Half-year Report

RNS Number : 7923V
Law Debenture Corp PLC
26 July 2018
 

Law Debenture

 

The Law Debenture Corporation p.l.c. today published its results for the half-year ended 30 June 2018. 

Investment Trust Highlights:

·     NAV total return for the six months was 4.7%, compared to 1.7% returned by the benchmark FTSE All Share Index

·     The trust has consistently outperformed its benchmark, with outperformance on a six month, one, five and ten year metric

·     The trust currently yields 3% which is one of the higher yields in the sector

·     On-going charges remain low at 0.43% compared to a sector average of 1.36%

·     The UK remained the central focus of the portfolio, key contributors included GKN, Senior and Rolls Royce

Independent Professional Services (IPS) Highlights:

·     Leading wholly owned independent provider of professional services, a key differentiator to other investment trusts

·     New CEO leading a strengthened senior management team, with a clear mandate to grow profitability while maintaining the unique brand and reputation of Law Debenture

·     Strengthened team has delivered a top line revenue increase of 12.7% (net of cost of sales) and profit after tax of 10.7% on prior period. We believe there is more we can do to drive shareholder value from these businesses in the coming years.

 Dividends:

·     Following approval at the AGM, a final dividend for 2017 of 11.8 pence per share was paid in April 2018

·     The Corporation attaches considerable importance to the dividend, which it aims to increase annually

·     The Board declared an interim dividend of 6.0 pence per share, an increase of 9.1% on prior year

·     This higher dividend has been supported by stronger performance from the IPS business

Commenting, Robert Hingley, Chairman, said:

"I am pleased with the progress we have seen from our IPS businesses over the period.  Driving increased revenues while controlling costs has supported payment to our shareholders of a dividend that is 9.1% higher than prior year.   Our investment trust has consistently outperformed its benchmark, with outperformance on a six month, one, five and ten year metric.  We continue to work hard to drive shareholder value across our unique business."

Commenting, Denis Jackson, Chief Executive Officer, said:

"I took over the mantle of Chief Executive at the start of this year with a clear mandate to drive growth across our IPS businesses. I am delighted with the response from our business heads and their teams who have achieved a 12.7% growth in income (net of cost of sales) and a 10.7% growth in profit compared to this time last year.   We have made a positive start, but I believe there is much more we can do to drive shareholder value from these businesses in the coming years."

Contact Information

 

 

Denis Jackson

Katie Thorpe

Chief Executive Officer

Chief Financial Officer

Email: denis.jackson@lawdeb.com

Email: katie.thorpe@lawdeb.com

Tel: +44 (0) 207 606 5451

Tel: +44 (0) 207 606 5451

 

 

 

The Law Debenture Corporation p.l.c. and its subsidiaries

Half yearly report for the six months to 30 June 2018 (unaudited)

 

The directors recommend an interim dividend of 6.0p on the ordinary shares for the six months to 30 June 2018. The report including the unaudited results for the period was as follows:

 

Group summary

We are a global investment trust and a leading provider of independent professional services.

 

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 divides into two distinct areas of business.

 

Investment trust

 

Our portfolio of investments is managed by James Henderson 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 through investing in a portfolio diversified both geographically and by industry.

 

 

Independent professional services

 

We are a leading provider of independent professional services. Our activities are corporate trusts, pension trusts, corporate services (including agent for service of process), whistle blowing services and governance services. We have offices in the UK, Cayman Islands, Channel Islands, Delaware, Dublin, Hong Kong and New York.

 

Companies, agencies, organisations and individuals throughout the world rely upon Law Debenture to carry out its duties with the independence and professionalism upon which its reputation is built.

 

 

Performance to 30 June 2018

 

 

6 months

     1 year

     5 years

  10 years

 

%

%

%

  %

NAV total return 1

4.7

10.3

70.2

168.8

FTSE Actuaries All-Share Index total return

1.7

       9.0

       52.8

111.2

Share price total return 1

      (3.3)

7.3

44.1

  203.0

 

 1 Net Asset Value at fair value calculated in accordance with AIC methodology, based on performance data held by Law Debenture.

 

 

 

 

 

30 June

2018

 

 

 

%

Ongoing charges 2

 

 

0.43

Gearing 2

 

 

5

 

 

 

 

 

  Ongoing charges are stated as at 31 December 2017 and are based on the costs of the investment trust, including

 the Janus Henderson Investors management fee of 0.30% of NAV for the investment trust. There is no performance element related to the fee.

 

2  Source: AIC

* Managed under a contract terminable by either side on six months' notice.

 

  

Financial summary 

 

30 June

2018

30 June

2017

31 December

2017

 

pence

pence

pence

 

Net revenue return per share:

- Investment trust

8.28

8.11

11.61

- Independent professional services

3.60

3.26

9.93

Group charges

-

-

 0.12

Group net revenue return per share

11.88

11.37

21.66

Capital return per share

4.78

39.49

67.10

Dividends per share

6.00

5.50

           17.30

Share price

596.00

572.00

629.00

NAV per share at fair value 1

688.29

641.10

669.53

 

%

%

%

(Discount)

(13.4)

(10.8)

(6.1)

 

1 Net Asset Value at fair value calculated in accordance with AIC methodology, based on performance data held by Law Debenture

   including fair value of the IPS business and long term borrowings.

 

NAV per share

 

30 June

2018

30 June

2017

31 December

2017

 

pence

pence

pence

NAV per share per financial statements

638.21

599.96

633.28

Fair value adjustment for IPS

70.08

65.99

61.57

Debt fair value adjustment

     (20.00)

   (24.85)

(25.32)

NAV per share as disclosed with debt at fair value

688.29

641.10

669.53

 

 

 

Fair valuation of the independent professional services businesses

 

The fair valuation of the independent professional services businesses (IPS) is based upon the historic earnings before interest, taxation, depreciation and amortisation (EBITDA), an appropriate multiple and the surplus net assets of the business at their underlying fair value. The multiple applied in valuing the IPS is from comparable companies sourced from market data, with appropriate adjustments to reflect the difference between the comparable companies and the IPS in respect of growth, margin, size and liquidity.

 

 

 

 

30 June

2018

30 June

2017

31 December

2017

 

£000

£000

£000

EBITDA at a multiple of 8.4

(30 June 2017: 8.3; 31 December 2017: 7.9)

87,696

82,004

77,396

Surplus net assets

22,800

16,730

17,176

 

110,496

98,734

94,572

 

An increase or decrease of 1 in the multiple would give rise to a £10.4 million change in the fair valuation of the IPS. The adjustment to NAV to reflect the IPS fair value is an increase of 70.08p per share (30 June 2017: 65.99p; 31 December 2017: 61.57p).

 

Half yearly management report

 

Performance

 

Our Net Asset Value total return for the six months to 30 June 2018 was 4.7%, compared to a total return of 1.7% for the FTSE Actuaries All-Share Index. Net revenue per share was 11.88p, 4.5% higher than the corresponding period last year (2017: 11.37p).

 

Dividend

 

The board has declared an interim dividend of 6.0p (2017: 5.5p). The dividend will be paid on 7 September 2018 to holders on the record date of 10 August 2018. The current expectation of the directors is that the final dividend will be at least maintained.

 

Investment trust review

 

Although the first six months of the year was one of significant change in the global economic environment, it did not fundamentally alter the picture regarding equities. The potential for equity market disruption from the onset of a trade war between the US and other countries, combined with a rise in the US bond yield, were countered by a pick-up in US economic activity which drove better corporate operating performance and margin growth. The result has been strong earnings and cash generation.

 

At a stock level the biggest contributor was GKN which was purchased by Melrose. Two other aerospace related stocks, Senior and Rolls Royce, were also large contributors. The aerospace industry in the UK is an area of excellence. It should continue to be a good investment area as the number of miles flown globally is growing at over twice the level of the increase in GDP. However, the proceeds from the GKN takeover have not yet been directed back into this segment as we monitor the potential impact of Brexit.

 

The detractors included Cummins, the US diesel engine manufacturer, which had been a strong contributor last year but subsequently suffered some share price weakness this year as investor concerns rose over the effect of tariffs between the US and China.

 

During the period under review we continued to look for opportunities to refresh the portfolio and remain on the lookout for new investments. As an example we undertook to support the capital raising for Ceres Power, a fuel cell company that may be on the cusp of achieving substantial orders after its joint venture tie up with a major Chinese bus maker.

 

 

Investment trust outlook

 

Although companies have achieved strong earnings growth, valuations have drifted lower. Dividends produced by equities continue to grow substantially faster than inflation. The yield on the portfolio is running at a higher level than the yield on gilts. This could mean a small increase in investor confidence will lead to a strong upward movement in share prices as investors reallocate back to UK equities, which are currently unpopular with investors. Concerns remain about the health of the economy, but, with our investment in a collection of good dynamic businesses, we believe in aggregate they can find a way to prosper going forward. We do not believe this is reflected in valuations and for this reason, we have been a net buyer of equities, with gearing moving up a modest amount to 5% at the period end.

 

Independent professional services review

 

Our wholly owned IPS businesses are leading providers of independent professional services, providing Law Debenture with a key differentiator to other investment trusts. As indicated in the 2017 annual report, our new CEO is leading a strengthened senior management team, with a clear mandate to grow profitability, while maintaining the unique brand and reputation of Law Debenture.

 

This strengthened team has delivered a topline revenue increase of 12.7% (net of cost of sales) and profit after tax has increased by 10.7% compared to the prior period. We are pleased that this increase in profitability has supported an increase in dividend payment to our shareholders of 9.1% compared to the prior period.

 

The fair value of our IPS businesses has increased by 17% over the first half of this year, which reflects a combination of higher market multiples for relevant comparators and improved profitability. We believe there is more we can do to drive shareholder value from these businesses in the coming years.

 

                                                                                    Group income statement

                                                                                    for the six months ended 30 June (unaudited)

 

 

 

                               30 June 2018

30 June 2017

 

 

 

 

 

 

 

 

 Revenue

        £000

Capital

£000

 Total

  £000

 Revenue

  £000

     Capital

£000

 Total

     £000

UK dividends

10,618

-

10,618

10,135

-

10,135

UK special  dividends

669

-

669

743

-

743

Overseas dividends                                                                 

2,251

-

2,251

2,537

-

2,537

Overseas special dividends

90

-

90

50

-

50

 

13,628

-

13,628

13,465

-

13,465

Interest income

165

-

165

47

-

47

Independent professional services fees

16,010

 

-

16,010

14,669

 

-

14,669

Other income

69

-

69

220

-

220

 

Total income

29,872

 

-

29,872

28,401

 

-

28,401

Net gain on investments held

at fair value through profit or loss

-

5,939

5,939

-

46,828

46,828

Gross income and capital gains

 29,872

5,939

35,811

 28,401

46,828

75,229

Cost of sales

(1,548)

-

(1,548)

(1,838)

-

(1,838)

Administrative expenses

(11,321)

   (289)

(11,610)

(10,287)

   (178)

(10,465)

Operating profit

17,003

5,650

22,653

16,276

46,650

62,926

Finance costs

 

 

 

 

 

 

Interest payable

 (2,386)

-

(2,386)

 (2,322)

-

(2,322)

Profit before taxation

14,617

5,650

20,267

13,954

46,650

60,604

Taxation

    (578)

-

   (578)

     (521)

-

   (521)

 

 

 

 

 

 

 

Profit for  period

  14,039

5,650

19,689

  13,433

46,650

60,083

Return per ordinary share (pence)

  11.88

 4.78

16.66

  11.37

 39.49

  50.86

Diluted return per ordinary

share (pence)

  11.88

 4.78

16.66

  11.37

 39.49

  50.86

 

 

 

                                           Statement of comprehensive income

                                                       for the six months ended 30 June (unaudited)

 

 

                            30 June 2018

                              30 June 2017

 

Revenue

£000

Capital

£000

Total

£000

Revenue

£000

Capital

£000

Total

£000

 

 

 

 

 

 

 

 

 

Profit for the period

 

 

  14,039

 

 

5,650

 

 

19,689

 

 

  13,433

 

 

46,650

 

 

60,083

Foreign exchange on translation of  foreign operations

-

136

136

-

(119)

(119)

Total comprehensive income for the period

    14,039

5,786

19,825

    13,433

46,531

59,964

 

 

  

                                                       Group statement of financial position

 

 

30 June 2018

(unaudited)

    £000

30 June 2017

(unaudited)

  £000

31 December 2017

(audited)

£000

 

 

 

 

Assets

 

 

 

Non current assets

 

 

 

Goodwill

1,932

1,941

1,920

Property, plant and equipment

99

136

129

Other intangible assets

154

145

161

Investments held at fair value through profit or loss

771,982

735,791

735,872

Retirement benefit asset

754

-

300

Deferred tax assets

639

1,076

614

Total non current assets

775,560

739,089

738,996

Current assets

 

 

 

Trade and other receivables

5,335

6,910

6,417

Other accrued income and prepaid expenses

6,892

6,068

5,003

Derivative financial instruments

-

1,017

-

Cash and cash equivalents

105,247

94,462

134,011

Total current assets

117,474

108,457

145,431

Total assets

893,034

847,546

884,427

Liabilities

 

 

 

Current liabilities

 

 

 

Trade and other payables

11,629

11,534

11,649

Corporation tax payable

456

23

-

Other taxation including social security

800

597

570

Deferred income

3,978

3,871

3,942

Derivative financial instruments

3,021

-

299

Total current liabilities

19,884

16,025

16,460

Non current liabilities and deferred income

 

 

 

Long term borrowings

114,090

114,046

114,068

Retirement benefit obligations

-

1,863

-

Deferred income

3,811

4,199

3,974

Provision for onerous contracts

1,128

2,551

1,667

Total non current liabilities

119,029

122,659

119,709

Total net assets

754,121

708,862

748,258

Equity

 

 

 

Called up share capital

5,918

5,918

5,918

Share premium

8,790

8,753

8,787

Own shares

(1,056)

(1,034)

(1,033)

Capital redemption

8

8

8

Translation reserve

1,797

2,037

1,661

Capital reserves

693,994

655,727

688,344

Retained earnings

44,670

37,453

44,573

Total equity 

754,121

708,862

748,258

   

 

                                                                        Group statement of cash flows

 

 

 

 

 

 

30 June

2018 (unaudited)

30 June

2017 (unaudited)

      31 December

2017

(audited)

 

£000

£000

£000

Operating activities

 

 

 

Operating profit before interest payable and taxation

22,653

62,926

111,037

(Gains) on investments

(5,650)

(46,650)

(79,267)

(Profit) on sale of unlisted investment

-

-

(3,275)

Foreign exchange  (gains)

(12)

(11)

(13)

Depreciation of property, plant and equipment

51

49

101

Amortisation of intangible assets

41

21

61

(Increase) in receivables

(807)

(1,695)

(137)

Increase/(decrease) in payables

105

(1,659)

(2,000)

Transfer from capital reserves

(114)

(40)

(142)

Normal pension contributions in excess of cost

(454)

(437)

(800)

Cash generated from operating activities

15,813

12,504

25,565

Taxation

(147)

(262)

(1,035)

 

 

 

 

Operating cash flow

15,666

12,242

24,530

 

 

 

 

Investing activities

 

 

 

Acquisition of property, plant and equipment

(21)

(27)

(74)

Expenditure on intangible assets

(34)

(96)

(149)

Purchase of investments

(66,829)

(38,385)

(80,356)

Sale of investments

36,529

45,442

120,089

Sale of unlisted investment

-

-

3,318

Cash flow from investing activities

(30,355)

6,934

        42,828

 

 

 

 

Financing activities

 

 

 

Derivative financial instrument

1,812

(1,148)

1,698

Interest paid

(2,925)

(2,888)

(5,916)

Dividends paid

(13,942)

(13,582)

(20,081)

Proceeds of increase in share capital

3

32

  66

Purchase of own shares

(23)

163

164

Net cash flow from financing activities

(15,075)

(17,423)

(24,069)

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

(29,764)

1,753

43,289

 

 

 

 

Cash and cash equivalents at beginning of period

134,011

94,804

94,804

Foreign exchange gains/(losses) on cash and cash equivalents

1,000

(2,095)

(4,082)

Cash and cash equivalents at  end of period

105,247

94,462

134,011

 

 

 

 

Cash and cash equivalents comprise

 

 

 

 

 

 

 

Cash and cash equivalents 

105,247

94,462

134,011

 

 

 

 

 

 

 

 

 

  

                                                             Group statement of changes in equity

 

 

 

 

 

 

 

 

 

 

 

Share capital

Share premium

     Own           shares

Capital redemption

Translation reserve

Capital reserves

Retained earnings

Total

 

£000

£000

£000

£000

    £000

£000

£000

£000

 

 

 

 

 

 

 

 

 

Balance at 1 January 2018

5,918

8,787

 

1,033)

 

8

 

       1,661

 

688,344

 

44,573

 

748,258

Profit

-

-

-

-

         -

5,650

14,039

19,689

Foreign exchange

-

-

 

-

 

-

           

136

 

-

 

-

 

136

Total comprehensive income for the period

           -

 

                -

 

         

 

 -

 

              

 

  -

 

    

    

 136

 

 

 

5,650

 

 

 

14,039

 

 

 

 19,825

-

3

-

-

-

-

-

3

Movement in own shares

-

-

 

(23)

 

-

 

       -

 

-

 

-

 

(23)

Dividend relating to 2017

-

-

 

-

 

-

    

   -

 

-

(13,942)

(13,942)

Total equity at 30 June 2018

5,918

8,790

(1,056)

8

  1,797

693,994

44,670

754,121

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group segmental analysis

 

 

 

Investment trust

Independent professional services

 

Group charges

                    

                               Total

 

30 June 2018

30 June 2017

31 Dec 2017

30 June 2018

30 June 2017

31 Dec 2017

30 June 2018

30 June 2017

31 Dec 2017

30 June

2018

30 June

 2017

31 Dec

2017

     

       £000

£000

£000

£000

£000

       £000

£000

£000

       £000

£000

£000

£000

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment income

13,628

13,465

21,463

16,012

14,669

31,021

-

-

-

29,640

28,134

52,484

Net gain on investments

-

-

-

 

-

 

-

 

3,275

 

-

 

-

 

-

 

-

 

-

 

3,275

Other income

67

95

 

2

 

157

 

249

 

-

 

-

 

-

 

69

 

220

 

344

Cost of sales

-

-

 

(1,548)

 

(1,838)

 

(3,875)

 

-

 

-

 

-

 

(1,548)

 

(1,838)

 

(3,875)

Administration costs

 

(1,665)

 

(1,661)

 

(3,274)

 

(9,658)

 

(8,626)

 

(17,658)

 

-

 

-

 

-

 

(11,323)

 

(10,287)

 

(20,842)

Release onerous contracts

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

245

 

-

 

-

 

245

 

12,030

18,284

4,808

4,362

13,102

-

-

   245

16,838

16,229

31,631

Interest (net)

(2,249)

(4,561)

28

5

(85)

-

-

-

(2,221)

(2,275)

(4,646)

Return, including profit on ordinary activities before taxation

9,781

9,587

         13,723

 

 

 

4,836

 

 

 

4,367

 

 

 

13,017

 

 

 

-

 

 

 

-

 

 

 

245

 

 

 

14,617

 

 

 

13,954

 

 

 

26,985

Taxation

-

-

-

 

(578)

 

(521)

 

(1,287)

 

-

 

-

 

(104)

 

(578)

 

(521)

 

(1,391)

Return, including profit attributable to shareholders

 

9,781

 

9,587

 

13,723

 

4,258

 

3,846

 

11,730

 

-

 

-

 

141

 

14,039

 

13,433

 

25,594

 

Revenue return per ordinary share (pence)

 

 

8.28

 

 

8.11

 

 

11.61

 

 

3.60

 

 

3.26

 

 

9.93

 

 

-

 

 

-

 

 

0.12

 

 

11.88

 

 

11.37

 

 

21.66

Assets

821,211

784,123

816,595

 

71,596

 

63,070

 

67,613

 

227

 

353

 

227

 

893,034

 

847,546

 

884,435

Liabilities

(93,876)

(96,025)

(90,152)

(43,909)

(40,108)

(44,358)

(1,128)

(2,551)

(1,667)

(138,913)

(138,684)

(136,177)

Total net assets

727,335

688,098

726,443

27,687

22,962

23,255

(901)

(2,198)

(1,440)

754,121

708,862

748,258

 

 

 

 

 

 

 

 

 

 

 

 

 

The capital element of the income statement is wholly attributable to the investment trust.

 

 

 

Analysis of the investment portfolio

By geographical location

 

 

 

 

 

 

 

 

 

 

 

 

 

Valuation

31 December 2017

£000

 

 

Purchases

£000

      

Costs of acquisition

£000

 

Sales proceeds

£000

 

  Appreciation

/(depreciation)

£000

Valuation 30 June 2018

£000

 

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United Kingdom

 

532,923

 47,621

 (213)

(27,051)

11,023

564,303

 73.1

North America

 

68,796

 -

 - 

(698)

(1,009)

 67,089

 8.7

Europe

 

61,119

19,208

(30)

(6,136)

(3,010)

 71,151

 9.2

Japan

 

15,484

 -  

 -  

-

(95)

 15,389

 2.0

Other Pacific

39,618

 -

-

 (2,644)

 (73)

36,901

 4.8

 

Other

 

17,932

 

 -

 

 -

 

 -  

 

(783)

 

 17,149

 

 2.2

 

 

735,872

 

66,829

 

 (243)

 

(36,529)

 

 6,053

 

771,982

 

100.0

 

 

 

 

By sector (excluding cash)

 

 

 

                  As at

              30 June

                   2018

As at

31 December

2017

 

%

%

Oil & gas

 11.0

9.4

Basic materials

 6.9

7.1

Industrials

 25.5

28.2

Consumer goods

 3.8

5.9

Health care

 8.2

7.5

Consumer services

 8.3

8.5

Telecommunications

 1.4

1.2

Utilities

 3.3

1.5

Financials

 28.6

28.8

Technology

 3.0

1.9

 

100.0

100.0

 

 

Investment portfolio valuation

as at 30 June 2018

 

 

 

 

 

UK unless otherwise stated.

 

 

Holdings in italics were acquired since 31 December 2017

 

 

 

 

 £000

 %

Oil & gas

 

 

Oil & gas producers

 

 

Royal Dutch Shell

 33,919

 4.39

BP

 18,506

 2.40

Indus Gas

 5,697

 0.74

Tullow Oil

 4,898

 0.63

Gibson Energy (Can)

 4,662

 0.60

Total (Fra)

 2,503

 0.32

Premier Oil

 1,606

 0.21

Providence Resources

 366

 0.05

 

72,157

  9.34

 

 

 

Oil equipment & services & distribution

 

 

 

Ceres Power

 5,160

 0.67

Schlumberger (USA)

 4,062

 0.53

Velocys

 1,931

 0.25

National Oilwell Varco (USA)

 1,643

 0.21

Now (USA)

 126

 0.02

 

  12,922

 1.68

 

 

 

Total oil & gas

  85,079

 11.02

 

 

 

 

 

 

Basic materials

 

 

Chemicals

 

 

Croda

 8,114

 1.05

Elementis

 5,353

 0.69

Koninklijke DSM (Net)

 2,086

 0.27

Linde (Ger)

 1,811

 0.23

Brenntag (Ger)

 1,446

 0.19

Carclo

 1,001

 0.13

 

  19,811

 2.56

 

 

 

Forestry & paper

 

 

Mondi

  8,196

1.06

 

  8,196

  1.06

 

 

 

Mining

 

 

Rio Tinto

 15,752

 2.04

BHP Billiton

 9,381

 1.22

 

 25,133

 3.26

 

 

 

Total basic materials

  53,140

 6.88

 

 

 

 

 

 

Industrials

 

 

Construction & materials

 

 

Marshalls

 7,772

 1.01

Ibstock

 5,808

 0.75

Balfour Beatty

 5,713

 0.74

Accsys Technologies

 5,535

 0.72

Geberit (Swi)

 2,197

 0.28

Assa Abloy (Swe)

 1,837

 0.24

 

 28,862

 3.74

 

 

 

 

Aerospace & defence

 

 

Senior

 17,431

 2.26

Rolls Royce

 16,305

 2.11

BAE Systems

 11,642

 1.51

Embraer (Bra)

 6,474

 0.84

Meggitt

 4,933

 0.64

 

 56,785

 7.36

 

 

 

General industrials

 

 

Smith (DS)

 11,527

 1.49

 

 11,527

 1.49

 

 

 

Electronic & electrical equipment

 

Spectris

 11,088

 1.44

Morgan Advanced Materials

 9,786

 1.27

TT Electronics

 3,516

 0.46

Legrand (Fra)

 1,996

 0.26

 

 26,386

 3.43

 

 

 

Industrial engineering

 

 

Hill & Smith

 8,652

 1.12

Caterpillar (USA)

 7,193

 0.93

Cummins (USA)

 6,044

 0.78

IMI

 4,948

 0.64

Deere (USA)

 4,134

 0.54

Weir Group

 4,000

 0.52

Renold

 1,757

 0.23

Severfield

 715

 0.09

 

 37,443

 4.85

 

 

 

 

 

 

Industrial transportation

 

 

Eddie Stobart Logistics

 5,250

 0.68

Deutsche Post (Ger)

 3,012

 0.39

AP Moller-Maersk (Den)

 1,329

 0.17

Wincanton

 1,211

 0.16

 

 10,802

 1.40

 

 

 

Support services

 

 

Johnson Service

 12,410

 1.61

Babcock

 8,145

 1.06

SGS (Swi)

 2,519

 0.33

Interserve

 1,689

 0.22

Augean

 377

 0.05

 

 25,140

 3.27

 

 

 

Total industrials

  196,645

 25.54

 

 

 

 

 

 

Consumer goods

 

 

Automobiles & parts

 

 

Toyota Motor (Jap)

 8,039

 1.04

General Motors (USA)

 6,714

 0.87

 

 14,753

 1.91

 

 

 

Beverages

 

 

Pernod-Ricard (Fra)

 2,321

 0.30

 

 2,321

 0.30

 

 

 

Food producers

 

 

Nestlé (Swi)

 2,584

 0.33

 

 2,584

 0.33

 

 

 

Household goods & home construction

 

Watkin Jones

 7,088

 0.92

 

 7,088

 0.92

 

 

 

Personal goods

 

 

L'Oreal (Fra)

 2,476

 0.32

 

 2,476

 0.32

 

 

 

Total consumer goods

 29,222

 3.78

 

 

 

Health care

 

 

Health care equipment & services

 

Becton Dickinson (USA)

 9,072

 1.18

Smith & Nephew

 6,571

 0.85

Spire Healthcare

 5,004

 0.65

Fresenius (Ger)

 2,770

 0.36

Philips Electronics (Net)

 2,346

 0.30

Fresenius Medical Care (Ger)

 2,247

 0.29

 

 28,010

 3.63

 

 

 

 

 

 

 

 

 

Pharmaceuticals & biotechnology

 

GlaxoSmithKline

 16,063

 2.08

AstraZeneca

 5,253

 0.68

Pfizer (USA)

 4,122

 0.53

Johnson & Johnson (USA)

 3,217

 0.42

Novartis (Swi)

 2,728

 0.35

Novo-Nordisk (Den)

 2,347

 0.30

Roche (Swi)

 1,581

 0.20

 

 35,311

 4.56

 

 

 

Total health care

 63,321

 8.19

 

 

 

Consumer services

 

 

General retailers

 

 

Dunelm

 3,282

 0.43

Findel

 2,542

 0.33

Inditex (Spa)

 1,252

 0.16

Topps Tiles

 401

 0.05

 

 7,477

 0.97

 

 

 

Media

 

 

Relx

 12,169

 1.58

Sky

 8,038

 1.04

Daily Mail & General Trust

 3,814

 0.49

Mirriad Advertising

 660

 0.09

 

 24,681

 3.20

 

 

 

Travel & leisure

 

 

International Consolidated Airlines

 7,468

 0.97

Irish Continental (Ire)

 5,423

 0.70

Greene King

 4,889

 0.63

Fastjet

 4,374

 0.57

Carnival

 4,347

 0.56

Marstons

 2,168

 0.28

Ryanair (Ire)

 2,097

 0.27

Paddy Power Betfair

 830

 0.11

 

 31,596

 4.09

 

 

 

Total consumer services

63,754

8.26

 

 

 

Telecommunications

 

 

Mobile telecommunications

 

 

Vodafone

 6,433

 0.83

Deutsche Telekom (Ger)

 2,114

 0.27

Inmarsat

 1,994

 0.26

Total telecommunications

 10,541

 1.36

 

 

 

Utilities

 

 

Electricity

 

 

SSE

 4,063

 0.53

Simec Atlantis Energy

 1,886

 0.24

 

 5,949

 0.77

 

 

 

Gas, water & multiutilities

 

 

National Grid

 10,976

 1.42

Severn Trent

 8,908

 1.15

 

 19,884

 2.57

 

 

 

Total utilities

25,833

3.34

 

 

 

Financials

 

 

Banks

 

 

HSBC

18,738

2.43

Standard Chartered

8,905

1.15

ING Group (Net)

1,535

0.20

UBS (Swi)

1,374

0.18

Permanent TSB (Ire)

       7

-

 

30,559

3.96

 

 

Nonlife insurance

 

 

Hiscox

 11,293

 1.46

RSA Insurance

 9,506

 1.23

Direct Line Insurance

 4,286

 0.56

Muenchener Rueckver (Ger)

 2,000

 0.26

Allianz (Ger)

 1,435

 0.19

 

 28,520

 3.70

 

 

 

Life insurance/assurance

 

 

Prudential

 12,731

 1.65

Aviva

 3,955

 0.51

Chesnara

 3,754

 0.49

 

 20,440

 2.65

 

 

 

Real estate investments & services

 

St Modwen Properties

 7,777

 1.01

 

 7,777

 1.01

 

 

 

Real estate investment trusts

 

 

Land Securities

 9,077

 1.18

Urban Logistics REIT

 8,126

 1.05

Mucklow (A&J) Group

 4,125

 0.53

Hammerson

 2,610

 0.34

 

 23,938

 3.10

 

 

 

Financial services

 

 

IP Group

 7,555

 0.98

Provident Financial

 6,196

 0.80

Allied Minds

 4,200

 0.54

Oxford Sciences Innovation (unlisted)

 3,700

 0.48

International Personal Finance

 3,465

 0.45

Standard Life Aberdeen

 2,442

 0.32

Amundi (Fra)

 2,369

 0.31

Deutsche Börse (Ger)

 2,194

 0.28

 

 32,121

 4.16

 

 

 

Equity and collective investment instruments

 

Stewart Investors Asia Pacific

 16,477

 2.13

Baillie Gifford Pacific

 13,129

 1.70

Herald Investment Trust

 11,348

 1.47

Templeton Emerging Markets Investment Trust

 10,675

 1.38

Schroder Japan Growth Fund (Jap)

 7,350

 0.95

Scottish Oriental Smaller Company Trust

 7,295

 0.95

John Laing Infrastructure Fund

 3,546

 0.46

Foresight Solar

 3,255

 0.42

Syncona

 2,889

 0.37

Better Capital (2012)

 1,300

 0.17

 

 77,264

 10.00

 

 

 

Total financials

220,619

28.58

 

 

 

Technology

 

 

Software & computer services

 

Microsoft (USA)

 11,203

 1.45

SAP (Ger)

 2,764

 0.36

Amadeus IT (Spa)

 2,364

 0.31

 

 16,331

 2.12

Technology hardware & equipment

 

Applied Materials (USA)

 4,897

 0.63

ASML (Net)

 2,087

 0.27

 

 6,984

 0.90

 

 

 

Total technology

23,315

3.02

 

 

 

Other

 

 

Other

213

0.03

Total other

213

0.03

 

 

 

 

 

 

Total investments

771,982

100.00

 

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 and credit risk. These are explained in the notes to the annual accounts for the year ended 31 December 2017. 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.

 

The principal risks of the independent professional services 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 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 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

25 July 2018  

 

 

 

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 2017 annual financial statements, except for those that relate to new standards effective for the first time for periods beginning on (or after) 1 January 2018, and will be adopted in the 2018 annual financial statements. New standards impacting the group that will be adopted in the annual financial statements for the year ended 31 December 2018 are IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers.

 

Details of the impacts are as follows:

 

• IFRS 9 Financial Instruments has replaced IAS 39 Financial Instruments: Recognition and Measurement and has not materially impacted the results. The replacement of the 'incurred loss' model with a forward looking 'expected credit loss' model has resulted in an increase in the impairment provision of £49,000. There are no changes to the classification of financial assets and no impact to the fair value of long term borrowings. The group has elected to continue to apply the hedge accounting requirements of IAS 39.

 

• IFRS 15 Revenue from Contracts with Customers has had no impact on the financial results. Revenue is measured based on the consideration specified in a contract with a customer and is recognised by the group when it transfers control over a service to a customer. Each of the revenue streams generated by the IPS businesses has been assessed and no amendment to the current revenue recognition policy is required.

 

Notes

 

1.   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 2017 have been filed with the Registrar of Companies. The independent auditors' report on the annual report and financial statements for 2017 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.   The calculations of NAV and earnings per share are based on:

           

NAV: shares at end of the period 118,162,191 (30 June 2017: 118,152,259; 31 December 2017: 118,160,055).

Income: average shares during the period 118,160,332 (30 June 2017: 118,134,437; 31 December 2017: 118,136,983).

 

3.   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 underlying net assets of the instruments.

    

    

Registered office

Fifth Floor

100 Wood Street

London EC2V 7EX

 

Telephone: 020 7606 5451

Facsimile:   020 7606 0643

 

(Registered in England No - 30397)

 


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