Final Results Preliminary Announcement
Preliminary announcement of final results for the year ended
31 December 2007 (audited)
The directors recommend a final dividend of 8.00p per share making a total for
the year of 12.00p. Subject to the approval of shareholders, the final dividend
will be paid on 23 April 2008 to holders on the register on the record date of
14 March 2008. The preliminary statement has been prepared in accordance with
International Financial Reporting Standards.
Group income statement
for the year ended 31 December
2007 2006
Revenue Capital Revenue Revenue Capital Total
£000 £000 £000 £000 £000 £000
UK dividends 9,643 - 9,643 9,805 - 9,805
UK special 94 - 94 19 - 19
dividends
Overseas dividends 1,507 - 1,507 1,499 - 1,499
Overseas special - - - 11 - 11
dividends
Interest from 418 - 418 146 - 146
securities
11,662 - 11,662 11,480 - 11,480
Interest income 4,323 - 4,323 2,474 - 2,474
Independent 32,418 - 32,418 26,741 - 26,741
fiduciary services
fees
Other income 129 - 129 144 - 144
Total revenue 48,532 - 48,532 40,839 - 40,839
Net gain on - 11,635 11,635 - 48,128 48,128
investments held at
fair value through
profit or loss
Gross income and 48,532 11,635 60,167 40,839 48,128 88,967
capital gains
Cost of sales (8,371) - (8,371) (8,465) - (8,465)
Administrative (17,038) (659) (17,697) (13,523) (179) (13,702)
expenses
Operating profit 23,123 10,976 34,099 18,851 47,949 66,800
Finance costs
Interest payable (2,459) - (2,459) (2,458) - (2,458)
Profit before 20,664 10,976 31,640 16,393 47,949 64,342
taxation
Taxation (4,008) - (4,008) (2,129) - (2,129)
Profit for year 16,656 10,976 27,632 14,264 47,949 62,213
Return per ordinary 14.23 9.37 23.60 12.18 40.95 53.13
share (pence)
Diluted return per 14.19 9.34 23.53 12.14 40.82 52.96
ordinary share
(pence)
Group statement of total recognised income and expense
for the year ended 31 December
Revenue Capital Total Revenue Capital Total
2007 2007 2007 2006 2006 2006
£000 £000 £000 £000 £000 £000
Return for the financial 16,656 10,976 27,632 14,264 47,949 62,213
year
Foreign exchange (31) - (31) (303) - (303)
Pension actuarial gains 26 - 26 3,119 - 3,119
Taxation on pension (8) - (8) (936) - (936)
Total recognised income 16,643 10,976 27,619 16,144 47,949 64,093
and expense relating to
the year
Financial summary
Highlights
31 December 31 December Change
2007 2006 %
pence pence
Share price 354.50 349.00 1.6
NAV per share 339.64 328.17 3.5
after proposed dividend
Earnings per share
- Investment trust 8.60 7.07 21.6
- Independent fiduciary 5.63 5.11 10.2
services
Group earnings per share 14.23 12.18 16.8
Dividends per share 12.00 10.50 14.3
Performance
2007 2006
% %
Share price total return 5.0 24.5
NAV total return 7.2 19.3
FTSE All-Share Index total 5.3 16.8
return
Chairman's statement
Performance
Over the year to 31 December 2007, our net asset value total return was 7.2%
compared to a total return of 5.3% for the FTSE Actuaries All-Share Index.
Our gross revenue increased over the year by 18.9% from £40.8 million to £48.5
million. Profit attributable to shareholders was £16.7 million, an increase of
16.8% over the previous year, as a result of a 21.6% improvement in the
investment trust and a 10.0% improvement in independent fiduciary services. The
10.0% is after deducting an adjustment to prior years' tax of £386,000.
Improved company dividends and net interest receivable increased the return
from the investment trust and all our independent fiduciary services businesses
performed well.
Earnings and dividends
Earnings per share for the year to 31 December 2007 were 14.23p, an increase of
16.8% from the previous year. The board is recommending a final dividend of
8.0p per ordinary share (2006: 7.1p), which, together with the interim dividend
of 4.0p (2005: 3.4p) gives a total dividend of 12.0p (2006: 10.5p), an increase
of 14.3%. The final dividend will be paid, subject to shareholder approval, on
23 April 2008 to holders on the register at the record date of 14 March 2008.
The policy of the company continues to be to seek growth in both capital and
income.
Investment trust
Our portfolio has been managed throughout the year by James Henderson, who has
an independent, value based approach to investment. During the year the total
return of the portfolio was 6.3%, ahead of the FTSE All-Share Index return of
5.3%.
We continue to select investments on the basis of what appears most attractive
in the conditions of the time. We will not pay unrealistically high prices but
hope to be able to buy growth shares on reasonable terms. We do not feel
obliged to hold shares in any particular type of company or industry or market,
but seek to find the best value. We aim to achieve a better return than the
FTSE All-Share Index by good stock picking. We believe that, in the long term,
returns on equities will exceed the cost of our long term borrowing.
Consequently we take on a level of gearing which we believe balances risk with
the objective of increasing the return to shareholders. However, during the
first ten months of the year we found it difficult to find good value in
equities and we were in a net cash position.
When share prices fell following the credit squeeze, we believed that good
buying opportunities arose. We invested in UK banks, house builders and
property stocks, ending the year with equity exposure of 104%.
The investment trust will benefit from a VAT refund arising from the successful
JP Morgan Fleming Claverhouse case against HM Revenue & Customs. We have not
reached a final agreement with our investment manager on the potential amount
recoverable and as it will not have a material effect on our NAV and results we
have not recognised any amount at 31 December 2007
Independent fiduciary services
Our independent fiduciary services business increased revenue by 21.2% and
profit before tax by 27.3%. Most areas of the business have seen continued
growth.
The corporate trust division had a busy year and a number of high profile
appointments. Our pension trustee business saw growth from new and existing
relationships and the Pensions Act 2004 continues to provide further
opportunities. Corporate services continue to grow significantly and we
acquired Delaware Corporate Services Inc. to increase market share and add new
products and services in the US. Service of process is benefiting from the
links between London, New York, Delaware, Hong Kong and the Channel Islands.
The New York trust business achieved significant growth and continues to
develop its business in niche markets. Hong Kong had a busy year as a result of
the high level of activity in China. Channel Islands developed its position as
an independent provider of trustee and corporate services.
On 31 October 2007 we acquired Safecall Limited, the UK's leading whistle
blowing firm, to extend our portfolio of independent fiduciary services.
Staff
The independent fiduciary services businesses performed strongly during the
year and made a significant contribution to our income. Their success is
dependent upon the professionalism and commitment of our people, whom I should
like to thank for their hard work during the year.
Douglas McDougall
Group Balance sheet
as at 31 December
2007 2006
£000 £000
Assets
Non current assets
Goodwill 4,185 -
Property, plant and equipment 666 694
Intangible assets 46 67
Investments held at fair value 423,494 365,114
through profit or loss
Deferred tax assets 332 705
Total non current assets 428,723 366,580
Current assets
Trade and other receivables 4,320 12,009
Other accrued income and prepaid 3,693 2,751
expenses
Cash and cash equivalents 34,685 74,555
Total current assets 42,698 89,315
Total assets 471,421 455,895
Current liabilities
Trade and other payables 8,583 9,541
Short term borrowings 65 34
Corporation tax payable 1,852 848
Other taxation including social 509 430
security
Deferred income 3,767 4,026
Total current liabilities 14,776 14,879
Non current liabilities
Long term borrowings 39,284 39,257
Retirement benefit obligations 257 1,073
Deferred income 7,871 8,041
Deferred purchase consideration 2,143 -
Total non current liabilities 49,555 48,371
Total net assets 407,090 392,645
Equity
Called up share capital 5,888 5,886
Share premium 7,477 7,410
Capital redemption 8 8
Shared based payments 195 167
Own shares (1,603) (1,326)
Capital reserves 368,000 357,024
Retained earnings 27,386 23,706
Translation reserve (261) (230)
Total equity shareholders' funds 407,090 392,645
Group cash flow statement
for the year ended 31 December
2007 2006
Operating activities £000 £000
Cash generated from operating activities 27,544 13,794
Taxation (2,497) (1,199)
Interest paid (2,459) (2,458)
Pension special contribution - (1,615)
Operating cash flow 22,588 8,522
Investing activities
Capital expenditure (129) (114)
Expenditure on intangible assets (33) (9)
Purchase of investments (117,682) (35,038)
Sale of investments 70,538 98,967
Sale of fixed assets - 22
Acquisition of subsidiary undertakings (1,905) -
Cash flow from investing activities (49,211) 63,828
Financing activities
Dividends paid (12,994) (10,945)
Proceeds of increase in share capital 69 183
Purchase of own shares (277) (363)
Net cash flow from financing activities (13,202) (11,125)
Net (decrease)/increase in cash and cash (39,825) 61,225
equivalents
Cash and cash equivalents at beginning of 74,521 13,599
period
Exchange losses on cash and cash equivalents (76) (303)
Cash and cash equivalents at end of period 34,620 74,521
Cash and cash equivalents comprise
Cash and cash equivalents 34,685 74,555
Bank loans and overdrafts (65) (34)
34,620 74,521
Segmental Analysis
Investment trust Independent Total
fiduciary
services
2007 2006 2007 2006 2007 2006
£000 £000 £000 £000 £000 £000
Segment revenue 11,662 11,480 32,418 26,741 44,080 38,221
Other income 27 30 102 114 129 144
Cost of sales - - (8,371) (8,465) (8,371) (8,465)
Administration costs (1,850) (1,804) (15,188) (11,719) (17,038) (13,523)
9,839 9,706 8,961 6,671 18,800 16,377
Interest (net) 711 (1,260) 1,153 1,276 1,864 16
Return, including profit 10,550 8,446 10,114 7,947 20,664 16,393
on
ordinary activities
before taxation
Taxation (481) (168) (3,527) (1,961) (4,008) (2,129)
Return, including profit 10,069 8,278 6,587 5,986 16,656 14,264
attributable to
shareholders
Return per ordinary share 8.60 7.07 5.63 5.11 14.23 12.18
Assets 447,762 430,343 23,659 25,552 471,421 455,895
Liabilities (50,728) (46,795) (13,603) (16,455) (64,331) (63,250)
Total net assets 397,034 383,548 10,056 9,097 407,090 392,645
Investment portfolio changes in geographical distribution
Valuation Purchases Sales Appreciation/ Valuations
31 £000 Proceeds (depreciation) 31
December December
£000 £000
2006 2007
£000 £000
United Kingdom 268,125 96,278 (49,310) (1,193) 313,900
North America 908 6,137 - (139) 6,906
Europe 48,709 15,267 (11,761) 6,488 58,703
Japan 18,210 - - (1,969) 16,241
Other Pacific 29,162 - (9,467) 8,049 27,744
365,114 117,682 (70,538) 11,236 423,494
This preliminary announcement does not comprise statutory accounts within the
meaning of Section 240 of the Companies Act 1985. The statutory accounts for
the year ended 31 December 2007 will be filed with the Registrar of Companies
in due course together with the auditors' report thereon. The information for
the year ended 31 December 2006 is an extract from the statutory accounts to
that date, which has been filed with the Registrar of Companies. Those accounts
included an audit report which was unqualified and which did not contain a
statement under section 237(2) or (3) of the Companies Act 1985.
By order of the board
Law Debenture Corporate Services Limited
Secretary
27 February 2008
Copies of the annual report will be available from the Corporation's registered
office.
The Law Debenture Corporation p.l.c. www.lawdeb.com
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