REG - Law Debenture Corp - Annual Financial Report
12/03/2025 07:00
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RNS Number : 2676A Law Debenture Corp PLC 12 March 2025
The Law Debenture Corporation p.l.c.
12 March 2025
Another year of capital growth and steadily increasing income
The Law Debenture Corporation p.l.c. ("Law Debenture" or the "Company")
releases its results for the year ended 31 December 2024.
Leading UK Equity income sector performance
1 year 3 years 5 years 10 years
% % % %
NAV total return(3) (with IPS at fair value and debt at par) 13.2 14.4 43.5 118.7
NAV total return(3) (with IPS and debt at fair value) 13.6 24.6 56.0 133.1
FTSE Actuaries All-Share Index Total Return(4) 9.5 18.5 26.5 81.9
Share price total return(4) 15.9 25.8 72.4 147.5
Change in Retail Price Index(5) 3.6 23.0 33.9 51.8
Relative performance (NAV at FV) 4.1 6.1 29.6 51.2
Relative performance (Share Price) 6.4 7.3 46.0 65.6
Past performance cannot be relied on as a guide to future performance. The
value of investments and any income from them can go down as well as up. Your
capital is at risk.
2024 Highlights
· Share price total return outperformed the FTSE Actuaries All-Share Index with
a total return of 15.9% for 2024, compared with 9.5%.
· NAV total return with debt and Independent Professional Services ("IPS")
business at fair value for FY 2024 of 13.6% (13.2% with debt at par).
· A solid performance from IPS, with net revenue increasing by 6.2% and
valuation up 5.1% to £194.5 million (excluding net assets).
· Underlying IPS profit before interest and tax up 6.4%. Statutory revenue
profit before interest and tax of £15.0m down by 0.5%, owing to
non-recurring costs of £1.0 million.
· The Company issued 1.4 million new Ordinary Shares at a premium to NAV during
2024, to existing and new investors, with net proceeds of £12.4 million.
Long-term outperformance
· Consistent share price and NAV (with IPS and debt at fair value)
outperformance of the benchmark over one, three, five and ten years.
· Strong long-term performance record, with share price total return
outperforming FTSE Actuaries All-Share by 45.9% over 5 years which compares
well with key sector peers.
Dividend Highlights
· Proposed 2024 dividend increase of 4.7% to 33.5 pence per Ordinary Share
(2023: 32.0 pence per Ordinary Share) compared to Group revenue return per
share of 33.48 pence.
· Dividend yield of 3.8% (based on our closing share price of 884 pence on 11
March 2025).
· Over the last 10 years, we have increased the dividend by 113.4% in aggregate
(7.9% CAGR), reflecting strong IPS cashflow and good Portfolio performance.
· We have a strong reserve position, and the Board is confident in achieving
continued growth of dividends over time, building on our record of 46 years of
increasing or maintaining dividends to shareholders.
Investment Portfolio Highlights
· Net capital gain on investments of £76.3 million (December 2023: £37.4
million).
· Revenue from the portfolio of £34.7m (December 2023: £33.5 million).
· Total ongoing charges of 0.51%(1) compared to the industry average of
1.05%(2).
IPS Highlights
· The Company's wholly-owned provider of professional services is a key
differentiator to other investment trusts and offers additional portfolio
flexibility.
· Accounts for c.19% of 2024 NAV but has funded approximately one-third of
dividends paid by the Company in the last 10 years.
· IPS has now delivered seven consecutive years of mid to high single digit
underlying growth, with a 5 year underlying PBIT CAGR of 7.3%.
· 2024 valuation of £194.5 million (excluding net assets), up 83.6% since 2019.
· Non cash goodwill impairment of £17.0 million on the 2021 acquisition of CSS.
Awards
Winner in the Active-Income category for the third year in a row at the 2024
AJ Bell Investment Awards.
Winner of the Best for Long-Term Income award at the QuotedData awards.
Recognised by the AIC as an "ISA Millionaire" performer
Robert Hingley, Chairman, said:
"I am pleased with the progress Law Debenture has made in 2024. The share
price total return of around 16% was ahead of the benchmark and includes a
further increase in our full-year total dividend of 4.7%.
With an 113% increase in our dividend over the last ten years and a long-term
record of benchmark outperformance, Law Debenture remains well positioned with
a clear long-term focus. The Board and our investment managers remain
confident in our future prospects, due to the diversified and resilient nature
of our Portfolio and the good growth potential for IPS."
Denis Jackson, Chief Executive Officer, commented:
"2024 has been another creditable year of operational and financial progress
for Law Debenture. We are proud to have delivered continued share price
outperformance as well as our 46th year of maintaining or increasing
dividends. We were especially pleased to be recognised by the AIC as an "ISA
Millionaire" performer, identifying Law Debenture as one of fifty investment
trusts which would have turned a full annual ISA allowance into over £1
million between 1999 and 2024."
" Our investment managers have constructed a diversified portfolio of strong,
well-managed businesses making Law Debenture resilient by design and capable
of delivering attractive capital returns and further increases in dividends.
The combination of IPS with the investment portfolio offers additional
flexibility in stock picking and is a well-proven and differentiated model. I
remain optimistic about the Company's prospects for 2025 and beyond."
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 one of the leading providers of independent professional services,
built on three 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.
The Law Debenture Corporation +44 (0)20 7606 5451
Denis Jackson, Chief Executive Officer
Isla Pickering, Chief Financial Officer
Trish Houston, Chief Operating Officer
Teneo (Financial PR) +44 (0)20 7260 2700
Jo Blackshaw / Oliver Bell lawdeb@teneo.com (mailto:lawdeb@teneo.com)
(1) Calculated based on data held by Law Debenture for the year ended 31
December 2024.
(2) Source: Association of Investment Companies (AIC) industry average as
at 31 December 2024.
(3) 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 and both total returns account for
shareholder returns through dividends.
(4) Source: Refinitiv.
(5) Source: Office for National Statistics.
ANNUAL FINANCIAL REPORT
YEAR ENDED 31 DECEMBER 2024 (AUDITED)
This is an announcement of the Annual Financial Report of The Law Debenture
Corporation p.l.c. as required to be published under DTR 4 of the FCA Listing
Rules.
The Directors recommend a final dividend of 9.5 pence per share making a total
for the year of 33.5 pence per share. Subject to the approval of shareholders,
the final dividend will be paid on 16 April 2025 to holders on the register at
the record date of 21 March 2025. The Annual Financial Report has been
prepared in accordance with International Financial Reporting Standards (IFRS)
as adopted by the UK.
The financial information set out in this Annual Financial Report does not
constitute the Company's statutory accounts for 2023 or 2024. Statutory
accounts for the years ended 31 December 2023 and 31 December 2024 have been
reported on by the Independent Auditor. The Independent Auditor's Reports on
the Annual Report and Financial Statements for 2023 and 2024 were unqualified,
did not draw attention to any matters by way of emphasis and did not contain a
statement under 498(2) or 498(3) of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2023 have been filed with
the Registrar of Companies. The statutory accounts for the year ended 31
December 2024 will be delivered to the Registrar in due course.
The financial information in this Annual Financial Report has been prepared
using the recognition and measurement principles of International Accounting
Standards, International Financial Reporting Standards and Interpretations
adopted for use in the UK (collectively Adopted IFRSs). The accounting
policies adopted in this Annual Financial Report have been consistently
applied to all the years presented and are consistent with the policies used
in the preparation of the statutory accounts for the year ended 31 December
2024. The principal accounting policies adopted are unchanged from those used
in the preparation of the statutory accounts for the year ended 31 December
2023.
Financial Summary
31 December 2024 31 December 2023 Change
£000 £000 %
Net Asset Value - with debt and IPS at fair value(1)* 1,150,512 1,048,304 9.75
Total Net Assets per the statement of financial position 920,764 854,229 7.79
Pence Pence
Net Asset Value ('NAV') per share at fair value(1)* 872.34 802.67 8.68
Group statutory revenue return per share† 33.48 33.43 0.15
Capital return per share 40.51 24.47 65.55
Dividends per share 33.50 32.00 4.69
Share price(4) 893 801 11.49
% %
Ongoing charges(3)* 0.51 0.49
Gearing(3)* 11 13
Premium/(discount)* at 31 December 2.37 (0.21)
† Underlying Group revenue return was 34.27 pence per share.
For reconciliation of NAV at fair value per the above to published year end
NAV please refer below.
Performance
1 year 3 years 5 years 10 years
% % % %
NAV total return(2)* (with IPS at fair value and debt at par) 13.2 14.4 43.5 118.7
NAV total return(2)* (with IPS and debt at fair value) 13.6 24.6 56.0 133.1
FTSE Actuaries All-Share Index Total Return(4) 9.5 18.5 26.5 81.9
Share price total return(4)* 15.9 25.8 72.4 147.5
Change in Retail Price Index(5) 3.6 23.0 33.9 51.8
Relative performance (NAV at FV) 4.1 6.1 29.6 51.2
Relative performance (Share Price) 6.4 7.3 46.0 65.6
*Items marked "*" are considered to be alternative performance measures and
are described in more detail on page 161 of the full annual report and
accounts.
(1) Please refer below for the calculation of net asset value. Please note
change in NAV per share in the financial summary does account for the effect
of dividends on total return.
(2) 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 and both total returns account for
shareholder returns through dividends.
(3) Ongoing charges are calculated based on AIC guidance, using the
administrative costs of the investment trust and include the Janus Henderson
Investors' management fee, charged at the annual rate of 0.30% of the
portfolio value. There is no performance related element to the fee. Gearing
is described in the Strategic Report below and in our alternative performance
measures on page 160 of the full annual report and accounts.
(4) Source: Refinitiv.
(5) Source: Office for National Statistics.
EXTRACTS FROM THE STRATEGIC REPORT
Chairman's Statement
Performance
Law Debenture has again performed creditably in both absolute and relative
terms in a year with relatively modest GDP growth and significant political
and geopolitical disruption. 2024 saw global interest rates start to decrease
from the relatively elevated levels of recent years, but they remain well
above those experienced for the majority of the period post the global
financial crisis of 2008/09. Equity markets have had to contend with numerous
elections as well as the ongoing war in Ukraine and the Israel/Palestine
conflict, all of which has resulted in ongoing market volatility. Nonetheless,
the combination of our well-diversified Portfolio and another good underlying
IPS performance has enabled Law Debenture to continue to deliver on its
commitment to produce capital growth over the longer term and steadily
increasing dividend income.
Law Debenture's long-term record of benchmark outperformance remains strong,
with share price outperformance of the FTSE Actuaries All-Share Index over the
last five years of c.46%. I am proud that Law Debenture has been a leading
performer in the UK Equity Income sector over the long term, which is
testament to the hard work of our investment managers and employees.
Our benchmark, the FTSE Actuaries All-Share Index, delivered a 9.5% total
return in 2024. The Company's share price total return creditably outperformed
this with a total return of 15.9% for 2024. The Net Asset Value ('NAV') with
debt and the independent professional services ('IPS') business at fair value
delivered a return of 13.6%.
Our revenue performance was more muted. This significantly reflects the
dividend income received from our Investment Portfolio, which was up 4%, from
£33.5m in 2023 to £34.7m in 2024. For a number of key investments, our
investment managers made a conscious decision to prioritise longer-term
capital growth over short-term dividends. During 2024, there were some very
strong capital growth performers like Marks & Spencer and Rolls Royce
where dividends were very low or even zero. In addition, there was a notable
preference from corporates for share buy-backs over special dividends, meaning
returns to our shareholders from such companies are reflected in capital
growth, rather than income. The net revenue from our IPS business increased
6.2%.
Overall, our statutory revenue profit before tax was up 1.7%, and our
statutory revenue EPS was up 0.1%, affected by £1.0m of non-recurring costs
incurred during the year. Excluding the impact of these, our underlying
revenue profit before interest and tax was up 4.9%, and our underlying EPS was
up 2.5%.
Awards
We were delighted to receive recognition for all the hard work of our great
team of people in the shape of two investment awards. At the AJ Bell
Investment Awards 2024, Law Debenture was named winner in the Active Income
category for the third consecutive year. We were also voted winner of the
inaugural QuotedData awards, winning the Best for Long-Term Income award. The
continued success in industry-leading awards demonstrates the excellent short
and longer-term record of our investment managers, supported by the IPS
business.
Dividend
We are proud of our record of increasing or maintaining our dividend payments
for the 46th year in a row. The consistent and reliable cash flows from our
IPS business have helped ensure that we can continue our strong dividend
record. Subject to your approval, we propose paying a final dividend of 9.5
pence per ordinary share.
The dividend is almost fully covered, but your Board is confident that
earnings should continue to increase and is committed to its quarterly
dividend policy.
The final dividend will be paid on 16 April 2025 to holders on the register on
the record date of 21 March 2025. This will provide shareholders with a total
dividend of 33.5 pence per share for 2024, an increase of 4.7% compared with
2023. This dividend increase is modestly ahead of CPI and represents a
dividend yield of XXX % based on our closing share price of XXX pence on 11
March 2025. Over the last 10 years, we have increased the dividend by 113.4%
in aggregate.
Our Portfolio
James Henderson and Laura Foll, our investment managers, continue to invest in
a differentiated selection of well-managed and high-quality businesses with
competitive advantage and good long-term growth prospects. Dividend income of
£34.7m from the Portfolio was slightly higher than in 2023. However, it is
pleasing to report a total capital profit for the year of £53.1m, primarily
driven by movements in the value of the holdings within the Portfolio.
We remain confident that James's and Laura's disciplined approach of buying at
attractive entry point valuations will continue to deliver over the longer
term for our shareholders. More detailed commentary on the Portfolio's
performance with a review from our investment managers can be found below.
IPS
Our professional services business has been a key differentiator in driving
consistent long-term outperformance compared to other UK income funds and it
remains well positioned to continue this, with a strong platform built in
recent years from which to grow further. Although accounting for only c.19% of
our NAV (with IPS and Debt at Fair Value), the IPS business has funded around
a third of our dividends in the last 10 years and has now delivered a compound
annual growth in underlying profit before interest and tax of 7.3% over the
last five years. Through its strong cashflow and consistent mid-to high single
digit growth rates, IPS enables our investment managers to build a more
flexible Portfolio that includes both income and growth-focused stocks, rather
than having to 'chase yield'.
In a year where many businesses faced a challenging trading backdrop, it is
encouraging to see IPS continue to show another underlying year of growth.
Some of our businesses benefit from a degree of counter-cyclicality, which is
in part, why IPS had another year of good underlying profit growth. Corporate
Services and Corporate Trust were the strongest performers, achieving net
revenue growth of 11% and 12.7%. Pensions had a net revenue decline following
an exceptionally high revenue growth rate of over 20% in 2023.
The Board is pleased to see continued good employee engagement and
satisfaction scores and we remain focused on strengthening our processes and
management information systems. With this ongoing investment in talent and
technology, the Board is confident IPS has the potential to sustain mid to
high single digit growth over the medium term.
Capital structure
In 2024, the Group issued 1.4 million new ordinary shares to existing and new
investors, with net proceeds of £12.4m to support ongoing investment. Shares
were issued at a premium to NAV to be accretive to existing shareholders.
Environmental, Social and Governance ('ESG')
Our Executive Leadership team has continued their work to create a working
culture that encompasses our four values: Make Change Happen; Better Together;
Believe It's Possible and Never Stop Learning.
Following our success in 2024, we were ranked again by the FTSE Women Leaders
Review in 2025, placing joint second in the Financial Services sector and
fifth overall amongst the FTSE 250. This is an achievement that we are
extremely proud of. We understand that gender balance needs to be treated as a
business issue, not an HR issue or one for a dedicated DE&I team to manage
alone.
Our IPS business is built upon the provision of independent governance
services. A central tenet of this work is our commitment to diversity, and we
are delighted that we have established a balanced gender pay gap position and
have strong female representation both at Board and senior executive level,
with women making up 50% of the Executive Leadership Team.
As an organisation, we believe that long-term growth is underpinned by
sustainability. This presents opportunities for investment in the IPS
business. It has a relatively small carbon-footprint compared to other FTSE
250 groups but, over the years, we have taken steps to further reduce this,
most notably with our choice of office space.
Further, as part of our commitment to the ESG agenda, Law Debenture has
continued to make voluntary disclosures in relation to Task Force on
Climate-Related Financial Disclosures ('TCFD'). This can be found on page 55
of the full annual report and accounts.
Our investment managers remain committed to investing in businesses that have
a sustainable business model and carefully take ESG into consideration when
making investment decisions. For more details please see page 53 of the full
annual report and accounts.
The Board
As reported this time last year, Tim Bond retired from the Board on 28 March
2024 having served nine years. Maarten Slendebroek was appointed to the Board
on 11 January 2024. He has extensive experience in financial services,
including as CEO of Jupiter Fund Management for five years from 2014 to 2019,
having joined the firm as Strategy and Distribution Director in 2012. His key
skills and experience include fund management and investment, strategy,
corporate finance, ESG matters and distribution to investors. There have not
been any further changes in Board composition.
Annual General Meeting ('AGM')
The AGM will be held Friday, 11 April 2025 at 11.00am. In order to welcome as
many of our shareholders as possible, this year we are holding our AGM at the
offices our joint- corporate broker Peel Hunt and not at our own office.
Please join us at Peel Hunt, 7th Floor, 100 Liverpool Street, London EC2M 2AT.
We will also be livestreaming the event. The Board and the wider Law Debenture
team really value the chance to meet with our shareholders and hear your
thoughts about the Company so we hope that you are able to join us for the AGM
and a light lunch.
Looking forward
The end of 2024 brought some optimism from investors that inflation is much
more under control and closer to targeted levels. This improved equity market
backdrop has to contend with interest rates that still look likely to stay at
much higher levels than those experienced for the majority of the period post
the global financial crisis of 2008/09.
The majority of the Portfolio is invested in UK equities, although many of the
earnings are derived from outside the UK. Our investment managers continue to
believe that UK market valuations remain low in both absolute and relative
terms and offer some attractive longer-term growth opportunities with a lot of
bad news already priced in. Many UK companies are leveraging their robust
balance sheets and good cash flow to consider share buy-backs. In addition,
many overseas corporates and private equity firms continue to see ongoing
attractions in UK company valuations. Companies with robust business models
and supportive long-term trends are now frequently overlooked by investors who
cannot see past a relatively subdued UK economic environment. Law Debenture is
well-positioned with a long-term focus on a quality and well diversified
portfolio. Many of the companies held in the portfolio are conservatively
managed by talented leadership teams, often market leading businesses that
trade on relatively modest valuations.
The Board and our investment managers therefore remain confident in our future
medium-term performance, due to the diversified and resilient nature of our
Portfolio and the good growth potential for IPS. Its services are generally
well sought after, its brand reputation is good and the market share
opportunities remain considerable. During these relatively subdued
macroeconomic times, our consistent delivery has only been possible due to the
hard work of our investment managers and our skilled workforce. On behalf of
the Board, I would like to thank them all, as well as our shareholders, for
their continuing support.
Robert Hingley
Chair of the Board
11 March 2025
Chief Executive Officer's Review
Introduction
2024 has been a good year overall for Law Debenture, despite continued
macroeconomic uncertainty. Elevated levels of interest rates proved to be
challenging for many consumers and businesses alike. That said, Law
Debenture's overall performance reflected well on the Group's ability to adapt
to a changeable economic climate. We delivered on our two main objectives,
producing NAV growth and continuing to increase income for shareholders. Our
total share price performance and NAV outperformed the index again (and by a
considerable margin in 2024) and we are proud to have had our 46th year of
maintaining or increasing dividends.
In this context, our investment managers, James Henderson and Laura Foll of
Janus Henderson, have continued to perform well. The Group takes great pride
in our long-term record over one, three, five and ten years, with consistent
outperformance of the benchmark, the FTSE Actuaries All Share Index, and
compared to our key sector peers. We see this as continuing validation of our
consistent strategy: Law Debenture offers a cost-effective way to access an
active and expertly managed portfolio and provides good liquidity to investors
given our market capitalisation.
Our investment managers have a consistent and proven valuation-driven process
which aims to identify market-leading, high-quality companies that are
undervalued at the point of purchase. It is a testament to the continued
outperformance and the investment team that Law Debenture has won another two
prestigious investment trust awards this year - the Active Income category at
the AJ Bell Investment Awards for the third consecutive year, and the winner
in the Best for Long-Term Income award at the QuotedData awards.
Our IPS business has delivered its seventh consecutive year of mid to high
single digit revenue and underlying profit growth. IPS business net revenues
(gross revenue less direct costs incurred) for 2024 rose by 6.2% to £53.7m
(2023: £50.5m).
A statutory profit before interest and tax ('PBIT') of £15.0m was reported.
Excluding the impact of £1.0m of non-recurring costs, the underlying PBIT of
IPS increased 6.4%. Please refer to APM on page 161 of the full annual report
and accounts.
During 2024, a non-cash £17.0m write-off was recorded within the capital
reserves of the Group for the goodwill arising on the acquisition of the
company secretarial services business of Konexo, a division of Eversheds
Sutherland LLP, in 2021.
At the time of this acquisition, we noted that the transaction was not "cost
out" but rather "cost in". The business was non-core to the seller and it
required material investment in people, training, technology and
infrastructure. Successfully addressing these issues is taking longer, and
costing more, than we had originally planned. Accordingly, we have taken the
prudential step of writing off the goodwill recognised at the time of
acquisition. Nonetheless, we continue to invest in the business and remain
confident in the longer-term growth and profit opportunities of our Corporate
Secretarial Services ('CSS') business and its' contribution to the success of
the IPS.
As we continue to invest in the IPS business, we are delighted to welcome
three new members to the IPS leadership team. Isla Pickering joins us as Chief
Financial Officer with a wealth of professional services experience. Spencer
Knightsbridge joins us as Chief Technology Officer with a background in
driving technology transformation at both the London Metal Exchange and the
New York Stock Exchange. Alex Ringer joins as our new Head of Legal, Risk and
Compliance.
The diversification of our income streams again served us well, with Corporate
Services and Corporate Trust being the strongest performers, with Pensions
down slightly after exceptional growth of c.21% in 2023. We continue to invest
to ensure our IT infrastructure and wider operating model are fit for purpose
as we seek to further scale and sustain our medium-term growth ambitions,
whilst also working hard to ensure our profit margins are sustainable.
For 135 years, we have stuck to our principles of independence, trust and
excellence. Our investment for growth over the last seven years has positioned
us well for the future. I am encouraged by the new business wins in 2024 and
by our strong client relationships, which means that approximately two-thirds
of our business is repeated year on year. As we continue to face a relatively
uncertain macroeconomic environment in 2025, our aim is that IPS should
continue to provide an element of structural growth and counter-cyclical
revenue that will support our overall performance. High-quality governance
services should remain core to our clients, regardless of the economic cycle.
We are proud to have delivered a 113.4% increase in dividends over the last
ten years. This record has been supported by the diversified nature and
consistently strong performance of IPS, which makes Law Debenture a unique
investment trust. The flow of income from IPS has funded approximately 1/3 of
dividends over that period. This gives James and Laura the flexibility to
invest in a broader and higher-growth portfolio than many sector peers,
helping to position the Portfolio for future longer-term growth.
We are delighted too, to receive a Top 40 ranking in the recently published FT
Top Employers 2025 survey. This is a wide-ranging independent survey that
considers a range of factors such as employee satisfaction, workplace culture,
employee benefits, and opportunities for career development.
DIVISION Net revenue Net revenue Net revenue Net revenue Net revenue Growth
2020 2021 2022 2023 2024 2023/2024
£000 £000 £000 £000 £000 %
Corporate trust 10,789 9,771 10,620 12,473 14,052 12.7%
Pensions 11,479 13,060 14,343 17,396 16,694 (4.0%)
Corporate services 12,226 18,755 20,206 20,640 22,915 11.0%
Total 34,494 41,586 45,169 50,509 53,661 6.2%
*Total net revenue is calculated by reducing segment income of £61,659k by
cost of sales of £7,998k. Please refer to note 6 in the full annual report
and accounts for the IPS segmental analysis.
Corporate services: 2021 includes additional revenue arising from the
acquisition of the CSS business from Eversheds Sutherland (International) LLP.
Corporate Trust
Law Debenture was incorporated to act as a bond trustee in 1889. The role of a
bond trustee is to act as bridge between the issuer of a bond and the
individual bondholders. Our responsibilities as bond trustee can vary
materially, whether servicing performing or defaulted bond issues.
Normal obligations for the bond trustee to support performing issues could
include communication to the bond holders of financial or security data,
together with the distribution and/or receipt of covenant information. For
completion of this work, we are typically paid an annual fee throughout the
lifetime of the bond. This fee is inflation linked for the majority of our
existing book of business. When an amendment to bond documentation is
required, we can also earn additional revenues to complete the necessary
changes. When bonds default, the workflow, risk and revenue profiles of our
role can materially change. A key duty of the bond trustee is to be the legal
creditor of the issuer on behalf of the bondholders. Our role in such default
situations requires material incremental work that, given a favourable
outcome, can lead to significant additional income for us. That said, defaults
often take years to play out and the results are uncertain. Given this
long-dated and fluctuating backdrop, our revenues for this work in any
specific calendar year can be somewhat lumpy. However, such post-issuance work
has strong economic countercyclicality and has produced sound returns for our
shareholders over time.
Corporate Trust - Market dynamics
New issuance in debt capital markets has always been a driver of revenues. As
well as receiving an ongoing (typically inflation-linked) annual fee for our
work, we also receive an upfront fee upon appointment to a role. As we noted
at the half year, following a couple of tough years and a reduction of
capacity in this area by the major global banks, new issuance continued to
recover in 2024, with deal volume in Europe up 19% year-on-year (Source:
Dealogic). Following a sustained period of monetary tightening, The Bank of
England, Federal Reserve and European Central Bank all cut rates during the
year. Corporate Bond spreads continued to tighten and finished the year at, or
very close, to decade-long lows (Source : ICE Data Indices).
Demand for our post issuance work is hard to predict and is often strongly
countercyclical. In last year's annual report, we stated that "it would not be
a surprise that on balance demand for our post issuance expertise were to
increase as we move further through this economic cycle". However, this did
not materialize to the extent that we thought. This is, of course, largely
good news for our clients as we do not wish them any misfortune. That said,
our long history tells us that the winds of change can blow fiercely in
economic conditions from time to time and we will be ready to help support our
clients when they do.
The primary law firm regulator, the Solicitors Regulation Authority ('SRA'),
continues to discourage its members from holding client monies. Given our
broad and well-established relationships with law firms, this has provided
fertile ground for developing our escrow offering in particular over the past
few years. An escrow solution allows two parties the ability to transfer an
asset, with a trusted independent third party ensuring that certain conditions
of the transaction have been met by both sides prior to completion. Our
ability to move fast and use our expertise to consider non-standard
transactions is well known to an increasingly broad network of referral
partners. During the year, we provided escrows to support, for example,
Litigation, Trade, Real Estate and Sporting events. In addition, support of
Corporate M&A transactions is an area where we continue to make solid
progress.
Corporate Trust - Highlights
Under the leadership of Eliot Solarz, we are pleased to report net revenue
growth of 12.7% in 2024 following a very strong 17.4% growth in 2023.
The majority of the capital markets transactions that sit on our books have
been built up over many decades, and have contractual inflation-linked fee
increases for our services. These fee increases are applied on the transaction
anniversary. Consequently, as inflation spiked in 2021/22/23, the associated
inflation-linked increases fed through to our book of business. This provided
a steady tail wind for revenues during this period. This has now played out,
and today's forward-looking inflation consensus appears much more benign.
Improving primary market conditions allowed us to complete a number of notable
new transactions during the year, including acting as a security agent on a
€220 million six-year sustainability-linked junior loan financing to HES
International BV.
We also saw a good pick up in high yield bond market issuance during the year
and have closed High Yield bond transactions with, amongst others, Flos
B&B Italia S.p.A., Almaviva S.p.A., TeamSystem S.p.A., Lottomatica S.p.A.
and Omni Helicopters International Group.
On 1 February 2024, Allwyn took over as operator of the National Lottery. We
were appointed as trustee by Allwyn. A new trust structure was created under
which we are holding funds for the protection of players of the National
Lottery, working closely with both Allwyn and the Gambling Commission.
Corporate Trust - Outlook
The strength of our Corporate Trust business lies in its diversified revenue
streams, some elements of countercyclicality and, in many cases, a linkage of
fee income to inflation. Our reputation for quality of product and ability to
move fast is well established.
We have invested in additional headcount to join our new business team and
have upped our investment in business development activity.
On a year-to-year basis, levels of both primary market activity and post
issuance work are hard to forecast. M&A volumes were up 29% in Europe in
2024 (Source Dealogic) and the major market participants in this cyclical
business have a positive outlook for 2025. If correct, this will provide a
rich seam for us to mine with our Escrow offering in the coming year.
We are confident that this business will continue to produce solid returns for
our shareholders over time.
Pensions
We are the longest serving and one of the largest independent providers of
pension trusteeship in the UK with over 230 appointments.
Our Pegasus offering of outsourced pensions executive and governance solutions
continues to be a leading provider in a competitive market, developing new
propositions that further support our clients.
Pensions - Market dynamics
For many schemes, 2024 felt a relatively calmer year in markets compared to
recent years. With funding levels on average remaining in a strong position,
conversations have continued on trustee boards and with corporate sponsors as
to the best way forward. Schemes are choosing different long-term paths
depending on their individual circumstances, whether running on in the long
term, running on strategically for the medium term, or making a more immediate
move to insurance. We expect such conversations to continue in 2025.
Two new regulatory Codes have been brought into force:
· The long-awaited General Code - this consolidates existing codes
and sets out in one place the expectations for UK occupational pension
schemes. We believe that strong governance reduces risk and leads to better
outcomes. We are working with clients to implement this in a proportionate way
and focusing on the value-add components.
· Defined Benefit Funding Code. This came into force on 12 November
2024 for DB valuations on or after 22 September 2024. We expect this to be an
area of focus in 2025 onwards as valuations come into scope.
Whilst the Autumn 2024 Budget had fewer pensions-specific items than had been
rumoured, there were several consultations to provide input to, including on
Inheritance Tax, Defined Contribution schemes and Local Government Pension
Schemes. A Pension Schemes Bill is expected in due course.
More than 50% of UK occupational pension schemes have an independent trustee.
This is a recognition of the value provided by an independent view. The market
remains competitive and we are seeing a number of tenders for services,
including an increase in interest in a Corporate Sole Trustee ('CST') model,
where our team-based approach works well.
Pensions - Highlights
Compound revenue growth in our Pensions business since 2017 has been 10.6%.
Growth in 2023 was an exceptional 21.3% following on from the fall out of the
LDI crisis of late 2022. We emphasised at the AGM in March last year and in
our dialogue with investors and analysts throughout the year that 2023 was an
outlier in terms of revenue growth and that 2024 was always going to be a
difficult year in terms of comparator. Recorded revenues reduced by a modest
4.0% in 2024.
Compound growth in revenues over the past two years is 7.9%, which is broadly
in line with the seven year revenue growth rate for this business. We remain
confident of our ability to growth this business solidly over the business
cycle.
In our core Pensions business, we were delighted to add incremental
appointments, that included Medical Research Council, Tilney Pension Fund,
Kellog Brown & Root and Saint-Gobain Ireland.
Ireland continued to grow with some strong wins, including the first
full-service CST in the Irish market. Our Manchester team has recruited
additional colleagues and continue to be a leading presence for trusteeship
and governance in the North. Jersey, where we have taken on another chair
role, also continues to be a focus.
The Pegasus business continues to see demand across a number of different
services areas, including support to in-house teams, project management
support, data/GMP projects, provider review and selection, General Code
support and trustee effectiveness reviews.
We added new capabilities to our CST clients, embedding the General Code as
standard, and will continue to demonstrate the streamlining CST can bring to
the governance for all sizes of scheme.
We welcomed seven new members into the team in 2024. In May, our new Managing
Director, Sankar Mahalingham, took over, with a new management team including
Jane Beverley as Head of Trusteeship and Mark Williamson as Head of Pegasus.
In the last twelve months, we have helped deliver over nine material buy-in
transactions for our clients, including De Beers, Next, Royal London and Hays.
Pensions - Outlook
2025 will be a busy year as the DB Funding Code comes into full implementation
for many schemes. It will also be a key time to prepare for upcoming changes
in both 2025 and 2026, with connections to the Pensions Dashboard Programme
from April 2025 onwards and schemes' first Own Risk Assessments from March
2026.
As trustee boards and sponsors continue to look at different long-term options
for schemes, we remain well placed to offer both strategic and operational
governance support.
We are also contributing to the debate surrounding DC consolidation and await
further discussion around revisions to the Value for Money framework.
This constantly changing financial and regulatory environment continues to
drive the increased professionalisation of pension trusteeship and governance.
We have an excellent reputation in this market and will continue to invest in
our business in order to meet this evolving client need over time.
Corporate Services
This is a collection of businesses, with four diversified constituents:
Structured Finance Services, our whistleblowing division Safecall, Service of
Process and our Corporate Secretarial Services business ('CSS').
In aggregate, revenue from these business was up 11.0% in 2024. Safecall,
Service of Process ('SOP') grew strongly, while our CSS and Structured Finance
revenues were broadly flat year on year.
Service of Process ('SoP')
SoP - Market dynamics
This is our business with the fewest recurring revenues, with the greatest
dependency on global macro-economic factors and deal flow in capital markets.
Following a challenging 2023, market conditions in Capital Markets improved
throughout 2024 and we participated well in this recovery.
SoP - Highlights
Investments in training of our staff and our referral partner networks paid
dividends in 2024 against the backdrop of improved market conditions.
We have been much more proactive with our business development efforts and
these continue to bear fruit. Particularly pleasing was to complete the
purchase of Linklaters book of business in December, as Linklaters sought to
focus their business activities around their core high value products and
services, and so decided to sell their non-core Service of Process business.
Service of Process has been a core competency of our firm for many decades
and, as law firms evolve their commercial approach, we see an increasing
number exploring opportunities to outsource non-core activities wherever they
can reasonably do so. We are well placed to take advantage of this.
Given the high transaction volumes, we continue to invest in our systems and
have much improved data insight.
Earnings in SoP will always be volatile, as demonstrated by the last two
years. Forward revenue visibility is very limited, but we remain confident
that this business will remain a material contributor to our profits over
financial market and economic cycles.
Corporate Secretarial Services ('CSS')
CSS - Market dynamics
Law makers and regulators worldwide continue to raise the bar for Corporate
Governance standards and statutory and regulatory obligations continue their
relentless rise.
We operate in three main areas:
Managed Services: Global Entity Management services ('GEMS') provide a single
outsourced point of contact to multinational corporations to ensure that their
legal entities are kept in good standing. Client appointments vary in scale
and coverage, ranging from a single legal entity in one country at its
simplest to over 300 subsidiaries in 50 countries at its most complex. We are
generally paid a fixed annual fee to deliver annual compliance and corporate
records maintenance. We may also earn incremental revenues from additional
projects such as incorporations and dissolutions, the co-ordination of global
corporate change projects and performing entity validation work. Excellent
workflow management and use of technology is critical to compete effectively
in this space and we continue to invest heavily here. Our team is based in our
Manchester office.
Corporate Governance Services: This covers all aspects of Board and Committee
support, from full outsourced company secretarial support to attending and
minuting meetings. We also provide practical company secretarial support to
companies preparing for an IPO transaction, including support post listing.
Our clients range from major Main Market and AIM listed companies, including
investment trusts, to UK operating subsidiaries of top global brands. Our fees
may be fixed annual fees for specifically scoped mandates but can also be
time- or project-based. Demand here is often for highly skilled professionals
with prior experience in a particular industry and/or governance framework who
can seamlessly transition work from being completed in-house. This team in
based in London.
Interim Resourcing: Here we provide immediate access to qualified governance
professionals, whether on-site or remotely, full time or part time, as
required by the client. Typically, we are paid on a time-spent basis, but also
complete certain work on a fixed fee. This team is based in London.
CSS - Highlights
Throughout 2024 we continued to take significant steps to prepare CSS for
longer-term growth:
· We have increased our headcount in this business by over 50%
since the 2021 acquisition of the Konexo business from Eversheds Sutherlands
LLP, the majority of whom have either been partly-qualified or fully-qualified
Company Secretaries. In turn, we have established clear KPIs and career
progression frameworks for this growing team.
· We established a new leadership team during the year. Ben Turner
leads the overall team and has over 16 years experience in Financial Services
building teams and scaling businesses. Jordan Owen leads our CSS team in
Manchester and Patrick Davis leads our CSS team in London.
· We have invested, and continue to invest, in our technology
platform and reimagining our operational work flows that will be critical to
our long term success.
· We have invested more in our business development efforts and our
new business pipelines continue to improve. During the final third of the
year, we visited many of our larger multi-national clients based in the United
States. Feedback was warm and opportunities to grow from here are numerous.
We remain confident that the significant investments that we have made in new
people, skills, technologies and operational workflows will underpin
sustainable and controlled growth that is consistent with the other businesses
in the IPS portfolio.
Structured Finance Services
Structured Finance Services - Market dynamics
We operate in three main product areas:
Management of Special Purpose Vehicles ('SPVs') and other similar corporate
structures: We provide directors, accounting and day-to-day corporate
administrative services to entities set up to help financial institutions,
including challenger banks and boutique asset managers (Private Equity and
Hedge Funds), diversify their funding using securitisation techniques. The
SPVs are established to raise funds in the bond / loan markets which are then
used to acquire distinct pools of assets (including mortgages, receivables,
credit card debt, aircraft, whole businesses etc.) against which the funds are
secured. The funding is generally non-recourse, meaning that the funds raised
only have recourse to the pool of assets on which they are secured and to no
other party.
Accounting services: We provide management and statutory accounting services
to corporate entities who wish to outsource this area or where they do not
have local accounting knowledge. We do not provide audit services to clients.
Facility and Paying Agency services: We manage and provide outsourced
administration for corporate loans and facilities by acting as a conduit
between multiple lenders and a single borrower. Our paying agency services
relate primarily to managing payments for law firms involved in M&A
transactions. Unlike facility agent work, which provides recurring fees, the
paying agent services are one-off transaction fees.
We are a small player in the sector, which is dominated by Private
Equity-backed competitors with mixed reputations for service delivery. Mark
Filer and his team continue to receive consistently good feedback for the
quality of our work from our clients.
Structured Finance Services - Highlights
Despite European capital markets new issuance levels generally improving in
2024, the securitisation markets remained subdued and new issuance was broadly
flat year on year. (Source: AFME) However, we were delighted to receive repeat
appointments from a number of leading names operating in the sector including
One William Street and Avenue Capital.
Our facility and paying agent business also grew during the year. These will
be reported as part of the Corporate Trust business line going forward.
Private Credit continues to expand as an asset class and presents
opportunities for us to provide outsourced solutions to non-bank lenders.
We have more to do to raise our profile with a larger number of clients and
referral partners in order to achieve our desired level of growth in this
substantial market.
Whistleblowing: Safecall
Safecall - Market dynamics
Since the rapid expansion of the #metoo movement in late 2017, law makers and
corporates throughout the developed world have embraced whistleblowing
frameworks and looked to establish best practices. Investors too are demanding
of robust, independent whistleblowing structures being in place prior to
allocating their capital.
The largest market remains the US, where our footprint is smallest. Hence we
have plenty of scope to increase our market share.
All enquiries are dealt with by our highly trained staff that continues to
consist largely of former police officers. The quality of the work that we do
for our clients receives high praise. To the best of our knowledge, our
competitors generally run business models based off low-cost call centres. We
have every intention of remaining a premium provider of high-quality products.
Safecall - Highlights
Joanna Lewis, who heads the business, has built excellent momentum since
joining us three years ago.
Revenues were a record, up 25.0% year on year, as were revenues from new
clients. Among the 119 new clients we took on in 2024 were Royal Mail, Neom
(Gratiya) and Specsavers.
We again provided a record number of reports to our clients in 2024 up 11% on
2023. Digital channels (as opposed to voice) continue to account for over 70%
of issues raised.
Client functionality via our portal improved in 2024 and will do so again in
2025. Client feedback on our upgraded digital offerings is encouraging. Our
confidence continues to grow in our ability to effectively compete for larger
mandates.
We expanded our sales and account management teams during the year and
increased investment in our training and investigations offerings. Given our
increasing client footprint, we will add further capacity and expertise to the
operations team managed by Tim Smith.
We are increasingly ambitious in this fast-growing sector.
Central Functions
The larger and more consistent the earnings growth within IPS, the more
optionality it creates for the managers of the Investment Portfolio to deliver
on our objective of long-term capital gains and steadily increasing income. As
we have noted in past annual reports, we are making a significant investment
in modernising our central support functions to support this growth.
We continue to plan for growth of mid to high single digits, and expect this
to be largely organic. We remain open to opportunities presented by
acquisitions where we believe this could add value to our clients and
shareholders.
In last year's annual report, we referenced the work done in late 2023 to
refresh our IPS strategic plan. In support of those commercial growth plans,
we have embarked on an ambitious programme to transform and future-proof our
operating model. The investment in our culture and in centralising and
modernising our support services signposted here over the last few years has
put us in a strong position from which to deliver this operational
transformation.
In early 2024, we completed the first phase of the transformation programme by
implementing our Professional Services Automation ('PSA') platform and
aligning all of our businesses around the vision of a single operating model.
Over the summer, we restructured the IPS leadership team to support the
upcoming transformation. As well as welcoming a new CFO and Head of Legal Risk
and Compliance , we expanded our Executive Leadership team ('ELT') to include
our new Chief Technology Officer ('CTO') Spencer Knightsbridge, thereby
increasing strategic and decision-making capacity. We then expanded the team
who directly support and influence the ELT in delivering strategic priorities
via a broader senior team and new governance structure centred around
expertise, experience and accountability.
In this context, we incurred £1.0m in cost of a non-recurring nature which,
as referred to above, has affected our statutory accounting profit.
Our PSA platform marks a significant change in the way we capture and use data
in our IPS businesses. While major system implementations are never easy,
colleagues across the business have stepped up to the challenge, embracing new
ways of working and demonstrating their commitment to our corporate values of
'make change happen' and 'never stop learning'. We end the year in a
substantially stronger operational position than we started it. We have more
to do, but the future looks bright as we increasingly turn our attention to
analysing and leveraging the data we have collected, to drive better, more
informed decision-making.
We continue to invest in our technology, people and processes. Making up for
under investment, coupled with delivering cultural change takes time. We
believe it is worth it and are confident that we are building a business which
will serve shareholders well.
Information Technology
Our IT strategy continues to be centred around being flexible users of
third-party software applications, with a focus on making our businesses easy
to find, easy to engage with and easy to use. Under the leadership of our new
CTO, Spencer Knightsbridge, who joined in September 2024 reporting to me, we
have made significant progress across several key initiatives.
The Digital Workplace Programme reached a major milestone with its completion
across all our global offices, including New York, Delaware, and Hong Kong.
This standardisation means all our offices now operate on the same modern
technology platform, significantly reducing operational complexity. The
successful relocation of our New York office demonstrated our ability to
execute complex technology transitions while maintaining business continuity.
Safecall continues to evolve its client portal with new functionality,
advancing its strategic development goals, and achieved ISO 27001
accreditation, a significant milestone in our security journey.
As noted in our principal risks, the cyber threat landscape is rapidly
changing, with attacks growing ever more sophisticated and frequent. Industry
data suggests that 'bad actors' are becoming increasingly well-financed and
sophisticated in their approach. To maintain our robust security posture and
protect our business and clients, we recognise the need for continued
investment in our cyber defences.
Our operational capabilities have been transformed through the implementation
of our Professional Services Automation platform, Kantata, alongside our
financial management system, Sage. These platforms have delivered significant
operational efficiencies through improved workflow management, enhanced
reporting capabilities, and better resource allocation across our business
units, supporting our continued growth.
Recognising the requirements of the FRC's enhanced UK Corporate Governance
Code, we continue to strengthen our IT General Controls framework to ensure we
maintain appropriate controls across our technology estate. This work,
combined with our broader technology initiatives, continues to enhance our
operational effectiveness while maintaining robust control environments.
Prospects
Law Debenture is well diversified and resilient by design. The combination of
IPS with the Portfolio is a well-proven model and I remain cautiously
optimistic about the Group's progress in 2025 and beyond, despite an external
environment which is expected to remain uncertain. I am confident that IPS is
well positioned for medium-term growth, in line with our mid to high single
percentage target. We continue to look for opportunities to grow IPS through
organic investment in some of our fastest growing businesses. We continue to
invest in operational fitness, talent and technology to ensure we gain market
share and maintain longer-term growth.
There has not yet been a significant re-rating of the UK market and our
Portfolio is on an average historical price earnings ratio of only around 11.2
times. Our hopes that a decisive UK election result would remove uncertainty
and benefit the UK stock market have not materialised. However, despite
headwinds from the downbeat reaction to the new UK government's first budget,
we continue to believe that good, well-managed UK companies should continue to
thrive. Therefore there is still significant potential for a meaningful
revaluation of the UK market with clear follow-on benefits to our capital
growth.
On behalf of the Board, I want to thank my colleagues for their admirable
dedication to developing Law Debenture's client service. I am also very
grateful for the continued support of shareholders.
We are cognisant that 2025 will likely present its own set of geopolitical and
economic challenges but, given the modest current valuation of the UK equity
market, we are optimistic about the investment opportunities we can see. We
believe our investment managers have constructed a well-diversified Portfolio
of strong and well-managed businesses on relatively low valuation multiples,
capable of delivering attractive capital returns, and further increases in
dividends, over the medium term.
Denis Jackson
Chief Executive Officer
11 March 2025
IPS 5 Year Performance at a Glance
IPS net revenue and underlying PBIT - 5 year performance
Department 2019 2020 2021 2022 2023 2024 5yr Revenue Variance 5yr Revenue Variance
£000 £000 £000 £000 £000 £000 £000 %
Pensions 10,598 11,479 13,060 14,343 17,396 16,694 6,096 57.5%
Corporate trust 9,024 10,789 9,771 10,620 12,473 14,052 5,028 55.7%
Corporate services 12,167 12,226 18,755(1) 20,206 20,640 22,915 10,748 88.3%
IPS net revenue 31,789 34,494 41,586 45,169 50,509 53,661(2) 21,872 68.8%
% Net Revenue growth 7.5% 8.5% 20.1% 8.6% 11.8% 6.2%
Underlying PBIT(3) 11,256 12,198 13,340 14,359 15,072 16,037 4,781 42.5%
% Underlying PBIT growth 9.9% 8.4% 9.4% 7.6% 5.0% 6.4%
(1) Includes revenue from the acquisition of the Company Secretarial Services
business from Eversheds Sutherland (International) LLP.
(2) This figure is included in the income statement by subtracting cost of
sales of £8.0m from gross revenue of £61.7m.
(3) Assessment of profitability has moved from PBT to PBIT as a better and
fairer assessment of performance given interest income can fluctuate with
changes in internal allocations of cash within the Group. Refer APMs on page
161 of the full annual report and accounts for reconciliation from statutory
profit.
IPS Valuation
2019 2020 2021 2022 2023 2024 5yr growth
£000 £000 £000 £000 £000 £000 %
Underlying EBITDA(4) 11,515 13,335 15,369 16,588 17,625 18,594 61.5%
Multiple* 9.2 9.4 10.8 10.5 10.5 10.5 13.7%
IPS fair value (excluding surplus net assets) 105,938 125,349 165,985 174,174 185,063 194,505 83.6%
NAV adjustment: total value less net assets already included 91,860 112,407 135,885 148,376 160,836 187,395 104.0%
* 2024 is an implied multiple. Refer below for further details on the change
in IPS valuation methodology for 2024.
(4) Refer to alternative performance measures on page 162 of the full annual
report and accounts for reconciliation from statutory EBITDA to underlying
EBITDA.
Investment Managers' Review
Investment Strategy
The investment approach adopted has not changed for many years, but it has
hopefully been improved with lessons learnt. There is a relatively long list
of stocks which allows for a blend of large, medium and small companies. There
are overseas holdings where a similar company cannot be found in the UK market
or the overseas company is cheaper. Over 80% of the portfolio is in UK quoted
companies at present, as this is where we are finding superior value despite
concerns about the UK economy. The belief behind portfolio construction is
that genuine diversity in the holdings is how capital is preserved in the long
term. We employ different approaches to how we look at potential investments.
Around 50% of the portfolio is in FTSE 100 companies. These are we believe
sound long term investments and they are often well-known companies that
feature in other portfolios with similar objectives. However it is what you do
differently to others that makes you perform differently. The structure of a
cash generative operating company and an investment portfolio gives the
opportunity to have a wider range of investments and still produce an
attractive level of earnings. Therefore, unusually for an income growth trust
there are investments that do not pay a dividend. Early-stage small companies
and operationally challenged large companies feature. The small companies that
succeed will give substantial returns, while large companies that have a
recovery plan that they implement with determination will in time return to
paying dividends at a considerably higher share price. The different
strategies employed to look at companies results in real diversification of
underlying operating activities. It does mean there are usually around 150
holdings and we do not go over 175. The absolute stock specific risk is
relatively low compared to the index and the exposure to smaller companies has
contributed, in the long term, to the better performance of your company.
Economic and market backdrop
The UK economy is suffering from a lack of productivity growth. The result of
this is for the economy to register very little expansion and this in turn
means the desire of the electorate for increased government expenditure in the
major areas of health, education and defence cannot easily be met. The decline
in gilt prices in the final quarter of the year likely reflects the concern
over the level of supply that will be forthcoming in future years, rather than
any immediate worries over surging inflation. However, the flat lining of the
economy masks from top-down observers the reality that there are sound
companies in the UK that are growing their profits and generating cash. This,
when combined with over half the profits of UK quoted companies coming from
overseas activities, means there remain plenty of good investment
opportunities for those that pay close attention to companies and valuations,
rather than being continually gloomy about the prospects of the UK.
Alternative Performance Measures 1 year 3 years 5 years 10 years
% % % %
NAV total return (with IPS at fair value and debt at par)(1) 13.2 14.4 43.5 118.7
NAV total return (with debt and IPS at fair value)(1) 13.6 24.6 56.0 133.1
FTSE Actuaries All-Share Index total return(2) 9.5 18.5 26.5 81.9
(1) NAV is calculated in accordance with AIC methodology, based on performance
data held by Law Debenture including fair value of IPS business. NAV total
return with debt at par excludes the fair value of long-term borrowings,
whereas NAV total return with debt at fair value includes the fair value
adjustment (see page 159 of the full annual report and accounts).
(2) Source: Refinitiv Datastream, all references to 'FTSE All-Share' and
'benchmark' in this review refer to the FTSE Actuaries All-Share Index total
return.
One Year Performance Review and Attribution
2024 was a good year for the Trust, achieving a positive absolute return and
outperforming the FTSE All-Share benchmark. We go into the stock specific
drivers of performance below, but it is worth noting that three of the five
best performers (Rolls-Royce, Flutter and Marks & Spencer) would have been
challenging to hold in size in a traditional income-seeking fund. This is
because Flutter currently pays no dividend, and while Marks & Spencer and
Rolls-Royce have recently returned to paying dividends, they have done so in a
relatively modest way, with dividend yields significantly below that of the
wider UK equity market. It is therefore the income contribution from the
professional services business that have allowed these positions to be held at
substantial weightings, demonstrating the advantages of the unusual combined
structure of the Trust.
The top five contributors to performance during the year (in absolute terms)
were:
Stock £ Appreciation % Appreciation
Rolls-Royce £24.3m 65.3
Barclays £13.7m 72.3
Flutter Entertainment £12.6m 58.3
Natwest £10.3m 72.5
Marks & Spencer £7.7m 35.1
Source: Law Debenture.
Note: % appreciation figures are share price only, not total return.
For the second year in a row, Rolls-Royce and Marks & Spencer were among
the top five contributors to performance. In both cases the businesses have
long had potential, and under refreshed management teams they are achieving
successful turnarounds.
In the case of Rolls-Royce, one of the market leaders globally in jet engines,
they have been helped by end market tailwinds, specifically a recovery in
flying hours following Covid, as well as difficulties in supply chains for new
build aircraft, meaning that older planes are tending to be flown for longer.
This is of benefit to Rolls-Royce, where the majority of their earnings are
generated from flying hours for existing engines, not from supplying new
engines. As well as helpful end markets, there has been 'self help' with a
renewed cost discipline and commercial focus. Following good performance the
position was materially reduced during 2024, as the turnaround story is more
widely appreciated and the valuation has moved higher.
In the case of Marks & Spencer, the food business had been successful for
some time but the clothing business had been a drag, losing market share for a
number of years. In recent years this has been changed, with a focus on more
competitive pricing as well as a refreshed clothing offering. As a result
sales and earnings forecasts have moved higher, as has the valuation on the
shares. Therefore for the same reason as Rolls-Royce, the Trust's holding in
the company has been reduced.
Also among the best contributors to performance during the year were bank
holdings Barclays and NatWest (HSBC and Standard Chartered also performed
well). In more 'normal' interest rate environments (by which we mean not the
near zero interest rate environment that we saw in the decade following the
financial crisis), banks can generate good returns on both sides of their
balance sheet. In other words they can generate a return from their assets
(their lending book such as mortgages, credit cards and commercial loans) as
well as their liabilities (deposits from consumers and businesses). This has
meant that since interest rates began rising in the period following Covid,
bank returns have improved dramatically, resulting in substantial earnings
upgrades. Despite higher interest rates, loan losses have (for now) remained
subdued. In the period following the financial crisis, banks went through a
slow process of repairing their balance sheets and, as a result, were cautious
in their lending practises. While this cautiousness was not necessarily
positive for the wider economy, it is evident in their low level of bad debts
in recent years.
Flutter Entertainment, the owner of brands such as Paddy Power and FanDuel,
have used their expertise built up in European and other global markets, to
become one of the leading operators in the fast growing US gambling market. If
they continue to be successful, as the US market matures, the potential
earnings opportunity is substantial.
The bottom five contributors to performance during the year (in absolute
terms) were:
Stock Depreciation % Depreciation
AFC Energy (£4.9m) (57.6)
Rio Tinto (£4.2m) (19.2)
Vanquis Banking Group (£4.2m) (68.2)
BP (£4.2m) (15.7)
Next Fifteen Communications (£3.2m) (55.1)
Source: Law Debenture.
Note: % depreciation figures are share price only, not total return.
In a subdued period for commodity prices, two of the bottom five performers
were commodity producers (Rio Tinto and BP). Both are held partly for
diversification purposes within the broader portfolio, as elsewhere we hold
sizable positions in commodity consumers such as industrial goods
manufacturers.
The largest individual detractor, AFC Energy, is a designer and manufacturer
of hydrogen fuel cells in applications such as construction sites (with the
aim being to replace traditional fuel sources such as diesel generators).
Commercial roll-out of the technology has been slower than expected, however
we continue to see their technology as having a role in the route to net zero.
Also among the detractors were consumer lender Vanquis and media agency Next
Fifteen Communications. Both had unexpected external factors that materially
impacted their earnings and share prices. Vanquis received a high volume of
complaints which, although largely not upheld by the financial ombudsman,
still carried a substantial cost of dealing with them. Next Fifteen had a
large customer contract unexpectedly come to an end. In each case, while
clearly disappointing developments, they demonstrate the importance of having
a long, diverse list of holdings.
Longer term performance review
The understandable tendency in annual reports is to focus on the year that has
just passed. However, our time horizon in making investments for this
portfolio is considerably longer than a year, so it is sometimes helpful to
take a step back and examine longer term performance.
On a five year time frame, the Group NAV has grown by 56%, compared to the
FTSE All-Share benchmark of 27%. If we look at the stocks that are the largest
contributors to this performance (the largest absolute contributors are shown
below), the advantages of the combined Trust structure are clear. For example,
Ceres Power, Rolls-Royce, Flutter Entertainment and Marks & Spencer are
all low or zero dividend yield shares - all would have been challenging to
hold in size in a portfolio that was aiming to meet or beat the FTSE All-Share
dividend yield. All have delivered substantial capital growth that have
allowed us, as positions are reduced, to recycle some of the sales proceeds
elsewhere in order to drive future capital and dividend growth for the Trust.
The top five absolute contributors over the last five years were:
Stock Contribution to return (%) Share price total return (%)
Ceres Power 4.3 (34.7)*
Rolls-Royce 3.9 142.5
Flutter Entertainment 2.8 128.4
Marks & Spencer 2.3 78.2
Rio Tinto 2.0 60.5
Source: Janus Henderson Investors, Bloomberg as at 31st December 2024.
*Ceres Power had a negative share price over the five year period, but rose
sharply during 2020 and we took substantial profits during 2020 and 2021,
hence it has been the best overall contributor.
Portfolio income
The income from the investment portfolio grew at a modest pace during the
year, rising from £33.5m in 2023 to £34.7m this year. Dividend growth for
the market as a whole was held back by an increasing tendency among UK
companies to undertake share buybacks rather than pay special dividends. The
increase in buybacks is, in our view, a reflection of growing frustration
among UK Boards at their (perceived) undervaluation relative to peers.
The modest level of dividend growth for the portfolio is partially deliberate,
in that we are not actively seeking high dividend payers. Some of the best
opportunities have been in shares that are not currently paying dividends, but
we believe will in future. Examples of this are Rolls Royce and Marks &
Spencer. The structure of Law Debenture, with its own stream of cash earnings
from the professional services business, allows us to invest at the early
stage of the recovery when dividends are not paid, without jeopardising the
distribution payments to our shareholders. This means the capital can be more
effectively grown and this in turn will lead to long term sustainable dividend
growth. It is strong capital growth that is the only way to provide long term
substantial dividend growth.
Portfolio activity
During the year our purchases and sales for the investment portfolio broadly
matched. Combined with the rise in the Trust's net asset value, this meant
that gearing fell modestly over the course of the year, ending at 10.9%
(compared to 12.7% at the previous year end).
The investment approach is to buy and sell slowly. With purchases, we are
looking to identify companies that are trading at what we view as an
unjustified valuation discount (whether compared to relevant peer companies,
or relative to the company's own history). If our investment thesis proves
correct and a company moves higher in terms of its valuation, we will then
look to slowly reduce the holding. This patient approach means the portfolio
has a long list of stocks, because position sizes tend to start small and are
then sold in increments. At the year end there were 151 holdings in the
portfolio.
Turning to specific stocks, the largest five purchases during the year were
new holdings in food retailer Sainsbury, fund manager group Schroders, autos
component supplier Dowlais, copper producer Freeport-McMoRan and budget hotel
operator Whitbread. There is no end market commonality to these companies.
What ties the companies together is that all are well managed, with scope to
grow earnings over time. In our view the current valuations fail to reflect
the long run prospects for the companies.
Disciplined selling is a fundamental part of the Trust's investment process,
and where valuations and/or earnings forecasts have moved higher as the
prospects for a company have become better understood, we will gradually move
on and rotate the proceeds elsewhere. This year the positions in Rolls-Royce
(sales proceeds of £38m) and Marks and Spencer (sales proceeds of £14m) were
reduced for this reason. There were also a number of sales driven not by
valuation but by corporate activity, with heightened takeover offers for UK
companies. This included the position in DS Smith (which was sold following
the agreed takeover by US-listed International Paper), Hipgnosis Songs Fund
(which was sold following the agreed takeover by Blackstone) and International
Distribution Services (better known as Royal Mail, which was sold following
the agreed takeover by private equity).
Outlook
Since the period end interest rates in the UK have been cut a further 0.50% to
4.50%. We expect further cuts during the course of the year as inflationary
pressures in the labour market ease. Survey data is pointing towards an
increase in unemployment which is likely to put downward pressure on wage
demands. The fall in the base rate highlights the attractive valuation of UK
equities. The underlying yield on the Trust's quoted portfolio of dividend
paying equities is likely to be in excess of the interest rate during 2025.
The dividends from the underlying holdings are supported by good earnings
cover and sound balance sheets, suggesting that predicted dividend growth in
the portfolio will prove robust. The confidence we have on the dividend
outlook makes us positive about potential capital returns. Therefore we intend
to be a net purchaser of equities over coming months, modestly increasing the
gearing.
Your Company is an investment trust and utilises the strength of the structure
by combining the professional services with the conventional share portfolio.
The combination of the two parts adds value to both. The Trust also uses the
investment trust structure to utilise gearing and the ability to buy less
liquid securities where the best value can often be found. These attributes
are advantages other investment products often lack.
The investment approach will remain the same as in the past. We will reduce
holdings in companies that we believe are approaching fair value and invest in
companies which we believe will come through with profitable growth which is
not currently recognised in the valuation.
James Henderson and Laura Foll
Investment managers
11 March 2025
Portfolio by Sector and Value
Portfolio by sector
2024 2023
Oil and gas 8.8% Oil and gas 10.3%
Basic materials 5.0% Basic materials 6.0%
Industrials 23.0% Industrials 25.6%
Consumer goods 8.4% Consumer goods 7.8%
Health care 5.7% Health care 6.0%
Consumer services 13.9% Consumer services 10.4%
Telecommunications 2.2% Telecommunications 1.9%
Utilities 3.5% Utilities 3.1%
Financials 26.7% Financials 27.4%
Technology 1.8% Technology 1.5%
Geographical distribution of Portfolio by value
2024 2023
United Kingdom 87.6% United Kingdom 88.2%
North America 5.6% North America 3.2%
Europe 5.5% Europe 7.4%
Japan 1.3% Japan 1.2%
Fifteen Largest Holdings: Investment Rationale
as at 31 December 2024
Rank 2024 Company Location % of Portfolio Approx Market Cap. Valuation Purchases (Sales) Appreciation/ (Depreciation) Valuation
2023 £000 £000 £000 2024
£000 £000
1. Flutter Entertainment UK 3.77 £11.39bn 21,576 7,304 (2,082) 12,570 39,368
Flutter is a global gambling provider and owner of brands such as Paddy Power
and Betfair. It is successfully rolling out in the US as states gradually
legalise gambling, providing a potential route to substantial earnings growth
in the long term.
2. HSBC UK 3.26 £116.08bn 27,555 - - 6,500 34,055
HSBC is a large global lender and financial services business. It provides
geographic diversification to the portfolio while becoming more focused on
geographies where they are among the market leaders.
3. Barclays UK 2.98 £14.89bn 18,915 671 (2,161) 13,680 31,105
Barclays is one of the largest lenders in the UK as well as owning a global
investment bank. It trades at a lower valuation than many of its peers because
of scepticism that the investment bank can generate good returns. On evidence
of better execution, it could have potential to re-rate from its low
valuation.
4. Shell UK 2.96 £99.18bn 32,119 - - (1,169) 30,950
Shell is a vertically integrated oil & gas company with significant
exposure to natural gas within its production mix. The business is highly cash
generative at current commodity prices, allowing attractive cash returns to
shareholders as well as funding significant capital expenditure.
5. Rolls Royce UK 2.28 £70.49bn 37,263 - (37,704) 24,322 23,881
Rolls-Royce is a designer and manufacturer of engines for use across a number
of end markets, most materially civil aerospace. They have won significant
market share on the next generation of wide-bodied planes, where flying hours
are recovering post Covid. Under a new CEO they are reducing costs and have
laid out ambitious medium term goals for cash generation.
6. BP UK 2.14 £80.24bn 26,571 - - (4,173) 22,398
BP is a vertically integrated oil & gas company. Similar to Shell it is
highly cash generative at current commodity prices, providing optionality for
the company to both fund significant capital expenditure and return cash to
shareholders.
7. GlaxoSmithKline UK 2.12 £70.43bn 20,158 3,848 - (1,932) 22,074
GSK is a global pharmaceutical company that is among the market leaders in
areas such as vaccines and HIV. The shares trade at a valuation discount to
global pharmaceutical peers that in our view is unjustified.
8. Standard Chartered UK 1.79 £14.78bn 12,563 - - 6,079 18,642
A global bank providing international banking and financial services, with a
particular focus on emerging markets. The position provides geographic
diversification for the portfolio as well as being positively exposed to
higher global interest rates.
9. Tesco UK 1.79 £15.72bn 14,673 - - 3,936 18,609
Tesco is the largest food retailer in the UK. It has used its scale to its
advantage, setting prices at competitive levels for the consumer while
generating good levels of free cash flow, much of which is returned to
shareholders via dividends and share buybacks.
10. Rio Tinto UK 1.7 £46.73bn 21,908 - - (4,197) 17,711
Rio Tinto is a diversified miner with significant exposure to iron ore. As a
results of its low position on the cost curve, it is able to remain cash
generative despite volatility in commodity prices and pays an attractive
dividend yield.
11. National Grid UK 1.54 £37.34bn 13,851 2,463 - (263) 16,051
National Grid are a regulated utility company with operations in both the UK
and the US. The need to reduce global carbon emissions is likely to increase
demands on electricity networks and this could lead to faster regulated asset
growth in future driven by the need to increase grid capacity. The position
brings defensive qualities and continues to pay an attractive dividend yield.
12. Marks & Spencer UK 1.44 £3.82bn 21,792 - (14,423) 7,651 15,020
M&S is a food and clothing retailer. After a long period of
underperformance it has been reinvigorated under a new Chairman and management
team. It is regaining market share in both clothing and food at good margins,
meaning substantial earnings upgrades have been achieved in recent years.
13. Sainsbury UK 1.4 £6.41bn - 13,960 - 678 14,638
Sainsbury's are one of the largest food retailers in the UK. Under the current
management team they have improved their price competitiveness, enabling them
to gain market share and grow earnings. They generate substantial levels of
cash, which is enabling them to invest in the business as well as return money
to shareholders.
14. Herald Investment Trust UK 1.4 £0.54bn 11,484 - - 3,066 14,550
Herald is a global technology focussed Investment Trust managed by Katie Potts
(who launched the Trust in 1994). Its technology focus brings worthwhile
diversity to the portfolio and it has been an excellent performer over time.
15. Senior UK 1.38 £0.79bn 15,118 807 - (1,510) 14,415
Senior produces specialist components for use across aerospace and industrial
end markets. The civil aerospace market was significantly impacted by Covid
and is still in a period of recovery. This means there is scope for further
earnings growth at Senior, while the business remains well managed.
Changes in Geographical Distribution
Region Valuation Purchases Costs of acquisition Sales proceeds Appreciation/ (Depreciation)* Valuation Geographical split at 31 December 2024
31 December 2023 £000 £000 £000 £000 31 December 2024* %
£000 £000
United Kingdom 852,381 154,712 (734) (155,989) 62,143 912,513 87.6%
North America 31,107 19,899 (44) (3,044) 10,853 58,771 5.6%
Europe 69,860 19,542 (13) (33,848) 1,980 57,521 5.5%
Japan 11,878 - - - 1,356 13,234 1.3%
Other - 32 - - (32) - 0.0%
965,226 194,185 (791) (192,881) 76,300 1,042,039 100.0%
* Please refer to note 2 on page 131 and note 13 on page 139 of the full
annual report and accounts.
Who we are
From its origins in 1889, Law Debenture has diversified to become a Group
which provides our shareholders, clients and people a unique combination of a
Portfolio and an Independent Professional Services ('IPS') business.
Our purpose and objective
Our purpose is to deliver peace of mind for our shareholders, clients and
people. This is central to our strategy, both at the Portfolio and IPS levels,
and underpins the way we think and behave every day.
Our objective as an investment trust 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
diversified portfolio of stocks and ownership of the IPS business.
To our IPS clients we are trusted, independent experts who have 136 years of
experience to call on in delivering vital aspects of their business cycle.
Our purpose and objective are underpinned by our corporate values of:
· We believe it's possible
· We make change happen
· We are better together
· We never stop learning
Our strategy - implementation
Our strategy is centred around the unique combination of the Portfolio and our
IPS business. Whilst overseen by the Board, the IPS business operates
independently from the Portfolio.
The IPS business provides a reliable source of revenue to the investment
trust. This supports the dividend and ensures our investment managers are not
constrained to choosing stocks solely based on yield. Instead, the investment
managers benefit from increased flexibility in stock selection supporting the
delivery of long-term capital growth.
Our unique structure is also tax efficient as some tax relief, arising from
excess costs and interest payments which would otherwise be unutilised, can be
passed from the Portfolio to the IPS business reducing the tax liability for
the Group and increasing shareholder returns.
The way in which we implemented the investment strategy during 2024 is
described in more detail in the investment managers' review above.
Annual performance is set out on pages 2 to 33 of the full annual report and
accounts, which contain tables, charts and data to explain performance both
during the year under review and over the long-term. Performance against KPIs
is discussed on page 38 of the full annual report and accounts.
Our business model
Our business model is designed to position the Company for optimal performance
in the AIC UK Equity Income investment trust sector.
Law Debenture's shares are intended for private investors in the UK (retail
investors), professionally advised private clients and institutional
investors. When choosing an equity focussed investment trust, shareholders
typically accept the risk of exposure to equities but hope that the pooled
nature of an investment trust portfolio will give some protection from the
volatility in share price movements that can affect individual equities.
Total Shareholder Return
PORTFOLIO INDEPENDENT PROFESSIONAL SERVICES
(c.81% of NAV - including IPS and long-term borrowings at fair value) (c.19% of NAV - including IPS and long-term borrowings at fair value)
· Invests in a diverse equity portfolio · Trusted provider of independent governance services, generating
recurring revenue.
· Earns capital returns and dividends · Profits provide the investment trust with a steadily increasing
revenue stream.
· Low ongoing charges
PORTFOLIO
· The Portfolio will typically contain over 70 and up to 175
stocks, the maximum permitted.
· The Portfolio is diversified in order to spread investment risk
with no obligation to hold shares in any particular type of company or
industry.
· The IPS business does not form part of the Portfolio.
Whilst performance is measured against the FTSE Actuaries All-Share Index, the
composition of the index does not influence the construction of the Portfolio.
As a consequence, it is expected that the Portfolio and performance will
deviate from the comparator index.
INDEPENDENT PROFESSIONAL SERVICES
Operating through a number of wholly owned subsidiary companies (see note 13
to the accounts in the full annual report and accounts), we provide pension
trustee executives, outsourced pension services, corporate trust services and
corporate services to companies, agencies, organisations and individuals
throughout the world. The services are provided through offices in the UK,
Dublin, New York, Delaware, Hong Kong and the Channel Islands.
Group employees are employed by L.D.C. Trust Management Limited ('LDCTM') and
Safecall Limited (in the UK) or a locally incorporated entity (in the overseas
jurisdictions). As part of their duties, a number of the employees provide
services to the investment trust and their time is charged to the trust,
forming part of the ongoing charges.
More details about the performance of the IPS business in 2024 are given in
the Chief Executive Officer's review above.
Our strategy - guidelines
The Board sets the investment strategy and actively monitors both the
investment managers' and Executive Leadership team's adherence through a
series of guidelines and parameters in each scheduled Board meeting. The
strategy is reviewed periodically to ensure we deliver on our objective.
Investments Permitted types of investments are: Restrictions:
· Equity Shares · Trading is not permitted in suspended shares or short positions
· Cash/Liquid Assets
·
No
mor
e
tha
n
15%
of
gro
ss
ass
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wil
l
be
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in
oth
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inv
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men
t
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·
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·
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t
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whi
ch
rai
ses
the
agg
reg
ate
val
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of
the
lar
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t
20
hol
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or
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ket
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to
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tha
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the
Por
tfo
lio
,
inc
lud
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gil
ts
and
cas
h
·
The
val
ue
of
a
new
acq
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on
in
any
one
hol
din
g
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exc
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5%
of
the
tot
al
Por
tfo
lio
val
ue
(in
clu
din
g
cas
h)
at
the
tim
e
the
inv
est
men
t
is
mad
e
·
Fur
the
r
add
iti
ons
sha
ll
not
cau
se
a
sin
gle
hol
din
g
to
exc
eed
5%,
and
Exe
cut
ive
app
rov
al
mus
t
be
sou
ght
(to
be
rep
ort
ed
at
the
nex
t
Boa
rd
mee
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to
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ain
a
hol
din
g
sho
uld
its
val
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inc
rea
se
abo
ve
the
5%
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it
·
No
inv
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men
t
in
any
inv
est
men
t
veh
icl
e
man
age
d
or
adv
ise
d
by
Jan
us
Hen
der
son
sha
ll
be
mad
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wit
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t
pri
or
Boa
rd
app
rov
al
·
No
inv
est
men
t
oth
er
tha
n
in
equ
ity
sha
res
quo
ted
on
a
maj
or
int
ern
ati
ona
l
Sto
ck
Exc
han
ge
(in
clu
din
g
AIM
for
the
avo
ida
nce
of
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bt)
or
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tru
men
ts
con
ver
tib
le
int
o
the
sam
e
may
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mad
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wit
hou
t
pri
or
Exe
cut
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app
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•
The
Com
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y
may
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inv
est
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ts
in
unl
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ted
lia
bil
ity
com
pan
ies
The current regional parameters are: Minimum Maximum
% %
United Kingdom 55 100
North America 0 20
Continental Europe 0 20
Japan 0 10
Asia/Pacific 0 10
Other (including South America) 0 10
Derivatives May be used with prior authorisation of the Board
Hedging Currency hedges may be put in place with Board approval to protect against
foreign exchange movements on the capital and income accounts
Stock-lending Up to 30% of the market value of the Portfolio may be lent
Gearing A ceiling on net gearing of 50% is applied. Typically net gearing, (i.e.
gearing net of cash), is between 10% and 20% of the total Trust value. The
Board retains the ability to reduce equity exposure so that net cash is above
10% if deemed appropriate. Refer to page 160 of the full annual report and
accounts for calculation of gearing
Daily dealing limit Net purchases in any dealing day are to be limited to £30 million unless
prior Executive approval is obtained
Underwriting Permitted capital at risk up to 5% of the value of the Portfolio
Corporate approval Where indicated, the investment managers must obtain prior approval to exceed
permitted limits either through Board or Executive approval. Executive
approval shall be the approval of either the Board Chair or the Chief
Executive Officer. The Board may make non-material adjustments or changes to
the investment policy from time to time. Any changes to the investment policy,
which the Board deem to be material, require prior shareholder approval
Agreement with the investment managers
Appointed investment managers: James Henderson and Laura Foll, Janus Henderson
Investors.
On a fully discretionary basis, our investment managers are responsible for
implementing the Company's investment strategy. The contract is terminable by
either side on six months' notice.
The agreement with Janus Henderson does not cover custody, which is the
responsibility of the depository (see section on regulatory compliance in the
Directors' Report, page 65 of the full annual report and accounts). It also
does not cover the preparation of data associated with investment performance
or record keeping, both of which remain the responsibility of the Company.
Fee structure and ongoing charges
Investment trusts are required to publish their ongoing charges ratio. This is
the cost of operating the trust and includes the investment management fee,
depository and custody fees, investment performance data, accounting, company
secretary and back office administration.
The Group continues to have one of the more competitive fee structures in the
UK Equity Income Sector with investment management fees of 0.30% p.a. of the
value of net assets of the Group (excluding the net assets of IPS), calculated
on the basis adopted in the audited financial statements, and total ongoing
charges of 0.51%.
No performance fee is paid to the investment manager.
Reappointment of the investment managers
On an annual basis, at a minimum, the Board assesses whether the investment
managers should be reappointed. The key criterion for assessment is the
long-term performance of the Portfolio.
Given Janus Henderson's proven record of performance, and the competitive fee
arrangements in place, the Board has concluded that the continued appointment
of our existing investment managers remains in the interests of our
shareholders.
Gearing and long-term borrowing
Investment trusts have the benefit of being able to 'gear' their portfolios
according to market conditions. This means that they can raise debt (either
short or long-term) to generate funds for further investment. These funds can
be used to increase the size of the Portfolio. Alternatively, assets from
within the Portfolio can be sold to reduce debt and the Portfolio can even be
'negatively geared'. This means selling assets to hold cash so that less than
100% of the Company's assets are invested in equities. At 31 December 2024,
our gearing was 11% (2023: 13%) (refer to page 160 of the full annual report
and accounts).
The Group has four debentures (long dated sterling denominated financing)
details of which are on page 150 of the full annual report and accounts. The
weighted average interest payable on the debentures is 3.96% (2023: 3.96%).
The fair value of long-term borrowings held by the Group is disclosed in note
20 to the accounts in the full annual report and accounts. The fair value
calculation of all long-term borrowings benchmarks the Group debt against
A-rated UK corporate bond yields.
Valuation of our IPS business
Accounting standards require us to consolidate the income, costs and taxation
of our IPS business into the Consolidated Statement of Profit or Loss below.
The assets and liabilities of the business are also consolidated into the
Group column of the statement of financial position below. A segmental
analysis is provided in note 6 (pages 133 and 134 of the full annual report
and accounts) to these accounts which shows a detailed breakdown of the split
between the Portfolio and the IPS business.
Consolidating the value of the IPS business in this way does not fully
recognise the value created for the shareholder by the IPS business in the
NAV. To address this, the NAV we have published for the Group has included a
fair value for the standalone IPS business.
In determining the calculation basis for the fair valuation of the IPS
business, the Board continues to take appropriate external professional
advice. Historically, the fair value of the IPS business has been calculated
based upon maintainable earnings before interest, taxation, depreciation and
amortisation ('EBITDA'), with an appropriate multiple applied.
EBITDA is reached by taking the maintainable return, including profit before
interest and tax and adding back the depreciation charge for property, plant
and equipment and right-of-use assets, the amortisation of intangible assets,
and net interest expense all shown in note 6 on page 133 of the full annual
report and accounts. At 31 December 2023, EBITDA of £17.6m was applied to a
multiple of 10.5x.
The multiple was based on comparable companies sourced from market data, with
appropriate adjustments to reflect the difference between the comparable
companies and IPS business in respect of size, liquidity, margin and growth. A
range of multiples was provided by the professional valuation firm, from which
the Board selected an appropriate multiple to apply.
The Board has recently noted that the reliability of adopting this market
approach as a primary valuation tool was increasingly limited, due to the
reducing number of companies with a strong degree of comparability in terms of
risk profile and business model. Consequently, an income based approach has
been adopted from 31 December 2024 that follows a discounted cash flow ('DCF')
analysis.
This approach considers business forecasts adjusted to consider the fair value
a hypothetical third-party would apply when viewing the forecasts. An
appropriate cost of equity was determined through consideration of comparable
entities to guide on discount rate and applied to the discrete forecast period
and projected free cashflows to estimate the terminal value. PwC provided a
range from which the Board selected a value.
The calculation of the IPS valuation and methodology used are included at note
13 on page 140 of the full annual report and accounts. As a cross check, the
implied multiple for 31st December 2024 was calculated by dividing the DCF IPS
valuation by the underlying EBITDA (see APM on page 162 of the full annual
report and accounts) deriving a multiple of 10.5x. This compares to the 10.5x
multiple applied in the two proceeding years.
Valuation guidelines require that the fair value of the IPS business be
established on a stand-alone basis. Therefore, the valuation does not reflect
the value of Group tax relief applied from the investment trust to the IPS
business.
It is hoped that our continued initiatives to achieve growth into the IPS
business will result in a corresponding increase in valuation over time. As
stated above, management is aiming to achieve mid to high single percentage
growth in 2025. The total valuation (excluding surplus net assets) of the
business has increased by £116m/148% since the first valuation of the
business as at 31 December 2015. The uplift reflects the IPS business
delivering seven years of revenue and underlying profit growth.
In order to assist investors, the Company restated its historical NAV in 2015
to include the fair value of the IPS business for the last ten years. This
information is provided within the 10-year record on page 41 of the full
annual report and accounts.
Calculation of Net Asset Value ('NAV') per share
The table below shows how the NAV at fair value is calculated. The value of
assets already included within the NAV per the Group statement of financial
position that relate to the IPS business have been removed (£25.9m) and
substituted with the calculation of the fair value and surplus net assets of
the business £213.3m. An adjustment of £42.4m is then made to show the
Group's debt at fair value, rather than the amortised cost that is included in
the NAV per the Group statement of financial position. This calculation shows
a NAV fair value for the Group as at 31 December 2024 of £1,150.5m or 872.34
pence per share.
31 December 2024 31 December 2023
£000 Pence per share £000 Pence per share
Net asset value ('NAV') per Group statement of financial position 920,764 698.14 854,229 654.07
Fair valuation of IPS 194,505 147.48 185,063 141.70
IPS Net Assets attributable to IPS valuation 18,811 14.26 25,729 19.70
Fair value of IPS business 213,316 161.74 210,792 161.40
Removal of IPS net assets included in Group net assets (25,921) (19.65) (49,956) (38.25)
Fair value uplift for IPS business 187,395 142.09 160,836 123.15
Debt fair value adjustment 42,353 32.11 33,239 25.45
NAV at fair value 1,150,512 872.34 1,048,304 802.67
NAV attributable to IPS 213,316 19% 210,792 20%
See commentary for the breakdown of the assets already included in the NAV per
the financial statements.
The 'results' NAV at fair value calculated above differs to the 'published'
NAV at fair value for 31 December 2024 (year end NAV released by RNS on 2
January 2025). As such, please see below for a reconciliation:
31 December 2024
Value £000 Pence per share
Reconciliation of published NAV to results NAV:
Published NAV cum income with debt at fair value 1,152,871 874.12
Reconciliation of shareholders' funds to net assets:
Published NAV (941,405) (713.79)
Results NAV 920,764 698.14
Revised IPS valuation uplift:
Published NAV (valuation per 30 June 2024) (169,070) (128.19)
Results NAV 187,395 142.09
Revised Fair Value of Debentures:
Published NAV (42,396) (32.15)
Results NAV 42,353 32.11
Total NAV at fair value per results 1,150,512 872.34
Our approach to risk
The Group's risk management and internal control framework is embedded in
everyday operations and subject to ongoing enhancements. The diagram below
summarises our risk reporting and governance framework, with risks effectively
managed and monitored in a continuous risk management process. Top-down
Board-level oversight for the Portfolio and IPS business is provided by the
Audit and Risk Committee.
In discharging its oversight responsibilities in relation to the Portfolio,
the Board considers risk matters during the year by meeting regularly with the
investment managers and receives a wide range of reports about the Portfolio
including investment review, risk reporting and comparative peer reporting.
Thematic discussions are held with the investment managers at two out of six
of the scheduled Board meetings each year to address market trends and
insights.
The Audit and Risk Committee assists the Board by receiving an annual report
from the Group Risk team and Internal Audit. This report includes the findings
from their annual operational due diligence visit, their assessment of the
annual AAF report, and their review of the quarterly internal controls reports
on the investment managers.
The Audit and Risk Committee reviews the principal risks to the Group as well
as the adequacy of the controls in place to appropriately mitigate those risks
as part of our ongoing risk management. Consideration is given to emerging
risks to ensure that the risk management framework remains relevant.
The Risk, Operations and Controls Committee monitors risk management within
the IPS business to ensure they are appropriately managed. Detailed, bottom-up
risk identification and management is owned by either individual business
lines or central functions and is analysed by the Group Risk team. The
objective is not to eliminate such risks but to understand and appropriately
mitigate these while seeking to deliver on our objectives. On at least a
quarterly basis, the Group Risk team provides a report to the Audit and Risk
Committee on key matters discussed at the Risk, Operations and Controls
Committee.
The risk assessment process evaluates the probability of the risk
materialising and the financial, strategic or reputational impact of the risk
using a scoring system approved by the Audit and Risk Committee. There may be
uncertainty in measuring certain risks, but the aim is to inform and guide
decisions and pinpoint areas which may require more attention.
Those risks which have a higher probability and significant impact on
strategy, reputation or financial impact under the risk scoring system are
identified as principal risks below. The policies and procedures used to
manage and measure these risks have not changed since the prior year.
Governance
The Group's risk management and internal control framework is governed by
those listed in "parties involved" section of the diagram above and overseen
by the Audit and Risk Committee. IPS business risks are managed through
business unit risk committees and management meetings. The outputs of these
are fed through to the Risk, Operations and Controls Committee and then the
Audit and Risk Committee for review and to the Board for approval as
appropriate.
Group risk summary and mitigating actions
PRINCIPAL GROUP RISKS CHANGES TO RISK IN 2024 MITIGATING FACTORS
1. Investment Performance and Market Risk
The risk of the Portfolio failing to deliver and/or failing to consider and UNCHANGED · Market risk is an accepted risk given the nature of the
react to market conditions to deliver the strategic objectives to:
Portfolio. To manage this inherent risk, the Board regularly reviews the
Continued geopolitical tensions present elements of uncertainty, and global investment managers' report including risk indicators, MI, and other financial
economic pressures continue to have an unfavourable impact on global markets information. The Board engages in open dialogue, robust discussion and
and therefore the Portfolio. High global inflation in the year undermines the provides challenge to the investment managers on their approach and
value of investment returns. performance, seeking explanations from the investment managers where
performance is not in line with our objectives.
· Achieve long-term capital growth.
· Deliver steadily increasing income
· Achieve a rate of return greater than the FTSE Actuaries · The investment trust is closed ended and therefore does not have
All-Share Index, our benchmark. to sell investments to provide liquidity to shareholders who wish to sell.
This enables our investment managers to invest for the long-term.
The principal risk is a material decline in the value of the NAV and · To mitigate leverage risk, all borrowings require the prior
under-performance against the benchmark. Investment performance and market approval of the Board and gearing ratios are kept under close review by the
risk are the largest risks to which the Group is exposed. Board. We have substantial headroom on all of our existing borrowings.
Our investment risk includes market risk, gearing risk, credit risk, leverage
risk and liquidity risk.
2. Cyber, Technology and Systems Risk
The threat of unauthorised or malicious attacks on our IT systems is an INCREASED · The Group is Cyber Essentials Plus certified, the highest level
ongoing risk. We rely on a set of critical IT systems which are fundamental to
of certification offered under the Government-backed, industry-supported Cyber
the day-to-day running of the business, as in any technology-enabled business. Cyber threats remain a relevant industry-wide risk with cyber-attacks growing Essentials scheme.
ever more sophisticated and their increasing frequency and scale is well
publicised. Industry data suggests that "bad actors" are becoming increasingly
well-financed, with cyber experts warning of a rising use of commercial
hacking tools.
Failures in these systems could lead to reduced revenue, increased costs, · All staff trained on cyber security risks including phishing
liability claims, or harm to our reputation or competitive position. The training and testing.
systems of Janus Henderson, our investment managers, are also considered under
this risk type.
· We are continually investing in our IT security framework
including working with industry-recognised best-in-class security providers.
· We have an information security governance structure to help
identify and mitigate threats.
· As part of our ongoing oversight of Janus Henderson's control
environment, Law Debenture's Group Risk team have specifically reviewed their
information security and business continuity/disaster recovery plans.
· Industry standard cyber insurance is in place to mitigate
financial loss.
3. IPS Concentration Risk
The unique setup of the Group as a Portfolio alongside an unquoted IPS UNCHANGED · The IPS business comprises a diversified range of services with
business, which represents 19% of NAV and accounted for 31% of revenue return
little client concentration risk.
per share in 2024, creates an illiquid concentration risk. The IPS business includes some counter-cyclical services which may help to
counteract any adverse market conditions for other business lines.
Failure to deliver on the IPS strategy could result in a significant reduction · The CEO and COO are accountable for the day-to-day running and
in valuation of the Group's largest asset, thereby putting pressure on our operation of the IPS business with independent oversight and challenge from
ability to meet our stated objective of long-term capital growth, and steadily the Non-Executive Directors. The performance of the IPS business is reviewed
increasing income. at all Board meetings.
IPS Concentration Risk also includes aggregation of litigation, compliance, · The annual IPS budget is subject to review and approval by the
regulatory and internal control failures and people risk. Board which provides robust scrutiny and challenge on IPS strategic plans.
· Any significant IPS investment requires Board approval. This
reduces the risk of unplanned concentration risk.
· Valuation of the IPS business takes into account the illiquid
nature of the holding. This is reviewed and approved by the Audit and Risk
Committee .
· The Audit and Risk Committee has oversight of internal control
findings from second/third line and external audit.
Emerging risks
Emerging risks are those identified by Law Debenture, where the potential
impact and/or likelihood is not yet fully known. The firm monitors the
evolution of these risks and associated mitigants.
ESG Regulatory Risk: Uncertainties related to the outcomes of evolving
environmental and sustainability regulations, which could incur additional
implementation and ongoing compliance costs, expertise and disclosure
requirements are closely monitored by the ESG manager.
Technological Advancements in Artificial Intelligence: There are both risks
and opportunities presented by advancements in artificial intelligence,
including the potential to disrupt or harm, as well as the operational
benefits of harnessing efficiencies, impacting the investment portfolio and
IPS business. We continue to review the risks and opportunities of artificial
intelligence across our business.
Viability statement
The Board has considered the Group's current financial position and the
potential impact of its principal risks and uncertainties, and has a
reasonable expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due for a period of five years from the
date of this report. The Board applied an assessment period of five years,
increasing from three years in 2023 to align with market peers and long-term
nature of the investment trust.
In assessing the viability of the Group over the review period, the Board has
considered a number of key factors, including:
Our business model and strategy
· The Board seeks to ensure that the Group delivers long-term
performance. The closed ended nature of the investment trust creates a stable
capital basis which enables our investment managers to take a longer term view
in their construction and management of the Portfolio. This partially
mitigates the risk to the Group of potential liquidity issues should
shareholders wish to sell their shares, potentially avoiding any untimely
requirements to sell down the Portfolio.
· As an investment trust, we benefit from the unique structure of a
predominately UK-based equity Portfolio with a diversified revenue stream
arising from the IPS business. As demonstrated by our long-term performance,
the combination of the Portfolio and the IPS revenue streams provide
protection to the long-term viability of the Group. Over a five year period,
the share-price total return is 72.4%. The NAV total return with debt at FV is
56.0% compared to the FTSE Actuaries All-Index Total Return of 26.5%.
· One of the principal group risks relates to investment
performance and market risk. Part of the risk to the Group is that a breach of
our debt covenants results in a requirement for the Group to repay the
debentures at short notice, potentially requiring the sale of assets during a
market downturn. Whilst the Board acknowledges this risk, the uncertainty
arising due to Covid and more recently the macroeconomic environment
demonstrates the Group's ability to navigate these challenges. At the height
of market decline on 23 March 2020, the Group maintained significant headroom
on all covenants.
· The IPS business currently holds enough working capital to meet
any short term requirements of the group and our book of clients provides a
steady, largely reoccurring, flow of income. There has been a concerted focus
on debtor management which has enhanced the IPS business's cashflow over the
past year and improved our working capital cycle.
· Furthermore, the majority of the Portfolio is invested in UK
listed securities which are traded on major stock exchanges, providing the
Group with the ability to quickly liquidate assets, should the need arise.
· The investment trust has an ongoing charge of 2024: 0.51% (2023:
0.49%). This is the second lowest OCR in the UK Equity Income sector*.
*Source: The AIC Compare investment companies | The AIC
Our business operations
· The investment trust retains ownership of all assets held by the
Custodian under the terms of formal agreements with the Custodian and
Depositary. This supports our ability to meet our Legal and Regulatory
requirements and acts as a control to both verify the existence of our assets
and further safeguard the interests of our shareholders.
· The Group's cash is all held with banks approved by the Board.
The Group's cash balance, including money market funds, as at 31 December 2024
amounted to £38.4m (31 December 2023: £31.4m) of which, IPS held £11.9m.
Cash is treated as a fungible across the Group and it is deployed on a basis
of need with periodic clear down of intercompany balances via an intra-group
net-off agreement.
· There is long term borrowing in place comprising four debentures;
Maturity date PAR Value Interest
2034 £40m 6.125%
2041 £20m 2.54%
2045 £75m 3.77%
2050 £30m 2.53%
Total £165m Weighted average: 3.96%
The weighted average cost of borrowing is 3.96%. Each debenture is subject to
a formal agreement, including financial covenants which the Company has
complied with in full during the year. As at the end of December, net gearing
was 10.9% which is well within the typical operating range of 10%-20%.
· During January 2021, the Company also made arrangements to put in
place a £50m unsecured overdraft facility with HSBC. Whilst available, this
facility is currently not in use but provides further mitigation of any
liquidity risk.
· The Board reviews the Portfolio performance including revenue
forecasts, along with other key metrics such as gearing at each Board Meeting
and receives monthly financial reporting to monitor and manage the principal
risk relating to investment performance.
In addition to this, the Board carries out an assessment of our principal
risks and uncertainties which could threaten the Group's business model. This
assessment has been shared separately and is presented as part of the annual
report. As part of this exercise, the Board has assessed the emerging risks
which may impact the operations of the Group and will continue to actively
review the likely impact of these potential risks. This is set out above.
The Board do not consider any ongoing geo-political events will have material
impact on the longer term viability of the Group, given the headroom
identified in the risk sensitivities from the far more extreme scenarios.
In light of the current conditions, the Board has considered the Group's
current financial position and the potential impact of its principal risks and
uncertainties, and has a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due for a period
of five years from the date of this report.
Balance sheet resilience
As at the 31 December 2024, Law Debenture Corporation held total investments,
including cash and the IPS business of £1.30bn (31 December 2023: £1.21bn).
With the exception of the IPS business, the majority of these assets are
liquid and could be sold down within a short period of time, i.e. less than 10
working days.
The Board and the Executive Leadership team have actively monitored the cash
position across the Group throughout the year, mindful of our commitment to
pay quarterly dividends to shareholders. As of 31 December 2024, the Group
holds cash of £38.4m (31 December 2023: £31.4m). In addition to this, the
Company has an overdraft facility of £50m to protect against any significant
reduction in cash inflows.
Extracts from the Directors' Report
Repurchase and issue of shares
At the 2024 AGM, the Directors were given power to buy back up to 19,666,035
ordinary shares or, if less, the number of shares equal to 14.99% of the
Company's issued share capital at that date. During the year, the Company did
not repurchase any of its shares for cancellation. This authority will expire
at the 2025 AGM. The Company intends to seek shareholder approval to renew its
powers to repurchase shares for cancellation up to 14.99% of the Company's
issued share capital if circumstances are appropriate, at the 2025 AGM.
The Directors were also given power to allot up to 13,119,436 ordinary shares
at the 2024 AGM. From the 2024 AGM to the 11 March 2025 the Company issued a
total of 1,401,388 ordinary shares under its share issuance programme and its
SAYE scheme. The authority will expire at the 2025 AGM at which the Company
intends to seek shareholder approval to renew its powers to issue shares up to
20% of the Company's share capital in issue at 11 March 2025.
Cancellation of share premium account
The share premium account is a non-distributable reserve and the Company is
therefore unable to use it, amongst other things, for justifying distributions
to shareholders, including the payment of dividends. As at 31 December 2024,
the Company had distributable reserves of approximately £34,283,000 and an
amount standing to the credit of the Company's share premium account of
£119,449,000.
Accordingly, in order to enhance the Company's distributable reserves
position, the Company is seeking shareholder approval at the AGM to cancel the
Company's share premium account. If approved by shareholders and subsequently
by the Court, this will result in an increase of the Company's distributable
reserves and thereby support the Company in achieving its objective of
increasing the Company's dividend over time.
Share capital and significant shareholdings
The Company's share capital is made up of ordinary shares with a nominal value
of 5 pence each. The voting rights of the shares on a poll are one vote for
every share held. There are no restrictions on the transfer of the Company's
ordinary shares or voting rights and no shares which carry specific rights
with regard to the control of the Company. There are no other classes of share
capital and none of the Company's issued shares are held in treasury. As at 31
December 2024, there were 132,594,209 ordinary shares in issue with
132,594,209 voting rights. Note 17 in the full annual report and accounts
includes details of share capital changes in the year.
As at 31 December 2024, there were no shareholders that had notified the
Company of a beneficial interest of 3% or more of the issued share capital.
Additionally, no such disclosures had been made to the Company as at 11 March
2025. Share information as required by section 992 of the Companies Act 2006
appears at pages 37 and 143 of the full annual report and accounts.
Directors' responsibility statement pursuant to DTR4
The Directors confirm to the best of their knowledge that:
· the financial statements have been prepared in accordance with
international financial reporting standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union and give a true and fair
view of the assets, liabilities, financial position and profit and loss of the
Group; and
· the Annual Report includes a fair review of the development and
performance of the business and the financial position of the Group, together
with a description of the principal risks and uncertainties that they face.
Extract from the Audit and Risk Committee Report
Significant financial issues relating to the 2024 accounts
The UK Corporate Governance Code requires the Committee to describe any
significant issues considered in relation to the 2024 financial statements and
how those issues were addressed.
The significant issues and judgements considered by the Committee include the
valuation of IPS, presentation of underlying results of IPS including a
detailed review of goodwill impairments and non-recurring costs, debtor
recoverability and discussions around the control environment.
No new significant issues arose during the course of the external audit. There
continued to be a focus on embedding the improved Finance operations and we
have continued to make investments in this area to support the strategy for
long term growth. We are pleased with the progress made and the improved
control environment.
The Committee is satisfied that the judgements made by management are
reasonable and that appropriate disclosures have been included in the
accounts. The Committee was able to conclude and report to the Board that the
financial statements themselves and the Annual Report as a whole are fair,
balanced and understandable and provide the necessary information for
shareholders to assess the Company and Group's position and performance,
business model and strategy.
Consolidated Statement of Profit or Loss
For the year ended 31 December 2024
2024 2023
Notes in the Annual Report Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
UK dividends 32,328 - 32,328 29,834 - 29,834
UK special dividends - 1,432 1,432 - 1,368 1,368
Overseas dividends 2,373 - 2,373 3,670 - 3,670
Total dividend income 34,701 1,432 36,133 33,504 1,368 34,872
Interest income 5 739 - 739 1,197 - 1,197
Independent professional services fees 6 61,659 - 61,659 58,543 - 58,543
Other income 1,204 - 1,204 1,369 - 1,369
Total income 98,303 1,432 99,735 94,613 1,368 95,981
Net gain on investments held at fair value through profit or loss 2 - 76,301 76,301 - 37,379 37,379
Total income and capital gains/(losses) 98,303 77,733 176,036 94,613 38,747 133,360
Cost of sales (8,212) - (8,212) (8,255) - (8,255)
Goodwill impairment 10 - (17,037) (17,037) - - -
Administrative expenses 3 (42,685) (2,706) (45,391) (39,708) (2,075) (41,783)
Operating profit 47,406 57,990 105,396 46,650 36,672 83,322
Finance costs
Interest payable 5 (1,640) (4,908) (6,548) (1,635) (4,908) (6,543)
Profit before taxation 6 45,766 53,082 98,848 45,015 31,764 76,779
Taxation 7 (1,897) - (1,897) (1,626) - (1,626)
Profit for the year 6 43,869 53,082 96,951 43,389 31,764 75,153
Return per ordinary share (pence) 9 33.48 40.51 73.99 33.43 24.47 57.90
Diluted return per ordinary share (pence) 9 33.48 40.51 73.99 33.41 24.47 57.88
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2024
2024 2023
GROUP Revenue Capital* Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Profit for the year 43,869 53,082 96,951 43,389 31,764 75,153
Foreign exchange on translation of foreign operations (219) (4,541) (4,760) (602) - (602)
Pension actuarial gains/(losses) 2,738 - 2,738 (1,400) - (1,400)
Taxation on pension (499) - (499) - - -
Other comprehensive income/(loss) for the year 2,020 (4,541) (2,521) (2,002) - (2,002)
Total comprehensive income for the year 45,889 48,541 94,430 41,387 31,764 73,151
*2024 charge offset by credit in foreign exchange translation reserve. See
Consolidated Statement of Changes in Equity.
All items stated in the statement of comprehensive income will be subsequently
classified to profit or loss when specific conditions are met.
Statement of Financial Position
As at 31 December 2024
GROUP COMPANY
Notes in the Annual Report 2024 2023 2024 2023
£000 £000 £000 £000
Assets
Non-current assets
Goodwill 10 1,976 19,006 - -
Property, plant and equipment 11 1,958 2,267 - -
Right-of-use assets 22 3,822 4,131 - -
Other intangible assets 12 2,631 3,034 16 16
Investments held at fair value through profit or loss 13 1,042,039 965,226 1,041,938 965,126
Investments in subsidiary undertakings 13 - - 61,176 61,368
Retirement benefit asset 23 10,475 7,440 - -
Total non-current assets 1,062,901 1,001,104 1,103,130 1,026,510
Current assets
Trade and other receivables 14 17,758 21,496 2,700 3,014
Contract assets 14 6,659 8,604 4 -
Cash and cash equivalents 15 38,354 31,439 26,453 12,382
Total current assets 62,771 61,539 29,157 15,396
Total assets 1,125,672 1,062,643 1,132,287 1,041,906
Current liabilities
Amounts owed to subsidiary undertakings 19 - - 25,537 18,558
Trade and other payables 16 18,989 22,553 11,789 11,023
Lease liabilities 22 1,018 1,025 - -
Corporation tax payable 2,297 2,198 - -
Other taxation including social security 2,266 1,842 25 839
Contract liabilities 16 8,996 8,000 10 8
Total current liabilities 33,566 35,618 37,361 30,428
Non-current liabilities
Long-term borrowings 20 163,868 163,889 124,295 124,343
Contract liabilities 16 1,866 2,403 - -
Deferred tax liabilities 7 1,418 1,788 - -
Lease liabilities 22 4,190 4,716 - -
Total non-current liabilities 171,342 172,796 124,295 124,343
Total net assets 920,764 854,229 970,631 887,135
Equity
Called up share capital 17 6,626 6,557 6,626 6,557
Share premium account 119,449 107,110 119,449 107,110
Own shares 17 (5,156) (3,926) - -
Capital redemption 8 8 8 8
Foreign exchange translation reserve 7,197 2,659 - -
Capital reserves 18 742,817 694,276 810,265 740,146
Retained earnings 49,823 47,545 34,283 33,315
Total equity 920,764 854,229 970,631 887,135
Total equity pence per share 694.42 651.13
As permitted by Section 408 of the Companies Act 2006, the Company has not
presented its own income statement, however its profit for the year was
£114,793k (2023: profit £76,763k). The financial statements were approved by
the Board of Directors and authorised for issue on 11 March 2025. They were
signed on its behalf by:
R. Hingley, Board Chair | D. Jackson, Chief Executive Officer
The Law Debenture Corporation p.l.c. registered number 00030397
Consolidated Statement of Changes in Equity
As at 31 December 2024
GROUP Foreign exchange translation reserve
Share premium account £000
£000 Capital redemption Capital reserves Retained earnings
Share capital Own shares £000 £000 £000 Total equity
£000 £000 £000
Balance at 1 January 2024 6,557 107,110 (3,926) 8 2,659 694,276 47,545 854,229
Profit for the year - - - - - 53,082 43,869 96,951
Deconsolidation of liquidated entities - - - - 4,538 (4,538) - -
Foreign exchange and other movements - - - - - (3) (219) (222)
Actuarial gain on pension scheme (net of tax) - - - - - - 2,239 2,239
Total comprehensive profit for the year - - - - 4,538 48,541 45,889 98,968
Issue of shares 69 12,339 (1,230) - - - - 11,178
Dividend relating to 2023 - - - - - - (11,971) (11,971)
Dividend relating to 2024 - - - - - - (31,640) (31,640)
Total equity at 31 December 2024 6,626 119,449 (5,156) 8 7,197 742,817 49,823 920,764
GROUP Foreign exchange translation reserve
Share premium account £000
£000 Capital redemption Capital reserves Retained earnings
Share capital Own shares £000 £000 £000 Total equity
£000 £000 £000
Balance at 1 January 2023 6,407 83,022 (3,128) 8 2,855 662,512 47,391 799,067
Profit for the year - - - - - 31,764 43,389 75,153
Foreign exchange and other movements - - - - (196) - (602) (798)
Actuarial (loss) on pension scheme (net of tax) - - - - - - (1,400) (1,400)
Total comprehensive profit/(loss) for the year - - - - (196) 31,764 41,387 72,955
Issue of shares 150 24,088 (798) - - - - 23,439
Dividend relating to 2022 - - - - - - (11,276) (11,276)
Dividend relating to 2023 - - - - - - (29,957) (29,957)
Total equity at 31 December 2023 6,557 107,110 (3,926) 8 2,659 694,276 47,545 854,229
Capital reserves comprises realised and unrealised gains on investments held
at fair value through profit or loss (see note 18 in the full annual report
and accounts) and the 2024 £17,037k impairment of CSS (see CEO Statement
above).
Please refer to note 8 in the full annual report and accounts for details of
dividends paid.
Statement of Changes in Equity
As at 31 December 2024
COMPANY Share premium account
Share capital £000 Capital redemption Capital reserves Retained earnings
£000 £000 £000 £000 Total
£000
Balance at 1 January 2024 6,557 107,110 8 740,146 33,315 887,135
Profit for the year - - - 70,119 44,674 114,793
Foreign exchange & other movements - - - - (95) (95)
Total comprehensive profit for the year - - - 70,119 44,579 114,698
Issue of shares 69 12,339 - - - 12,408
Dividend relating to 2023 - - - - (11,971) (11,971)
Dividend relating to 2024 - - - - (31,640) (31,640)
Total equity at 31 December 2024 6,626 119,449 8 810,265 34,283 970,631
COMPANY Share premium account
Share capital £000 Capital redemption Capital reserves Retained earnings
£000 £000 £000 £000 Total
£000
Balance at 1 January 2023 6,407 83,022 8 708,382 29,549 827,368
Profit for the year - - - 31,764 44,999 76,763
Total comprehensive profit for the year - - - 31,764 44,999 76,763
Issue of shares 150 24,088 - - - 24,238
Dividend relating to 2022 - - - - (11,276) (11,276)
Dividend relating to 2023 - - - - (29,957) (29,957)
Total equity at 31 December 2023 6,557 107,110 8 740,146 33,315 887,135
Capital reserves comprises realised and unrealised gains on investments held
at fair value through profit or loss (see note 18 in the full annual report
and accounts).
Please refer to note 8 in the full annual report and accounts for details of
dividends paid.
Cash Flow Statement
For the year ended 31 December 2024
GROUP COMPANY
Notes in the Annual Report 2024 2023 2024 2023
£000 £000 £000 £000
Cash flows from operating activities (before dividends received) and taxation 28 11,070 11,268 (6,319) (5,780)
paid
Cash dividends received 36,578 32,964 50,828 48,964
Taxation paid (770) - - -
Cash generated from operating activities 46,878 44,232 44,509 43,184
Investing activities
Acquisition of property, plant and equipment 11 (268) (874) - -
Acquisition of right of use assets 22 - - - -
Expenditure on intangible assets 12 (275) (54) - -
Purchase of investments (less cost of acquisition) 13 (193,394) (98,934) (193,394) (98,934)
Sale of investments 13 192,881 62,093 192,881 62,093
Interest received 5 739 1,197 449 323
Cash flow from investing activities (317) (36,572) (64) (36,518)
Financing activities
Interest paid (6,294) (6,544) (6,652) (6,653)
Dividends paid 8 (43,012) (40,518) (43,012) (40,518)
Payment of lease liabilities 22 (1,295) (1,272) - -
Proceeds from issuance of share capital 12,408 24,237 12,408 24,237
Purchase of own shares 17 (1,230) (798) - -
Movement in amounts owed to subsidiary undertakings* - - 6,977 (1,043)
Net cash flow from financing activities (39,423) (24,895) (30,279) (23,977)
Net increase/(decrease) in cash and cash equivalents 7,138 (17,235) 14,166 (17,311)
Cash and cash equivalents at beginning of year 31,439 49,559 12,382 29,825
Foreign exchange losses on cash and cash equivalents (223) (886) (95) (132)
Cash and cash equivalents at end of year 38,354 31,439 26,453 12,382
*Comparative figure restated. Please see note 28 in the full annual report and
accounts.
Extracts from the Notes to the Accounts
For the year end 31 December 2024
Going concern
The Directors have considered the impact of the current economic uncertainty,
across the Group, including cash flow forecasting, balance sheet review at
entity level, a review of covenant compliance including the headroom above the
covenants and an assessment of the liquidity of the Portfolio. Whilst the
debentures held are subject to covenants, the Directors are comfortable that
the risk of breach is minimal, and the current economic environment does not
create material uncertainty for the Group.
The assets of the Group consist largely of securities that are readily
realisable, and it will be able to meet its financial obligations, including
the repayment of the debenture interest, as they fall due for a period of at
least twelve months from the date of approval of the financial statements.
Accordingly, the Directors believe that the Group has adequate resources to
continue in operational existence for at least twelve months from the date of
approval of the financial statements.
Having assessed these factors and the principal risks, the Directors are not
aware of any other material uncertainties that cast significant doubt on the
Group's ability to continue as a going concern.
Segment analysis
Investment Portfolio Independent Professional Services Total
31 December 31 December 31 December 31 December 31 December 31 December
2024 2023 2024 2023 2024 2023
£000 £000 £000 £000 £000 £000
Revenue
Dividend income 34,701 33,504 - - 34,701 33,504
IPS revenue:
Corporate Services - - 28,260 25,041 28,260 25,041
Corporate Trust - - 16,524 16,043 16,524 16,043
Pensions - - 16,875 17,459 16,875 17,459
Segment revenue 34,701 33,504 61,659 58,543 96,360 92,047
Other income 1,204 1,369 - - 1,204 1,369
Cost of sales (214) (221) (7,998) (8,034) (8,212) (8,255)
Administration costs (note 3) (4,025) (4,271) (38,660) (35,437) (42,685) (39,708)
Profit before interest and tax 31,666 30,381 15,001 15,072 46,667 45,453
Interest payable (net) (note 5) (1,184) (1,302) 283 864 (901) (438)
Profit before tax 30,482 29,079 15,284 15,936 45,766 45,015
Income tax - - (1,897) (1,626) (1,897) (1,626)
Profit for the year 30,482 29,079 13,387 14,310 43,869 43,389
Revenue return per ordinary share (pence) 23.26 22.41 10.22 11.02 33.48 33.43
Assets 1,071,082 980,587 54,590 82,056 1,125,672 1,062,643
Liabilities (176,239) (176,314) (28,669) (32,100) (204,908) (208,414)
Total net assets 894,843 804,273 25,921 49,956 920,764 854,229
The table below shows the segment results adjusted for the non-recurring
administration expenses (see APMs on page 161 of the full annual report and
accounts):
Adjusted profit before interest and tax 31,666 30,381 16,037 15,072 47,703 45,453
Adjusted profit before tax 30,482 29,079 16,320 15,936 46,802 45,015
Adjusted profit after tax 30,482 29,079 14,423 14,310 44,905 43,389
Adjusted revenue return per share 23.26 22.41 11.01 11.02 34.27 33.43
Geographic location of revenue: Approximately 90% of revenue is based in the
UK. Geographic location is based on the jurisdiction in which the contracting
legal entity is based.
Major customers: Due to the diverse nature of the IPS revenue streams, there
is no single customer or concentration of customers that represents more than
3% of gross revenue streams.
Capital element: The capital element of the income statement is wholly gains
and losses relating to investments held at fair value through profit and loss
(2024: gains £76,301k; 2023: gains £37,379k), administrative expenses (2024:
£2,706k; 2023: £2,075k), interest payable (2024: £4,908k; 2023: £4,908k)
and a capital dividend received of 2024: £1,432k; 2023: £1,368k, which
corresponds to amounts classified as capital in nature in accordance with the
SORP are shown in the capital column of the income statement above. For 2024,
the capital element also includes the goodwill impairment of £17,037k from
the IPS segment. 2024 IPS statutory PBT and PBIT were £(1,753)k and
£(2,036)k respectively following the goodwill impairment reported as a
capital expense.
Details regarding the segments are included in note 1 - Segment reporting on
page 123 of the full annual report and accounts.
Investment Portfolio Independent Professional Services Total
31 December 31 December 31 December 31 December 31 December 31 December
2024 2023 2024 2023 2024 2023
£000 £000 £000 £000 £000 £000
Other information
Capital expenditure - - 912 1,319 912 1,319
Depreciation and amortisation - - 1,584 1,295 1,584 1,295
Depreciation - right-of-use assets - - 719 891 719 891
Financial instruments
The principal risks facing the Group in respect of its financial instruments
remain unchanged from 2023 and are:
Market risk
Price risk, arising from uncertainty in the future value of financial
instruments. The Board maintains strategy guidelines whereby risk is spread
over a range of investments, the number of holdings normally being between 70
and 175. In addition, the stock selections and transactions are actively
monitored throughout the year by the investment manager, who reports to the
Board on a regular basis to review past performance and develop future
strategy. The Portfolio is exposed to market price fluctuation: if the
valuation at 31 December 2024 fell or rose by 10%, the impact on the Group's
total capital reserves for the year would have been £104.2m (2023: £96.5m).
Corresponding 10% changes in the valuation of the Portfolio on the Company's
total capital reserves for the year would have been £104.2m (2023: £96.5m).
10% has been used based on historic trends, however we will continue to
revisit this on a periodic basis.
Foreign currency risk, arising from movements in currency rates applicable to
the Group's investment in equities and fixed interest securities and the net
assets of the Group's overseas subsidiaries denominated in currencies other
than sterling. The Group's financial assets denominated in currencies other
than sterling were:
2024 2023
GROUP Investments Net monetary assets Total currency exposure Investments Net monetary assets Total currency exposure
£000 £000 £000 £000 £000 £000
US Dollar 41,391 4,101 45,492 24,062 1,766 25,828
Canadian Dollar 6,329 - 6,329 5,564 - 5,564
Euro 44,247 410 44,657 56,492 2,829 59,321
Danish Krone 4,935 - 4,935 3,147 - 3,147
Swiss Franc 5,268 - 5,268 8,376 - 8,376
Hong Kong Dollar - 311 311 - 1,455 1,455
Japanese Yen 13,190 - 13,190 11,877 - 11,877
Total 115,360 4,822 120,182 109,518 6,050 115,568
The Group US dollar net monetary assets is that held by the US operations of
£2.0m (2023: £1.4m) together with £1.8m (2023: £0.4m) held by non-US
operations.
2024 2023
COMPANY Investments Net monetary assets Total currency exposure Investments Net monetary assets Total currency exposure
£000 £000 £000 £000 £000 £000
US Dollar 41,391 - 41,391 24,062 - 24,062
Canadian Dollar 6,329 - 6,329 5,564 - 5,564
Euro 44,247 - 44,247 56,492 - 56,492
Danish Krone 4,935 - 4,935 3,147 - 3,147
Swiss Franc 5,268 - 5,268 8,376 - 8,376
Japanese Yen 13,190 - 13,190 11,877 - 11,877
Total 115,360 - 115,360 109,518 - 109,518
The holding in Scottish Oriental Smaller Companies Trust is denominated in
sterling but has underlying assets in foreign currencies equivalent to £9.4m
(2023: £8.2m). Investments made in the UK and overseas have underlying assets
and income streams in foreign currencies which cannot easily be determined and
have not been included in the sensitivity analysis. If the value of all other
currencies At 31 December 2024 rose or fell by 10% against sterling, the
impact on the Group's total profit or loss for the year would have been
£12.8m and £10.5m respectively (2023: £12.2m and £10.0m). Corresponding
10% changes in currency values on the Company's total profit or loss for the
year would have been the same. The calculations are based on the Portfolio at
the respective year end dates and are not representative of the year as a
whole.
Interest rate risk, arising from movements in interest rates on borrowing,
deposits and short-term investments. The Board reviews the mix of fixed and
floating rate exposures and ensures that gearing levels are appropriate to the
current and anticipated market environment. The Group's interest rate profile
was:
2024
GROUP COMPANY
Sterling HK Dollars US Dollars Euro Sterling US Dollars Euro
£000 £000 £000 £000 £000 £000 £000
Floating rate assets 33,484 311 4,101 410 26,453 - -
2023
GROUP COMPANY
Sterling HK Dollars US Dollars Euro Sterling US Dollars Euro
£000 £000 £000 £000 £000 £000 £000
Floating rate assets 25,740 1,455 1,766 2,829 12,425 - -
The Group holds cash and cash equivalents on short-term bank deposits and
money market funds. Interest rates tend to vary with bank base rates. The
Portfolio is not directly exposed to interest rate risk.
GROUP COMPANY
2024 2023 2024 2023
Sterling Sterling Sterling Sterling
£000 £000 £000 £000
Fixed rate liabilities 163,868 163,892 124,295 124,343
Weighted average fixed rate for the year 3.96% 3.96% 3.27% 3.27%
If interest rates during the year were 1.0% higher the impact on the Group's
total profit or loss for the year would have been £256,000 credit (2023:
£311,000 credit). It is assumed that interest rates are unlikely to fall
below the current level.
The Company holds cash and cash equivalents on short-term bank deposits and
money market funds, it also has short-term borrowings. Amounts owed to
subsidiary undertakings include £40m at a fixed rate. Interest rates on cash
and cash equivalents and amounts due to subsidiary undertakings at floating
rates tend to vary with bank base rates. A 1.0% increase in interest rates
would have affected the Company's profit or loss for the year by £145,000
credit (2023: £161,000 credit). The calculations are based on the balances at
the respective year end dates and are not representative of the year as a
whole.
Liquidity risk
Is the risk arising from any difficulty in realising assets or raising funds
to meet commitments associated with any of the above financial instruments. To
minimise this risk, the Board's strategy largely limits investments to
equities and fixed interest securities quoted in major financial markets. In
addition, cash balances are maintained commensurate with likely future
settlements. The maturity of the Group's existing borrowings is set out in
note 20 in the full annual report and accounts. The interest on borrowings is
paid bi-annually on March and September for the 2045 secured senior notes,
April and October for the 2034 secured bonds and May and November for the 2041
and 2050 senior secured notes. Refer to note 20 in the full annual report and
accounts for details of financial covenants attached to the loan notes.
Credit risk
Is the risk arising from the failure of another party to perform according to
the terms of their contract. Cash and cash equivalents are held with banks
which are rated "A-" or higher by Standard & Poor's Rating Services.
The credit risk on liquid funds and borrowings is limited because the
counterparties are banks with high credit-ratings assigned by international
credit rating agencies.
The Group's maximum exposure to credit risk arising from financial assets is
£56.1m (2023: £48.8m). The Company's maximum exposure to credit risk arising
from financial assets is £29.2m (2023: £12.8m).
Outstanding customer receivables are continuously monitored and followed up
where required. Specific provisions incremental to ECL are made when there is
evidence that the Group will not be able to collect the debts from the
customer. This evidence can include indications that the customer is
experiencing financial difficulty, problems contacting the customer or
disputes with a customer. The ageing of trade receivables and the expected
credit loss at the reporting date are disclosed below.
Stock lending
Stock lending agreements are transactions in which the Group lends securities
for a fee and receives cash as collateral. The Group continues to recognise
the securities in their entirety in the statement of financial position
because it retains substantially all of the risks and rewards of ownership.
Because as part of the lending arrangement the Group sells the contractual
rights to the cash flows of the securities, it does not have the ability to
use the transferred assets during the term of the arrangement.
Stock lending transactions are carried out with a number of approved
counterparties. Details of the value of securities on loan at the year end can
be found in note 27 in the full annual report and accounts. In summary, the
Group only transacts with counterparties that it considers to be credit
worthy.
Trade and other receivables
The ageing profile of the carrying value of trade receivables past due is as
follows:
GROUP COMPANY
2024 2023 2024 2023
£000 £000 £000 £000
Between 31 and 60 days 2,474 1,965 - -
Between 61 and 90 days 2,476 1,375 - -
More than 91 days 5,125 6,192 36 21
Total 10,075 9,532 36 21
IFRS 9 credit loss rates
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade receivables
and contract assets. To measure expected credit losses trade receivables are
grouped based on similar risk characteristics including business area and
business geography and ageing.
The expected loss rates are estimated using the Group's historical credit
losses experienced over a three-year period prior to the year end. The
historical loss rates are adjusted for current and forward-looking information
on macroeconomic factors affecting the Group's customers. The Group has
identified gross domestic product (GDP) and unemployment trends act as key
economic indicators which may impact our customers' future ability to pay
debt.
The below table displays the gross carrying amount against the expected credit
loss provision and specific provisions. Specific provisions relate to certain
balances 91+ days overdue and the Group writes off a trade receivable when
there is information indicating that the debtor is in severe financial
difficulty and there is no realistic prospect of recovery.
The total specific and credit loss provision at 31 December 2024 is
£1,975,000 (2023: £2,143,000).
The loss allowance as at 31 December 2024 was determined as follows:
Trade receivables - days past due
Current 1 - 30 days overdue 31 - 60 days overdue 61 - 90 days overdue 91+ days overdue Total
£000 £000 £000 £000 £000 £000
31 December 2024
Expected loss rate 2.94% 3.10% 3.42% 3.48% 4.35% 3.60%
Gross carrying amount 1,541 4,089 2,474 2,476 5,125 15,705
Expected credit loss provision (45) (127) (85) (86) (223) (566)
Specific provision - - - - (1,409) (1,409)
Net carrying amount 1,496 3,962 2,389 2,390 3,493 13,730
The loss allowance as at 31 December 2023 was determined as follows:
Trade receivables - days past due
Current 1 - 30 days overdue 31 - 60 days overdue 61 - 90 days overdue 91+ days overdue Total
£000 £000 £000 £000 £000 £000
31 December 2023
Expected loss rate 0.80% 2.08% 2.85% 5.38% 5.86% 3.31%
Gross carrying amount 5,902 2,409 1,965 1,375 6,192 17,843
Expected credit loss provision (47) (50) (56) (74) (363) (590)
Specific provision - - - - (1,553) (1,553)
Net carrying amount 5,855 2,359 1,909 1,301 4,276 15,700
Trade and other payables
GROUP COMPANY
2024 2023 2024 2023
£000 £000 £000 £000
Due in less than one month 18,989 22,553 11,789 11,023
Due in more than one month and less than three months - - - -
Total 18,989 22,553 11,789 11,023
Fair value
The Directors are of the opinion that the fair value of financial assets and
liabilities of the Group are not materially different to their carrying
values, with the exception of the long-term borrowings (see note 20 in the
full annual report and accounts). The Group's basis of fair value calculation
on these long-term borrowings uses quoted prices (unadjusted) in active
markets for identical liabilities that the entity can access at the
measurement date. The Group does not make adjustments to quoted prices, only
under specific circumstances, for example when a quoted price does not
represent the fair value (i.e. when a significant event takes place between
the measurement date and market closing date).
Related party transactions
GROUP
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation.
COMPANY
The related party transactions between the Company and its wholly owned
subsidiary undertakings are summarised as follows:
2024 2023
£000 £000
Dividends from subsidiaries 14,250 16,000
Interest on intercompany balances charged by subsidiaries 721 721
Management charges from subsidiaries 1,000 850
The ultimate parent entity is The Law Debenture Corporation p.l.c.
Amounts owed to subsidiary undertakings represent intercompany loans which are
unsecured, interest-free and repayable on demand. These are presented net due
to the intercompany netting agreement (see accounting policies). Included
within this net balance are a receivable and payable of £19m and £40m
respectively which are contractually repayable on demand but have been
considered non-current as these are not expected to be repaid within 12
months.
Fair value
The key management personnel are the Directors of the Company and are those
persons having authority and responsibility for planning, directing and
controlling the activities of the entity. Details of their compensation are
included in note 4 to the accounts on page 132 of the full annual report and
accounts and in Parts 2, 3 and 4 of the Remuneration Report on pages 86 to 103
of the full annual report and accounts. Key management personnel costs
inclusive of employers national insurance are £1,559k (2023: £1,558k).
Annual General Meeting (AGM)
The 135(th) AGM will be held in-person at the offices of Peel Hunt, 7th Floor,
100 Liverpool Street, London EC2M 2AT and streamed online on 11 April 2025 at
11.00am. Further details are included in the Notice of AGM included in the
full annual report and accounts.
Access to the Annual Report
The annual report and accounts will shortly be available for download from the
National Storage Mechanism
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
CORPORATE INFORMATION
Company Advisers and Information
Directors Investment portfolio manager
Robert Hingley(*+) Janus Henderson Global Investors
Pars Purewal(#) 201 Bishopsgate, London EC2M 3AE
Claire Finn(~)
Clare Askem Investment managers
Maarten Slendebroek James Henderson and Laura Foll are joint managers. They also manage Lowland
Investment Company plc and the Henderson UK Equity Income & Growth Fund.
Denis Jackson
Trish Houston
James joined Henderson Global Investors (now Janus Henderson Investors) in
1983 and has been an investment trust portfolio manager since 1990. He first
became involved in the management of Law Debenture's portfolio in 1994 and
(*)Chairman of the Board took over lead responsibility for management of the portfolio in June 2003.
(+)Chairman of the Nomination Committee
(~) Chairman of the Remuneration Committee Laura joined Janus Henderson Investors in 2009 and has held the position of
portfolio manager on the Global Equity Income team since 2014. She first
(#)Chairman of the Audit and Risk Committee became involved with Law Debenture's portfolio in September 2011 and became
joint portfolio manager in 2020.
Website
https://www.lawdebenture.com (https://www.lawdebenture.com/)
Registrar
Computershare Investor Services PLC
The Pavilions, Bridgwater Road, Bristol BS99 6ZZ
T: 0370 707 1129
Auditors
Deloitte LLP, 110 Queen Street, Glasgow, G1 3BX
Alternative Investment Fund Manager
The Law Debenture Corporation p.l.c.
Global custodian
HSBC Bank plc (under delegation by the depositary)
8 Canada Square, London E14 5HQ
Joint brokers
J.P. Morgan Securities PLC
25 Bank Street, London E14 5JP
Peel Hunt LLP
100 Liverpool Street, London, EC2M 2AT
Depositary
NatWest Trustee and Depositary Services Limited
250 Bishopsgate, London EC2M 4AA
The Law Debenture Corporation p.l.c. is registered in England, company
registration number 30397. LEI number - 2138006E39QX7XV6PP21
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