Final Results
Preliminary announcement of final results for the year ended
31 December 2006(audited)
The directors recommend a final dividend of 7.10p per share making a total for
the year of 10.50p. Subject to the approval of shareholders, the final dividend
will be paid on 25 April 2007 to holders on the register on the record date of 16
March 2007. The preliminary statement has been prepared in accordance with
International Financial Reporting Standards.
Group income statement
for the year ended 31 December
2006 2005
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 '000
UK dividends 9,805 - 9,805 9,213 - 9,213
UK Special 19 - 19 135 - 135
dividends
Overseas dividends 1,499 - 1,499 1,442 - 1,442
Overseas special 11 - 11 13 - 13
dividends
Interest from 146 - 146 138 - 138
securities
11,480 - 11,480 10,941 - 10,941
Bank deposit 2,474 - 2,474 1,068 - 1,068
interest
Trustee and other 26,741 - 26,741 23,556 - 23,556
related fees
Other income 144 - 144 107 - 107
Total revenue 40,839 - 40,839 35,672 - 35,672
Net gain on - 48,128 48,128 - 64,339 64,339
investments held at
fair value through
profit or loss
Gross income and 40,839 48,128 88,967 35,672 64,339 100,011
capital gains
Cost of sales (8,465) - (8,465) (7,342) - (7,342)
Administrative (13,523) (179) (13,702) (12,682) (297) (12,979)
expenses
Operating profit 18,851 47,949 66,800 15,648 64,042 79,690
Finance costs
Interest payable (2,458) - (2,458) (2,471) - (2,471)
Profit before 16,393 47,949 64,342 13,177 64,042 77,219
taxation
Taxation (2,129) - (2,129) (1,404) - (1,404)
Profit for year 14,264 47,949 62,213 11,773 64,042 75,815
Return per ordinary 12.18 40.95 53.13 10.05 54.67 64.72
share (pence)
Diluted return per 12.14 40.82 52.96 10.05 54.67 64.72
ordinary share
(pence)
Statement of total recognised income and expense
for the year ended 31 December
Revenue Capital Total Revenue Capital Total
2006 2006 2006 2005 2005 2005
£000 £000 £000 £000 £000 £000
Return for the financial 14,264 47,949 62,213 11,773 64,042 75,815
year
Foreign exchange (303) - (303) 250 - 250
Pension actuarial gains/ 3,119 - 3,119 20 - 20
(losses)
Taxation on pensions (936) - (936) (6) - (6)
Total incomeand expense 16,144 47,949 64,093 12,037 64,042 76,079
relating to the year
Financial summary
Highlights
31 December 31 December Change
2006 2005 %
pence pence
Share price 349.00 288.75 20.9
NAV per share 328.17 283.98 15.6
after proposed dividend
Earnings per share
- investment trust 7.07 5.73 23.4
- trustee and related 5.11 4.32 18.3
services
Group earnings per share 12.18 10.05 21.2
Dividends per share 10.50 9.05 16.0
Performance
2006 2005
% %
Share price 20.9 24.2
NAV total return 19.3 28.5
FTSE Actuaries All-Share 16.8 22.0
Index total return
Chairman's statement
Performance
Over the year to 31 December 2006, our net asset value total return was 19.3%
compared to a total return of 16.8% for the FTSE Actuaries All-Share Index.
Our gross revenue increased over the year by 14.5% from £35.7 million to £40.8
million. Profit attributable to shareholders was £14.3 million, an increase of
21.2% over the previous year, as a result of a 23.4% improvement in the
investment trust and an 18.2% improvement in trustee and related services.
Improved company dividends and reduced net interest payable have increased the
return from the investment trust and all our trustee related services
businesses have performed well.
Earnings and dividends
Earnings per share for the year to 31 December 2006 were 12.18p, an increase of
21.2% from the previous year. The board is recommending a final dividend of
7.10p per ordinary share (2005: 5.95p), which, together with the interim
dividend of 3.40p (2005: 3.10p) gives a total dividend of 10.50p (2005: 9.05),
an increase of 16.0%. The final dividend will be paid, subject to shareholder
approval, on 25 April 2007 to holders on the register at the record date of 16
March 2007. The policy of the company continues to be to seek growth in both
capital and income.
Investment trust
Our portfolio has been managed throughout the year by James Henderson, who has
an independent, value based approach to investment. During the year the total
return of the portfolio was 17.5%, ahead of the FTSE Actuaries All-Share Index.
We continue to select investments on the basis of what appears most attractive
in the conditions of the time. We will not pay unrealistically high prices but
hope to be able to buy growth shares on reasonable terms. We do not feel
obliged to hold shares in any particular type of company or industry or market,
but seek to find the best value. We aim to achieve a better return than the
Index by good stock picking. We believe that, in the long term, returns on
equities will exceed the cost of our long term borrowing. Our policy is to
assume only a level of gearing which we believe balances risk with the
objective of increasing the return to shareholders. However, during the year we
found it increasingly difficult to find value in global equities and the
gearing was reduced. We ended the year in a net cash position.
Growth in the global economy has been reasonably strong, with favourable
implications for company profits and stock markets. Higher energy and commodity
prices did not create the inflationary pressures that might have been expected
and company profits continued to improve.
In the UK, many companies have been benefiting from economic growth and
dividend growth has been strong.
Trustee and related services
Our trustee and related services business increased revenue by 13.1% and
underlying profit before tax by 20.3%. Most areas of the business have seen
continued growth.
The commercial trust division had a busy year and a number of high profile
appointments. Our pension trustee business has seen growth from new and
existing relationships and expects the Pensions Act 2004 to continue to provide
further opportunities. Corporate services continue to grow significantly and we
opened an office in Wilmington, Delaware to increase market share and add new
products and services in the US. Service of process is benefiting from the
links between London, New York, Delaware and Hong Kong. The New York corporate
trust business has achieved significant growth and continues to develop its
business in niche markets. Hong Kong has had a busy year as a result of the
high level of acquisition activity in China. Channel Islands developed its
position as an independent provider of trustee and corporate services.
The deficit of our defined benefit pension scheme has reduced during the year
as a result of: a special contribution of £1,615,000; a one-off contribution to
profit of £403,000 as a result of a change made to the benefits last year; and
£3,119,000 as a result of changes to discount rates and investment returns.
Staff
The trustee and related services businesses performed strongly during the year
and made a significant contribution to our income. Their success is dependent
upon the professionalism and commitment of our people, whom I should like to
thank for their hard work during the year.
Douglas McDougall
Group Balance sheet
as at 31 December
Group
2006 2005
£000 £000
Assets
Non current assets
Property, plant and equipment 694 739
Intangible assets 67 113
Investments held at fair value 365,114 380,747
through profit or loss
Other assets - 5
Deferred tax assets 705 2,106
Total non current assets 366,580 383,710
Current assets
Trade and other receivables 12,009 7,716
Other accrued income and prepaid 2,751 2,419
expenses
Other current assets - 46
Cash and cash equivalents 74,555 19,295
Total current assets 89,315 29,476
Total assets 455,895 413,186
Current liabilities
Trade and other payables 9,541 8,260
Short term borrowings 34 5,696
Corporation tax payable 848 548
Other taxation including social 430 433
security
Deferred income 4,026 4,326
Total current liabilities 14,879 19,263
Non current liabilities
Long term borrowings 39,257 39,230
Retirement benefit obligations 1,073 6,443
Deferred income 8,041 8,626
Total non current liabilities 48,371 54,299
Total net assets 392,645 339,624
Equity
Called up share capital 5,886 5,882
Share premium 7,410 7,231
Capital redemption 8 8
Shared based payments 167 114
Own shares (1,326) (963)
Capital reserves 357,024 309,075
Retained earnings 23,706 18,204
Foreign exchange reserve (230) 73
Total equity shareholders' funds 392,645 339,624
Group cash flow statement
for the year ended 31 December
2006 2005
Operating activities £000 £000
Cash generated from operating activities 13,794 14,948
Taxation (1,199) (1,315)
Interest paid (2,458) (2,471)
Pension special contribution (1,615) (885)
- -
Operating cash flow 8,522 10,277
Investing activities
Capital expenditure (114) (46)
Expenditure on intangible assets (9) (4)
Purchase of investments (35,038) (71,592)
Sale of investments 98,967 59,508
Sale of property, plant and equipment 22 37
Cash flow from investing activities 63,828 (12,097)
Financing activities
Dividends paid (10,945) (9,196)
Proceeds of increase in share capital 183 212
Purchase of own shares (363) (36)
Net cash flow from financing activities (11,125) (9,020)
Net (increase/(decrease)in cash and cash 61,225 (10,840)
equivalents
Cash and cash equivalents at beginning of 13,599 24,189
period
Exchange (losses) / gains on cash and cash (303) 250
equivalents
Cash and cash equivalents at end of period 74,521 13,599
Cash and cash equivalents comprise
Cash and cash equivalents at beginning of 74,555 19,295
period
Bank loans and overdrafts (34) (5,696)
74,521 13,599
Segmental Analysis
Investment trust Trustee services Total
2006 2005 2006 2005 2006 2005
£000 £000 £000 £000 £000 £000
Segment revenue 11,480 10,941 26,741 23,556 38,221 34,497
Other income 30 61 114 46 144 107
Cost of sales - - (8,465) (7,342) (8,465) (7,342)
Administration costs (1,804) (1,684) (11,719) (10,998) (13,523) (12,682)
9,706 9,318 6,671 5,262 16,377 14,580
Interest (net) (1,260) (2,411) 1,276 1,008 16 (1,403)
Return, including profit 8,446 6,907 7,947 6,270 16,393 13,177
on
ordinary activities
before taxation
Taxation (168) (197) (1,961) (1,207) (2,129) (1,404)
Return, including profit 8,278 6,710 5,986 5,063 14,264 11,773
attributable to
shareholders
Return per ordinary share 7.07 5.73 5.11 4.32 12.18 10.05
Assets 430,343 384,362 25,552 28,824 455,895 413,186
Liabilities (46,795) (55,579) (16,455) (17,983) (63,250) (73,562)
Total net assets 383,548 328,783 9,097 10,841 392,645 339,624
Changes in geographical distribution
Valuation Purchases Sales Appreciation/ Investments
31 £000 Proceeds (depreciation) 31 December
December
£000 £000 2006
2005
£000
£000
United Kingdom 273,882 26,568 (71,623) 39,298 268,125
North America 23,866 623 (21,643) (1,938) 908
Europe 37,709 7,708 (5,701) 8,993 48,709
Japan 19,633 - - (1,423) 18,210
Other Pacific 25,657 - - 3,505 29,162
380,747 34,899 (98,967) 48,435 365,114
This preliminary announcement does not comprise statutory accounts within the
meaning of Section 240 of the Companies Act 1985. The statutory accounts for
the year ended 31 December 2006 will be filed with the Registrar of Companies
in due course together with the auditors' report thereon. The information for
the year ended 31 December 2005 is an extract from the statutory accounts to
that date, which has been filed with the Registrar of Companies. Those accounts
included an audit report which was unqualified and which did not contain a
statement under section 237(2) or (3) of the Companies Act 1985.
By order of the board
Law Debenture Corporate Services Limited
Secretary
27 February 2007
Copies of the annual report will be available from the Corporation's registered
office.
The Law Debenture Corporation p.l.c. www.lawdeb.com
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