Edison issues review on The Law Debenture Corp.
London, UK, 28 February 2022
Edison issues review on The Law Debenture Corporation (LWDB)
The Law Debenture Corporation (LWDB) has once again proved that while its structure may be unusual, its combination of a UK-biased investment trust and a portfolio of independent professional services (IPS) businesses can deliver for investors. IPS produced a fourth consecutive year of on-target high single-digit growth in FY21, while the investment portfolio bounced back after a tough 2020 in both capital and revenue terms. The IPS contribution to revenues (c 35% in FY21) gives fund managers James Henderson and Laura Foll at Janus Henderson increased flexibility to select lower- or non-yielding stocks that may have better growth potential. That said, the top contributors to performance in the year unusually included such stalwarts as Marks & Spencer and Shell. A 5.5% increase in total dividends for the year secures a 43rd year of growing or maintaining the payout, and the trust currently yields 3.3%.
In the past 12 months LWDB's share price has moved from a persistent discount to NAV (long-term range of c 5-15%) to a small average premium of 0.8%. This has facilitated the issuance of c £40m in new shares over the past 12 months, which, along with an additional £50m in low-cost borrowing, gives significant firepower to both the fund managers and the IPS business to pursue attractive opportunities where they present themselves. While the current geopolitical strife may dent appetite for risk assets in the near term, we see the much lower volatility in LWDB's discount/premium over the past 12 months as suggestive that any de-rating is unlikely to be severe or sustained, assuming no major systemic or market events.
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