENT ASSETS
Cash and cash equivalents 1,412 21,204 11,149
Receivables 2,643 5,584 3,245
TOTAL ASSETS 702,105 993,059 1,100,238
CURRENT LIABILITIES
Payables (2,017) (1,014) (1,066)
TOTAL ASSETS LESS CURRENT LIABILITIES 700,088 992,045 1,099,172
NON-CURRENT LIABILITIES
Interest bearing borrowings (114,089) (114,010) (114,049)
NET ASSETS 585,999 878,035 985,123
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS
Ordinary share capital 16,719 16,719 16,719
Share premium 96,040 96,040 96,040
Capital reserves 449,585 728,685 835,243
Retained earnings 23,655 36,591 37,121
TOTAL EQUITY 585,999 878,035 985,123
NET ASSET VALUE PER SHARE 876.29p 1,312.99p 1,473.13p
STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 JUNE 2020 (unaudited)
30 June 2020 30 June 2019 31 December 2019
(unaudited) (unaudited) (audited)
£000 £000 £000
Cash flows from operating activities
(Loss)/profit before tax (379,305) 96,985 218,862
Adjustments for:
Losses/(gains) on investments 381,924 (79,446) (188,920)
Finance costs 2,471 2,471 4,942
Purchases of investments (1) (467,223) (56,898) (152,237)
Sales of investments (1) 472,631 75,046 160,040
Dividend income (8,074) (22,224) (39,465)
Interest income (64) (175) (313)
Dividends received 10,259 19,591 39,578
Interest (receivable)/received (377) 359 336
Increase/(decrease) in payables 271 54 106
Overseas withholding tax suffered (165) (96) (172)
391,653 (61,318) (176,105)
Net cash flows from operating activities 12,348 35,667 42,757
Cash flows from financing activities
Unclaimed dividends - 9 8
Equity dividends paid (19,654) (2,432) (35,757)
Interest paid on borrowings (2,431) (21,045) (4,864)
Net cash used in financing activities (22,085) (23,468) (40,613)
Net (decrease)/increase in cash and cash equivalents (9,737) 12,199 2,144
Cash and cash equivalents at the start of the period 11,149 9,005 9,005
Cash and cash equivalents at the end of the period 1,412 21,204 11,149
1. Purchases and sales of investments are considered to be operating
activities of the Company, given its purpose, rather than investing
activities.
RESPONSIBILITY STATEMENT
The Directors confirm to the best of their knowledge that:
* the condensed set of financial statements contained within the half-year
report has been prepared in accordance with the Accounting Standards Board’s
Statement ‘Half-Yearly Financial Reports’;
* the half-yearly financial report includes a fair review of the information
required by Disclosure and Transparency Rule 4.2.7R of important events that
have occurred during the first six months of the financial year and their
impact on the condensed set of financial statements and a description of the
principal risks and uncertainties for the remaining six months of the
financial year; and
* in accordance with Disclosure and Transparency Rule 4.2.8R there have been
no related parties transactions during the six months to 30 June 2020 and
therefore nothing to report on any material effect by such a transaction on
the financial position or performance of the Company during that period.
The half-yearly financial report was approved by the Board on 24 September
2020 and the above responsibility statement was signed on its behalf by:
Arthur Copple
Chairman
Notes
1. Comparative figures
The financial information contained in this half-year
report does not constitute statutory accounts as defined in section 434-436 of
the Companies Act 2006. The financial information for the six months ended
30 June 2020 and 30 June 2019 has not been audited.
The information for the year ended 31 December 2019
does not constitute statutory accounts, but has been extracted from the latest
published audited accounts, which have been filed with the Registrar of
Companies. The report of the auditors on those accounts contained no
qualification or statement under section 498(2) or (3) of the Companies Act
2006.
2. Publication
This half-year report is being sent to shareholders and
copies will be made available to the public at the Company’s registered
office and on its website.
For further information please contact:
Virginia Duncan
Ninety One UK Limited 020 3938 2000
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