Law Debenture Annual Results: Strong overall performance with 5.8% increase in full year dividend

The Law Debenture Corporation p.l.c. ("Law Debenture") has published its results for the year ended 31 December 2020.

Here we have some highlights and insight from the team. To view the full 2020 Annual Report click here or for the 2020 Report and Accounts click here.

Group Highlights

Share price total return^[1] for 2020 of 12.9%, outperforming the FTSE Actuaries All-Share Index by 22.7%

Continued strong performance from the Independent Professional Services business (IPS) supports dividend growth

£20m acquisition of UK company secretarial business from Eversheds Sutherland (International) LLP ("CSS"), which completed at the end of January 2021 and has not been factored into the  financial statements as at 31 December 2020

Continued low ongoing charges (0.55%), compared to the industry average of 1.02%^[2]

£10,000 invested in Law Debenture ten years ago would be worth £27,746 as at 31 December 2020^[3]

Dividend Highlights:

2020 FY dividends increased by 5.8% to 27.5 pence per ordinary share (2019: 26.0p)

Dividend yield of 3.8%[4], Q4 dividend of 8.00 pence per ordinary share

Transitioned to quarterly dividends, creating greater regularity and predictability around dividend payments

Investment Highlights:

Net Asset Value (NAV) per share (with debt at par) grew 3.6%[5]

Moved to daily NAV publication from the start of August to increase transparency

Law Debenture has consistently outperformed its benchmark on short- and longer-term performance measures

	1 year	3 years	5 years	10 years
NAV total return debt at par5	3.6%	15.6%	59.1%	147.8%
NAV total return debt at fair value5	2.0%	13.2%	53.0%	134.7%
Share price total return	12.9%	24.3%	67.3%	174.8%
FTSE Actuaries All-Share Index3	(9.8)%	(2.7)%	28.5%	71.9%

 

IPS Highlights:

Leading wholly-owned independent provider of professional services which helps support dividend growth, a key differentiator to other investment trusts

Revenue increase of 8.5% and earnings per share are up 9.5% on prior period, reflecting consistent growth under new management team, funding over a third of the increased 2020 full year dividend

Fair value of the IPS business increased by 18.3% in 2020 to £136.0m (2019 increase was 21%)[6]

Longer-Term Record:

132 years of value creation for shareholders

42 years of increasing or maintaining dividends to shareholders

116.5%^[7] increase in dividend over ten years 

Robert Hingley, Chairman, said:

"Law Debenture seeks to combine long-term capital growth and steadily increasing income. In light of the Covid-19 pandemic, Law Debenture has delivered a good performance in 2020, demonstrating the advantages of its unique structure, which allows increased flexibility in portfolio construction. Following the step change in dividend in 2019, we are pleased again to propose to increase our full year dividend at a time of widespread dividend cuts across the market. This illustrates our continued resilience and strong revenue reserves.

Our investment portfolio's long-term performance remains well ahead of its benchmark and our IPS business has now delivered three years of strong, high single-digit growth, despite some significant macroeconomic headwinds. Long-term income sustainability is a key priority and the Group's aim is to continue to deliver gradually increasing dividend payments in excess of inflation over time."

Denis Jackson, Chief Executive Officer, said:

"2020 was another successful year for Law Debenture with a share price total return of 12.9%, outperforming its benchmark by 22.7%. On behalf of the management team, I would like to express my deepest gratitude to everyone for their incredible work through the pandemic. Both the long and short-term performance of our investment portfolio remains strong. We have an excellent investment management team, who the Board is confident is well placed to continue to position the equity portfolio for future longer-term growth.

We are encouraged that IPS has delivered on its ambitions, with a third year of  high single digit earnings per share growth, despite a challenging macroeconomic backdrop. Reflecting these improved earnings and growth prospects, the valuation of our IPS business increased by 18.3% in 2020.

We still see opportunities to grow revenue and earnings significantly over time.  IPS has  attractive financial characteristics and we continue to invest in talent and technology to take advantage of material market share opportunities.  We are proud to welcome the CSS team and view the acquisition as both strategically and financially compelling with attractive longer-term revenue synergy opportunities. Ultimately, the strengthening of IPS will facilitate our aim of producing long-term capital growth and steadily increasing income for our shareholders."

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 internationally, 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 Source: Bloomberg.

² Ongoing charges are for the year ended 31 December 2020. Law Debenture ongoing charges have been calculated based on data held by Law Debenture.  Industry average data was sourced from The Association of Investment Companies (AIC) industry as at 31 December 2020. No performance related element to the fee.

³ Calculated on a total return basis assuming dividend re-investment between 31 December 2010 and 31 December 2020.

⁴ Based on a closing share price of 723p as at 24 February 2021.

⁵ NAV is calculated in accordance with the AIC methodology, based on performance data held by Law Debenture including fair value of the IPS business and long-term borrowings. NAV is shown with debt measured at par and with debt measured at fair value.

⁶ Increase in annual valuation of IPS business, excluding change in surplus net assets.

⁷ Calculated on total dividend payments in respect of accounting periods ended 31 December 2010 to 31 December 2020.