Law Debenture Corp PLC · LSE:LWDB
Law Debenture — FY2015 Earnings Presentation
30 slides from Law Debenture's earnings presentation, Mar 17, 2016
Slide 1: Law Debenture Annual Results 2015
Law Debenture Annual Results 2015 17 March 2016 1 March 2016
Slide 2: Presented by
Presented by Tim Fullwood Law Debenture Chief Financial Officer James Henderson Investment Manager Laura Foll Investment Manager 1
Slide 3: Introduction
Introduction • In September 2015 long term gearing was increased from £40 million to £115 million, following issue of £75 million fixed rate 30 year notes at 3.77% per annum. • Short term borrowings of £30 million repaid. Ongoing effective interest rate 4.589%, currently all receiving tax relief aga
Slide 4: IFS Fair value
IFS Fair value • Board has concluded it will provide a better understanding of NAV/share price for individual shareholders. • Accounts not amended to incorporate fair value, however, methodology and value disclosed in notes to the accounts. Based on EBITDA multiple of 8.4 (2014:8.9) • Fair value doe
Slide 5: Revenue and charges
Revenue and charges Change 2015 2014 % Pence Pence Investment trust 11.01 10.08 +9.2 Independent fiduciary services 7.09 6.87 +3.2 Total revenue earnings per share 18.10 16.95 +6.8 Dividends per share 16.20* 15.70 +3.2 Ongoing charges 0.46% 0.47% * Subject to shareholder approval 4
Slide 6: Financial performance
Financial performance 2015 2014 2013 2012 2011 Share price total return (1) (3.0) 3.1 28.3 32.0 (2.9) NAV total return (2) (0.3) 2.8 29.4 15.6 (0.1) FTSE Actuaries 1.0 1.2 20.8 12.3 (3.5) All-Share Index total return (1) Source AIC (2) Calculated in accordance with AIC methodology based on NAV inclu
Slide 7: Net asset value and retained revenue reserves
Net asset value and retained revenue reserves Pence NAV at 31 December 2014 at fair value after final dividend 531.35 Capital return (21.93) Revenue return 18.10 Dividends (16.20) Change in fair value of debt 1.33 Foreign exchange, pension and movement in shares 0.89 NAV at 31 December 2015 513.54 I
Slide 8: NAV and discount
NAV and discount 2015 2014 Pence Pence Share price 498.00 530.00 NAV per share after proposed final dividend at fair value (1) 513.54 531.35 % % Discount (3.0) (0.2) (1) At 31 December 7
Slide 9: Long Term Performance
Long Term Performance 5 years 10 years % % NAV total return (1) 53.2 124.0 FTSE Actuaries All-share index total return (2) 33.8 71.8 Share price total return (2) 64.4 146.1 Change in retail price index (2) 13.7 33.7 Investment trusts (Global) (3) 57.7 129.7 Unit trusts/OEICs (Global) (3) 32.8 69.3 I
Slide 10: Summary of revenue returns 2015
Summary of revenue returns 2015 Investment Independent portfolio fiduciary services Total £000 £000 £000 Income 19,030 30,555 49,585 Cost of sales - (3,461) (3,461) Administration costs (2,926) (17,485) (20,441) 16,104 9,609 25,713 Interest (net) (3,117) (390) (3,507) Return, before taxation 12,987
Slide 11: Investment trust
Investment trust 2015 2014 Change £000 £000 % Revenue UK dividends 16,456 14,685 12.1 Overseas dividends 2,549 2,128 19.8 Interest from securities - 103 Other 25 60 19,030 16,976 Expenses (2,926) (2,606) 12.3 16,104 14,370 Interest Debenture interest (3,199) (2,450) Inter-company interest 82 (48) 12
Slide 12: Investment portfolio
Investment portfolio • Aim to achieve a better return than the FTSE All Share. • Stock picking valuation based approach. • Overseas holdings bring exposure to opportunities that cannot be found in the UK stock market. • The equity portfolio is expected to provide good dividend growth over long term.
Slide 13: Momentum has outperformed value since the financial crisis
Momentum has outperformed value since the financial crisis Can this continue indefinitely? 400.0% Momentum Return (%) 350.0% Value Return (%) 300.0% 250.0% 200.0% 150.0% 100.0% 50.0% 0.0% 2003 2005 2007 2009 2011 2013 2015 -50.0% -100.0% 12
Slide 14: Investing the proceeds of the debenture
Investing the proceeds of the debenture Adding to positions at attractive valuations New positions in: • Ibstock • Anglo American • Standard Chartered • Johnson & Johnson • Apple Added to positions in: • Royal Dutch Shell • Rolls-Royce • Weir Group • International Personal Finance • Elementis 13
Slide 15: Investment equity portfolio asset breakdown
Investment equity portfolio Asset breakdown at 28 February 2016 % UK 72 Europe 7 USA 10 Japan 3 Far East 6 Other 2 Total 100 Equity Gearing 17.4 Total Gearing 14.7 14
Slide 16: Major contributors to performance for 2015
Major contributors to performance for 2015 Biggest rises by value Company Value Portfolio appreciation valuation £000 % 1 Amlin 4,525 1.8 2 Redrow 3,748 1.2 3 Bellway 2,912 0.8 4 Marshalls 2,911 1.6 5 Provident Financial 2,497 1.5 Biggest falls by value Company Value Portfolio depreciation valuation
Slide 17: UK portfolio sector breakdown
UK portfolio Sector breakdown of direct equity holdings at: 28 February 2016 Size biases Law Debenture % Industrials 30 Financials 19 Consumer Services 12 Basic Materials 11 Oil & Gas 9 Consumer Goods 8 Health Care 6 Utilities 3 Telecommunications 1 Technology (including Herald) 1 Total 100 16
Slide 18: UK portfolio ten largest holdings
UK portfolio (cont’d) Ten largest holdings at: 28 February 2016 % 1 Royal Dutch Shell 2.7 2 GKN 2.0 3 BP 2.0 4 Senior 1.9 5 HSBC 1.8 6 Smith (DS) 1.7 7 GlaxoSmithKline 1.7 8 Hill & Smith 1.6 9 Rio Tinto 1.6 10 IP Group 1.6 17
Slide 19: UK dividends still look attractive on a global basis
UK dividends still look attractive on a global basis Source: Datastream as at 31st December 2015 18
Slide 20: Investment outlook
Investment outlook • Diversity of holdings is key • Corporates continue to be highly cash generative with conservative balance sheets • Continued environment of moderate global economic growth, with pockets of weakness and pockets of strength 19
Slide 21: IFS Objectives
IFS Objectives • To grow the business safely. Management look for opportunities to stretch the brand, but are risk averse. • To help the investment trust grow earnings so that dividends to shareholders can increase. • To maintain the tax efficiency of the group to enhance the returns to shareholders
Slide 22: Independent fiduciary services summary
Independent fiduciary services summary • Underlying income flat relative to 2014. • Costs remain stable and controlled. • Overall profit before tax down 0.9% from 2014. • Effective tax rate of 9.2%, benefitting from relief of investment trust costs and reduction in UK tax rate. • Revenue per share u
Slide 23: Independent fiduciary services
Independent fiduciary services 2015 2014 Change £000 £000 % Revenue 30,555 32,526 (4.8) Cost of sales (3,461) (5,291) (26.8) Underlying income 27,094 27,235 (0.5) Administration costs (17,485) (17,625) (0.8) 9,609 9,610 Interest (net) (390) (310) Return, including profit on ordinary activities 9,219
Slide 24: Corporate trust: UK, US, HK and Channel Islands
Corporate trust: UK, US, HK and Channel Islands • Our income is generated by acceptance fees on new business, annual trustee fees and fees for post-issuance work which may arise from restructurings, ratings down grades and other actions required by the trust deed. • New business in UK Corporate trus
Slide 25: Pensions trusts and Governance services: UK
Pensions trusts and Governance services: UK • Our pension trusteeship service had another good year in a market environment that continues to change. • An increased focus on defined contribution schemes and the continued refinement of the needs of final salary schemes provided an increasing demand f
Slide 26: Corporate Services: including agent for service of process
Corporate Services: including agent for service of process UK, US, HK and Channel Islands. • Our long established and highly regarded service of process business had another solid year. • The corporate services business (provision of corporate directors, company secretary, accounting and administrat
Slide 27: Safecall
Safecall • Our external whistleblowing service had another successful year with a considerable number of new appointments. • As pressure increases from regulators, both in the UK and around the world, more and more organisations are looking to enhance their compliance programmes. This has been parti
Slide 28: Conclusion
Conclusion • We expect that 2016 will be another flat year. Wider uncertainties surrounding commodities and the emerging markets are not good news for some of our businesses. Nor is the threat of a Brexit. • We will continue to keep under review the range of services that we offer and remain open to
Slide 29: Important information
Important information Henderson Global Investors 201 Bishopsgate, London EC2M 3AE Tel: 020 7818 1818, Fax: 020 7818 1819 This document is solely for the use of professionals and is not for general public distribution. This document is solely for the use of professionals, defined as Eligible Counterp
Slide 30: End
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