Monday, 20 February 2017

Steve Hewlett RIP

It was only recently that I listened to Steve Hewlett, the BBCs presenter of the Media Show on R4 talking very candidly to Eddie Mair on PM about his diagnosis with cancer of the oesophagus. It was that interview which prompted my post to flag up the Movember charity.

I was really sad to hear the news earlier today that Steve has passed away at the age of just 58 and I will very much miss his unique style and sense of humour. He was very much a trusted voice and embodied everything positive in public service journalism.

For anyone interested, here's a link to the interview (BBC podcast).

Friday, 17 February 2017

Unilever Back on Board (Just in Time!)

Unilever is one of the world's leading suppliers of fast-moving consumer goods. Some well-known brands include Marmite, Flora Margarine, PG tips, Pot Noodle, Ben & Jerrys Ice Cream, Colman’s Mustard, Magnum Ice Cream, Hellmann’s Mayonnaise and in personal care - Dove soaps,  Lynx Deodorant, Sure Deodorant, Vaseline, Brylcreem

The company states that more than 2 billion consumers worldwide use a Unilever product every day.

As part of my revised strategy to wind down my individual shares portfolio, Unilever was sold last April at the price of £33 and the proceeds recycled into Vanguard Lifestrategy which has done really well partly due to the boost from the fall in sterling post the referendum.


Strangely, this fall in the value of the pound has resulted in me revisiting Unilever because their dividends are in Euros and after conversion, investors in the UK get around 15% more now compared to previous years. This, combined with a dip in the share price following the full year results persuaded me to bring the shares back into the fold as I have spare cash earning nothing in my SIPP account.

The shares were repurchased just two weeks back to qualify for the final dividend. The price was £31.60, slightly below my sale price last year.

Today the shares were boosted to £38 by the announcement of a bid from Kraft Heinz for $143bn. The offer has been rejected by Unilever but as this is the opening gambit, I am sure there will be an increased offer down the line.

Luckily I am sitting on an instant gain of 20% which should help to offset some of my capital losses on other holdings - Next, Amec Foster etc. this past year or so.

I will wait to see how the bid unfolds and in the meantime collect the quarterly dividends which have been boosted by the fall in sterling. Kraft now have 30 days to come up with an increased bid.


A 4th quarterly dividend of 32.01 euros - 27.68p will be paid in March. This will make a total of 128 euros for the full year. I expect an uplift for the coming year to around 135 euros which would translate to ~115p compared to 109p in 2016.

Unilever is one of those companies with strong brands and a wide economic moat which helps it to maintain an edge over competitors and provide good long-term returns for patient investors. It is a top holding for Nick Train’s Finsbury Growth & Income Trust comprising around 9.0% of the portfolio.

Although dividend income will be affected by currency fluctuations, these things have a way of balancing out over the longer term. In any event future divis may well be in US dollars soon!

Feel free to leave a comment below with your thoughts on the takeover bid.

Update Sunday 5.30 pm
Looks like the merger is off as Kraft have reportedly decided not to pursue a deal.

Temple Bar - Final Results

I hold this investment trust in my ISA. It is part of my ‘basket’ of income-focussed investment trusts designed to provide an above inflation rising natural income and hopefully some increases in capital over the longer term.

TMPL has been managed by Alastair Mundy since 2000. He takes a contrarian view on the timing of buy and sell decisions - buying the shares of companies when sentiment towards them is thought to be near its worst and selling them as fundamental profit improvement and/or re-evaluation of their long-term prospects takes place.

This contrarian approach centres on long-term investment in cheap, out-of-favour companies in the belief that over time, these will be affected by reversion to mean.

This approach has proved very successful over the longer term with the trust outperforming the FTSE All Share index over the past 5 & 10 years. In more recent times, the value approach has underperformed the benchmark.


They have today published full year results for 2016 (link via Investegate). The past 12 months has  been much better than the previous year with total return of net assets increasing by 20.4% compared to a gain of  16.8% for the FTSE All Share index. The contrarian approach often requires long periods before the benefits for the trust are realised.

TMPL v FTSE All Share (click to enlarge)

Despite a post-Brexit wobble, Temple Bar emerged from 2016 with the best one-year NAV total returns of any of the mainstream UK income trusts.

Temple Bar's attractions include ongoing charges of just 0.62%, a natural dividend yield of 3.2% and the third-best 10-year total returns in the UK equity income sector (behind my other holdings Edinburgh and Finsbury) despite a poor run in 2014 and 2015.

I am hoping maybe the tide is at last turning in favour of value investors.


The trust is committed to paying a rising dividend year on year and has met this commitment for the last 33 years.

The board are recommending a final dividend of 16.18p making 40.45p for the full year - an increase of 2% on 2015. The dividend is covered by income receipts of 43.74p.

In my report last year, the share price has lost around 16% over the previous 12 months, so things seem to be back on track.  The share price appreciation over recent months means the yield has reduced from 4.0% last year to currently ~3.2%.

I took the opportunity to reduce my holding in TMPL a couple of years back but I am happy to continue with the remaining shares for the longer term.

Feel free to leave a comment below if you have any thoughts on this investment trust.

Tuesday, 14 February 2017

Work Out Your Retirement Figure

I drifted into retirement at the age of 55 yrs. The partnership I worked in on the edge of Dartmoor (hence covers for my books) wound down and we all went our separate ways.

After a short break, I looked at my savings, investments and pension pot and realised I could probably make a couple of changes to my portfolio and get along just fine on the income I could generate with the option to convert my pension at a later date to income drawdown.

Basically, the amount I needed to retire on was not so much about a vague idea of amassing a fortune - say half a million pounds - but more a case of being able to generate sufficient income from my assets to replace earned income.

If I possessed a little more foresight in my earlier years, I might have put in place a planned strategy for early retirement. Here are a few thoughts on how younger workers in their 20s, 30s and 40s could start to work out a rough figure to aim for their retirement.

The Process

There are two basic questions to be addressed - what level of income do I need when retired and secondly, what level of savings will be needed to provide that income?

So, although this is not a precise science and each individuals circumstances and preferences will vary, here is the outline of a few basic steps towards working out a figure.

1. Set a target date for your ideal retirement - it may need to change as the calculations unfold.

2. If you know what income you need fine, otherwise take your current annual net income and deduct 20% as this is the average work-related expense you will not have to spend when retired. So, if your take home pay is £30,000 this target figure would be £24,000.

3. If you have a works and/or personal pension or SIPP, get a projection of the annual amount(s) to be paid and deduct from the above figure.

4. Multiply the remaining sum by 25 to provide you with a ballpark capital sum needed to generate the remaining income.
Therefore if the replacement income figure after deducting works pensions was £12,000, the lump sum needed to generate this annual income would be £300,000 (£12K x 25). This is based on a reasonably sustainable return of 4% p.a. from the investments.

If you intend to bridge the gap between early retirement and state pension, for example 10 yrs from age 57 to 67, it may be an option to use a lower multiplier figure of say x 18 (rather than x 25) which would obviously reduce the lump sum figure - in the above example from £300K to £216K. The income taken from the lower sum would be nearer 6% p.a. which would be less sustainable long term but certainly a feasible option over 10 yrs.

5. Once you have settled on a final figure and you know the number of years from now to your retirement date, work out what level of savings from your current income would be needed to reach this figure. 

There are many online calculators available - I use Candid Money . To generate £300,000 in the above example would take just over 20 yrs saving at 20% of salary in an investment ISA assuming 6% average return.

If you are saving via a sipp or the new lifetime ISA remember to factor in the HMRC tax credits to your contributions.

6. If your retirement date is close to your state pension age of 66 or 67, remember to factor this additional income into the calculations, for example the new flat rate pensions are ~£8,000 p.a. . In the above example, the £12,000 therefore reduces to just £4,000 and the lump sum required comes down from £300K to £100K.

The Decision

Having worked your way through these steps and maybe played around with a number of different calculations, it is time to make a decision.

Is it worth cutting back on all but essentials, living frugally and increasing the savings rate to 40% or 50% to bring forward the retirement date by maybe 10 yrs like my fellow blogger RIT has recently achieved?

Maybe you could manage on less than current salary minus 20%.

Once you have all the information, settled on your ideal retirement date and worked through the various calculations, you can make an informed choice. Without doing the above, you are not really in control of two important elements - how early you can retire and how much you will receive.

I suspect, like me, most people will be more focussed on the present and possibly just hope things will work out for the best down the line.

Feel free to comment below if you have some thoughts on saving towards retirement