Law Debenture: Replacement: Annual Financial Report

The Law Debenture Corporation p.l.c. 12 March 2025 Amendment: The Annual Financial Report announcement released on 12 March 2025 at 07.00 under RNS No. 2676A has been amended to reflect the dividend yield and share price as at market close on 11 March 2025, stated within the Chairman's Statement. There have been no other changes to the contents of the original announcement. The full amended text is shown below: 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 yearended31 December 2024. Leading UK Equity income sector performance 1 year % 3 years % 5 years % 10 years % NAV total return3(with IPS at fair value and debt at par) 13.2 14.4 43.5 118.7 NAV total return3(with IPS and debt at fair value) 13.6 24.6 56.0 133.1 FTSE Actuaries All-Share Index Total Return4 9.5 18.5 26.5 81.9 Share price total return4 15.9 25.8 72.4 147.5 Change in Retail Price Index5 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 andIndependent 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 1.4million 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 ActuariesAll-Share by 45.9% over 5 years which compares well with key sector peers. Dividend Highlights · Proposed 2024 dividend increase of 4.7% to33.5 penceper Ordinary Share (2023:32.0 penceper Ordinary Share) compared to Group revenue return per share of 33.48 pence. · Dividend yield of 3.8% (based on our closing share price of884 penceon11 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 Debenturehas 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 forLaw 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 Debentureresilient 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 byJames HendersonandLaura FollofJanus 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 Trustand Corporate Services businesses. We operate internationally, with offices in theUK,New York,Ireland,Hong Kong,Delawareand theChannel Islands. Companies, agencies, organisations and individuals throughout the world rely uponLaw Debentureto carry out our duties with the independence and professionalism upon which our reputation is built. The Law Debenture Corporation Denis Jackson, Chief Executive Officer Isla Pickering, Chief Financial Officer Trish Houston, Chief Operating Officer +44 (0)20 7606 5451 Teneo(Financial PR) Jo Blackshaw / Oliver Bell +44 (0)20 7260 2700 lawdeb@teneo.com 1Calculated based on data held byLaw Debenturefor the year ended31 December 2024. 2Source:Association of Investment Companies(AIC) industry average as at31 December 2024. 3NAV is calculated in accordance with the AIC methodology, based on performance data held byLaw Debentureincluding 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. 4Source: Refinitiv. 5Source: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 £000 31 December 2023 £000 Change % 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 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. 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 CRead More

Law Debenture: Replacement: Annual Financial Report

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