Temple Bar appoints RWC Asset Management and sticks with value style

Following on from the announcement by Temple Bar (TMPL), on 2 September, that it had delayed the release of its interim results due to an ongoing review of its investment management arrangements, the fund has entered into a heads of terms agreement with RWC Asset Management (RWC). The portfolio will be managed by the long-term partnership of Nick Purves and Ian Lance, each of whom has around 30 years experience.

It is expected that the appointment of RWC as investment manager will take effect around the end of October. We note that over April, it was announced that Alastair Mundy, the previous individual manager of Temple Bar (TMPL), had been given an extended leave of absence by Ninety One (TMPL’s manager), for health reasons. Click here for our full story from April.

Readers interested in finding out more about TMPL, and a wider look at ‘value versus’ growth can read our latest note on the trust, published this morning and accessible by clicking here.

Board decides not to abandon the value style

TMPL note that it is apparent that the value style can be characterised by quite long periods of relative weakness followed by sharp periods of strong outperformance. Its board concluded that this is not a time in the cycle of returns to abandon this value style bias. The Board, advised by Stanhope (who independently reviewed the performance of value in the UK and internationally), then invited investment management proposals from providers internationally.

TMPL’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.

The fine print

In TMPL’s view, the change in management will provide the following benefits:

  • “Added value of two highly experienced fund managers, backed by a proven long term track record: 20-year fund total return of 234%. vs. 122%. 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 undervalued.
  • Maintained management fee of 0.35% 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.”

25% cut in dividend proposed

Following a review of TMPL’s income position with RWC, the board intends to recommend a total dividend for the current year of 38.5p, with both the third interim dividend and the final dividend recommended to be 8.25p. This new total dividend represents a 25% cut. TMPL note that 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.

TMPL’s chairman, Arthur Copple, noted: “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.”

TMPL: Temple Bar appoints RWC Asset Management and sticks with value style

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