Interim Results
PRELIMINARY ANNOUNCEMENT OF INTERIM RESULTS
FOR THE SIX MONTHS TO 30 JUNE 2005 (unaudited)
The Directors recommend an interim dividend of 3.10p on the ordinary shares for
the six months to 30 June 2005. The unaudited results for the period were as
follows:
International Financial Reporting Standards (IFRS)
The results for the period have been prepared in accordance with IFRS and the
prior periods have been restated to reflect these changes in accordance with
IFRS 1, First Time Adoption of IFRS. Details of the changes on the transition
are included in our separate document which will be sent to all shareholders
and on our website at : www.lawdeb.com.
Group income statement
For the period ended 30 June 2005 (unaudited)
Six months to Six months to
30 June 2005 30 June 2004
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
UK dividends 4,909 - 4,909 4,404 - 4,404
UK special dividends 135 - 135 25 - 25
Overseas dividends 983 - 983 1,039 - 1,039
Overseas special dividends 458 - 458 - - -
Interest from securities 52 - 52 168 - 168
6,537 - 6,537 5,636 - 5,636
Bank deposit interest 542 - 542 211 - 211
Trustee and other related 11,279 - 11,279 9,626* - 9,626*
fees
Other income 63 - 63 66 - 66
Total revenue 18,421 - 18,421 15,539 - 15,539
Net gain on investments - 21,461 21,461 - 6,896 6,896
held at fair value through
the profit or loss account
Gross income and capital 18,421 21,461 39,882 15,539 6,896 22,435
gains
Cost of sales (3,365) - (3,365) (2,275)* - (2,275)*
Administrative expenses (6,491) (133) (6,624) (6,285) (94) (6,379)
Operating profit 8,565 21,328 29,893 6,979 6,802 13,781
Finance costs
Interest payable (1,226) - (1,226) (1,225) - (1,225)
Profit before taxation 7,339 21,328 28,667 5,754 6,802 12,556
Taxation (733) - (733) (514) - (514)
Profit for period 6,606 21,328 27,934 5,240 6,802 12,042
Earnings per ordinary 5.64 18.21 23.85 4.47 5.81 10.28
share (pence)
Diluted earnings per 5.63 18.21 23.84 4.47 5.81 10.28
Ordinary share (pence)
* Restated to include legal expenses as turnover and cost of sales
From its origins in 1889 Law Debenture has diversified to become a group with a
unique range of activities in the financial services sector. The group divides
into two distinct complementary areas of business.
Investment trust
We are a global growth investment trust listed on the London Stock Exchange.
Our portfolio of investments are managed by Henderson Global Investors Limited
under a contract terminable by either side on 12 months' notice.
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 through investing in a portfolio diversified
both geographically and by industry.
Trustee and related services
We are a leading independent provider of professional trustee, fiduciary and
related services (including corporate services and agent for service of
process) to the wholesale markets and to occupational pension schemes. We have
offices in London, New York, the Channel Islands and the Cayman Islands.
Individuals, companies, agencies and organisations throughout the world rely
upon Law Debenture to carry out its duties with the independence upon which its
reputation is built.
Financial summary of The Law Debenture Corporation p.l.c.
Highlights
At At At
30 June 30 June 31 December
2005 2004 2004
pence pence pence
Share price 262.50 210.00 232.50
NAV per share 251.90 212.73 232.85
NAV per share after proposed 248.80 209.93 228.10
dividend
Earnings per share
- Investment trust 3.77 2.95 5.06
- Trustee and related services 1.87 1.52 3.51
Group earnings per share 5.64 4.47 8.57
Dividends per share 3.10 2.80 7.55
Performance to 30 June 2005
6 months 12 months
% %
Share price 12.9 25.0
NAV total return 10.2 22.0
FTSE All-Share Index total return 8.2 18.7
Management Commentary
Performance
Over the six months to 30 June 2005, our net asset value total return was 10.2%
compared to the FTSE Actuaries All-Share Index total return of 8.2%.
Our gross revenues increased over the prior half year by 18.5% from £15.5
million to £18.4 million. Profit before taxation was £7.3 million, an increase
over the previous period of 27.5% as a result of a 28.0% improvement in the
investment trust and a 26.9% improvement in trustee and related services. The
investment trust benefited from special dividends of £593,000 and trustee and
service related businesses continued the improved performance of the second
half of 2004. Interest received increased by £331,000 over the previous half
year as a result of a reduction in gearing in the investment trust and
increased interest rates.
Earnings and dividends
Earnings per ordinary share for the six months to 30 June 2005 were 5.64p, an
increase of 26.2%, a rate of increase which is unlikely to be sustained over
the full year. The policy of the company continues to be to seek growth in both
capital and income; and the board has declared an interim dividend of 3.10p
which is an increase of 10.7% over the previous interim dividend of 2.80p.
The dividend is payable on 13 September 2005 to shareholders on the register on
12 August 2005. Barring unforeseen circumstances, directors expect to recommend
that the final dividend will at least equal that paid in respect of 2004.
Investment manager's report
During the period, global equity markets made sustained progress in spite of
continued difficulties on several fronts. The oil price has continued its
upward movement and with it has brought concerns over inflation as well as
industrial slowdown. The US trade and fiscal deficits remain substantial.
Nevertheless, global equity investors have focused on the strengths of the
underlying companies. Corporate cash generation is substantial. Share owners
are benefiting from large share buyback programmes and increased commitments to
real dividend growth. In the UK, dividends have increased by approximately 8%
over the last year. This is expected to continue next year and underpins our
confidence in this area. The cash generation from companies is also resulting
in a flow of takeover activity. The portfolio benefited from Aggregates
Industries and Mersey Docks receiving bid approaches.
The overseas portfolio is intended to provide exposure to areas of investment
with attractive features which cannot easily be found in the UK.
Trustee and related services
Trustee and related services increased revenue by 17.0% as a result of
increased activity in company restructurings and continued growth in most other
areas of the business.
Law Debenture continues to be involved in a wide variety of capital markets
transactions, from the successful restructuring in January of the British
Energy bonds (where Law Debenture acts as both trustee and, through our Jersey
office as distribution agent) to a number of capital raising exercises for
issuers such as Euroclear Bank, NIB Capital, and the Swedish utility,
Vattenfall. Stand alone issues for UK financial institutions included Clerical
Medical, Friends Provident and Lloyds TSB. We have also acted as administrator
on perpetual bond issues by UK registered limited partnerships for Bank of
Ireland, DEPFA Bank, Investec and Lehman Brothers.
There has been continued activity, including court cases during the year, in
connection with bonds issued by a finance subsidiary of the Polish industrial
conglomerate, Elektrim S.A., for which Law Debenture is trustee. It is
anticipated that there will be further activity in 2005 on this and certain
other matters. In all cases, we work closely with our legal advisers to
endeavour to protect the interests of the bondholders. Although the trustee is
legally entitled to recover its costs, we are not always able to do so.
Our corporate services business is now well established. It continues to win
appointments primarily in the structured finance market place and is performing
ahead of our expectations.
Our pension trustee business has had a strong flow of enquiries in the current
year resulting in a number of new appointments. The establishment of the new
Pensions Regulator is likely to raise awareness of the responsibilities of
pension trustees and lead to an increase in the demand for professional pension
trustee services.
Our New York office has had a good six months. Corporate services has shown a
significant improvement over the previous period and improved name recognition
in the trustee market has resulted in several appointments to high yield
corporate transactions in South America and Europe.
The Hong Kong market continues to see rising levels of activity, buoyed by the
improving stock and property markets, and better business confidence.
Group income statement
For the period ended 30 June 2005 (unaudited)
Six months to Six months to
30 June 2005 30 June 2004
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
UK dividends 4,909 - 4,909 4,404 - 4,404
UK special dividends 135 - 135 25 - 25
Overseas dividends 983 - 983 1,039 - 1,039
Overseas special dividends 458 - 458 - - -
Interest from securities 52 - 52 168 - 168
Total 6,537 - 6,537 5,636 - 5,636
Bank deposit interest 542 - 542 211 - 211
Trustee and other related 11,279 - 11,279 9,626* - 9,626*
fees
Other income 63 - 63 66 - 66
Total Revenue 18,421 - 18,421 15,539 - 15,539
Net gain on investments - 21,461 21,461 - 6,896 6,896
held at fair value through
the profit or loss account
Gross Income & capital 18,421 21,461 39,882 15,539 6,896 22,435
gains
Cost of sales (3,365) - (3,365) (2,275)* - (2,275)*
Administrative expenses (6491) (133) (6,624) (6,285) (94) (6,379)
Operating profit 8,565 21,328 29,893 6,979 6,802 13,781
Finance Costs
Interest payable (1,226) - (1,226) (1,225) - (1,225)
Profit before taxation 7,339 21,328 28,667 5,754 6,802 12,556
Taxation (733) - (733) (514) - (514)
Profit for period 6,606 21,328 27,934 5,240 6,802 12,042
Earnings per ordinary 5.64 18.21 23.85 4.47 5.81 10.28
share (pence)
Diluted earnings per 5.63 18.21 23.84 4.47 5.81 10.28
ordinary share (pence)
* Restated to include legal expenses as turnover and cost of sales
Statement of total recognised income and expense
For the period ended 30 June 2005 (unaudited)
Six months to Six months to
30 June 2005 30 June 2004
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Profit for the financial 6,606 21,328 27,934 5,240 6,802 12,042
period
Foreign exchange gains 27 - 27 - - -
Total income and expenses 6,663 21,328 27,961 5,240 6,802 12,042
relating to the period
Balance sheet
Group net assets
30 June 30 June 2004 31 December
2005 2004
(unaudited)
(unaudited) (audited)
£'000
£'000 £'000
Assets
Non current assets
Property, plant and equipment 808 926 855
Intangible assets 147 272 193
Investments held at fair value 330,380 284,661 304,100
through profit or loss
Other Assets 5 7 7
Deferred tax assets 2,208 1,684 2,239
Total non current assets 333,548 287,550 307,394
Current assets
Trade and other receivables 6,835 5,870 5,624
Other accrued income and prepaid 2,549 2,652 1,680
expenses
Other current assets 10 55 49
Cash and cash equivalents 20,002 18,116 24,333
29,396 26,693 31,686
Total assets 362,944 314,243 339,080
Current liabilities
Trade and other payables 7,346 5,580 5,667
Short term borrowings 144 139 144
Current tax payable 778 722 898
Deferred income 4,508 4,474 4,240
Total current liabilities 12,776 10,915 10,949
Non current liabilities and
deferred income
Long term borrowings 39,216 39,191 39,204
Retirement benefit obligations 7,348 5,613 7,348
Deferred tax - 74 47
Deferred income 8,537 9,516 9,018
Total non current liabilities 55,101 54,394 55,617
Total net assets 295,067 248,934 272,514
Notes
1. These are not statutory accounts in terms of section 240 of the Companies
Act and are unaudited . The figures and financial information for the year
ended 31 December 2004 have been extracted from the 2004 report and accounts
(as adjusted under IFRS), which have been filed with the Registrar of
Companies. Those accounts included an unqualified auditors' report and did not
contain a statement under Section 237 of the Companies Act 1985.
2. The calculations of NAV and earnings per share are based on:
NAV: actual shares in issue at period end 117,134,669 (2004: 117,018,396)
Revenue: average shares in issue during the period 117,119,556 (2004:
117,097,964)
Group cash flow statement
For the six months ended 30 June 2005 (unaudited)
30 June 31 December 30 June
2004
2005 2004
£'000 £'000 £'000
Operating activities
Cash generated from operating 7,900 14,412 7,400
activities
Taxation (726) (236) 31
Interest paid (1,226) (2,456) (1,224)
Operating cash flow 5,948 11,720 6,207
Investing activities
Capital expenditure (19) (37) (23)
Expenditure on intangible assets (4) (20) (13)
Purchase of investments (29,144) (49,917) (23,844)
Sale of investments 24,269 56,444 26,197
Other movements - 1 -
Cash flow from investing activities (4,898) 6,471 2,317
Financing activities
Dividends paid (5,571) (8,238) (4,961)
Proceeds of increase in share capital 199 507 508
Purchase of own shares (36) (360) (360)
Net cash flow from financing (5,408) (8,091) (4,813)
activities
Net increase/(decrease) in cash and (4,358) 10,100 3.711
cash equivalents
Cash and cash equivalents at 24,189 14,266 14,266
beginning of period
Exchange gains / (losses) on cash and 27 (177) -
cash equivalents
Cash and cash equivalents at end of 19,858 24,189 17,977
period
Cash and cash equivalents comprise
Cash and cash equivalents at end of 20,002 24,333 18,116
period
Bank overdrafts (144) (144) (139)
19,858 24,189 17,977
Statement of changes in equity
Share Share Share Own Capital Foreign Other Retained Total
capital premium based shares redemption exchange reserves earnings 2005
payment
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 5,875 7,026 63 (927) 8 (177) 245,033 15,613 272,514
January 2005
Net profit - - - - - - 21,328 6,606 27,934
Foreign exchange - - - - - 27 - - 27
Total income and 5,875 7,026 63 (927) 8 (150) 266,361 22,219 300,475
expenditure
Issue of shares 6 193 - - - - - - 199
Dividend relating - - - - - - - (5,571) (5,571)
to 2004
Movement in own - - - (36) - - - - (36)
shares
Total equity 5,881 7,219 63 (963) 8 (150) 266,361 16,648 295,067
shareholders' funds
at 30 June 2005
Segmental analysis
Investment trust Trustee and related Total
services
30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec 30 Jun 30 Jun 31 Dec
2005 2004 2004 2005 2004 2004 2005 2004 2004
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Segment revenue 6,537 5,636 10,015 11,342 9,692* 19,892* 17,879 15,328* 29,907*
Cost of sales - - - (3,365) (2,275)* (4,983)* (3,365) (2,275)*(4,983)*
Administration (868) (723) (1,487) (5,623) (5,562) (10,449) (6,491) (6,285) (11,936)
costs
5,669 4,913 8,528 2,354 1,855 4,460 8,023 6,768 12,988
Interest (net) (1,107) (1,348) (2,450) 423 334 640 (684) (1,014) (1,810)
Profit for the 4,562 3,565 6,078 2,777 2,189 5,100 7,339 5,754 11,178
period before
taxation
Taxation (143) (116) (153) (590) (398) (995) (733) (514) (1,148)
Profit for the 4,419 3,449 5,925 2,187 1,791 4,105 6,606 5,240 10,030
period
Earnings per share 3.77 2.95 5.06 1.87 1.52 3.51 5.64 4.47 8.57
* Restated to include legal expenses as turnover and cost of sales.
Analysis of the investment portfolio
by geographical location
United North Europe Japan Pacific Total
Kingdom America £'000 £'000 £'000 £'000
£'000 £'000
Investments at 31 223,569 18,942 32,797 9,367 19,425 304,100
December 2004
Purchases 16,832 8,765 3,547 - - 29,144
Cost of acquisition (108) (16) (9) - - (133)
Sales proceeds (10,106) (5,638) (8,419) - (106) (24,269)
Appreciation 15,072 1,390 2,817 78 2,181 21,538
Valuation at 30 June 245,259 23,443 30,733 9,445 21,500 330,380
2005
Per cent of total 74.2 7.1 9.3 2.9 6.5 100.0
By Sector
(excluding cash)
As at As at
30 June 31 December
2005 2004
Resources 12.3 11.5
Basic industries 7.4 8.3
General industrials 5.3 6.0
Cyclical consumer goods 1.3 0.4
Non-cyclical consumer goods 14.9 15.4
Cyclical services 15.8 15.4
Non-cyclical services 5.6 4.7
Utilities 3.4 3.2
Information technology 1.0 0.7
Financials 33.0 34.4
100.0 100.0
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