Preliminary announcement of 2004 Results
Preliminary announcement of final results for the year ended
31 December 2004 (audited)
The directors recommend a final dividend of 4.75p per share making a total for
the year of 7.55p. Subject to the approval of shareholders, the final dividend
will be paid on 19 April 2005 to holders on the register on the record date of
18 March 2005.
Consolidated statement of total return
for the year ended 31 December
Revenue Capital Total Revenue+ Capital Total+
2004 2004 2004 2003 2003 2003
£000 £000 £000 £000 £000 £000
Total capital gains from - 30,370 30,370 - 41,945 41,945
investments
Income from investments 10,607 - 10,607 9,651 - 9,651
and deposits
Trustee and related 14,909 - 14,909 13,568 - 13,568
services income
Underwriting commission 54 - 54 136 - 136
and other income
Gross revenue andcapital 25,570 30,370 55,940 23,355 .41,945. 65,300
gains
Administrative expenses (11,916) - (11,916) (12,108) - (12,108)
Return, including profit
on ordinary
activities before
interest payable
and taxation 13,654 30,370 44,024 11,247 41,945 53,192
Interest payable (2,456) - (2,456) (2,456) - (2,456)
Return, including profit
on ordinary
activities before 11,198 30,370 41,568 8,791 41,945 50,736
taxation
Taxation (1,106) - (1,106) (718) - (718)
Return, including profit
attributable
to ordinary shareholders 10,092 30,370 40,462 8,073 41,945 50,018
Dividends on ordinary (8,852) - (8,852) (8,061) - (8,061)
shares
Transfer to reserves 1,240 30,370 31,610 12 41,945 41,957
Return per ordinary 8.62 25.95 34.57 6.91 35.91 42.82
share (pence)*
+ Restated to reflect minor reclassifications between income and administrative
expenses.
* No dilutive effect.
Notes
The revenue columns of this statement represent the profit and loss accounts of
the Group. All amounts relate to continuing operations.
Statement of total recognised gains and losses for the year ended 31 December
Revenue Capital Total Revenue Capital Total
2004 2004 2004 2003 2003 2003
£000 £000 £000 £000 £000 £000
Return for the financial 10,092 30,370 40,462 8,073 41,945 50,018
year
Foreign exchange (177) - (177) (240) - (240)
Total gains and losses 9,915 30,370 40,285 7,833 41,945 49,778
relating to the year
Financial summary
Highlights
31 December 31 December Change
2004 2003 %
pence pence
Share price 232.50 221.75 4.8
NAV per share 233.01 206.10 13.1
Earnings per share
- investment trust 5.06 4.51 12.2
- trustee and related 3.56 2.40 48.3
services
Group earnings per share 8.62 6.91 24.7
Dividends per share 7.55 6.90 9.4
Performance
2004 2003
% %
Share price 4.8 15.2
NAV total return 16.7 25.9
FTSE Actuaries All-Share 12.8 20.9
Index total return
Chairman's statement
Performance
Over the year to 31 December 2004, our net asset value total return was 16.7%
compared to a total return of 12.8% for the FTSE Actuaries All-Share Index.
Our gross revenue increased over the year by 9.5% from £23.4 million to £25.6
million. Profit after tax attributable to shareholders was £10.1 million, an
increase of 25.0% over the previous year as a result of a 12.5% improvement in
the investment trust and a 48.4% improvement in trustee and related services.
Improved dividends increased the return from the investment trust and all our
trustee and related services businesses have performed well.
Earnings and dividends
Earnings per ordinary share for the year to 31 December 2004 were 8.62p, an
increase of 24.7% from last year. The board is recommending a final dividend of
4.75p per ordinary share (2003: 4.24p), which, together with the interim
dividend of 2.80p (2003: 2.66p), gives a total dividend of 7.55p (2003: 6.90p),
an increase of 9.4%. The final dividend will be paid, subject to shareholder
approval, on 19 April 2005 to holders on the register on the record date of 18
March 2005. Following two years with no growth in dividend, this recommended
increase reflects the increase in the Retail Price Index since 2001. 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 15.1%, significantly ahead of the FTSE All-Share
Index.
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 of 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.
Growth in the global economy has been reasonably strong, with favourable
implications for company profits and stock markets. The year was marked by
investment markets encountering a higher interest rate environment and higher
oil prices. Globally, interest rates moved up as the fear of deflation receded.
In the UK, short-interest rates rose from 3.75% to 4.75% as the Bank of England
responded to the buoyant housing market, which is responsible for the
significant increase in personal indebtedness. The Federal Reserve increased
rates in the USA from 1% to 2.25%.
In the UK, many companies have been benefiting from economic growth. Dividend
growth has been better than expected and dividend cover has increased.
Corporate debt has fallen as better profits have come through. Operating
margins for many companies have improved. In Continental Europe, however,
corporate profit performance has been less strong and our exposure to this area
has been reduced. We continue to be concerned about the laxness of US monetary
and fiscal policies, reflected in high rates of borrowing, a record current
account deficit and a weak dollar.
Trustee and related services
Our trustee and related services business increased revenue by 9.9% and profit
before tax by 52.2%. Most areas of the business have seen continued growth,
whilst our costs have been reduced. We believe trustee and related services are
well placed for growth in 2005 but that our cost base is unlikely to be reduced
further.
Commercial trusts had a busy year with a number of major appointments. Our
pension trustee business has seen growth from new and existing relationships
and we expect the Pensions Act 2004 to provide further opportunities. Corporate
services continue to grow significantly and service of process is looking to
increase the links between London, New York and Hong Kong for further
development of the business. New York trust business has achieved break even in
the second full year of operations and continues to develop in niche markets.
Hong Kong significantly improved its results and achieved a profit. Channel
Islands developed its position as an independent provider of trustee and
corporate services, resulting in a significant increase in income.
Board
Ken Inglis has decided not to seek re-election at the annual general meeting
('AGM'). He joined the board in 1995 and I should like to thank him for his
strong contribution in all areas of the company. Rob Williams stepped down from
his part-time executive role at the end of the year, but I am pleased to say
that he has agreed to remain on the board as a non-executive director.
Professor John Kay joined the board in September and his appointment stands to
be confirmed at the AGM. He has a distinguished record as an economist and we
are looking forward to working with him. He succeeds Ken Inglis as chairman of
the audit committee.
Staff
The trustee and related 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 and efforts during the year.
Douglas McDougall
Balance sheet
as at 31 December
Group Corporation
2004 2003* 2004 2003
£000 £000 £000 £000
Fixed assets
Tangible 1,048 1,327 - -
Investments 304,609 280,573 299,929 276,014
305,657 281,900 299,929 276,014
Current assets
Debtors 7,395 8,461 6,641 5,660
Short term cash investments 13,842 3,167 4,949 289
Bank balances and short term 10,491 11,099 2,048 50
deposits
31,728 22,727 13,638 5,999
Creditors
Amounts failing due within one (16,463) (14,516) (55,310) (54,923)
year
Net current assets/(liabilities) 15,265 8,211 (41,672) (48,924)
Total assets less current 320,922 290,111 258,257 227,090
liabilities
Creditors
Amounts failing due after more (48,222) (48,914) (285) (321)
than one year
Provisions for liabilities and - (77) - -
charges
Net assets 272,700 241,120 257,972 226,769
Capital & reserves
Called up share capital 5,875 5,862 5,875 5,862
Share capital redemption reserve 8 8 8 8
Own shares held (927) (567) - -
Share premium account 7,026 6,532 7,026 6,532
Capital reserves - realised 167,476 167,467 167,827 167,856
Capital reserves - unrealised 78,066 47,705 73,504 43,214
Revenue reserves 15,176 14,113 3,732 3,297
Shareholders' funds - equity 272,700 241,120 257,972 226,769
* Restated in accordance with UITF38 to show own shares held as a deduction
from shareholders' funds. Own shares held were previously included in fixed
asset investments. With this exception there have been no changes in accounting
policies. Reclassifications have been made to capital reserves and revenue
reserves in respect of foreign exchange differences and goodwill.
Group cash flow statement
for the year ended 31 December
2004 2004 2003 2003
£000 £000 £000 £000
Net cash inflow from operating 14,412 12,674
activities
Servicing of finance
Debenture interest paid (2,450) (2,450)
Bank interest paid (6) (6)
(2,456) (2,456)
Tax (236) (510)
Financial investment
Purchase of own shares (360) (567)
Purchase of investments (49,917) (46,318)
Sales of investments 56,444 40,237
6,167 (6,648)
Capital expenditure
Purchase of tangible fixed assets (57) (334)
Sales proceeds from tangible fixed 1 -
assets
(56) (334)
Equity dividends paid (8,238) (8,066)
Management of liquid resources
Cash (placed)/withdrawn on short term (10,676) 7,323
deposit
Financing
Proceeds of increase in share capital 507 402
(Decrease)/increase in cash (576) 2,385
Reconciliation of the movement in net
debt
(Decrease)/ increase in cash as above (576) 2,385
Cash inflow/(outflow) from liquid 10,676 (7,323)
resources
10,100 (4,938)
Exchange movements (177) (242)
Amortisation of debenture costs (27) (27)
Net debt brought forward (24,910) (19,703)
Net debt carried forward (15,014) (24,910)
Segmental Analysis
Investment Trustee Total
trust and 2004
related
services
2004 £000 £000 £000
Revenue 9,716 14,909 24,625
Administrative expenses (1,487) (10,429) (11,916)
8,229 4,480 12,709
Interest (net) (2,151) 640 (1,511)
Return, including profit on ordinary 6,078 5,120 11,198
activities before taxation
Taxation (153) (953) (1,106)
Return, including profit attributable to 5,925 4,167 10,092
shareholders
Net assets 257,972 14,728 272,700
Return per ordinary share (pence) 5.06 3.56 8.62
Investment Trustee Total
and
trust related 2003
services
2003 £000 £000 £000
Revenue 8,976 13,568 22,544
Administrative expenses (1,391) (10,717) (12,108)
7,585 2,851 10,436
Interest (net) (2,157) 512 (1,645)
Return, including profit on ordinary 5,428 3,363 8,791
activities before taxation
Taxation (163) (555) (718)
Return, including profit attributable to 5,265 2,808 8,073
shareholders
Net assets 226,769 14,351 241,120
Return per ordinary share (pence) 4.51 2.40 6.91
Changes in geographical distribution
Valuation Purchases Sales Appreciation/ Investments
31 £000 Proceeds (depreciation) 31 December
December
£000 £000 2004
2003
£000
£000
United Kingdom 197,740 23,831 (24,962) 27,447 224,056
North America 19,349 18,018 (19,390) 966 18,943
Europe 35,171 8,068 (12,092) 1,671 32,818
Japan 8,795 - - 572 9,367
Other Pacific 19,518 - - (93) 19,425
280,573 49,917 (56,444) 30,563 304,609
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 2004 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 2003 is an extract from the statutory accounts to
that date which have 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
28 February 2005
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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