Temple Bar looks to brighter future – Temple Bar Investment Trust has published results for the year ended 31 December 2020. The first nine months were a difficult period for the trust – seeing it lose its manager and underperform significantly. Alastair Mundy’s retirement due to ill health prompted a review of management arrangements. RWC Partners became the manager on 30 October 2020 – we wrote a note about it at the time. The good news on vaccines then prompted a rally in Temple Bar’s NAV.
From 1 January 2020 to 29 October 2020, under Ninety One Fund Managers UK, the total return on net assets was -45.6%. From 30 October 2020 to 31 December 2020, under RWC, the total return was +32.2%. This resulted in the total return for the year of -28.0%.
Dividend cut
Up until 2020, the company had increased its dividend every year for 36 years. There had been no cut in the annual payment for over 50 years. Unfortunately, as previously announced, this record was impossible to maintain given a collapse in revenue from £39.7m to £12.7m.
During the year, Temple Bar paid four interim dividends totalling 38.5p. The board does not intend to recommend the payment of a final dividend. The total payment for the 2020 financial year represents a fall of 25.1% from the dividend paid in 2019. Even this reduced level of dividend has required a significant transfer from revenue reserves. Going forward, however, the board hopes to resume dividend growth from this lower level.
Portfolio
The new manager notes that all of the underperformance came in the first half of the year. A number of holdings were particularly badly affected. This include Capita, BP, Royal Dutch Shell, Barclays, Lloyds, SIG and Travis Perkins. The company was, however, able to recoup a portion of the lost ground post the vaccine announcements in November 2020, with holdings such as ITV, Royal Mail Group, NatWest Group, BP, Easyjet and RSA rebounding very strongly into the year end, on hopes of an economic recovery in 2021.
Outlook
The new managers, Ian Lance and Nick Purves, conclude their review of the year with this message. “The stock markets of today show parallels with both the technology bubble of 1999/2000 and the global financial crisis of 2008. On both occasions, there was extreme dislocation in the markets, with some areas looking very overpriced, whilst other areas offered significant value. On each of these occasions, we were able to take advantage of the dislocation to purchase sound businesses at bargain prices, thereby setting our clients up for several years of strong excess returns. We are at the same juncture today and whilst the future is inherently uncertain and the path will be uneven, we believe that, after a difficult 2020, the company is well positioned to deliver outsized rewards for its shareholders in the years to come.”
[RWC has a clearly differentiated approach to running money from the majority of managers of UK equity trusts. It has got off to a great start with Temple Bar, providing some welcome respite for shareholders.]
TMPL : Temple Bar looks to brighter future