TIDMLWDB
RNS Number : 9870G
Law Debenture Corp PLC
30 July 2021
The Law Debenture Corporation p.l.c. today published its results
for the half-year ended 30 June 2021
Group Highlights:
-- 2021 dividend to be increased from 2020 level of 27.5 pence per share
-- Dividend yield of 3.7% as quarterly dividend increased by 5.8%
-- Investment Portfolio delivered strong positive returns outperforming the benchmark
-- Independent Professional Services business (IPS) has entered
its fourth consecutive year of both revenue and earnings per share
growth.
-- 4 million new ordinary shares issued to existing and new
investors, worth c. GBP29.2 million, exceeding GBP20 million target
to refinance the acquisition of new Company Secretarial business.
We continue to issue shares when the opportunity arises to generate
value for the Trust
-- Increase in the valuation of the IPS business by 10.1% year to date to GBP149.7m.
Investment Portfolio Highlights:
-- NAV total return (with debt at par) for the six months grew
16.7% compared to 11.1% for the benchmark, FTSE Actuaries All-Share
Total Return Index
-- Material outperformance of the benchmark over one, three, five and ten years
-- Net investors in the period, investing GBP36.4m (2020:
GBP33m) to take advantage of attractive valuation opportunities
-- On-going charges remain low at 0.50%(1) compared to the industry average of 1.02%(2)
YTD 1 year 3 years 5 years 10 years
NAV total return debt at par(3) 16.7% 41.7% 27.5% 75.6% 167.5%
NAV total return debt at fair
value(3) 19.4% 46.0% 26.5% 77.1% 158.8%
Share price total return(4) 10.9% 50.0% 42.6% 85.5% 184.0%
FTSE Actuaries All-Share Index(4) 11.1% 21.5% 6.3% 36.9% 85.5%
IPS Highlights:
-- Wholly-owned independent provider of professional services,
continues to provide a diversified and repeatable revenue stream
for the dividend
-- IPS enters its fourth consecutive year of growth with
revenues increased by 18.2%(5) , Profit before tax of 6.1% and
earnings per share by 5.0%(6)
-- Acquired Company Secretarial business expected to strengthen
capabilities and offer growth opportunities
Longer Term Track Record:
-- 132 years of value creation for shareholders
-- 116% increase in the dividend over the last 10 years
-- 42 years of increasing or maintaining dividends to shareholders
-- IPS revenues funded 36%(7) of dividends for the Trust over the preceding 10 years
Robert Hingley, Chairman, commented:
"Against a challenging economic backdrop, I am pleased to report
that your company has continued to outperform its benchmark on a
one, three, five and ten year basis. In addition, our IPS business
experienced further strong financial performance. The business
provides your company with a diverse steady income stream and its
financial performance is not directly correlated with markets.
The board is committed to targeting both capital appreciation
and steadily increasing the income for our shareholders. Subject to
market conditions, our current intention is to increase the total
2021 dividend compared to the total 2020 dividend of 27.5 pence per
ordinary share. We are confident that, in the long term, the
combination of a robust equity portfolio and continued growth in
our IPS business will deliver strong NAV total returns and
attractive dividend growth."
Denis Jackson, Chief Executive Officer, commented:
"We are pleased to report another period of strong financial
performance - further outperformance by our Investment Portfolio
while our IPS business has performed strongly, with revenue up
18.2% and profit before tax up 6.1%.
I am extremely grateful to my excellent colleagues who have been
as diligent and hard working as ever during the first half of the
year. We have invested significantly in our people, bolstering our
team and widening our existing expertise, and have continued to
provide a high quality client service from our new offices in
London and Salford. We look forward to capturing the opportunities
ahead."
The Law Debenture Corporation +44 (0)20 7606 5451
Denis Jackson, Chief Executive Officer denis.jackson@lawdeb.com
Trish Houston, Chief Operating Officer trish.houston@lawdeb.com
Tulchan Communications (Financial +44 (0) 777 193 7173
PR) l awdebenture@tulchangroup.com
Simon Pilkington
Deborah Roney
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.
(1) Calculated based on data held by Law Debenture for the six
months ended 30 June 2021.
2 Source: Association of Investment Companies (AIC) industry
average (excluding 3i) as at 31 December 2020.
3 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.
4 Source: Bloomberg.
5 Calculated on revenue net of cost of sales
6 Calculated as at 30 June 2021.
7 Calculated for the 10 years ended 31 December 2020.
The Law Debenture Corporation p.l.c. and its subsidiaries
Half yearly report for the six months to 30 June 2021
(unaudited)
Financial summary 30 June 30 June 31 December
2021 2020 2020
GBP000 GBP000 GBP000
--------------------------- ------- --------- -----------
Net assets(1) 936,448 642,705 787,219
Pence Pence Pence
Net Asset Value (NAV) per
share at fair value(1,2*) 766.89 543.93 666.15
Revenue return per share
- Investment portfolio 8.48 6.33 12.12
- Independent professional
services 4.39 4.18 9.35
- Group charges -- 0.09
Group revenue return per
share 12.87 10.51 21.56
Capital return/(loss) per
share 79.92 (131.86) (19.06)
Dividends per share(3) 6.875 13.0 27.50
Share price 750.00 517.00 690.00
--------------------------- ------- --------- -----------
%% %
Ongoing charges(4*) 0.50 0.48 0.55
Gearing(*) 11 19 9
(Discount)/Premium(*) (2.2) (5.0) 3.6
* Items marked "*" are considered to be alternative performance
measures. For a description of these measures, see page 128 of the
annual report and financial statements for the year ended 31
December 2020.
(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 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) The second interim dividend is not due to be announced until
September 2021 and has not been factored in the calculation
presented. The Board have already indicated their intention to pay
three interim dividends of 6.875p with respect to 2021,
representing a quarter of the total 2020 dividend declared of
27.5p. The final dividend will be declared in February 2022.
(4) 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 portfolio. There is no performance
related element to the fee.
Half yearly management report
Introduction
At the start of Law Debenture's reporting year, the UK entered a
third lockdown. This continued the Covid-19 related disruptions to
the economy to which we had become all too accustomed in 2020.
Despite these challenges, Law Debenture delivered on both of its
objectives: producing long-term capital growth and steadily
increasing income for our shareholders.
Our Investment Managers have continued their successful
long-term record of material outperformance against our benchmark,
the FTSE Actuaries All Share Index, over one, three, five and ten
years, and drivers of their performance are covered in detail in
their report. Our IPS business entered its fourth year of growth,
with net revenue up 18.2% and profit before tax up 6.1%, all while
retaining its reputation for quality and outstanding client
outcomes.
Dividend
We are pleased to continue building on our 42-year track record
of maintaining or increasing dividends, and I am extremely proud
that we have been able to do so against a backdrop of repeated
lockdowns and ensuing economic difficulty. Although the UK dividend
outlook is looking increasingly bright, predominantly thanks to the
impact of the successful vaccine rollout, some uncertainties in
global markets do remain - Law Debenture's unique structure and
diversified pool of businesses will be as important as ever.
We recently declared a first interim dividend of 6.875 pence per
ordinary share, representing an increase of 5.8% over the prior
year's first interim dividend. This once again highlights the
benefits of IPS' stable and consistent income stream, as well as
the level of our substantial revenue reserves - a crucial feature
of investment trusts that enabled us to continue delivering for our
shareholders throughout the Covid-19 crisis.
This dividend was paid on 7 July 2021 to shareholders on the
register at close of business on 4 June 2021. Based on the current
share price, the dividend yield per Law Debenture share is 3.7%.
Since the publication of our Annual Report at the end of February
2021, we have issued 4 million new ordinary shares to existing and
new investors, worth GBP29.2 million. This exceeds the GBP20
million target to refinance the acquisition of our new company
secretarial business.
It is the Board's current intention to recommend that the total
dividend in relation to 2021 is an increase on the total 2020
dividend of 27.5p. Our shareholders will be asked to vote on the
final dividend at our AGM in April 2022.
IPS performance
The IPS businesses continue to perform well. We are pleased to
be reporting strong revenue growth and growth of PBT and EPS in
line with our objective of mid to high single digit growth.
Pensions
Following a very strong first half of 2020, I am delighted to
report that our Pensions business maintained its positive momentum
with revenue growth of 10.7% in the first six months of 2021. There
is no doubt that driven by the regulator, and much like listed
company governance, professionalism of Pensions Governance in the
UK continues to increase. Over the past thirty years, the UK listed
company governance journey has seen the publication of The Cadbury
Report in 1992; The Greenbury Report in 1995; The Hempel Report in
1995; The Combined Code in 2000; The Higgs Review in 2003; The
Walker Review in 2009; The Stewardship code in 2010; and the
revised Corporate Governance Code. Whilst the Pensions journey may
not quite match that volume of governance changes, echoes from it
will be heard; regulatory burdens will increase and the demand for
high-quality expertise to help navigate through these changes will
grow.
Our non-executive Director Trustee offering was established over
fifty years ago and is one of the largest independent providers of
Pension Trustees in the UK. It is essential that we continue to
invest in our expertise in order to stay ahead of the regulatory
changes, exceed the expectations of our clients and maintain our
leading position in this growing, competitive market. During the
first half of the year we secured additional, and highly sought
after, legal and restructuring knowledge to both broaden and deepen
the skill set our Trustee team offers. During the first half of the
year, we welcomed Paul Torsney to the business with a remit to
establish a Pensions Trustee offering in Ireland, as that market
accelerates its governance enhancements.
It is clear from the meetings that I have attended this year
that our Pensions clients place a very high value on the wealth of
knowledge and experience that a Law Debenture Trustee brings to
discussions. The combined experience of the team, across a large
client footprint, takes years to replicate and is a material
competitive advantage. As the economic impact of the pandemic was
felt, new business enquiries were understandably quiet during the
first half of 2020. However, the additions to our business
development team made during this time, have produced a strong
current pipeline of new opportunities.
Our Pension Executive offering, Pegasus, continues to
demonstrate good growth. We have welcomed Sankar Mahalingham as
Director of Pegasus. Year on year revenue growth for the first six
months was again in excess of 40%. Particularly pleasing is our
ability to win new appointments across the broadest range of our
product suite from scheme secretarial, at its simplest, through to
fully outsourced pensions management and professional sole trustee
solutions, at its most complex. The pandemic has increased the
focus of Chief Financial Officers on their cost base and the
willingness of these potential buyers to outsource critical but
non-core activities continues to grow.
Similar to our Trustee offering, we have invested in the
expertise required to support our Pension Executive business. In
particular, we have added further specialists with experience in
GMP equalisation, Buy-out and Buy-in skills to our employee roster
as demand for experienced help in these areas of specialism
continues to increase.
The Pension business is now four years into a growth journey
which so far has yielded compound annual growth of 10.1%. Momentum
and operating margins are strong. Our reputation for excellence in
execution has been further enhanced as the stresses placed on the
pensions eco system, by the pandemic, have needed to be
systematically addressed. Our success is hard earned, and we are
proud of our progress. We will continue to invest in the people and
infrastructure required to be a market leader in this growth
business.
Corporate Trust
Given the 19.5% growth recorded in our Corporate Trust business
in 2020, comparisons were always going to be tough, and our broadly
flat year on year revenues are reflective of that. Last year's
excellent performance was underpinned by robust activity in both
the capital markets and post issuance work. The impact of 21%
growth in debt issuance revenues in European Capital Markets* and a
pick up in the counter cyclical post issue work that we undertake
to act as a bridge between economically stressed issuers and their
bondholders served us well in 2020. Market conditions in the first
half of 2021 have been more subdued. Overall debt issuance revenues
in Europe (our main market) were flat in the first half of the
year*. Despite the tougher operating environment, we have
maintained market share. New appointments have included trustee
appointments of public deals for Natwest, Hammerson, Gamenet,
Santander and Telegram group.
A bi-product of the unprecedented financial support offered to
corporates around the world by central governments has been a
material reduction in the number of bankruptcies recorded during
the period. By way of example, UK Insolvency Service data shows
that UK bankruptcies have approximately halved since the onset of
the pandemic and are currently running at levels not seen since the
economic boom of the late 1980's. This data helps us to understand
why following a sharp pick up in post issuance work in the first
half of 2020 as the initial impact of the pandemic was felt, our
post issuance revenues have not continued to grow as we have
experienced in prior economic downturn and recovery cycles. We do
not wish ill on any company, but we would not be surprised to see
bankruptcies return to more normal or even elevated levels as many
of the emergency funding mechanisms provided by central governments
are gradually withdrawn. This in turn would support demand for our
expertise as issuers work their way through from covenant waivers
to default and beyond.
That said, we are not passive, and we continue to invest in the
skills necessary to grow this business. During the first half of
the year we have hired an incremental business development
headcount into our team to support Corporate Trust. This resource
is being applied across our full Corporate Trust offering and
Escrow appointments have shown strong growth in terms of number,
size of underlying transaction, and breadth of underlying
purpose.
Flat year on year revenues in any business never feel good.
Given the challenging market conditions detailed above and the
substantial growth recorded last year, we consider the results to
be satisfactory. Remember too, that approximately two thirds of the
annual revenues in our book of business is contractually secured
and that over the past three this business has produced compound
annual growth in revenues of 10.9%.
Our operating margins remain strong and we continue to enhance
our reputation for speed, innovation and deep domain expertise. We
were incorporated in 1889 to act as a bond trustee and remain
confident in our ability to produce excellent outcomes for both our
clients and our shareholders over time.
*Source: Dealogic
DIVISION Revenue(1) Revenue(1) Growth
30 June 30 June 2020/2021
2021 2020
GBP000 GBP000 %
------------------- --- ---------- ---------- ----------
Pensions 6,462 5,839 10.7%
Corporate Trust 4,937 4,878 1.2%
Corporate Services 8,069 5,753 40.3%
Total 19,468 16,470 18.2%
------------------------ ---------- ---------- ----------
(1) Revenue shown is net of cost of sales.
Corporate Services
Overall, our revenues across these businesses were up by 40.3%
year on year with a material amount of this driven by acquisition
as further detailed below.
Structured Finance Services
A very small business at present for us but one that we hope to
grow materially over time. The acquired company secretarial
business enhances our capabilities and growth opportunities in a
sector that we know well, having served clients for over twenty
years. We will look to provide an extended product suite to a
significantly expanded book of clients as we get to know and
understand them .
Experience tells us that the provision of company secretarial
services can be right at the start of corporate journey. If that
journey is more of a Special Purpose Vehicle than an operating
company, it may offer opportunities for outsourced accounting and
transaction management services, both of which we provide. This is
particularly the case in the fast growing continuum of the Private
Equity/Hedge Fund/Boutique Asset Manager industries. Structurally
long on capital and constrained on headcount, such organisations
are frequent adopters of third party services to outsource elements
of their underlying asset servicing and this has yielded a number
of such appointments in the first half of the year. We will look to
accelerate our sales pipeline as we further embed our recent
acquisition.
Service of Process
As we mentioned in our latest annual report, this is our
operating business with the least recurring amount of contractual
revenues. Whilst it seems like a long time ago now, 2020 had
actually started very brightly for this business until the pandemic
took hold. Consequently, revenues for the first two and half months
of 2021 were materially down from the equivalent period in 2020.
Happily, as global economic activity started to benefit from the
easing of Covid-19 restrictions, we ended the reporting period with
our noses in front compared to last year.
Further progress will to some degree be driven by the strength,
or otherwise, of global economic activity but again we continue to
invest in building a strong growth platform. Ten days ago we rolled
out a new technology platform to support this business that will
help to scale its operations whilst enhancing control. Whilst we
will not be abandoning our traditional distribution channels, the
truly global footprint of the product lends itself well to digital
distribution channels. Additional focus from the business
development team will ensure that we build and maintain a very high
profile with our extensive referral partner network as we hopefully
emerge from lockdown in the second half of the year.
Safecall
At the year-end we announced that after twenty-two years Graham
Long, the Co-founder and CEO of Safecall would be stepping down
from his executive responsibilities in 2021 to become the
non-executive Chairman of Safecall. We are delighted to announce
that Joanna Lewis will be joining us in August to lead this
business through the next chapters in its story.
Despite the difficult economic conditions in Europe particularly
during the first quarter, the business recorded growth for the six
months to June 2021. We added 70 new clients to the platform
including high profile organisations such as ITV, The AA and Great
Ormond Street Hospital, which underscore the breadth of appeal of
our proposition.
As well as new leadership, we continue to invest in our
operating capability. Elevated levels of cases to be handled, from
an ever-expanding client base, means that we have added additional
call handlers and operations management to the team to allow us to
maintain our differentiated high quality offering.
Corporate Secretarial Services Acquisition
The headline here for the first half of 2021 was the acquisition
of the corporate secretarial business from Konexo UK, a division of
Eversheds Sutherland (International) LLP (Eversheds), a global top
10 law practice. We completed the acquisition at 5pm on Friday 29th
January. At 9am on Monday 1st February we started our journey with
the same staff, servicing the same clients, on the same commercial
terms. It was critical to both us and Eversheds that the highest
levels of client service were maintained during the transition.
Many of the clients in the newly acquired business still remain key
clients of Eversheds' broader law firm offerings.
Five months into the acquisition, we have demonstrated that we
can continue to service existing clients well. Moreover, we have
demonstrated our ability to win business with notable new
relationships including Rio Tinto and Monzo Bank.
Corporate Centre
We are now working out of our new offices at 100 Bishopsgate,
London. This new location has been well received by both our people
and clients. We continue to invest more widely in our Corporate
Centre to support the ongoing growth of our business. We have made
investments into new Finance and HR systems and strategic hires in
Business Development, HR, Finance and IT.
The acquisition also gave us a regional footprint in the North
West and on June 23rd we opened our new office at 2 New Bailey,
Manchester. We are in the process of establishing a group shared
service centre in the office to support all of our businesses; many
of our shared group functions have already transitioned from London
to Manchester. We have also taken on our first Pensions staff in
Manchester, allowing us to accelerate delivery of a regional
offering to a considerable local client base.
We recently welcomed all of our colleagues to our new offices in
both London and Manchester when government restrictions were lifted
on July 19th.
We continuously strive to ensure our expenditure and investment
serves to bring value to our shareholders. We have recently
completed a competitive audit tender process and we are delighted
to announce our intention to appoint Deloitte LLP as our new
external auditors, subject to the completion of the engagement
process. Throughout the tender process, Deloitte demonstrated the
value they would bring to the Group as our external auditors and
will be responsible for undertaking the 2021 Group audit.
Environmental, Social and Governance (ESG)
We continue to give consideration to ESG factors across both the
investment portfolio and the IPS business. We will be enhancing our
reporting on ESG in the 2021 Annual Report.
Outlook
As we enter the second half of the year, with the UK economy on
the path to recovery, we remain confident in our ability to deliver
for our shareholders. The attractiveness of Law Debenture's unique
offering is stronger than ever and is built to weather difficult
periods.
As an important source of income for many of our shareholders,
we understand the importance they place on us to deliver regular
and reliable income. We remain focussed on continuing our unbroken
42-year track record of maintaining or raising the dividend. Our
confidence is underpinned by the diversified and repeatable nature
of the revenues of our IPS business. The cash flows from IPS allow
James and Laura increased flexibility in portfolio construction to
outperform the benchmark over time.
We remain on track with our IPS business, which continues to
follow a trajectory of sustainable growth. At Law Debenture we take
a long-term view - we build to last. As part of our growth
strategy, we are investing in growing our high-quality workforce to
support our ambitious plans, enabling us to win new business while
retaining our exceptional level of client service that is critical
to superior performance. We would like to thank our staff for their
continued hard work and focus on delivering skillfully for our
clients. As previously stated, we are always alert to opportunities
presented by acquisitions, where we believe they could accelerate
the growth in returns for our shareholders.
In today's ever-changing market landscape characterised by
emerging public health risks, geopolitical threats and inflation,
there is no shortage of difficulties for investors. We are
especially pleased with James and Laura's performance.
The Board has great confidence in your Company's future and
appreciates the enduring trust you place in us with your
capital.
Denis Jackson
Chief Executive
29 July 2021
Investment manager's report
Overview
The vaccination rollout which has allowed the economy to slowly
reopen has been a positive background for equities. The results
from companies have, in aggregate, been at the top end of investor
expectations. The forward guidance by companies has been supportive
of further upgrades in earnings projections. The relationship
between earnings upgrades and share price performance is strong. It
has been a more powerful factor in investors' minds than the
growing concerns around the pick-up in inflation and any consequent
future increases in interest rates. Therefore, in spite of concerns
around the economy it has been a good period for growth in assets
and earnings.
During the first half of the year we have been net buyers of
equities as we respond to the opportunities that have arisen. The
weighting in the banking sector, for instance, has been increased
as they are benefitting from the increased economic activity with
their provisions for bad debts proving overly cautious.
The valuation of the UK market is low in an international
context as the UK market has been out of favour with international
investors for a number of years as a result of concerns over
politics and Brexit. These concerns have receded and sterling has
stabilised, which has led to a return of investor interest. This
has not just been confined to portfolio managers but also to
corporates, where takeover activity has increased. Agreed bids for
the insurer RSA (in November 2020) and St Modwen, the property
company, have been two notable examples having a positive impact on
Law Debenture's portfolio.
Portfolio performance and activity
The first six months of 2021 were a good period for the Trust on
an absolute basis and relative to the FTSE All-Share benchmark. The
Trust's NAV (keeping debt at par) grew 16.7% in the period. This
compares with the FTSE All-Share benchmark which rose 11.1%. We go
into more details of the stock-specific drivers of performance in
the attribution section below, but broadly the Trust benefitted
from its exposure to the domestic and global economic recovery. The
industrials sector, which as at the end of the period was 23.8% of
the portfolio, was a key contributor to the outperformance. For
many of the industrial companies in the portfolio, the sales
recovery that has begun in the first half of this year has come at
a time when meaningful costs have been taken out following the
pandemic. This has led to a faster than expected earnings recovery,
a trend which we expect to continue into the second half of the
year.
During the first half of the year we were net investors,
investing GBP36.4m (net). The majority of this investment
(GBP29.7m) went into the UK, as this is where we continue to
identify the most attractive valuation opportunities. As a result
the UK remains the majority of the investment portfolio (82% as at
the end of June 2021). North America was the second largest area
for net investment (GBP6.0m), consisting predominantly of a new
position in Merck and an addition to the existing position in
Schlumberger.
New positions established in the six months included Vertu
Motors, iEnergizer, Plant Health Care, Sanofi, Glencore, Convatec
and VH Global Sustainable Energy Opportunities. There is
deliberately no common end market exposure across these holdings.
They range from small domestic companies such as Vertu Motors (a UK
motor retailer) to global pharmaceutical companies such as Sanofi.
Were there to be a common theme it is that they are market leaders
in the areas they operate in, with highly experienced management
teams that are focused on growth.
The largest sale during the period was St Modwen Properties,
which was sold in June following an increased takeover offer from
private equity. This was a trend seen elsewhere in the first half
of the year with bids received (that were rejected by the boards)
for aerospace components supplier, Senior and speciality chemicals
company, Elementis.
Other full sales during the period included British American
Tobacco, following which the portfolio has no tobacco exposure. The
regulatory outlook for traditional tobacco products and next
generation products remains unclear. Therefore despite the high
dividend yields available in the sector, in our view there are
better opportunities elsewhere. The income provided by Law
Debenture's IPS business means that the investment portfolio has
flexibility to avoid investing in high dividend yield sectors that
are not viewed as attractive total return opportunities, while
continuing to provide an attractive dividend yield to
shareholders.
Portfolio attribution
In a reversal of performance in the first half of 2020 the
industrials sector was the largest positive contributor to
performance, and three of the top five best performers seen below
are in this sector. While the overall driver of industrial
performance was the economic recovery, there were distinct end
markets behind each of the holdings. Royal Mail benefitted from
heightened ecommerce demand at a time when traditional retailers
were often closed, Senior will benefit as the civil aerospace
market recovers and Kier is benefitting from strong levels of UK
infrastructure spend (such as HS2).
Applied Materials, which designs and manufactures equipment for
the semiconductor industry, is seeing good demand as semiconductors
are increasingly used in end markets outside of technology (such as
cars and white goods). BT was a new position added in November
2020. It is our view that the fibre to the home rollout that is
currently underway will provide a visible path to earnings growth
over the next decade. Following the final regulatory outcome
announced in the first half of this year, this improved growth
profile is now beginning to be reflected in the valuation.
Top five contributors
The following five stocks produced the largest absolute
contribution to performance in the first half of 2021:
Share price Contribution
total return (GBPm)
Stock (%)
Royal Mail 71.0 7.3
-------------- -------------
Senior 69.7 5.3
-------------- -------------
Applied Materials 65.0 4.3
-------------- -------------
BT Group 46.7 4.1
-------------- -------------
Kier 96.7 3.8
-------------- -------------
Source: Bloomberg calendar year share price total return as at
30 June 2021.
Top five detractors
The following five stocks produced the largest negative impact
on portfolio valuation in the first half of 2021:
Share price Contribution
total return (GBPm)
Stock (%)
SIMEC Atlantis Energy -77.4 -2.9
-------------- -------------
Ceres Power -19.9 -2.8
-------------- -------------
Provident Financial -24.4 -1.7
-------------- -------------
AFC Energy -20.0 -1.5
-------------- -------------
Hiscox -16.3 -1.5
-------------- -------------
Source: Bloomberg calendar year share price total return as at
30 June 2021.
Three of the five largest detractors from performance this year
are in the alternative energy sector (SIMEC Atlantis Energy, Ceres
Power, AFC Energy). This sector was among the key drivers of
outperformance in 2020, and we had taken significant profits in the
area, for example reducing the Ceres Power and ITM Power positions.
It remains our view that some of the companies held could be future
leaders in large end markets such as fuel cells, but the route to
full commercialisation is unlikely to be smooth. The first half of
this year saw little material news, but there was a period of share
price consolidation following good performance last year.
Provident Financial fell as a result of customer complaints in
its home collected credit business, a division which they are
currently in the process of exiting (the costs of this exit remain
uncertain). The key driver of long-term shareholder value is their
credit card business which has grown significantly over the last
decade. Hiscox is an insurer primarily for small and medium sized
businesses that incurred large events and business interruption
insurance claims last year following the pandemic. As the pandemic
progressed (for example with further 'lockdowns' in late 2020 and
early 2021) further claims levels remained unclear and this has
remained an overhang on the shares. On a longer-term basis we
continue to view Hiscox as a good quality underwriter and the
shares trade on a lower valuation than they have historically,
therefore we supported Hiscox in a placing last year and have
continued to hold the shares.
Income
It was encouraging to see a rise in investment income during the
period, which rose to GBP11.8m from GBP9.1m in 2020. Among the key
drivers of this growth was the financial sector, particularly the
banks which totalled approximately 5% of investment income in the
period (having paid nothing in the first half of 2020 as returns to
shareholders were suspended by the regulator). The comparable
investment income figure in 2019 was GBP15.1m. Therefore income
levels have recovered from the depressed levels of 2020, but have
not yet fully recovered to pre-pandemic levels. We expect further
income growth from here, driven by a combination of earnings
recovery and dividend pay-out ratios rising. For example,
continuing to use the banks as an example, while dividends have
resumed they are currently based on low pay-out ratios and excess
capital positions remain material. Therefore there is further scope
for significant dividend growth as company boards gain confidence
in the sustainability of the economic recovery.
Outlook
The approach used for running the portfolio is to focus on
companies and how they are developing, while being mindful of their
valuation. There is, however, a need to remain aware of the
macroeconomic outlook. In the short-term, economic growth should
continue to positively surprise as activities open up. The
bottlenecks in supply will be overcome by increased capital spend,
which will in time further aid growth.
An important question is how long and persistent the pick-up in
inflation will be, and how high interest rates will need to go in
response. In the medium term there will be large costs for the
economy in the move towards decarbonisation that could create long
term inflationary pressures. It is necessary in this environment
not only to be invested in companies that have pricing power
because of the relative uniqueness of their offering, but also to
be invested in companies leading the transformation of the
economy.
The portfolio is a diverse list of holdings in businesses that
are equipped to deal and respond to rapid changes in their
operating environments. Part of the evidence for this is how well
they have coped with the events of the last eighteen months.
James Henderson and Laura Foll
Investment Managers
29 July 2021
Sector distribution of portfolio by value
30 June 2021 31 December 2020
% %
Oil and gas 10.0 11.6
------------- -----------------
Basic materials 11.0 9.3
------------- -----------------
Industrials 23.8 22.0
------------- -----------------
Consumer goods 5.9 6.2
------------- -----------------
Health care 6.5 5.2
------------- -----------------
Consumer services 7.3 8.9
------------- -----------------
Telecommunications 3.1 1.9
------------- -----------------
Utilities 3.8 4.8
------------- -----------------
Financials 26.8 28.5
------------- -----------------
Technology 1.8 1.6
------------- -----------------
Geographical distribution of portfolio by value
30 June 2021 31 December 2020
% %
United Kingdom 82.0 82.1
------------- -----------------
North America 6.7 5.4
------------- -----------------
Europe 9.5 10.1
------------- -----------------
Japan 1.1 1.1
------------- -----------------
Other Pacific 0.7 0.9
------------- -----------------
Other 0.0 0.4
------------- -----------------
Fifteen largest holdings: investment rationale
at 30 June 2021
Approx. Valuation Appreciation/ Valuation
% of Market 2020 Purchases Sales (Depreciation) 2021
Rank Company portfolio Cap. GBP000 GBP000 GBP000 GBP000 GBP000
----- -------------------- ---------- -------- ---------- ------------ --------- ---------------- ----------
1 GlaxoSmithKline 2.52 GBP72bn 22,479 - - 1,296 23,775
2 Rio Tinto 2.37 GBP76bn 20,513 - - 1,796 22,309
3 Barclays 1.96 GBP29bn 7,261 8,766 - 2,454 18,481
4 HSBC 1.92 GBP85bn 11,881 5,297 - 917 18,095
5 BP 1.91 GBP63bn 14,524 - - 3,431 17,955
Royal Dutch
6 Shell 1.86 GBP60bn 15,743 - - 1,744 17,487
7 Royal Mail 1.80 GBP6bn 10,466 - (745) 7,265 16,986
8 Accsys Technologies 1.72 GBP339m 11,131 1,372 - 3,802 16,305
Lloyds Banking
9 Group 1.48 GBP33bn 7,652 3,572 - 2,783 14,007
10 Ceres Power 1.47 GBP2bn 24,198 - (7,512) (2,800) 13,886
11 Aviva 1.45 GBP16bn 11,008 - - 2,732 13,740
Morgan Advanced
12 Materials 1.44 GBP1bn 11,974 - - 1,616 13,590
Herald Investment
13 Trust 1.38 GBP2bn 17,506 - (4,034) (392) 13,080
14 National Grid 1.37 GBP33bn 12,189 - - 787 12,976
15 Anglo American 1.37 GBP41bn 10,910 - - 2,016 12,926
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 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 failed
to recognise the value created for shareholders 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 2020, and the
EBITDA for the half year to June 2021, 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 10.1x, which represents a discount of 27% on
the mean multiple across the comparable companies to reflect the
relative size of the IPS business and the fact that it is
unlisted.
The comparable companies used, and their recent performance, is
presented in the table below:
Revenue EBITDA
LTM EV /EBITDA CAGR margin
Company 30 June 2021 2016-2020 LTM
Law Debenture IPS 10.1x 7% 44%
--------------- ----------- --------
Intertrust N.V. 10.3x 11% 32%
--------------- ----------- --------
SEI Investments Company 13.9x 2% 29%
--------------- ----------- --------
JTC PLC 19.8x 23% 27%
--------------- ----------- --------
SS&C Technologies Holdings,
Inc. 13.0x 30% 41%
--------------- ----------- --------
EQT Holdings Limited 13.8x 3% 39%
--------------- ----------- --------
Perpetual Limited 12.3x -1% 33%
--------------- ----------- --------
Source: Capital IQ.
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 2021. The valuation of the IPS business has
increased by GBP59.2m/65.5% 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
(GBP20.9m) and substituted with the calculation of the fair value
and surplus net assets of the business (GBP128.8m). The fair value
of the business has increased by 10.1% as a result of an increased
multiple and EBITDA. An adjustment of GBP41.6m 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
2021 of GBP936.4m or 766.89 pence per share:
30 June 2021 31 December 2020
Pence per Pence per
GBP000 share GBP000 share
------------------------------------ ----------- ---------- --------- ----------
Net asset value (NAV) per Group
statement of financial position 849,239 695.47 726,994 615.19
------------------------------------ ----------- ---------- --------- ----------
Fair valuation of IPS: EBITDA at
a multiple of 10.1x (2020: 8.7x) 138,017 113.03 125,349 106.07
Surplus net assets 11,696 9.58 10,605 8.97
Fair value of IPS business 149,713 122.61 135,954 115.05
Removal of assets already included
in NAV per financial statements (20,938) (17.15) (23,547) (19.93)
Fair value uplift for IPS business 128,775 105.46 112,407 95.12
Debt fair value adjustment (41,566) (34.04) (52,182) (44.16)
NAV at fair value 936,448 766.89 787,219 666.15
Group income statement
for the six months ended 30 June 2021 (unaudited)
30 June 2021 30 June 2020
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- --------- --------- --------- ---------- ----------- -----------
UK dividends 10,050 - 10,050 6,654 - 6,654
UK special dividends - - - 458 - 458
Overseas dividends 1,789 - 1,789 1,986 - 1,986
Overseas special dividends - - - - - -
-------------------------------- --------- --------- --------- ---------- ----------- -----------
Total dividend income 11,839 - 11,839 9,098 - 9,098
Interest income - - - 88 - 88
Independent professional
services fees 23,047 - 23,047 18,633 - 18,633
Other income 302 - 302 16 - 16
-------------------------------- --------- --------- --------- ---------- ----------- -----------
Total income 35,188 - 35,188 27,835 - 27,835
-------------------------------- --------- --------- --------- ---------- ----------- -----------
Net gain/(loss) on investments
held at fair value through
profit or loss - 99,170 99,170 - (152,698) (152,698)
-------------------------------- --------- --------- --------- ---------- ----------- -----------
Total income and capital
gains/(losses) 35,188 99,170 134,358 27,835 (152,698) (124,863)
-------------------------------- --------- --------- --------- ---------- ----------- -----------
Cost of sales (3,579) - (3,579) (2,163) - (2,163)
Administrative expenses (14,826) (1,105) (15,931) (11,943) (1,145) (13,088)
--------------------------------
Operating profit/(loss) 16,783 98,065 114,848 13,729 (153,843) (140,114)
Finance costs
Interest payable (660) (1,979) (2,639) (660) (1,979) (2,639)
Profit/(loss) before
taxation 16,123 96,086 112,209 13,069 (155,822) (142,753)
Taxation (650) - (650) (650) - (650)
Profit/(loss) for the
period 15,473 96,086 111,559 12,419 (155,822) (143,403)
-------------------------------- --------- --------- --------- ---------- ----------- -----------
Return per ordinary share
(pence) 12.87 79.92 92.79 10.51 (131.86) (121.35)
Diluted return per ordinary
share (pence) 12.87 79.92 92.79 10.51 (131.86) (121.35)
-------------------------------- --------- --------- --------- ---------- ----------- -----------
Statement of comprehensive income
for the six months ended 30 June 2021 (unaudited)
30 June 2021 30 June 2020
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- ------- ------- ------- ------- ---------- ----------
Profit/(loss) for the
period 15,473 96,086 111,559 12,419 (155,822) (143,403)
-------------------------------- ------- ------- ------- ------- ---------- ----------
Foreign exchange on translation
of foreign operations - (20) (20) - 489 489
Total comprehensive income
for the period 15,473 96,066 111,539 12,419 (155,333) (142,914)
-------------------------------- ------- ------- ------- ------- ---------- ----------
Group statement of financial position
Unaudited Unaudited Audited
30 June 2021 30 June 2020 31 December 2020
Non-current assets GBP000 GBP000 GBP000
--------------------------------- -------------- -------------- ------------------
Goodwill 20,122 1,966 1,914
Property, plant and equipment 2,202 78 1,088
Right-of-use asset 5,591 5,632 5,413
Other intangible assets 620 73 619
Investments held at fair
value through profit or
loss 945,471 701,014 812,297
Retirement benefit asset - 3,180 -
Deferred tax assets 771 - 771
Total non-current assets 974,777 711,943 822,102
--------------------------------- -------------- -------------- ------------------
Current assets
Trade and other receivables 12,979 9,208 16,129
Other accrued income and
prepaid expenses 9,759 5,822 6,529
Cash and cash equivalents 9,885 25,504 41,762
--------------------------------- -------------- -------------- ------------------
Total current assets 32,623 40,534 64,420
--------------------------------- -------------- -------------- ------------------
Total assets 1,007,400 752,477 886,522
--------------------------------- -------------- -------------- ------------------
Current liabilities
Trade and other payables 25,490 13,376 27,405
Lease liability 250 240 -
Corporation tax payable 763 814 238
Deferred tax liability - 150 -
Other taxation including
social security 670 714 860
Deferred income 5,305 5,417 4,367
Total current liabilities 32,478 20,711 32,870
--------------------------------- -------------- -------------- ------------------
Non-current liabilities
and deferred income
--------------------------------- -------------- -------------- ------------------
Long-term borrowings 114,214 114,179 114,201
Deferred income 3,234 2,451 4,011
Lease liability 5,881 5,803 5,606
Retirement benefit liability 2,354 - 2,840
Provision for onerous contracts - 127 -
--------------------------------- -------------- -------------- ------------------
Total non-current liabilities 125,683 122,560 126,658
--------------------------------- -------------- -------------- ------------------
Total net assets 849,239 609,206 726,994
--------------------------------- -------------- -------------- ------------------
Equity
Called up share capital 6,123 5,922 5,923
Share premium 38,346 9,171 9,277
Own shares (2,003) (1,533) (1,461)
Capital redemption 8 8 8
Translation reserve 1,982 2,386 2,002
Capital reserves 770,677 541,297 674,591
Retained earnings 34,106 51,955 36,654
Total equity 849,239 609,206 726,994
--------------------------------- -------------- -------------- ------------------
Net Asset Value (pence)
per share 695.47 515.58 615.19
--------------------------------- -------------- -------------- ------------------
Group statement of cash flows
Unaudited Unaudited Audited
30 June 2021 30 June 2020 31 December 2020
GBP000 GBP000 GBP000
---------------------------------------- -------------- -------------- ------------------
Operating activities
Operating profit/(loss) before
interest payable and taxation 114,848 (140,114) 9,406
(Gains)/losses on investments (98,066) 153,843 18,570
Foreign exchange (gains)/losses - (26) 19
Depreciation of property, plant
and equipment 181 21 37
Depreciation of right-of-use
assets 354 572 1,179
Interest on lease liability 257 35 49
Amortisation of intangible assets - 37 59
Loss on sale of fixed assets - - (15)
(Increase)/decrease) in receivables (80) (811) (9,007)
(Decrease)/increase in payables (1,931) 163 14,926
Transfer from capital reserves (800) (798) (1,341)
Normal pension contributions
in excess of cost (486) (480) (960)
---------------------------------------- -------------- -------------- ------------------
Cash generated from operating
activities 14,277 12,442 32,922
---------------------------------------- -------------- -------------- ------------------
Taxation (125) (479) (1,103)
Operating cash flow 14,152 11,963 31,819
---------------------------------------- -------------- -------------- ------------------
Investing activities
Acquisition of property, plant
and equipment (1,295) (31) (1,079)
Expenditure on intangible assets (1) (6) (574)
Purchase of investments (112,370) (89,827) (173,831)
Sale of investments 77,980 58,089 166,908
Acquisition of subsidiary undertakings (18,208) - -
Cash flow from investing activities (53,894) (31,775) (8,576)
---------------------------------------- -------------- -------------- ------------------
Financing activities
Interest paid (2,639) (2,639) (5,278)
Dividends paid (18,021) (22,976) (46,071)
Payment of lease liability (212) (613) (1,163)
Proceeds of increase in share
capital 29,269 25 132
Purchase of own shares (542) (201) (129)
Net cash flow from financing
activities 7,855 (26,404) (52,509)
---------------------------------------- -------------- -------------- ------------------
Net decrease in cash and cash
equivalents (31,887) (46,216) (29,266)
---------------------------------------- -------------- -------------- ------------------
Cash and cash equivalents at
beginning of period 41,762 71,236 71,236
Foreign exchange gains/(losses)
on cash and cash equivalents 10 484 (208)
Cash and cash equivalents at
end of period 9,885 25,504 41,762
---------------------------------------- -------------- -------------- ------------------
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 2021 5,923 9,277 (1,461) 8 2,002 674,591 36,654 726,994
--------------------- --------- --------- -------- ------------ ------------ ---------- ---------- ---------
Net gain for
the period - - - - - 96,086 15,473 111,559
Foreign exchange - - - - (20) - - (20)
--------------------- --------- --------- -------- ------------ ------------ ---------- ---------- ---------
Total comprehensive
income for
the period - - - - (20) 96,086 15,473 111,539
Issue of shares 200 29,069 - - - - - 29,269
Movement in
own shares - - (542) - - - - (542)
Dividend relating
to 2020 - - - - - - (9,614) (9,614)
Dividend relating
to 2021 - - - - - - (8,407) (8,407)
Total equity
at 30 June
2021 6,123 38,346 (2,003) 8 1,982 770,677 34,106 849,239
--------------------- --------- --------- -------- ------------ ------------ ---------- ---------- ---------
Group segmental analysis
Independent Professional
Investment Portfolio Services Group charges Total
----------------------------------- --------------------------------- --------------------------- ------------------------------------
30 30 30 30 30
June 30 31 June June 31 June June 31 30 30 31
2021 June 2020 Dec 2020 2021 2020 Dec 2020 2021 2020 Dec 2020 June 2021 June 2020 Dec 2020
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- ---------- ----------- ---------- --------- ---------- ---------- ------- ------- --------- ----------- ----------- ----------
Revenue
Segment income 11,839 9,098 17,937 23,047 18,633 38,898 - - - 34,886 27,731 56,835
Other income 299 12 213 3 4 6 - - - 302 16 219
Cost of sales - - - (3,579) (2,163) (4,405) - - - (3,579) (2,163) (4,405)
Administration
costs (1,289) (1,034) (2,570) (13,537) (10,909) (22,301) - - (8) (14,826) (11,943) (24,879)
Release of
onerous
contracts - - - - - - - - 118 - - 118
----------------
10,849 8,076 15,580 5,934 5,565 12,198 - - 110 16,783 13,641 27,888
Interest
payable
(net) (660) (600) (1,260) - 28 29 - - - (660) (572) (1,231)
---------------- ---------- ----------- ---------- --------- ---------- ---------- ------- ------- --------- ----------- ----------- ----------
Return,
including
profit on
ordinary
activities
before
taxation 10,189 7,476 14,320 5,934 5,593 12,227 - - 110 16,123 13,069 26,657
Taxation - - - (650) (650) (1,178) - - - (650) (650) (1,178)
---------------- ---------- ----------- ---------- --------- ---------- ---------- ------- ------- --------- ----------- ----------- ----------
Return,
including
profit
attributable
to
shareholders 10,189 7,476 14,320 5,284 4,943 11,049 - - 110 15,473 12,419 25,479
---------------- ---------- ----------- ---------- --------- ---------- ---------- ------- ------- --------- ----------- ----------- ----------
Return per
ordinary
share (pence) 8.48 6.33 12.12 4.39 4.18 9.35 - - 0.09 12.87 10.51 21.56
---------------- ---------- ----------- ---------- --------- ---------- ---------- ------- ------- --------- ----------- ----------- ----------
Assets 952,257 714,209 850,255 55,122 38,218 36,246 21 50 21 1,007,400 752,477 886,522
Liabilities (123,977) (128,105) (146,992) (34,184) (15,039) (12,536) - (127) - (158,161) (143,271) (159,528)
---------------- ---------- ----------- ---------- --------- ---------- ---------- ------- ------- --------- ----------- ----------- ----------
Total net
assets 828,280 586,104 703,263 20,938 23,179 23,710 21 (77) 21 849,239 609,206 726,994
---------------- ---------- ----------- ---------- --------- ---------- ---------- ------- ------- --------- ----------- ----------- ----------
The capital element of the income statement is wholly
attributable to the investment portfolio.
Principal risks and uncertainties
The principal risks of the Company relate to the investment
activities and include market price risk, foreign currency risk,
liquidity risk, interest rate risk, credit risk, country/region
risk and regulatory risk. These are explained in the notes to the
annual accounts for the year ended 31 December 2020. 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 continued to consider 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 above in the half
yearly management report and 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 for the year ended 31 December
2020.
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 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 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
29 July 2021
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 2020 annual financial statements, except for those that
relate to new standards effective for the first time for periods
beginning on (or after) 1 January 2021, and will be adopted in the
2021 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 2020 have been filed
with the Registrar of Companies. The independent auditor's report
on the annual report and financial statements for 2020 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 122,109,313 (30 June 2020:
118,159,734; 31 December 2020: 118,173,664) being the total number
of shares in issue less shares acquired by the ESOT in the open
market.
Income: average shares during the period 120,226,033 (30 June
2020: 118,169,964; 31 December 2020: 118,171,875) 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 2021
The half yearly report 2021 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
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END
IR FLFLDDEIAFIL
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