TIDMLWDB
RNS Number : 4834H
Law Debenture Corp PLC
28 July 2023
The Law Debenture Corporation p.l.c. today published its results
for the half-year ended 30 June 2023
Solid overall performance in difficult market conditions
Group Highlights:
-- Net asset value (NAV) total return with debt and Independent
Professional Services (IPS) business at fair value (FV) for H1 2023
delivered a modest outperformance of 4.0% compared to our
benchmark, the FTSE All-Share Index, at 2.6%. With debt at par the
return was 2.2%.
-- IPS profit before tax up by 8.5% and valuation up 4.4% to
GBP210m (compared to 30 December 2022).
-- Since the publication of The Law Debenture Corporation
p.l.c.'s (Law Debenture) Annual Report in February 2023, Law
Debenture has issued 2 million new ordinary shares at a premium to
NAV (to existing and new investors) with net proceeds of GBP16.6m
to support ongoing investment.
-- Continued low ongoing charges of 0.48%, compared to the UK
Equity Income industry average of 1.07%.
Winner of Investment Week's UK Equity Income Investment Trust of
the Year for 2022 (second year running); winner in UK Equity -
Active category at the AJ Bell Fund and Investment Awards 2022 and
winner for Best Investment Trust for Income at the 2022 Shares
Awards.
Dividend Highlights:
-- Declared a first interim dividend of 7.625 pence per ordinary
share, paid in July 2023, representing an increase of 5.17% over
the prior year's first interim dividend.
-- It is the Board's intention for each of the first three
interim dividends for 2023 to be equivalent to a quarter of Law
Debenture's total 2022 dividend of 30.5 pence per ordinary share.
Performance and growth of the IPS business continues to support the
Board's intention to maintain or increase the total dividend in
2023.
-- Dividend yield of 3.8% based on our closing share price of
812 pence on 26 July 2023 (with a relatively strong reserves
position).
Overall Highlights:
-- Modest outperformance (with debt and IPS at FV) in first half of 2023.
-- Long-term outperformance of the benchmark over three, five and ten years.
-- Strong long-term record with share price total return over 10
years of 129.3% (FTSE All-Share: 78%).
-- Total dividend income from the portfolio of GBP19.3m (June 2022: GBP18.4m).
YTD 1 year 3 years 5 years 10 years
% % % % %
NAV total return (with debt at par)[1] (*) 2.2 6.0 43.0 28.4 121.9
NAV total return (with debt at fair value)(1*) 4.0 11.1 60.9 38.9 136.4
FTSE Actuaries All-Share Index
Total Return[2] 2.6 7.9 33.2 16.5 78.0
Share price total return(2) (*) 1.5 5.0 67.4 59.2 129.3
Change in Retail Price Index[3] 4.1 10.4 28.2 33.3 50.3
IPS Highlights:
-- Wholly-owned independent provider of professional services.
Accounts for 21% of H1 2023 NAV but has funded approximately 34% of
dividends in the last 10 years.[4]
-- IPS enters its sixth consecutive year of consistent growth
with net revenues of GBP24.1m (June 2022: GBP21.7m) up 11.2% with
profit before tax up by 8.5% (compared to 30 June 2022).
Longer Term Record:
-- 134 years of history with a long-term track record of value creation for shareholders.
-- GBP10,000 invested in Law Debenture ten years ago would be
worth GBP22,930 as at 30 June 2023[5].
-- Over 44 years of increasing or maintaining dividends to shareholders.
Robert Hingley, Chairman, said:
"Law Debenture aims to provide a steadily increasing income for
our shareholders whilst achieving long-term capital growth in real
terms. The market backdrop has been difficult, with elevated levels
of inflation proving more persistent than many economic
commentators may have hoped and, within the investment trust
sector, a marked widening of discounts. Against this background, we
are pleased that IPS has shown continued growth and that, overall,
we have modestly outperformed our benchmark. We are confident that
the combination of a high-quality equity portfolio and growth in
our IPS business will continue to deliver attractive long-term
returns for our shareholders.
Denis Jackson, Chief Executive Officer, commented:
"Against a backdrop of continued macroeconomic uncertainty with
high global inflation and interest rates, Law Debenture has
delivered a solid performance in the first half of 2023. Our
portfolio managers select investments based on an assessment of
their long-term value and believe an undervalued UK stock market
continues to offer investors the opportunity to own resilient,
cash-generative and well-managed businesses at attractive valuation
multiples. We believe the strong, predictable income from the IPS
business offers our portfolio managers greater flexibility in their
investment selection, helping set Law Debenture apart from other UK
equity income trusts. Though the near-term economic outlook is not
without its challenges, we feel our ongoing investment in IPS
leaves it well positioned for medium-term growth in-line with our
mid to high single percentage target."
Past performance is not a guide to future performance. The value
of an investment and any income from it is not guaranteed and may
go down as well as up and investors may not get back the amount
invested.
THE LAW DEBENTURE CORPORATION P.L.C. AND ITS SUBSIDIARIES
HALF YEARLY REPORT FOR THE SIX MONTHS TO 30 JUNE 2023
(UNAUDITED)
Financial summary
Six months Six months Twelve months
30 June 30 June 2022 31 December
2023 2022
GBP000 GBP000 GBP000
------------------------------------ ----------- -------------- --------------
Net Asset Value - with debt
and IPS at fair value* 1,009,140 917,365 972,566
Total Net Assets per the statement
of financial position 812,578 787,932 799,067
------------------------------------ ----------- -------------- --------------
Pence Pence Pence
NAV per share at fair value(1,2,*) 775.92 726.74 761.69
Revenue return per share:
Investment portfolio 13.29 13.66 24.06
Independent professional services 4.80(3) 4.55(3) 10.38
Group revenue return per share 18.09 18.21 34.44
Capital (loss)/return per share (5.26) (100.61) (103.17)
Dividends per share(4) 7.625 7.25 30.50
Share price 767 760 771
------------------------------------ ----------- -------------- --------------
% % %
Ongoing charges(5*) 0.48 0.48 0.49
Net gearing(*) 13 11 12
Premium/(discount)(*) (1.15) 4.58 1.22
------------------------------------ ----------- -------------- --------------
(1) Please see below for calculation of NAV.
(2) NAV is calculated in accordance with the AIC methodology,
based on performance data held by Law Debenture including the fair
value of the IPS business and long-term borrowings.
(3) Revenue per share is calculated using the weighted average
shares in issue as at 30 June 2023.
(4) The second interim dividend is not due to be announced until
September 2023 and has not been factored in the calculation
presented. The Board have indicated their intention to pay three
interim dividends of 7.625p in respect of 2023, each representing a
quarter of the total 2022 dividend declared of 30.5p. The final
dividend will be declared in February 2024.
(5) Ongoing charges are calculated based on AIC guidance, using
the administrative costs of the investment trust and include the
Janus Henderson investment management fee, charged at an annual
rate of 0.30% of the NAV of the investment portfolio. There is no
performance related element to the fee.
* Items marked "*" are alternative performance measures ('APM')
and calculated using the published daily NAV. For a description of
these measures, see page 152 of the annual report and financial
statements for the year ended 31 December 2022.
Half yearly management report
Introduction
I am pleased to report that The Law Debenture Corporation p.l.c.
('Law Debenture') has delivered another solid performance during a
time of significant global economic uncertainty. Elevated interest
rates and persistent inflation have resulted in ongoing market
volatility. Despite these headwinds, the combination of our
well-diversified portfolio and another good performance from our
Independent Professional Services ('IPS') business has enabled Law
Debenture to marginally outperform our benchmark, the FTSE
Actuaries All-Share Index. This delivered a 2.6% total return,
whereas Law Debenture's Net Asset Value ('NAV'), with debt and IPS
at fair value, delivered a return of 4.0%. With debt at par, our
NAV delivered a return of 2.2%.
Our Investment Managers continue to build on their successful
long-term record of outperformance against our benchmark, the FTSE
Actuaries All Share Index, and drivers of their performance are
covered in detail in their report. Our IPS business is now well
into its sixth year of consistent mid-to-high single-digit growth,
with net revenue up 11.2% and profit before tax up 8.5%.
Our IPS business accounts for 21% of Law Debenture's NAV but has
funded approximately 34% of dividends over the past decade. As a
result, our Investment Managers have increased flexibility in
selecting what they feel are strong business models and attractive
valuation opportunities, which we believe will continue to position
the equity portfolio for future longer-term growth.
Dividend
We are pleased to continue building on our 44-year record of
maintaining or increasing dividends. We recently declared a first
interim dividend of 7.625 pence per ordinary share, representing an
increase of 5.2% over the prior year's first interim dividend. This
highlights the benefits of IPS's income streams, as well as Law
Debenture's substantial revenue reserves. This dividend was paid on
6 July 2023 to shareholders on the register at close of business on
2 June 2023. Based on the closing share price on 26 July 2023 of
812 pence, the dividend yield per Law Debenture share is 3.8%(1) .
Over the last 10 years, we have increased the dividend by 114%(2)
in aggregate, which compares favourably with our sector peers.
Since the publication of our Annual Report at the end of
February 2023, we have issued 2 million new ordinary shares to
existing and new investors, raising a total of GBP16.6 million. It
is the Board's current intention to recommend that the total
dividend in relation to 2023 is to maintain or increase the total
2022 dividend of 30.5 pence per ordinary share. Our shareholders
will be asked to vote on the final dividend at our AGM in 2024.
(1) Based on the total dividend paid in relation to 2022 of
30.5p per share.
(2) Based on the period 2012 to 2022.
Independent Professional Services
DIVISION Net revenue(1) Net revenue(1) Growth
30 June 2023 30 June 2022 2021/2022
GBP000 GBP000 %
-------------------- --------------- --------------- ----------
Pensions 8,597 6,973 23.3
Corporate Trust 5,818 5,185 12.2
Corporate Services 9,693 9,515 1.9
-------------------- --------------- --------------- ----------
Total 24,108 21,673 11.2
-------------------- --------------- --------------- ----------
(1) Revenue shown is net of cost of sales.
Corporate Trust
Despite a challenging economic backdrop, we are pleased to
report net revenue growth of 12.2% in the first half of 2023.
Primary issuance in debt capital markets ebbs and flows and
market conditions can change rapidly. Our long-standing
relationships with many of our clients and referral partners make
us well placed to participate when a more buoyant issuance
environment returns.
The strength of our Corporate Trust business lies in its
diversified revenue streams, some elements of countercyclicality
and, in the current environment at least, a healthy proportion of
fee income with linkage to inflation.
In 2019, we made the decision to increase the investment in our
escrow product. This product allows two (or more) parties the
ability to transfer an asset, typically cash, to us as a trusted
independent third-party, pending the satisfaction of certain
conditions that need to be met prior to the entitlement to such
assets being determined. Our increasing success in this market is
based on our ability to move fast and use our expertise to consider
bespoke transactions. Our book of business is growing steadily and
has considerable range including Corporate M&A, Litigation,
Real Estate and Sporting Events. Pensions is also an increasingly
active market for escrow services, which we are well-placed to
serve. For example, we completed a Reservoir Trust in the first
half of 2023 that resolved trapped surplus considerations between
the sponsor and participants in a major UK Pension Scheme.
Post-issue work, when a bond issuer runs into financial
difficulty, can lead to countercyclical incremental revenues for
this business. It is inevitable but unfortunate that, as businesses
adapt to the elevated interest rate environment, we are beginning
to see increasing signs of stress, which is likely to impact our
pool of issuers over time. Office for National Statistics' data
shows that corporate bankruptcies are currently on the rise. (3)
When bonds default, the workflow, risk and revenue profiles of our
role can materially change. A key duty of the bond trustee is to be
the legal creditor of the issuer on behalf of the bondholders. Our
role in such default situations requires material incremental work
that, given a favourable outcome, can lead to significant
additional income for us. That said, defaults often take years to
play out and the results are uncertain.
Many of the debt capital markets transactions that sit on our
books, built up over many decades, have contractual
inflation-linked fee increases for our services. The longer that
inflation remains at elevated levels (40-year highs for UK RPI were
recorded toward the end of last year (4) ) the more these
inflation-linked increases feed through to our book of
business.
We are now in our 134 (th) year of the provision of Corporate
Trust services to our clients. We are pleased to have grown our
business in the first half of 2023 despite challenging primary
market conditions. The diversification of our revenue streams, and
our ability to innovate, underpin our confidence that this business
will continue to produce good returns over the longer-term.
(3) Commentary - Monthly Insolvency Statistics April 2023 -
GOV.UK (www.gov.uk).
(4) Inflation and price indices - Office for National Statistics
(ons.gov.uk).
Pensions
The first half of 2023 has illustrated the importance of
effective pension scheme trusteeship and governance in turbulent
times. We have seen the continuation of activity driven from the
"gilts crisis" in Q3/Q4 2022 with many schemes recognising the need
to review their funding and investment strategies. In particular,
we are seeing an increased interest in journey planning and buy-in
strategies, as well as corporate sponsors working with trustees to
consider the viability of running pension schemes with a surplus on
a long-term basis.
Increasing regulatory obligations require more attention and
manpower than ever from the trustees and in-house teams. The common
denominator is the need for more expertise and relevant experience
from professional trustees and governance executives to help manage
schemes properly and effectively. We believe that the market need
for independent professional pension support continues to grow.
The Pensions business had a busy first half-year supporting
their existing clients as well as winning new business, with net
revenues up 23.3% for H1 at GBP8.6m. This positions us well to
build on our record of growth within this business, having
delivered compound revenue growth in the five-year period 2018 to
2022 of 10.7%.
Notable wins for the Trustee business have been Arvin Meritor,
Lafarge UK Pension Plan, and SLB. Ireland continues to grow its
book of business, having added Irish Life MasterTrust to its
portfolio of clients, among others. The Manchester Pensions team is
also growing and has firmly put Law Debenture on the map for
potential opportunities coming from the local offices of large law
firms and consultancies. In February, we were proud and grateful to
have been awarded "Independent Trustee Firm of the Year" at the
2023 Pensions Age awards. It was an honour to be recognised for the
work we do for our clients, especially following an eventful year
like 2022.
Our outsourced pensions governance business, Pegasus, has
expanded its team and continues to win new business including in
the corporate sole trustee space, in house support, scheme
secretarial services, project management, trustee effectiveness
review work and single code implementation.
We continue to hire and invest in the right people who can
deliver the high-quality service our Pensions team is known for in
the market. We believe that the diversity of expertise, experience
and background of our Pensions team has enabled us to provide a
first-class service to our clients and evolve our offering to meet
their requirements.
Corporate Services
Our Corporate Services business reported net revenue growth of
1.9%.
Corporate Secretarial Services ('CSS')
In our 2022 year-end update, we mentioned the capacity
constraints that we were experiencing. However, healthy demand for
our products and services remains very much in place. Satisfying
that demand with excellent people, efficient operational workflows,
and enhanced technology takes some time to deliver. Our journey to
hire and develop the right people, skills, technology, and
operational infrastructure continued in H1 2023 and will be the
focus for this business for the remainder of the year, under Trish
Houston's leadership.
At the last year end, we had raised our headcount by almost 40%
since the January 2021 acquisition of CSS. We added to our
headcount by a further 12% in this business in H1 2023, despite
fierce competition for candidates. We continue to make progress in
filling the skills and experience gaps that we have identified and
have expanded our staff training initiatives. Just after the year
end, we completed the implementation of a digital matter management
system that significantly enhances control, delivers efficiencies
and builds scale in the Global Entity Management segment of this
business. We are increasingly recording more accurate and useful
management information and are progressively able to make
better-informed decisions regarding effective resource
allocation.
The growing need for these types of outsourced governance
solutions is well established and underpinned by a steady stream of
regulatory initiatives. Put simply, the provision of high-quality
supply needs to catch up with demand. Over time, we are confident
that we will see good returns from this investment.
Service of Process
This remains our business which has the fewest recurring
revenues and is most dependent on global macro-economic factors.
Major economies, such as the UK and US, allow overseas businesses
to sign legal documents subject to their laws, provided that they
have either a registered address or appointed agent for service of
process in the governing law jurisdiction. We act as the agent for
service of process to thousands of clients from all over the world
each year. The greater the amount of global economic activity and
capital markets new issuance, the greater the demand for our
product. Given the difficult conditions in primary capital markets,
downward revisions to global economic growth, and a number of major
economies being at or close to entering recession, Service of
Process revenues were unsurprisingly depressed in the first half of
2023.
Our knowledge of this market reassures us that we will be well
placed as primary markets activity in capital markets improves and
global economic expansion returns. However, we have no special
insight as to when this might happen. In the meantime, we have
continued to improve our technology platform and remain very much
present in the minds of our referral partner networks.
Structured Finance
This niche business provides accounting and administrative
services to special purpose vehicles ('SPVs'). Typical buyers of
our services are asset managers, hedge funds and challenger banks.
They use SPV structures to warehouse and provide long-term funding
for real assets. Examples include credit card receivables,
mortgages, real estate and aircraft leases.
Although a small business for us, we saw record levels of
enquiry, new business wins and revenue in the first half of the
year. This is particularly pleasing given the difficult operating
conditions for many financial markets' participants. The increase
in our Paying Agency work (often driven by corporate disposals) was
encouraging in H1 2023 and we will work hard to continue to build
momentum in this substantial market.
In a busy industry where excellent delivery is a differentiator,
we will continue to focus on providing high-quality bespoke
products to our expanding group of clients.
Safecall
The first half of 2023 was another robust period for this
business as we continue to increase our market share in this
growing market.
Significant investment in account management and business
development resource was made, with new business wins hitting an
all-time high. Reports received on behalf of our clients also
reached record levels and barely a week goes by without a major
news story involving a whistleblower. Increased public awareness of
the product and regulatory impetus further reinforce our confidence
in the long-term growth prospects for our business in this
market.
Examples of the breadth of new business signed in the first half
of 2023 includes Evelyn Partners, TBC Bank, Herbert Smith
Freehills, a number of sporting organisations and several Fire
Services across the UK.
It is also important that we continue to innovate through
investment in our product offering. As a result, our revenue
streams are increasingly diversified. Sales of our training modules
are growing, as are appointments to undertake investigations, where
our unique expertise adds significant value for clients.
From a technology perspective, we delivered a new management
information module for our clients in H1 2023 and will develop more
advancements for clients in the latter half of the year. In
addition, we are investing in a new investigation training module
for our clients together with a new website, to improve user
experience for both prospective and existing clients.
Central overview
We have been steadily investing to ensure that our
infrastructure provides an appropriate, scalable, control
environment which is critical for us to deliver sustainable
long-term growth. In the first part of 2023, we have selectively
added expertise to fill skills gaps identified in HR, Finance and
IT.
Technology advances continue to quicken and, in order to compete
effectively and deliver as our clients demand, we must be nimble.
Accordingly, we have started a programme to refresh our IT
operating model adopted in 2019 that served us well during the many
challenges of Covid.
Environmental, Social and Governance ('ESG')
2022 was a significant year in Law Debenture's ESG development
and this was detailed in the 2022 Annual Report (pages 50-57).
Since then, we have continued our progress in the areas where we
can make a real impact.
We were ranked 1st in the Financial Services category and 2nd
overall amongst the FTSE 250 in the FTSE Women Leaders Review for
the second consecutive year. This Review is the third and successor
phase to the Hampton-Alexander and Davies Reviews. It is an
independent, voluntary and business-led initiative supported by the
UK Government, aimed at increasing the representation of women in
leadership roles.
In March 2023 we were shortlisted in the Trailblazer Exco and
Direct Reports' category for FTSE 250 businesses for the inaugural
Institute of Directors and INSEAD Alumni Balance in Business
Awards. Other shortlisted companies included a number of our
clients and market leading organisations such as Diageo plc, HSBC
Bank plc, Lloyds Banking Group plc, Marks and Spencer plc, Tate
& Lyle plc and Tesco plc.
We continue to give consideration to ESG factors across both the
investment portfolio and the IPS business and will share a more
detailed review in the 2023 Annual Report.
Outlook
We believe that the combination of IPS with the investment
portfolio is a unique and well-diversified model and I am
cautiously optimistic about the Group's progress in the second half
of 2023 and beyond, in spite of the ongoing macroeconomic
uncertainties. I believe that IPS' investment in talent and
technology leaves it well positioned to continue to win new
business, increase market share and deliver medium-term growth in
line with our mid-to-high single percentage target.
Our Investment Managers continue to invest in what they feel are
a differentiated selection of high-quality businesses with
competitive advantage and good long-term growth prospects. We are
confident that their disciplined approach of buying at attractive
entry point valuations will continue to deliver over the
longer-term for our shareholders. The Board supports their view
that the UK stock market continues to offer investors the
opportunity to own resilient, cash-generative and well-managed
business models that are well positioned to produce attractive
longer-term returns.
Denis Jackson
Chief Executive
27 July 2023
Investment managers' report
Overview
The period began positively with the return of some investor
confidence in equity markets. However, this proved short-lived when
the Silicon Valley Bank collapsed. There was concern at the time
that this collapse might lead to contagion globally. Thankfully,
this did not prove to be the case as the banking system does not
carry the same degree of leverage as in the past. The narrative in
the market moved on, but risk aversion in the market remains. The
global inflation level has not fallen as quickly as some had hoped.
This is particularly the case with the UK, resulting in continued
upward movement in its interest rates. The outcome has been that
the gilt market has adjusted downwards, leaving yields at a level
that is even higher than last autumn. This background of rising
rates has undermined investor confidence in equities, particularly
in UK-orientated small companies. AIM-listed companies in
particular, have experienced share price weakness, falling, in some
cases, to what appear to be extraordinarily low valuations.
Year to date, the FTSE Actuaries All-Share Index has seen some
marginal growth of 2.6% in total return. This compares to Law
Debenture's NAV (with debt and IPS at fair value) which saw total
return growth of 4%. This marginal out-performance of the benchmark
is predominantly driven by movements in the fair value of the debt
and growth in the valuation of the IPS business.
Activity
The share price weakness in UK listed businesses is creating
attractive long-term investment opportunities. Therefore, over the
six-month period, we have been a net buyer of GBP31.6 million UK
shares. This has been in a diverse number of companies; for
instance, the holding in Marshalls, the building materials company,
has been added to, as has Marks and Spencer where there are early
signs of trading improving. In the smaller companies' sphere, the
holding in the alternative energy company, Ceres Power, has been
increased, as has the exposure to Hipgnosis, the owner of a
catalogue of recorded music. In the technology space, we increased
the holding in Oxford Nanopore, the gene sequencing business, and
Surface Transforms, the ceramic brake maker. The exposure to
renewable energy was further expanded by purchases of Air Products
and Chemicals and Johnson Matthey. These companies are mainly
servicing very different end-markets, but they have in common the
potential to be substantially bigger businesses in the future,
without the current valuation reflecting this.
When increasing gearing, it is important to remain vigilant to
companies held that are not performing as hoped. During the period,
the holding in Direct Line was reduced after a disappointing
underwriting result. Unilever and Haleon were sold as their
valuations appear relatively high due to investors believing them
to be safe havens. On a recovery in equity market sentiment, the
risk appetite of investors might increase, which should benefit the
Portfolio.
Contributors
Amongst the five biggest positive contributors are two aerospace
stocks, namely Rolls Royce and Senior. The aviation industry is
recovering from the severe setback of Covid effects on air travel.
The number of miles flown globally has recovered and the aerospace
industry is an area of excellence in the UK. Another recovery stock
which has seen share price appreciation is Marks and Spencer,
thanks to an improved operating performance as a result of bold
management action, particularly in relation to its store footprint
and work to reposition their offering in clothing. One of the
largest contributors in the period was Flutter Entertainment, which
operates Betfair and Paddy Power in the UK. Flutter Entertainment
has also seen very strong growth in gaming in the US with the
opening up of the gambling market in some States, which contributed
to the rise in its share price.
Detractors
The largest detractor in the period was Direct Line. The
insurance company has had very disappointing underwriting results.
They failed to pick up some of the underlying trends in claims
experience. We reduced the holding and await management action to
address the problems.
Top five absolute contributors
The following five stocks produced the largest absolute
contribution to performance in the first half of 2023:
Share price
Stock movement (%) Contribution (GBPm)
----------------------- -------------- --------------------
Flutter Entertainment 40.0 7.0
Rolls Royce 77.1 6.8
Marks & Spencer 60.5 5.2
HSBC 20.6 4.6
Senior 39.9 4.3
Source: Performance data held by Law Debenture based on market
prices.
Top five absolute detractors
The following five stocks produced the largest negative impact
on portfolio valuation in the first half of 2023:
Share price
Stock movement (%) Contribution (GBPm)
----------------------- -------------- --------------------
Direct Line Insurance (35.7) (5.1)
Anglo American (30.9) (4.5)
i3 Energy (43.5) (3.3)
Rio Tinto (14.0) (3.1)
AFC Energy (58.6) (2.3)
Source: Performance data held by Law Debenture based on market
prices.
The next three largest detractors, Anglo American, i3 Energy and
Rio Tinto, are all commodity producers. The concerns over economic
activity have led to a fall in the price of, for instance, oil and
copper. These are cyclical shares, and we would expect them to
recover over time.
Income from the Investment Portfolio
Dividend payments from the underlying Portfolio are growing with
ordinary dividend income for H1 2023 up 4.9% at GBP19.3m (H1 2022:
GBP18.4m). This has exceeded our expectations, but last year the
Portfolio did benefit from GBP3.4m of special dividends, which has
not been repeated in 2023.
A large contributor to Law Debenture's overall income remains
the IPS business, which facilitates us holding low- or
zero-yielding stocks, not typically seen in an income fund.
ESG
We continue to interact and engage with companies, both at the
board and executive levels, on ESG factors. We believe that this
approach provides the most accurate insights into the progress
companies are making against their ESG objectives, such as
environmental footprint.
During the first half, we have challenged several company
management teams about all aspects of sustainability. Where
appropriate, we took action as a result of those engagements, which
included exiting positions where it seemed there was very little
progress against sustainability goals.
Outlook
The chart regarding UK Market PE vs World on page 11 of the half
year report illustrates how undemanding UK companies' valuations
have become. The investment focus remains on companies that will be
able to adapt to the circumstances they find themselves in. They
will do this by providing good quality products and services. At
the moment, however, investors are predominantly focused on
macro-economic concerns, the main one of which is the persistence
of inflation and the level interest rates may reach within the UK.
It is through periods of uncertainty like this that we can refresh
the Portfolio and position it so that it will benefit when a degree
of confidence returns.
James Henderson and Laura Foll
Investment Managers
27 July 2023
Sector distribution of portfolio by value
30 June 2023 31 December 2022
-------------------- ------------- -----------------
Oil and gas 10.9% 10.9%
Basic materials 6.7% 8.7%
Industrials 23.1% 21.7%
Consumer goods 7.4% 7.7%
Health care 7.7% 8.1%
Consumer services 10.3% 9.0%
Telecommunications 2.1% 2.0%
Utilities 3.2% 3.2%
Financials 26.6% 27.4%
Technology 2.0% 1.3%
Geographical distribution of portfolio by value
30 June 2023 31 December
2022
---------------- ------------- ------------
United Kingdom 83.8% 83.2%
North America 5.5% 5.1%
Europe 9.6% 10.6%
Japan 1.1% 1.1%
Fifteen largest holdings: investment rationale
as at 30 June 2023
Approx Valuation Appreciation/ Valuation
Rank % of Market Dec 2022 Purchases Sales (Depreciation) June 2023
2023 Company Location portfolio Cap. GBP000 GBP000 GBP000 GBP000 GBP000
----- ---------------- --------- ---------- ----------- ---------- ---------- ------- --------------- ----------
1 Shell UK 3.18 GBP109bn 29,075 - - 206 29,281
2 HSBC UK 2.93 GBP128.2bn 22,360 - - 4,601 26,961
3 BP UK 2.84 GBP86.5bn 27,069 - - (943) 26,126
Flutter
4 Entertainment UK 2.67 GBP11.3bn 17,492 - - 6,990 24,482
5 GlaxoSmithKline UK 2.1 GBP69.6bn 19,983 - - (679) 19,304
6 Barclays UK 2.05 GBP16.1bn 19,498 - - (632) 18,866
7 Rolls Royce UK 2.05 GBP69.8bn 8,797 3,223 - 6,786 18,806
8 Rio Tinto UK 2.04 GBP46.7bn 21,742 - - (3,048) 18,694
9 NatWest UK 1.7 GBP22.5bn 17,238 - - (1,592) 15,646
10 Marks & Spencer UK 1.68 GBP3.7bn 8,631 1,558 - 5,219 15,408
11 Senior UK 1.63 GBP0.8bn 10,682 - - 4,265 14,947
12 Sanofi France 1.57 GBP103.3bn 12,815 746 - 822 14,383
13 National Grid UK 1.48 GBP28.1bn 13,058 - - 557 13,615
14 Tesco UK 1.43 GBP16.7bn 11,888 - - 1,284 13,172
Lloyds Banking
15 Group UK 1.42 GBP33.0bn 13,623 - - (546) 13,077
Calculation of net asset value (NAV) per share
Valuation of our IPS business
Accounting standards require us to consolidate the income, costs
and taxation of our IPS business into the Group income statement
below. The assets and liabilities of the business are also
consolidated into the Group column of the statement of financial
position below. A segmental analysis is also provided below, which
shows a detailed breakdown of the split between the investment
portfolio, IPS business and Group charges.
Consolidating the value of the IPS business in this way fails to
recognise the value created for shareholders by the IPS business.
To address this, since December 2015, the NAV performance we have
published for the Group has included a fair value for the
standalone IPS business.
The current fair value of the IPS business is calculated based
on historical earnings before interest, taxation, depreciation and
amortisation ('EBITDA') for the second half of 2022, and the EBITDA
for the half year to 30 June 2023, with an appropriate multiple
applied.
The calculation of the IPS valuation and methodology used to
derive it are included in the previous annual report at Note 3 on
page 135. In determining a calculation basis for the fair valuation
of the IPS business, the Directors have taken external professional
advice from PwC LLP. The multiple applied in valuing IPS is from
comparable companies sourced from market data, with appropriate
adjustments to reflect the difference between the comparable
companies and IPS in respect of size, liquidity, margin and growth.
A range of multiples is then provided by PwC from which the Board
selects an appropriate multiple to apply. The make-up of our IPS
business is unique meaning we do not have a like for like
comparator group to benchmark ourselves against. We believe our
core comparators remain as Sanne Group, Intertrust, Link
Administration Holdings and JTC. However, each of these companies
have specific factors which limit their usability for a market
multiples-based valuation approach.
Sanne and Intertrust have been acquired and are no longer
listed. Link's valuation has been impacted by transactional
influences and updates to the ongoing Woodford scandal. JTC
continues to be a highly acquisitive group.
These company-specific factors restrict their usability when
monitoring market movements, but the transaction multiples
themselves do provide benchmark data points for consideration.
However, given these limitations, PwC have also considered the
wider, less comparable companies listed below, but only to broadly
assess market movements in the relevant and complementary service
sectors. The table below shows a summary of performance of our
comparators:
Revenue
Revenue CAGR FY19 EBITDA
LTM* LTM EV/EBITDA - margin
Company (GBPm) 30 June 2023 LTM 2023 LTM
------------------------------ -------- -------------- ----------- --------
Law Deb IPS 50 10.5x 12% 38%
SEI Investments Company 1,519 12.3x 5% 22%
SS&C Technologies Holdings,
Inc. 4,325 10.5x 4% 32%
EQT Holdings Limited 67 14.0x 7% 34%
Perpetual Limited 428 11.1x 11% 19%
JTC PLC 200 18.0x 27% 24%
Link Administration Holdings
Limited 662 5.3x -4% 13%
Begbies Traynor Group plc 116 8.7x 18% 19%
Christie Group plc 69 4.7x -3% 9%
*LTM refers to the trailing 12 months 'results' which are
publicly available. Source: Capital IQ.
The multiple selected for the current period is 10.5x, which is
broadly in line with the mean multiple of the comparator group. The
multiple selected is consistent with that used at both the half
year and year end of 2022.
It is hoped that our initiatives to inject growth into the IPS
business will result in a corresponding increase in valuation over
time. As stated above, management is aiming to achieve mid to high
single digit growth in 2023. The valuation of the IPS business has
increased by GBP120m/133% since the first valuation of the business
as at 31 December 2015.
Valuation guidelines require the fair value of the IPS business
be established on a stand-alone basis. The valuation does not
therefore reflect the value of Group tax relief from the investment
portfolio to the IPS business.
In order to assist investors, the Company restated its
historical NAV in 2015 to include the fair value of the IPS
business for the last ten years. This information is provided in
the annual report within the 10 year record.
Long-term borrowing
The methodology of fair valuing all long-term borrowings is to
benchmark the Group debt against A rated UK corporate bond
yields.
Calculation of NAV per share
The table below shows how the NAV at fair value is calculated.
The value of assets already included within the NAV per the Group
statement of financial position that relates to IPS is removed
(GBP57.3m) and substituted with the calculation of the fair value
and surplus net assets of the business (GBP153.4m). The fair value
of the IPS business has increased by 4.4% due to a combination of
higher surplus net assets being available and a higher EBITDA. An
adjustment of GBP43.1m is then made to show the Group's debt at
fair value, rather than the book cost that is included in the NAV
per the Group statement of financial position. This calculation
shows NAV fair value for the Group as at 30 June 2023 of
GBP1,009.1m or 775.92 pence per share:
30 June 2023 31 December 2022
Pence Pence per
GBP000 per share GBP000 share
------------------------------------ ---------- ----------- --------- ----------
Net asset value (NAV) per Group
statement of financial position 812,578 624.78 799,067 625.81
Fair valuation of IPS: EBITDA at
a multiple of 10.5x (31 December
2022: 10.5x) 178,017 136.88 174,174 136.41
IPS net assets attributable to
IPS valuation 32,627 25.09 27,566 21.59
Fair value of IPS business 210,644 161.97 201,740 158.00
Removal of IPS net assets included
in Group net assets (57,263) (44.03) (53,364) (41.79)
Fair value uplift for IPS business 153,381 117.94 148,376 116.20
Debt fair value adjustment 43,181 33.20 25,123 19.68
NAV at fair value 1,009,140 775.92 972,566 761.69
------------------------------------ ---------- ----------- --------- ----------
GBP000 % GBP000 %
NAV attributable to IPS 210,644 21 201,740 21
------------------------------------ ---------- ----------- --------- ----------
See commentary for the breakdown of the assets already included
in the NAV per the financial statements.
The Financial Statements NAV at fair value calculated above
differs to the published NAV at fair value for 30 June 2023 (half
year NAV released by RNS on 3 July 2023). As such, please see below
for a reconciliation:
Reconciliation of published NAV to results Pence
NAV: GBP000 per share
-------------------------------------------------- ---------- -----------
Published NAV cum income with debt at fair value 1,010,790 777.19
Reconciliation of shareholders' funds to net
assets:
Published NAV (819,233) (629.90)
Results NAV 812,578 624.78
Revised IPS valuation uplift:
Published NAV (valuation per 31 December 2022) (148,376) (114.08)
Results NAV 153,381 117.93
-------------------------------------------------- ---------- -----------
Total NAV at fair value per results 1,009,140 775.92
-------------------------------------------------- ---------- -----------
Group income statement
for the six months ended 30 June 2023 (unaudited)
30 June 2023 30 June 2022
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------------------- --------- -------- --------- --------- ---------- ----------
UK dividends 16,005 - 16,005 15,921 - 15,921
UK special dividends - - - - 3,442 3,442
Overseas dividends 3,291 - 3,291 2,487 - 2,487
Overseas special dividends - - - - - -
-------------------------------------------- --------- -------- --------- --------- ---------- ----------
Total dividend income 19,296 - 19,296 18,408 3,442 21,850
Interest income 440 - 440 14 - 14
Independent professional services fees (+) 27,174 - 27,174 25,691 - 25,691
Other income 393 - 393 216 - 216
-------------------------------------------- --------- -------- --------- --------- ---------- ----------
Total income 47,303 - 47,303 44,329 3,442 47,771
-------------------------------------------- --------- -------- --------- --------- ---------- ----------
Net gain/(loss) on investments held
at fair value through profit or loss - (3,285) (3,285) - (124,238) (124,238)
-------------------------------------------- --------- -------- --------- --------- ---------- ----------
Total income and capital gains/(losses) 47,303 (3,285) 44,018 44,329 (120,796) (76,467)
-------------------------------------------- --------- -------- --------- --------- ---------- ----------
Cost of sales (3,141) - (3,141) (4,061) - (4,061)
Administrative expenses (19,391) (1,045) (20,436) (16,288) (996) (17,284)
-------------------------------------------- --------- -------- --------- --------- ---------- ----------
Operating profit/(loss) 24,771 (4,330) 20,441 23,980 (121,792) (97,812)
Finance costs
Interest payable (818) (2,454) (3,272) (818) (2,454) (3,272)
-------------------------------------------- --------- -------- --------- --------- ---------- ----------
Profit/(loss) before taxation 23,953 (6,784) 17,169 23,162 (124,246) (101,084)
Taxation (625) - (625) (669) - (669)
-------------------------------------------- --------- -------- --------- --------- ---------- ----------
Profit/(loss) for the period 23,328 (6,784) 16,544 22,493 (124,246) (101,753)
-------------------------------------------- --------- -------- --------- --------- ---------- ----------
Return per ordinary share (pence) 18.09 (5.26) 12.83 18.21 (100.61) (82.40)
Diluted return per ordinary share (pence) 18.08 (5.26) 12.82 18.21 (100.58) (82.37)
-------------------------------------------- --------- -------- --------- --------- ---------- ----------
+ IPS fees are presented gross. Please refer to Note 6 below for
a reconciliation to the net revenue.
Group statement of comprehensive income
for the six months ended 30 June 2023 (unaudited)
30 June 2023 30 June 2022
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------------------------- -------- -------- ------- -------- ---------- ----------
Profit/(loss) for the period 23,328 (6,784) 16,544 22,493 (124,246) (101,753)
------------------------------------------------------- -------- -------- ------- -------- ---------- ----------
Foreign exchange gain/(loss) on translation of foreign
operations - (168) (168) - (112) (112)
------------------------------------------------------- -------- -------- ------- -------- ---------- ----------
Total comprehensive income/(loss) for the period 23,328 (6,952) 16,376 22,493 (124,358) (101,865)
------------------------------------------------------- -------- -------- ------- -------- ---------- ----------
Group statement of financial position
as at 30 June 2023 (unaudited)
Unaudited Unaudited Audited
30 June 2023 30 June 2022 31 December 2022
Non-current assets GBP000 GBP000 GBP000
------------------------------------------------------- ------------- ------------- -----------------
Goodwill 19,010 18,973 19,036
Property, plant and equipment 1,838 1,901 1,796
Right-of-use asset 4,584 5,253 5,040
Other intangible assets 2,971 3,177 3,417
Investments held at fair value through profit or loss 918,221 853,231 891,005
Retirement benefit asset 7,973 7,085 7,400
Total non-current assets 954,597 889,620 927,694
------------------------------------------------------- ------------- ------------- -----------------
Current assets
Trade and other receivables 18,363 24,213 19,697
Contract assets 9,576 8,720 7,182
Cash and cash equivalents 33,520 71,979 49,559
------------------------------------------------------- ------------- ------------- -----------------
Total current assets 61,459 104,912 76,438
------------------------------------------------------- ------------- ------------- -----------------
Total assets 1,016,056 994,532 1,004,132
------------------------------------------------------- ------------- ------------- -----------------
Current liabilities
Trade and other payables 18,865 19,854 19,815
Lease liability 964 356 991
Corporation tax payable 1,718 1,387 1,256
Other taxation including social security 2,376 2,561 2,892
Contract liabilities 6,139 7,504 5,223
------------------------------------------------------- ------------- ------------- -----------------
Total current liabilities 30,062 31,662 30,177
------------------------------------------------------- ------------- ------------- -----------------
Non-current liabilities and deferred income
------------------------------------------------------- ------------- ------------- -----------------
Long-term borrowings 163,931 164,267 163,909
Contract liabilities 3,151 3,463 3,976
Deferred tax liability* 1,344 1,060 1,344
Lease liability 4,990 6,148 5,659
Total non-current liabilities 173,416 174,938 174,888
------------------------------------------------------- ------------- ------------- -----------------
Total net assets 812,578 787,932 799,067
------------------------------------------------------- ------------- ------------- -----------------
Equity
Called up share capital 6,530 6,371 6,407
Share premium 102,812 72,042 83,022
Own shares (4,180) (3,128) (3,128)
Capital redemption 8 8 8
Translation reserve 2,687 2,544 2,855
Capital reserves 655,463 665,177 662,512
Retained earnings 49,258 44,918 47,391
------------------------------------------------------- ------------- ------------- -----------------
Total equity 812,578 787,932 799,067
------------------------------------------------------- ------------- ------------- -----------------
Total equity pence per share(+) 624.78 624.20 625.81
------------------------------------------------------- ------------- ------------- -----------------
* The deferred tax liability has been re-classified as
non-current to align with the disclosure requirements outlined in
IAS 1.56.
(+) Please see above for calculation of total equity pence per
share.
Group statement of cash flows
for the six months ended 30 June 2023 (unaudited)
Unaudited Unaudited Audited
30 June 2023 30 June 2022 31 December 2022
GBP000 GBP000 GBP000
--------------------------------------------------------------------- ------------- ------------- -----------------
Cash flows from operating activities (before dividends received and
taxation paid) 3,603 (2,052) 2,249
--------------------------------------------------------------------- ------------- ------------- -----------------
Cash dividends received 17,958 15,921 37,498
--------------------------------------------------------------------- ------------- ------------- -----------------
Taxation paid - - (700)
--------------------------------------------------------------------- ------------- ------------- -----------------
Cash generated from operating activities 21,561 13,869 39,047
--------------------------------------------------------------------- ------------- ------------- -----------------
Investing activities
Acquisition of property, plant and equipment (191) (79) (151)
Acquisition of right of use assets - - (428)
Expenditure on intangible assets - (60) (639)
Purchase of investments (less cost of acquisition) (51,631) (77,296) (170,653)
Sale of investments 21,130 92,327 145,892
--------------------------------------------------------------------- ------------- ------------- -----------------
Cash flow from investing activities (30,692) 14,892 (25,979)
--------------------------------------------------------------------- ------------- ------------- -----------------
Financing activities
Interest paid (3,272) (3,272) (6,544)
Dividends paid (21,236) (19,530) (37,167)
Payment of lease liability (629) (239) (505)
Proceeds of increase in share capital 19,913 30,403 41,419
Purchase of own shares (1,052) 87 87
--------------------------------------------------------------------- ------------- ------------- -----------------
Net cash flow from financing activities (6,276) 7,449 (2,710)
--------------------------------------------------------------------- ------------- ------------- -----------------
Net increase/(decrease) in cash and cash equivalents (15,407) 36,210 10,358
--------------------------------------------------------------------- ------------- ------------- -----------------
Cash and cash equivalents at beginning of period 49,559 35,880 35,880
Foreign exchange gains/(losses) on cash and cash equivalents (632) (111) 3,321
--------------------------------------------------------------------- ------------- ------------- -----------------
Cash and cash equivalents at end of period 33,520 71,979 49,559
--------------------------------------------------------------------- ------------- ------------- -----------------
Group statement of changes in equity
as at 30 June 2023 (unaudited)
Share Share Capital Translation Capital Retained
capital premium Own shares redemption reserve reserves earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- ---------
Balance at 1
January 2023 6,407 83,022 (3,128) 8 2,855 662,512 47,391 799,067
--------------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- ---------
Profit/(loss)
for the
period - - - - - (6,784) 23,328 16,544
Foreign
exchange - - - - (168) (265) (225) (658)
--------------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- ---------
Total
comprehensive
profit/(loss)
for the
period - - - - (168) (7,049) 23,103 15,886
Issue of
shares 123 19,790 (1,052) - - - - 18,861
Dividend
relating to
2022 - - - - - - (11,276) (11,276)
Dividend
relating to
2023 - - - - - - (9,960) (9,960)
--------------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- ---------
Total equity
at 30 June
2023 6,530 102,812 (4,180) 8 2,687 655,463 49,258 812,578
--------------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- ---------
Independent Professional
Investment Portfolio Services Total
---------------------------------- ------------------------------- ----------------------------------
30 30 31 30 June 30 June 31 30 30 31
June June 2022 Dec 2022 2023 2022 Dec June June 2022 Dec 2022
2023 2022 2023
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- ---------- ---------- ---------- --------- --------- --------- ---------- ---------- ----------
Revenue
Dividend income 19,296 18,408 34,464 - - - 19,296 18,408 34,464
IPS revenue
Corporate
Trust - - - 6,800 6,614 13,292 6,800 6,614 13,292
Corporate
Services - - - 11,744 12,094 25,792 11,744 12,094 25,792
Pensions - - - 8,630 6,983 14,368 8,630 6,983 14,368
Segment income 19,296 18,408 34,464 27,174 25,691 53,452 46,470 44,099 87,916
Other income 393 216 847 - - - 393 216 847
Cost of sales (75) (43) (125) (3,066) (4,018) (8,283) (3,141) (4,061) (8,408)
Administration
costs (1,856) (898) (3,522) (17,535) (15,390) (30,810) (19,391) (16,288) (34,332)
Return before
interest and
tax 17,758 17,683 31,664 6,573 6,283 14,359 24,331 23,966 46,023
Interest
payable (net) (624) (804) (1,432) 246 - 62 (378) (804) (1,370)
Return,
including
profit on
ordinary
activities
before
taxation 17,134 16,879 30,232 6,819 6,283 14,421 23,953 23,162 44,653
Taxation - - - (625) (669) (1,392) (625) (669) (1,392)
Return,
including
profit
attributable
to
shareholders 17,134 16,879 30,232 6,194 5,614 13,029 23,328 22,493 43,261
Return per
ordinary share
(pence) 13.29 13.66 24.06 4.80 4.55 10.38 18.09 18.21 34.44
Assets 931,689 910,116 922,080 84,367 84,416 84,640 1,016,056 994,532 1,006,720
Liabilities (176,373) (166,604) (176,377) (27,105) (39,996) (31,276) (203,478) (206,600) (207,653)
Total net
assets 755,315 743,512 745,703 57,263 44,420 53,364 812,578 787,932 799,067
Group segmental analysis
Please see below for a breakdown of net revenue by
department.
The capital element of the income statement is wholly
attributable to the investment portfolio.
Principal risks and uncertainties
The principal Group risks include investment performance and
market risk, cyber and technology risk and IPS concentration risk.
ESG considerations are our emerging risk.
These top risks are explained along with mitigating actions in
the Risk Management section of the Annual Report for the year ended
31 December 2022. In the view of the Board these risks and
uncertainties are as applicable to the remaining six months of the
financial year as they were to the period under review. As part of
ongoing risk management to identify new risks and developments, the
Board continues to review and assess risks, uncertainties and
impacts during the course of the year.
Related party transactions
There have been no related party transactions during the period
which have materially affected the financial position or
performance of the Group. During the period, transactions between
the Corporation and its subsidiaries have been eliminated on
consolidation. Details of related party transactions are given in
the notes to the annual accounts for the year ended 31 December
2022.
Directors' responsibility statement
We confirm that to the best of our knowledge:
-- the condensed set of financial statements have been prepared
in accordance with IAS 34 Interim Financial Reporting as
adopted by the UK and gives a true and fair view of the
assets, liabilities, financial position and profit of the
Group as required by DTR 4.2.4R;
-- the half yearly report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that
have occurred during the first six months of the current
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 year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken
place in the first six months of the current financial
year and that have materially affected the financial
position or performance of the entity during that period.
On behalf of the Board
Robert Hingley
Chairman
27 July 2023
Past performance is not a guide to future performance. The value
of an investment and any income from it is not guaranteed and may
go down as well as up and investors may not get back the amount
invested.
Notes to the condensed consolidated financial statements
Basis of preparation
1.
The condensed set of financial statements included in this
half yearly financial report has been prepared in accordance
with International Accounting Standards (IASs) in conformity
with the requirements of the Companies Act 2006 and in accordance
with International Financial Reporting Standards (IFRS) as
adopted and endorsed by the UK.
The financial resources available are expected to meet the
needs of the Group for the foreseeable future. The financial
statements have therefore been prepared on a going concern
basis.
The Group's accounting policies during the period are the
same as in its 2022 annual financial statements, except for
those that relate to new standards effective for the first
time for periods beginning on (or after) 1 January 2023,
and will be adopted in the 2023 annual financial statements.
Presentation of financial information
2.
The financial information presented herein does not amount
to full statutory accounts within the meaning of section
435 of the Companies Act 2006 and has neither been audited
nor reviewed pursuant to guidance issued by the Auditing
Practices Board. The annual report and financial statements
for 2022 have been filed with the Registrar of Companies.
The independent auditor's report on the annual report and
financial statements for 2022 was unqualified, did not include
a reference to any matters to which the auditor drew attention
by way of emphasis without qualifying the report, and did
not contain a statement under section 498(2) or (3) of the
Companies Act 2006.
Calculations of NAV and earnings per share
3.
The calculations of NAV and earnings per share are based
on:
NAV: shares at end of the period 130,057,740 (30 June 2022:
126,230,289; 31 December 2022: 127,685,028) being the total
number of shares on issue less shares acquired by the ESOT
in the open market.
Income: average shares during the period 128,924,615 (30
June 2022: 123,497,103; 31 December 2022: 125,628,620) being
the weighted average number of shares on issue after adjusting
for shares held by the ESOT.
Listed investments
4.
Listed investments are all traded on active markets and as
defined by IFRS 13 are Level 1 financial instruments. As
such they are valued at unadjusted quoted bid prices. Unlisted
investments are Level 3 financial instruments. They are valued
by the Directors using unobservable inputs including the
underlying net assets of the instruments.
5. Note to the statement of cash flows
The presentation of the cash flow statement has been updated in
line with that in the 2022 annual report. As such, this note
accompanies the statement of cash flows above.
Unaudited Unaudited Audited
30 June 30 June 31 December
2023 2022 2022
GBP000 GBP000 GBP000
------------------------------------------ ---------- ---------- -------------
Operating profit/(loss) before
interest and taxation 20,441 (97,812) (78,411)
Adjust for non-cash flow items:
------------------------------------------ ---------- ---------- -------------
Losses/(gains) on investments 3,285 124,238 126,234
Movement in amortised cost of borrowings 22 - (336)
Depreciation of property, plant
and equipment 149 152 328
Depreciation of right-of-use assets 456 349 931
Amortisation of intangible assets 379 679 675
Decrease/(increase) in receivables (1,060) (5,856) 198
(Decrease)/increase in payables (950) (8,183) (9,604)
(Decrease)/increase in deferred
income 91 - (475)
(Decrease)/increase in other taxation
payable (679) 811 (1,123)
Normal pension contributions in
excess of cost (573) (509) 1,330
Dividends receivable (17,958) (15,921) (37,498)
------------------------------------------ ---------- ---------- -------------
Cash flows from operating activities
(before dividends received and
taxation paid) 3,603 (2,052) 2,249
------------------------------------------ ---------- ---------- -------------
6. Breakdown of net revenue per department
The table below illustrates a breakdown of net revenue per
department:
Gross Revenue Cost of sales Net Revenue
---------------------------- ---------------------------- ----------------------------
30 June 30 June 31 Dec. 30 June 30 June 31 Dec. 30 June 30 June 31 Dec.
2023 2022 2022 2023 2022 2022 2023 2022 2022
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Pensions 8,630 6,983 14,368 (33) (10) (25) 8,597 6,973 14,343
Corporate
Trust 6,800 6,614 13,292 (982) (1,429) (2,672) 5,818 5,185 10,620
Corporate
Services 11,744 12,094 25,792 (2,051) (2,579) (5,586) 9,693 9,515 20,206
----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total IPS
income 27,174 25,691 53,452 (3,066) (4,018) (8,283) 24,108 21,673 45,169
----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
7. Investments
A full list of investments is included on the website each month.
8. Half yearly report 2023
The 2023 half yearly report will be available on the website in early
August via the following link:
https://www.lawdebenture.com/investment-trust/shareholder-information/annual-reports-and-half-yearly-reports
Registered office:
8th Floor, 100 Bishopsgate, London, EC2N 4AG Telephone: 020 7606
5451
(Registered in England - No. 00030397)
LEI number - 2138006E39QX7XV6PP21
[1] NAV is calculated in accordance with the Association of
Investment Companies (AIC) methodology, based on performance data
held by Law Debenture including the fair value of the IPS business
and long-term borrowings.
[2] Source: Refinitiv.
[3] Source: Office for National Statistics.
[4] Calculated for the 10 years ended 31 December 2022.
[5] Calculated on a total return basis assuming dividend
re-investment between 30 June 2013 and 30 June 2023.
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IR FLFETDSIDFIV
(END) Dow Jones Newswires
July 28, 2023 02:00 ET (06:00 GMT)
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