TIDMLWDB
RNS Number : 7481U
Law Debenture Corp PLC
31 July 2020
The following amendment has been made to the Half Year Report
announcement under RNS number 6825U: Footnote 3 relating to the
Financial Summary has been corrected in relation to the intention
to pay a full year dividend of not less than 26.0 pence per share.
All other details remain unchanged. The full amended text is shown
below.
The Law Debenture Corporation p.l.c. today published its results
for the half-year ended 30 June 2020.
Group Highlights:
-- 2020 dividend to be at least equal to 2019 level of 26.0 pence per share
-- Dividend yield of 5%(1)
-- Solid performance from the Independent Professional Services
business continues to support dividend growth
-- Transitioned to quarterly dividends, creating greater
regularity and predictability around dividend payments
-- On-going charges remain low at 0.48% compared to the industry average of 1.04%(2)
Investment Portfolio Highlights:
-- NAV total return (with debt at par) for the six months
declined 16.5%(3) compared to a 17.5%(4) decline in the benchmark
FTSE Actuaries All-Share Total Return Index
-- Sizeable net investor during period, investing GBP33m to take
advantage of attractive valuations
-- Outperformance of the benchmark in all performance periods.
Strong long term out performance of 57.6% over 10 years and 58.6%
over 5 years(4)
-- Moving to daily NAV publication from the start of August to increase transparency
YTD 1 year 3 years 5 years 10 years
Performance % % % % %
-------------------------------- ------ ------ ------- ------- --------
NAV total return (with debt
at par)(3*) (16.5) (10.6) (2.0) 24.1 144.7
NAV total return (with debt
at fair value)(3*) (18.6) (13.0) (4.8) 18.1 129.7
FTSE Actuaries All-Share
Index Total Return(5) (17.5) (13.0) (4.6) 15.2 91.8
Share price total return(5*) (16.5) (7.3) 2.0 21.9 163.9
Change in Retail Price Index(5) 0.3 1.1 7.5 13.0 30.6
Independent Professional Services (IPS) Highlights:
-- Leading wholly owned independent provider of professional
services, a key differentiator to other investment trusts
-- Revenues grew by 6.5% and earnings per share by 6.6%
Longer Term Track Record:
-- 131 years of value creation
-- 113%(6) increase in dividend over the last ten years
-- 41 years of increasing or maintaining dividends to shareholders
-- Diversified and highly repeatable nature of IPS revenues
funded 35%(7) of dividends for the trust over the preceding 10
years
Commenting, Robert Hingley, Chairman, said:
" The spread of Covid-19 has resulted in some very challenging
months for the global economy. Your Company has shared in some of
that pain, with a decline in NAV total return never comfortable to
report. However, our investment portfolio's long-term performance
remains well ahead of its benchmark. Our IPS business has continued
to build on two years of strong high single digit growth, despite
some significant macroeconomic headwinds.
The pandemic has highlighted how advantageous Law Debenture's
unique structure is for regular income seekers. The Board
recognises the importance of our dividend to shareholders, at a
time of pervasive dividend cuts across the market. We informed
shareholders in June of our intention to at least maintain calendar
2020 dividends at 26.0 pence per share, implying an attractive 5%
dividend yield. We have moved to a quarterly dividend cycle, with
our first quarterly payment made to shareholders on 28 July. This
differentiates Law Debenture and illustrates our continued
resilience and strong revenue reserves."
Commenting, Denis Jackson, Chief Executive Officer, said:
"I am grateful to our talented team for their incredible work
and best in class client service through the pandemic. Despite the
difficult macroeconomic backdrop, our IPS business grew revenues by
6.5% and earnings per share by an impressive 6.6%.
As we look ahead, we remain focused on execution within our IPS
business where we continue to see significant opportunities to grow
our market share. We have an excellent investment management team,
who the Board is confident are well placed to continue to position
the equity portfolio for future longer-term growth and
outperformance."
Company History:
From its origins in 1889, Law Debenture has diversified to
become a group with a unique range of activities in the financial
and professional services sectors. The group has two distinct areas
of business.
Investment Portfolio:
Our portfolio of investments is managed by James Henderson and
Laura Foll of Janus Henderson Investors.
Our objective is to achieve long term capital growth in real
terms and steadily increasing income. The aim is to achieve a
higher rate of total return than the FTSE Actuaries All-Share Index
Total Return through investing in a diversified portfolio of
stocks.
Independent Professional Services:
We are a leading provider of independent professional services,
built on three excellent foundations: our Pensions, Corporate Trust
and Corporate Services businesses. We operate globally, with
offices in the UK, New York, Ireland, Hong Kong, Delaware and the
Channel Islands.
Companies, agencies, organisations and individuals throughout
the world rely upon Law Debenture to carry out our duties with the
independence and professionalism upon which our reputation is
built.
The Law Debenture Corporation +44 (0)20 7606 5451
Denis Jackson, Chief Executive Officer denis.jackson@lawdeb.com
Katie Thorpe, Chief Financial Officer katie.thorpe@lawdeb.com
Tulchan Communications (Financial +44 (0)20 7353 4200
PR) Lawdebenture@tulchangroup.com
David Allchurch
Deborah Roney
* Items marked "*" are considered to be alternative performance
measures. For a description of these measures, see page 115 of the
annual report and financial statements for the year ended 31
December 2019.
1 Based on a closing share price of 522 pence as at 29 July
2020.
2 Law Debenture ongoing charges have been calculated based on
data held by Law Debenture as at 31 December 2019. Industry average
data was sourced from The Association of Investment Companies
(excluding 3i) as at 31 December 2019.
3 NAV is calculated in accordance with the Association of
Investment Companies methodology, based on performance data held by
Law Debenture including the fair value of the IPS business and
long-term borrowings. NAV is shown with debt measured at par and
with debt measured at fair value.
4 Outperformance compares NAV total return with debt at par to
the FTSE Actuaries All-Share Index Total Return.
5 Source: Bloomberg
6 Calculation based on the increase in annual dividend per share
between 1 January 2010 and 31 December 2019.
7 Dividends paid to shareholders between 1 July 2010 and 30 June
2020.
The Law Debenture Corporation p.l.c. and its subsidiaries
Half yearly report for the six months to 30 June 2020
(unaudited)
Financial summary 30 June 30 June 31 December
2020 2019 2019
GBP000 GBP000 GBP000
--------------------------- -------- -------- -----------
Net assets(1) 642,705 784,213 830,139
Pence Pence Pence
Net Asset Value (NAV) per
share at fair value(1,2*) 543.93 663.67 702.17
Revenue return per share
- Investment portfolio 6.33 11.76 22.18
- Independent professional
services 4.18 3.92 8.54
- Group charges -- (0.04)
Group revenue return per
share 10.51 15.68 30.68
Capital (loss)/return per
share (131.86) 50.42 79.27
Dividends per share(3) 13.0 6.60 26.00
Share price 517.00 592.00 650.00
--------------------------- -------- -------- -----------
%% %
Ongoing charges(4*) 0.48 0.43 0.48
Gearing(4) 197 9
Discount(*) (5.0) (10.8) (7.4)
* Items marked "*" are considered to be alternative performance
measures. For a description of these measures, see page 115 of the
annual report and financial statements for the year ended 31
December 2019.
1 Please refer to later in this statement for calculation of net
asset value.
2 NAV is calculated in accordance with the Association of
Investment Companies (AIC) methodology, based on performance data
held by Law Debenture including fair value of IPS business and
long-term borrowings. NAV is shown with debt measured at par and
with debt measured at fair value.
3 Whilst the second interim dividend is not due to be announced
until September 2020, the Board have already indicated their
intention to pay a full year dividend of not less than 26.0 pence
for 2020. This number includes an expected second interim dividend
of 6.5 pence for comparability.
4 Source: AIC. Ongoing charges are based on the costs of the
investment trust and include the Janus Henderson Investors
management fee of 0.30% of NAV of the investment trust. There is no
performance related element to the fee.
Half yearly management report
Introduction
The Covid-19 pandemic has had a profound impact on the
investment trust industry. The impact has not just been felt in the
well documented volatility in markets and wide spread dividend
cuts, but also by our growing global workforce of 154 people.
During the first three weeks of March, all of our employees
transitioned to remote working as Covid-19 took a firm grip on the
world's economy.
Since that time, all of our employees have had to adapt their
working practices significantly and have made huge sacrifices in
both their personal and professional lives. My enduring memory of
the last six months will be the way that all of our staff,
unselfishly, and with no prompting from me, brought the very best
of our collective experience to bear to solve the rapidly evolving
needs of our clients. I am proud of the kindness that our staff
showed to one another and the calm, measured and thoroughly
professional way in which they applied themselves. We are lucky to
have them and must continue to invest in them and in their
wellbeing.
Dividend
In April, our AGM was held virtually for the first time in your
Company's 131 year history. The Corporation declared, and our
shareholders overwhelmingly approved, a 50% increase in our final
dividend payment for 2019.
With significant turmoil in global markets as a result of the
Covid-19 pandemic, a large number of quoted companies cut their
dividends in response to the collapse of global revenues. We
recognised that this was happening at a time when the recipients of
those dividends may themselves be increasingly reliant on that
income.
A great advantage of the investment trust structure is the
ability to retain a portion of income received each year in order
to smooth dividends in times of market stress. With that backdrop,
the unique advantage of the Law Debenture structure has never been
more evident. We approached 2020 with an Independent Professional
Services business that had funded more than a third of dividends
for the Group over the preceding 10 years and Group retained
earnings of GBP62.5m(1) . Indeed, Investec produced some
independent research in March highlighting that our reserves
position was the strongest of all investments trusts in the AIC's
UK income and growth sector.
We were able to use these qualities to our shareholders'
advantage. Our first quarterly dividend payment of 6.5 pence per
ordinary share was made earlier this week to shareholders on the
register at the close of business on 26 June 2020. Based on the
current share price, that implies a dividend yield for the Law
Debenture share of 5.0%(2) .
Part of the reason for the confidence in our dividend is that we
have done this for a long time. The business itself was founded as
a Corporate Trustee 131 years ago; in every single one of the last
41 years we have either increased or at least maintained that
dividend. Indeed, in the last 10 years the dividend has more than
doubled. We intend to pay two further interim dividends of 6.5
pence per ordinary share in October 2020 and January 2021.
Shareholders will be asked to vote on a final dividend to be paid
in April 2021 at the Corporation's 2021 AGM. It is the Board's
current intention to recommend the final dividend payment be at
least 6.5 pence per share, thus sustaining our dividend at a time
of persistent market cuts.
1 Group retained earnings as at 31 December 2019 as disclosed on
page 81 of the annual report and accounts.
2 Based on a closing share price of 522 pence as at 29 July
2020.
Our Investment Portfolio
The impact on global stock markets of the Covid-19 pandemic has
been profound. Every business has been affected in some way, as our
way of life changed overnight. For many businesses, at least
initially, this impact has been a negative one. For a smaller
proportion, the impact has been positive, as change drove strong
demand for certain pockets of products.
Your investment portfolio has shared in some of that pain. At
the peak of market dislocation on 23 March, the FTSE Actuaries All
Share Index against which we benchmark our performance was down
34.3%. With a predominately UK portfolio of quoted stocks, combined
with a widening of discounts across the sector, our share price at
that point in the cycle had declined by 33.4% from the start of the
year.
Since then, we have seen a partial recovery from markets and a
strengthening of demand for our shares which, as I write to you
today, have gained 24.8%(5) from that low. The net asset value
total return performance (with debt at par) for the first half of
2020 declined by 16.5%, compared to a decline of 17.5% by the
benchmark. With a mandate to grow capital for our shareholders, we
can never be comfortable reporting such a decline. We can, and do
however, take comfort from our outperformance of the benchmark on a
year to date, one, three, five and 10 year performance metric(6)
.
The unique combination of our IPS business with our investment
portfolio, as we have noted above, provides a significant advantage
for our Investment Managers with regards to portfolio construction.
Put simply, the cash that we generate from that IPS business has
allowed James and Laura to avoid potential value traps, as other
income funds may be forced into a narrower selection of stocks to
maintain their own dividend yield. You can hear from James and
Laura in their own words later in this results statement on the
drivers behind the performance of the portfolio for the period and
their outlook on markets in these challenging economic
circumstances.
We are fortunate to have secured their expert services for a
management fee of 30 basis points. Our ongoing charges ratio is
currently 48(3) basis points compared to a sector average of 103(4)
basis points, which we believe makes the trust excellent value for
money. In light of continued market volatility, we will be
providing a daily NAV to the market from the start of August. This
is another step in our journey of increasing transparency for our
shareholders.
Independent Professional Services
DIVISION Revenue(7) Revenue(7) Growth
30 June 30 June 2019/2020
2019 2020
GBP000 GBP000 %
------------------- ---------- ---------- ----------
Pensions 5,098 5,839 14.5
Corporate Trust 4,372 4,878 11.6
Corporate Services 5,991 5,735 (4.0)
Total 15,461 16,470 6.5
----------------------- ---------- ---------- ----------
3 Calculated based on data held by Law Debenture for the year
ended 31 December 2019.
4 Source: Association of Investment Companies industry average
(excluding 3i) as a31 December 2019.
5 Based on a closing share price of 522 pence as at 29 July
2020.
6 Outperformance compares NAV total return with debt at par to
the FTSE Actuaries All-Share Index Total Return.
7 Revenue shown is net of cost of sales.
We have often talked about the advantage of our unique
structure, but it is at points like this in the cycle where that
benefit is even more pronounced. Firstly, the capital valuation of
the IPS business (which currently accounts for 17% of the net asset
value of the Group), while linked to, is not directly correlated
with markets. This provides a diversification of risk for our
investors, compared to broader market movements. Secondly, as noted
above, it allows James and Laura a genuine flexibility in portfolio
construction. Thirdly, within the IPS business, our diverse revenue
streams have afforded our shareholders a great deal of resilience
in these challenging economic circumstances.
Over the course of the first half of 2020 we have been able to
grow our revenues by 6.5% and earnings per share by 6.6% compared
to 2019. This builds on revenue growth of 9.0% and earnings per
share growth of 9.2% in 2018 and on revenue growth of 7.5% and
earnings per share growth of 8.5% in 2019. Over the past two and a
half years we have grown revenue by 20.8% and earnings per share by
22.1%. We are proud that our business has been able to deliver
these results for shareholders in such a difficult economic
environment.
.
Our Pensions business
Our Pensions business has posted its fourth year of positive
growth, with revenue increasing by 14.5% compared to the first half
of 2019. Today, we service more than 200 schemes, with oversight of
over GBP350bn of assets, providing pension benefits to more than
three million families.
The requirement for excellent governance of pension schemes is
not dependent on economic conditions. In fact, with extreme market
dislocation comes heightened risk. Covid-19 has brought many
challenges to the pensions industry, including the weakening of
employer covenants; cash constraints in large corporates to fund
deficits; and concerns around the administration of schemes and the
payment of pensions in light of remote working requirements. In
these circumstances, the focus of the management teams of the
sponsor may legitimately be elsewhere. This highlights the benefit
of our sole trustee and Pegasus offerings to take away the
administrative burden of a highly complex area. Over the past two
years, our Pegasus business, which provides outsourced pensions
executive services, has doubled the size of its' team and grown
revenue by 85%, Revenues for the first half of 2020 have more than
doubled compared to the same period in 2019.
In addition to supporting our clients on a day to day basis
through these turbulent times, we have also been providing
innovative solutions to broader strategic problems. We have been
involved in several transformational deals and industry
initiatives, including playing an instrumental role in Premier
Foods PLC's landmark agreement regarding the restructure of its
pension schemes. Cash contributions required to the schemes have
reduced by between GBP115m and GBP145m. The shares in the company
have more than doubled since the changes were announced. We have
improved the security for British Bankers' Association scheme
members (a sole corporate trustee client) through the purchase of a
GBP95 million insurance policy with FTSE 100 Aviva. Two of our
trustees were also elected to the Legal & General Mastertrust
Board and the Legal & General Investment Management's
Independent Governance Committee respectively as we continue to
develop our defined contribution offering.
Our Corporate Trust business
Our Corporate Trust business is why we came into being in 1890,
providing services to act as a bridge between the issuers and
holders of bonds. Much of this revenue is predictable and inflation
linked, which is a considerable advantage when operating under
these type of market conditions. We started 2020 with almost two
thirds of our revenue secured and inflation linked.
In addition to this structural advantage, there is a strong
degree of counter-cyclicality to this business. In times of
economic stress, we are often required to do additional work for
our clients as they seek waivers or restructure their debt. Our
post issue work has seen a 47.6% increase in revenue in the first
half of 2020. compared to the same period in the prior year. This
in turn has contributed to overall revenue growth in the Corporate
Trust business of 11.6%. Following the global financial crisis in
2008, after an initial slowdown of revenue as a result of a drying
up of debt issuance, we ultimately saw revenues recover and grow
over the following three year period This crisis has fundamentally
different characteristics, with the possibility of increased
revenue from stressed situations. That said, we must be mindful
that in some circumstances default scenarios may involve the
business incurring cost and can take years to play out.
In addition to the stability and predictability of our revenues,
despite more than 130 years in this business, we still display the
ability to innovate. We have been quick to support new clients as
countries have needed to urgently source PPE to combat the Covid-19
crisis, providing a small, but absolutely critical contribution
through our escrow services to help to solve those procurement
issues. Working with both new and existing clients in the year, we
have acted as trustee on almost GBP30bn of bonds, notes and
certificates issued in the first half of the year. This brought the
total principal value on which we act as trustee to more than
GBP900bn as at 30 June 2020.
Our Corporate Services business
Our diversified pool of businesses has served us well during
this challenging period but our Corporate Services business
suffered the greatest collective headwinds. This line of business
is made up of three distinct revenue streams being core Corporate
Services, the Safecall whistleblowing business and Service of
Process.
Our company secretarial, special purpose vehicle accounting and
administrative services offering continued to grow nicely from a
small base, with a particularly strong first quarter. We made new
hires during the period and will continue to do so to stay ahead of
demand. We are relatively small compared to the market opportunity
and are confident we can significantly increase our footprint.
Our Safecall whistleblowing business had a bright start to the
year in January and February and wins during the period included
Channel 4, Morgan Sindall and Westminster Council. On 27 January,
The House of Lords had its first reading of the Office of the
Whistleblower Bill which establishes the UK frameworks for
whistleblowing legislation. Helpful too, in the medium term, is the
European Whistleblowing Directive that comes into force in 2021.
The Directive requires all companies with over 50 employees or
EUR10m in turnover in the EU to have a whistle blowing regime in
place. These regulatory tailwinds will be supportive to our long
term growth ambitions. Equally important are the numerous examples
of the high quality work that we completed on behalf of our
existing clients during the period.
With the onset of Covid-19 in March, the growth of this business
did slow from the c.20% seen in the prior two calendar years, as
many purchasing decisions were understandably placed on hold.
Conversely, the value of our proposition to the management teams
and boards of our clients has never been clearer. Employees used
our service to raise concerns around working conditions, allowing
employers to quickly adapt to new working practices. We have
received much unsolicited praise for our work and have an increased
confidence in both the quality and value of our product. As we
start the second half of the year, new business enquiries are
returning to more normal levels. We remain optimistic regarding our
ability to grow our market share around the world.
Our service of process business is highly transactional and is
our business with the least contractual recurring revenues. Put
simply, sharp contractions in the global economy mean less deals
are signed, which in turn reduces demand for a service of process
agent. History tells us that the drop off in revenues that we saw
from March onwards is similar to the sharp drop off that we saw in
2008 at the height of the global financial crisis. History tells us
too that demand should recover well as the subsequent restructuring
phase of economic hardship gets a full head of steam. We have deep
relationships around the globe that have been built over many
decades, and remain sanguine that our opportunities will increase
as the world economy begins to recover. In the meantime we continue
to invest in the technology platform that supports this business
and in developing digital distribution channels that we believe
will differentiate our offering.
Outlook
The next six months will undoubtedly bring ongoing challenges
due to the pandemic and the UK's exit from European Union. We feel
optimistic for the rest of year and excited to see what the longer
term future will hold for your Company.
As announced previously Katie Thorpe, our Chief Financial
Officer, will be leaving us in October. Katie has made a hugely
positive contribution to our business and we wish her every
continued success in her new endeavours. I am delighted to announce
that Hester Scotton will be promoted to replace Katie as CFO. We
continue to invest in creating a platform for sustainable and
controlled growth in all of our businesses, and we have also
promoted Kelly Stobbs to the role of General Counsel.
We have listened to our investors who are seeking regular,
reliable income and have moved to a quarterly dividend cycle. We
are currently providing a dividend yield of 5%, which we have
sustained at a time of profound and widespread dividend cuts across
the wider market. Our dividend is underpinned by the diversified
and highly repeatable nature of the revenues of our professional
services business. We believe, and our track record over the past
three years demonstrates, we can continue to grow over time. We
have an excellent long term track record of outperformance versus
our benchmark and believe we are at a favorable point in the
investment cycle to identify quality companies that have been
mispriced by the market.
Despite these unprecedented challenges, our Independent
Professional Services business was able to produce a plethora of
outstanding outcomes for our clients and a positive result for our
shareholders. I suspect though, the real value creation for our
shareholders from the IPS business over last six months will be
harvested over time, as the litany of best in class experiences has
added materially to our reputation for operational excellence. We
also remain alert to any prospective acquisitions that we feel
could accelerate growth in returns for our shareholders.
This combination of factors underpins my belief that the Law
Debenture investment proposition is, in fact, stronger now than it
was at the end of last year. On behalf of the Board, I would like
to thank all of our shareholders who have trusted us with their
hard earned capital, and to reassure you that we are working
tirelessly to reward the faith you have shown in us over this
unprecedented crisis.
Denis Jackson
Chief Executive
30 July 2020
Investment manager's review
Investment approach and process
The challenges facing the global economy as a result of the
Covid-19 pandemic are well documented, albeit the longer term
implications are still uncertain. For managers looking to provide a
much needed source of income as well as a long term capital return
to shareholders, the almost unprecedented dividend cuts implemented
by companies have made the markets in 2020 particularly difficult
to navigate.
In markets such as these, the advantages of the investment trust
structure, when compared to open ended investment products, become
even more pronounced. Specifically we know the Board had the
advantage of entering this period of global uncertainty with the
strongest reserves position in the UK equity income sector(1) .
Coupled with that, we have the unique advantage of the diversified
source of revenue provided by the IPS business, which has funded
35%(2) of Law Debenture's dividends to its shareholders over the
past ten years. As a result of the continued robust nature of the
IPS revenue, we have not been forced into the value traps that may
have ensnared other income investors as they search for yield to
maintain their own dividend payments to their investors.
We have a diversified investment portfolio, which aims to be a
one-stop-shop for investors seeking quoted market exposure to
quality companies. Our overall approach of the portfolio has not
changed, either as a result of the current pandemic or the change
in sector from the AIC's Global sector to the UK Equity Income
sector, slightly over a year ago. What we believe has changed over
that same period is the opportunity set when we look at global
valuations. 2020 has continued the theme of the second half of
2019, rotating out of overseas stocks on the grounds of valuation
and rotating into UK stocks we feel have been disproportionately
penalised by the market in the current economic environment.
The majority of the portfolio, 80.3%, was in UK stocks at the
half year end, little changed from 80.7% at 31 December 2019. Of
the UK portfolio, around 55% of the portfolio is invested in the
FTSE 100, with the remainder in small and medium sized
companies.
Although our focus remains the UK, we will continue to
confidently go to other geographies for companies that do not have
a credible UK equivalent where we perceive we can add value to the
overall portfolio. This approach remains entirely consistent with
the approach we have applied historically and has not been affected
by the change in sector. Looking to the global element of the
portfolio, we have reduced our exposure to North America, primarily
as a result of the stretch in valuation levels.
Our long standing benchmark is the FTSE Actuaries All-Share
Index Total Return. The portfolio performance for the period is
discussed in more detail below.
Portfolio performance and activity
The trust's NAV fell 16.5% on a total return basis (with debt at
par) in the first half of 2020. While it is always disappointing to
see the NAV decline in absolute terms, this decline was modestly
less than the FTSE All-Share benchmark which fell 17.5% during the
same time period. We go into more detail in the portfolio
attribution section below, but predominantly the outperformance was
driven by two alternative energy names held (Ceres Power and ITM
Power), as well as holding comparatively less than the benchmark in
the oil & gas industry following a material fall in the oil
price. On a debt at fair value basis, the NAV fell 18.6%, modestly
underperforming the benchmark. This is because in an environment of
falling bond yields the fair value of the debt was revised
upwards.
The largest change in positioning year to date is that we were
sizeable net investors during the period, investing GBP33m in total
and taking the gearing at period end to 19%. The majority of this
net investment took place in March during a period of heightened
market weakness; in recent months we have been largely neutral with
buying and selling approximately matched.
Net investment during the six months was concentrated in the UK
and Continental Europe. In contrast, in North America we reduced
the exposure by GBP16m, exiting long held positions including
Microsoft and Johnson & Johnson. In both cases the positions
were sold on valuation grounds following strong performance rather
than as a result of fundamental concerns.
New positions established during the six months included Anglo
American, Marks & Spencer, Linde, Tesco, Boku and Ricardo.
There is deliberately no common theme across these additions; they
range from small to large companies, domestically focused to
international, and the impact on their businesses of Covid-19
varies widely. For example Boku, which sells mobile payments
technology, has benefitted during the period with mobile payment
volumes growing materially as consumers transitioned to spending
online. For Tesco, the effect of Covid-19 has been broadly neutral,
with higher sales largely offset by additional costs, while for
Marks & Spencer the effect has been negative as the majority of
their clothing & home sales were temporarily paused (although
the share price, in our view, more than reflects this difficult
trading period).
If there were to be a commonality across the additions to the
portfolio it would be that the majority have chosen to temporarily
suspend their dividends as a result of Covid-19. This is not a
coincidence. It has come about because, in our view, the best total
return opportunities in the market currently reside in areas that
have been most affected by the virus and have therefore chosen to
temporarily suspend payments. When these companies return to paying
dividends, and some have already signalled their desire to do so,
the prices that we have been purchasing the shares will, we think,
result in an attractive dividend yield in the future. The unique
structure of Law Debenture with the income provided by the IPS
business means that we can confidently purchase these shares that
are currently not paying a dividend, while knowing that the Trust
as a whole can still pay an attractive dividend yield to
shareholders.
Portfolio attribution
At the sector level, the largest positive contributor to returns
relative to the FTSE All-Share benchmark was oil & gas. This
splits into two distinct categories; the larger position in
alternative energy names (Ceres Power and ITM Power), which
contributed strongly to performance at both an absolute and
relative level, and the relatively smaller holding in traditional
oil & gas companies (specifically Royal Dutch Shell and BP),
which contributed positively to relative performance.
Conversely the largest detractor from returns relative to the
benchmark was the sizeable position in the industrials sector,
specifically companies exposed to civil aerospace including
Rolls-Royce and Senior. We go into those companies in more detail
in the detractors section below.
1 Source: Investec.
2 Dividends paid to shareholders between 1 July 2010 and 30 June
2020.
Top five contributors
The following five stocks produced the largest absolute
contribution for 2020:
Share price
total return Contribution
Stock (%) (GBPm)
Ceres Power 103.1 12.4
-------------- ---------------
ITM Power 275.2 6.3
-------------- ---------------
Flutter Entertainment 19.5 1.8
-------------- ---------------
Microsoft 14.5 1.4
-------------- ---------------
Cellnex Telecom
Sau 51.0 1.0
-------------- ---------------
Source: Bloomberg calendar year share price total return as at
30 June 2020.
As the need to reduce global carbon emissions becomes evident,
there is a growing interest in alternatives to fossil fuels. One
area of focus is the role that hydrogen can play in the transition
to a lower carbon economy. We have two companies exposed to the
area, Ceres Power, which designs fuel cells and licenses the
technology to partners including Bosch and Weichai, and ITM Power,
which produces electrolysers that can be used to generate hydrogen
from electricity and water (ideally 'green hydrogen' with
electricity generated from renewable energy sources). Both
companies have performed well as they move closer towards
widespread commercialisation of their technologies by forming
agreements with large partners.
ITM Power announced a joint venture with industrial gases
company Linde (also held in the portfolio), and Ceres Power
announced that Bosch would be increasing their stake in the company
and taking a seat on the Ceres Board. These partners provide
external validation of the technologies and could also accelerate
commercialisation because of the relationships and balance sheets
that they bring. In both cases following strong share price
performance we have reduced the positions.
Another strong performer during the period was Flutter
Entertainment (formerly Paddy Power Betfair), which completed the
acquisition of US company Stars Group giving them exposure to the
fast growing US gambling market. Following strong performance we
have recently taken modest profits in the position.
As noted above, we have now exited the Microsoft position on the
basis of valuation following strong performance. Cellnex, a Spanish
telecoms infrastructure business, also performed well, benefitting
from its defensive revenue streams at a time of high economic
uncertainty and also from the perception that large, incumbent
telcoms companies will continue to sell their tower assets to
specialist tower companies.
Top five detractors
The following five stocks produced the largest negative impact
on the portfolio valuation for 2020:
Share price
total return Contribution
Stock (%) (GBPm)
Royal Dutch Shell -45.3 -12.7
-------------- ---------------
Hammerson -73.4 -7.6
-------------- ---------------
Rolls Royce -60.5 -6.8
-------------- ---------------
Senior -57.9 -6.5
-------------- ---------------
Carnival -72.9 -6.0
-------------- ---------------
Source: Bloomberg calendar year share price total return as at
30 June 2020.
The largest detractor from returns on an absolute basis was
Royal Dutch Shell. The sharp fall in the oil price as a result of
falling demand (particularly in transportation) meant their ability
to generate free cash flow was substantially reduced. As a result
the Board took the (in our view logical) decision to reduce the
dividend by two thirds to a level which we now view as sustainable,
and which has the potential to grow if the oil price recovers. The
share price performance has been disappointing and (with hindsight)
the company was over-distributing. However, at the newly rebased
level the shares are still paying an approximately 4% dividend
yield and on an oil price recovery the shares could recover.
One of the main detractors from performance at the sub-sector
level has been civil aerospace, where we have three holdings
exposed materially to the supply chain; engine maker Rolls-Royce
and components manufacturers Senior and Meggitt. The sharp fall in
flying hours that will occur this year has been a seismic shock for
the aerospace industry; considerably worse in terms of the hit to
passenger miles flown than the financial crisis of 9/11. It will
likely take several years for passenger numbers to recover to 2019
levels. This backdrop creates a challenging environment for the
supply chain in terms of, for example, excess capacity that needs
to come out and likely pricing pressure from Boeing and Airbus.
However, we need to view these challenges in the context of how
weak the shares have already been, the cost savings programmes that
are being accelerated, and the other businesses that the companies
operate in (for example all three companies also operate in defence
as an end market, which is proving resilient). In our view the very
challenging end market in civil aerospace is well known and
understood, and on balance we have decided to maintain our exposure
to the area.
Also among the largest detractors were retail property owner
Hammerson and cruise ship operator Carnival, both of which had
their business models severely disrupted as a result of Covid-19.
In the case of Hammerson, the majority of their tenants had to
close stores during 'lockdown' and as a result rental receipts were
poor. This came at a time when retail property values were already
under pressure from the shift in consumer spending to online. In
our view these structural factors will persist but there will
continue to be a value for prime retail properties, such as
Bicester village (in which Hammerson own a stake) or the Bullring
in Birmingham. Cruise operator Carnival, in a similar manner to the
airline industry, had to temporarily suspend its cruises and the
timeline to re-starting in some countries (such as the US) remains
unclear. The valuation is low on a return to historic levels of
profitability, but in the short term there is a lack of
visibility.
Income
Investment income during the period fell to GBP9.1m, compared to
GBP15.1m in the first six months of 2019. This fall was a result of
widespread dividend suspensions in abroad variety of sectors
including retailers, housebuilders, industrial companies, non-life
insurers and banks. Other sectors including life insurers,
pharmaceuticals, utilities, consumer goods and alternative asset
classes (such as renewable energy) are proving more resilient, as
are the overseas holdings. As a result of the diversified nature of
the portfolio we expect the fall in investment income in 2020 to be
less than the fall in the overall market, although still
material.
Given the strength of the reserves and the contribution of the
IPS business, the Board recently announced its intention for the
2020 dividend to be at least equal to the 2019 level of 26.0p per
share (paid in quarterly instalments). We fully support this
decision and crucially do not think that it impacts the way the
portfolio has always been managed, which is to treat income as an
output and focus on growing the capital.
Outlook
There is large divergence in economic forecasts from reputable
analysts. It is not clear how consumers and corporates in aggregate
are going to behave as 'lockdown' is eased. The consumers saving
ratio has substantially risen while peacetime has never seen
government indebtedness expand faster. Companies, given the
increased cost of production as they comply with social distancing,
may use an increase in demand to raise prices while the changes to
trading patterns forced by the approach of Brexit are unclear.
We take comfort from the fact that Law Debenture's portfolio is
not a proxy for the UK economy, but rather a diverse mix of
holdings in companies with strong management teams that are well
placed to cope with adversity. It is a focus on excellence of
product or service that is the best solution in dealing with an
erratic economy. The valuation of the overall portfolio holdings is
low given their longer-term earnings prospects. This is why after
share price weakness we have increased gearing, positioning the
portfolio for a pick-up in economic activity, as confidence slowly
returns.
James Henderson and Laura Foll
Investment Managers
30 July 2020
Sector distribution of portfolio by value
30 June 2020 31 December 2019
% %
Oil and gas 10.4 9.7
------------- -----------------
Basic materials 8.6 6.4
------------- -----------------
Industrials 21.2 23.2
------------- -----------------
Consumer goods 6.0 5.2
------------- -----------------
Health care 8.6 8.9
------------- -----------------
Consumer services 9.6 10.2
------------- -----------------
Telecommunications 1.4 1.1
------------- -----------------
Utilities 4.7 4.0
------------- -----------------
Financials 27.5 28.9
------------- -----------------
Technology 2.0 2.4
------------- -----------------
Geographical distribution of portfolio by value
30 June 2020 31 December 2019
% %
United Kingdom 80.3 80.7
------------- -----------------
North America 6.7 8.3
------------- -----------------
Europe 10.2 7.8
------------- -----------------
Japan 1.2 1.1
------------- -----------------
Other Pacific 0.9 0.9
------------- -----------------
Other 0.7 1.2
------------- -----------------
Fifteen largest holdings
at 30 June 2020
Approx. Valuation Appreciation Valuation
% of Market 2019 Purchases Sales /(Depreciation) 2020
Rank Company portfolio Cap. GBP000 GBP000 GBP000 GBP000 GBP000
----- ------------------ ---------- --------- ---------- ------------ -------- ----------------- ----------
1 GlaxoSmithKline 3.91 GBP82bn 29,792 - - (2,386) 27,406
2 Ceres Power 3.09 GBP924m 12,052 - (2,869) 12,428 21,611
3 Rio Tinto 2.43 GBP57bn 16,884 - - 173 17,057
4 Royal Dutch Shell 2.18 GBP96bn 27,994 - - (12,694) 15.300
5 Relx 2.00 GBP37bn 14,288 - - (263) 14,025
6 National Grid 1.99 GBP37bn 13,307 - - 618 13,925
Herald Investment
7 Trust 1.86 GBP1bn 12,580 - - 476 13,056
8 Severn Trent 1.77 GBP6bn 12,575 - - (180) 12,395
9 Dunelm 1.75 GBP2bn 11,097 - - 340 12,247
10 Prudential 1.62 GBP32bn 13,506 - - (2,125) 11,381
11 AstraZeneca 1.49 GBP111bn 13,609 - (3,962) 789 10,436
12 HSBC 1.42 GBP78bn 15,606 - - (5,629) 9,977
13 BP 1.40 GBP62bn 15,091 - - (5,262) 9,829
Urban Logistics
14 REIT 1.33 GBP258m 9,933 - - (620) 9,313
Morgan Advanced
15 Materials 1.32 GBP688m 11,095 979 - (2,795) 9,279
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.
The assets and liabilities of the business are also consolidated
into the Group column of the statement of financial position. A
segmental analysis is provided 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 failed
to recognise the value created for the shareholder by the IPS
business. To address this, from December 2015, the NAV 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
upon historical earnings before interest, taxation, depreciation
and amortisation (EBITDA) for the second half of 2019, and the
EBIDTA for half year 2020, 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 14. In
determining a calculated basis for the fair valuation of the IPS
business, the Directors have taken external professional advice.
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 the professional valuation firm, from which the Board
selects an appropriate multiple to apply. The multiple selected for
the current year is 8.7x, which represents a discount of almost 39%
on the mean multiple across the comparable businesses.
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 2020. The valuation of the business has
increased by GBP21.6m/23.8% 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 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 relate to IPS are removed
(GBP23,179,000) and substituted with the calculation of the fair
value and surplus net assets of the business GBP112,056,000. The
fair value of the business has declined by 3.6% in light of the
impact on multiples of the Covid-19 pandemic and resulting market
instability, partially offset by the increase in EBITDA. An
adjustment of (GBP47,680,000) 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 an NAV fair value for the Group as at 30 June 2020 of
GBP642,705,000 or 543.93 pence per share:
30 June 2020 31 December 2019
GBP000 Pence GBP000 Pence
per share per share
--------------------------------------------- ----------- ----------- ----------- -----------
Net asset value (NAV) per Group statement
of financial position 609,206 515.58 775,272 655.76
--------------------------------------------- ----------- ----------- ----------- -----------
Fair valuation of IPS: EBITDA at a multiple
of 8.7x (2019: 9.2x) 102,086 86.40 105,938 89.61
Surplus net assets 9,970 8.44 16,367 13.84
Fair value of IPS business 112,056 94.84 122,305 103.45
Removal of assets already included in
NAV per financial statements (23,179) (19.62) (30,445) (25.75)
Fair value uplift for IPS business 88,877 75.22 91,860 77.70
Debt fair value adjustment (47,680) (40.36) (36,992) (31.29)
Dividend (7,698) (6.51) - -
--------------------------------------------- ----------- ----------- ----------- -----------
NAV at fair value 642,705 543.93 830,139 702.17
Group income statement
for the six months ended 30 June 2020 (unaudited)
30 June 2020 30 June 2019
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------------------- --------- ------------ ------------ ---------- --------- ---------
UK dividends 6,654 - 6,654 11,990 - 11,990
UK special dividends 458 - 458 893 - 893
Overseas dividends 1,986 - 1,986 2,131 - 2,131
Overseas special dividends - - - 85 - 85
9,098 - 9,098 15,099 - 15,099
Interest income 88 - 88 358 - 358
Independent professional
services fees 18,633 - 18,633 17,634 - 17,634
Other income 16 - 16 27 - 27
--------- ------------ ------------ ---------- --------- ---------
Total income 27,835 - 27,835 33,118 - 33,118
Net gain on investments
held at fair value
through profit or loss - (152,698) (152,698) - 62,730 62,730
----------------------------------- ------------------ ------------ ------------ ---------- --------- ---------
Total income and capital
(losses)/gains 27,835 (152,698) (124,863) 33,118 62,730 95,848
Cost of sales (2,163) - (2,163) (2,172) - (2,173)
Administrative expenses (11,943) (1,145) (13,088) (11,114) (1,166) (12,280)
--------------------------------------------
Operating profit(loss) 13,729 (153,843) (140,114) 19,831 61,564 81,395
Finance costs
Interest payable (660) (1,979) (2,639) (660) (1,979) (2,639)
Profit/(loss) before taxation 13,069 (155,822) (142,753) 19,171 59,585 78,756
Taxation (650) - (650) (642) - (642)
Profit/(loss) for the period 12,419 (155,822) (143,403) 18,529 59,585 78,114
-------------------------------------------- --------- ------------ ------------ ---------- --------- ---------
Return per ordinary share
(pence) 10.51 (131.86) (121.35) 15.68 50.42 66.10
Diluted return per ordinary
share (pence) 10.51 (131.86) (121.35) 15.68 50.42 66.10
Statement of comprehensive income
for the six months ended 30 June (unaudited)
30 June 2020 30 June 2019
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- -------- ----------- ----------- -------- -------- --------
Profit/(loss) for the period 12,419 (155,822) (143,403) 18,529 59,585 78,114
-------------------------------- -------- ----------- ----------- -------- -------- --------
Other comprehensive income
for the period - - - - - -
Foreign exchange on translation
of foreign operations - 489 489 - 12 12
Total comprehensive income
for the period 12,419 (155,333) (142,914) 18,529 59,597 78,126
-------------------------------- -------- ----------- ----------- -------- -------- --------
Group statement of financial position
Unaudited Unaudited Audited
30 June 2020 30 June 2019 31 December 2019
GBP000 GBP000 GBP000
Assets-Non-current assets
Goodwill 1,966 1,952 1,930
Property, plant and equipment 78 89 64
Right-of-use asset 5,632 - 1,057
Other intangible assets 73 135 104
Investments held at fair
value through profit or
loss 701,014 761,784 822,316
Retirement benefit asset 3,180 2,969 2.700
Total non-current assets 711,943 766,929 828,171
--------------------------------- -------------- -------------- ------------------
Assets-Current assets
Trade and other receivables 9,208 6,866 7,213
Other accrued income and
prepaid expenses 5,822 6,540 6,438
Cash and cash equivalents 25,504 86,467 71,236
--------------------------------- -------------- -------------- ------------------
Total current assets 40,534 99,873 84,887
--------------------------------- -------------- -------------- ------------------
Total assets 752,477 866,802 913,058
--------------------------------- -------------- -------------- ------------------
Current liabilities
Trade and other payables 13,376 11,525 13,010
Lease liability 240 - 730
Corporation tax payable 814 662 710
Deferred tax liability 150 - 83
Other taxation including
social security 714 656 540
Deferred income 5,417 4,719 5,625
Total current liabilities 20,711 17,562 20,698
--------------------------------- -------------- -------------- ------------------
Non-current liabilities
and deferred income
Long-term borrowings 114,179 114,135 114,157
Deferred income 2,451 3,106 2,463
Lease liability 5,803 - 350
Provision for onerous contracts 127 135 118
--------------------------------- -------------- -------------- ------------------
Total non-current liabilities 122,560 117,376 117,088
--------------------------------- -------------- -------------- ------------------
Total net assets 609,206 731,864 775,272
--------------------------------- -------------- -------------- ------------------
Equity
Called up share capital 5,922 5,919 5,921
Share premium 9,171 8,916 9,147
Own shares (1,533) (1,332) (1,332)
Capital redemption 8 8 8
Translation reserve 2,386 2,123 1,897
Capital reserves 541,297 663,018 697,119
Retained earnings 51,955 53,212 62,512
Total equity 609,206 731,864 775,272
--------------------------------- -------------- -------------- ------------------
Net Asset Value (pence)
per share 515.58 619.37 655.76
--------------------------------- -------------- -------------- ------------------
Group statement of cash flows
Unaudited Unaudited Audited
30 June 2020 30 June 2019 31 December 2019
GBP000 GBP000 GBP000
------------------------------------- -------------- ---------------- ------------------
Operating activities
Operating (loss)/profit before
interest payable and taxation (140,114) 81,395 136,638
(Losses)/gains on investments 153,843 (61,564) (97,644)
Foreign exchange (gains)/losses (26) (1) 20
Depreciation of property, plant
and equipment 21 - 1,101
Depreciation of right-of-use
assets 572 29 55
Interest on lease liability 35 - 99
Amortisation of intangible
assets 37 56 104
(Increase) in receivables (811) (713) (958)
Increase/(decrease) in payables 163 (344) 1,298
Transfer (from) capital reserves (798) (867) (1,680)
Normal pension contributions
in excess of cost (480) (469) (1,000)
Cash generated from operating
activities 12,442 17,522 38,033
Taxation (479) (168) (663)
Operating cash flow 11,963 17,354 37,370
------------------------------------- -------------- ---------------- ------------------
Investing activities
Acquisition of property, plant
and equipment (31) (17) (21)
Expenditure on intangible assets (6) (5) (23)
Purchase of investments (89,827) (70,098) (163,106)
Sale of investments 58,089 33,445 102,888
Cash flow from investing activities (31,775) (36,675) (60,262)
------------------------------------- -------------- ---------------- ------------------
Financing activities
Interest paid (2,639) (2,639) (5,277)
Dividends paid (22,976) (15,272) (23,050)
Payment of lease liability (613) - (1,777)
Proceeds of increase in share
capital 25 12 245
(Purchase) of own shares (201) (366) (366)
Net cash flow from financing
activities (26,404) (18,265) (29,625)
------------------------------------- -------------- ---------------- ------------------
Net (decrease) in cash and
cash equivalents (46,216) (37,586) (52,517)
------------------------------------- -------------- ---------------- ------------------
Cash and cash equivalents at
beginning of period 71,236 124,148 124,148
Foreign exchange gains/(losses)
on cash and cash equivalents 484 (95) (395)
Cash and cash equivalents at
end of period 25,504 86,467 71,236
------------------------------------- -------------- ---------------- ------------------
Group statement of changes in equity
Share Share Own Capital Translation Capital Retained
capital premium shares redemption reserve reserves earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- --------- --------- ---------- ------------ ------------ ------------ ----------- ------------
Balance at
1 January
2020 5,921 9,147 (1,332) 8 1,897 697,119 62,512 775,272
--------------- --------- --------- ---------- ------------ ------------ ------------ ----------- ------------
Net loss
for the
period - - - - - (155,822) 12,419 (143,403)
Foreign
exchange - - - - 489 - - 489
--------------- --------- --------- ---------- ------------ ------------ ------------ ----------- ------------
Total
comprehensive
income for
the period - - - - 489 (155,822) 12,419 (142,914)
Issue of
shares 1 24 - - - - - 25
Dividend
relating
to 2019 - - - - - - (22,976) (22,976)
Movement
in own shares - - (201) - - - - (201)
Total equity
at 30 June
2020 5,922 9,171 (1,533) 8 2,386 541,297 51,955 609,206
--------------- --------- --------- ---------- ------------ ------------ ------------ ----------- ------------
Group segmental analysis
Independent professional
Investment Portfolio services Group charges Total
---------------------------------- ------------------------------------- --------------------------- -------------------------------------
30 30 30 30 30 30 31 30 30 31
June June 31 June June 31 June June Dec June June Dec
2020 2019 Dec 2019 2020 2019 Dec 2019 2020 2019 2019 2020 2019 2019
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------- ---------- ---------- ---------- ----------- ----------- ----------- ------- ------- --------- ----------- ----------- -----------
Revenue
Segment
income 9,098 15,099 29,201 18,633 17,634 36,815 - - - 27,731 32,733 66,016
Other
income 12 21 17 4 6 3 - - - 16 27 20
Cost
of sales - - - (2,163) (2,173) (5,026) - - - (2,163) (2,173) (5,026)
Adminis-tration
costs (1,034) (865) (2,186) (10,909) (10,249) (20,536) - - (113) (11,943) (11,114) (22,835)
Release
onerous
contracts - - - - - - - - 113 - - 113
-----------------
8,076 14,255 27,032 5,565 5,218 11,256 - - - 13,641 19,473 38,288
Interest
(net) (600) (360) (822) 28 58 209 - - - (572) (302) (613)
----------------- ---------- ---------- ---------- ----------- ----------- ----------- ------- ------- --------- ----------- ----------- -----------
Return,
including
profit
on ordinary
activities
before
taxation 7,476 13,895 26,210 5,593 5,276 11,465 - - - 13,069 19,171 37,675
Taxation - - - (650) (642) (1,370) - - (50) (650) (642) (1,420)
----------------- ---------- ---------- ---------- ----------- ----------- ----------- ------- ------- --------- ----------- ----------- -----------
Return,
including
profit
attributable
to
share-holders 7,476 13,895 26,210 4,943 4,634 10,095 - - (50) 12,419 18,529 36,255
----------------- ---------- ---------- ---------- ----------- ----------- ----------- ------- ------- --------- ----------- ----------- -----------
Return
per ordinary
share
(pence) 6.33 11.76 22.18 4.18 3.92 8.54 - - (0.04) 10.51 15.68 30.68
----------------- ---------- ---------- ---------- ----------- ----------- ----------- ------- ------- --------- ----------- ----------- -----------
Assets 714,209 825,358 870,944 38,218 41,387 42,021 50 57 50 752,477 866,802 913,015
Liabilities (128,105) (123,636) (126,399) (15,039) (11,167) (11,226) (127) (135) (118) (143,271) (134,938) (137,743)
----------------- ---------- ---------- ---------- ----------- ----------- ----------- ------- ------- --------- ----------- ----------- -----------
Total
net assets 586,104 701,722 744,545 23,179 30,220 30,795 (77) (78) (68) 609,206 731,864 775,272
----------------- ---------- ---------- ---------- ----------- ----------- ----------- ------- ------- --------- ----------- ----------- -----------
The capital element of the income statement is wholly
attributable to the Investment Portfolio.
Principal risks and uncertainties
The principal risks of the Corporation relate to the investment
activities and include market price risk, foreign currency risk,
liquidity risk, interest rate risk, country/region risk and
regulatory risk. These are explained in the notes to the annual
accounts for the year ended 31 December 2019. In the view of the
board these risks are as applicable to the remaining six months of
the financial year as they were to the period under review.
Since the year end the Board has considered the risks faced by
the Corporation arising from the Covid-19 pandemic on both the
investment portfolio and the ability of the IPS business to
operate. More information on the impact is given in the half-yearly
management report and in the Investment Manager's report.
The principal risks of the IPS business arise during the course
of defaults, potential defaults and restructurings where we have
been appointed to provide services. To mitigate these risks we work
closely with our legal advisers and, where appropriate, financial
advisers, both in the set up phase to ensure that we have as many
protections as practicable, and at all other stages whether or not
there is a danger of default.
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.
Directors' responsibility statement
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU 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 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
30 July 202
Basis of preparation
The results for the period have been prepared in accordance with
International Financial Reporting Standards (IAS 34 - Interim
financial reporting).
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 2019 annual financial statements, except for those that
relate to new standards effective for the first time for periods
beginning on (or after) 1 January 2020 and will be adopted in the
2020 annual financial statements.
Notes
1. Presentation of financial information
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 2019 have been filed
with the Registrar of Companies. The independent auditor's report
on the annual report and financial statements for 2019 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.
2. Calculations of NAV and earnings per share
The calculations of NAV and earnings per share are based on:
NAV: shares at end of the period 118,159,734 (30 June 2019:
118,162,211; 31 December 2019: 118,224,400) being the total number
of shares in issue less shares acquired by the ESOT in the open
market.
Income: average shares during the period 118,169,964 (30 June
2019: 118,168,197; 31 December 2019: 118,181,082) being the
weighted average number of shares in issue after adjusting for
shares held by the ESOT.
3. Listed investments
Listed investments are all traded on active markets and as
defined by IFRS 7 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.
4. Portfolio investments
A full list of investments is included on the website each
month.
5. Half-yearly report 2020
The half-yearly report 2020 will be available on the website in
early August via the following link:
https://www.lawdebenture.com/investment-trust/shareholder-information/regulatory-financial-reporting
Registered office:
Fifth Floor, 100 Wood Street, London EC2V 7EX Telephone: 020 7606 5451
(Registered in England - No. 00030397)
LEI number - 2138006E39QX7XV6PP21
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FIFFDDVILVII
(END) Dow Jones Newswires
July 31, 2020 03:29 ET (07:29 GMT)
Law Debenture (LSE:LWDB)
Historical Stock Chart
From Jun 2024 to Jul 2024
Law Debenture (LSE:LWDB)
Historical Stock Chart
From Jul 2023 to Jul 2024
