Law Debenture (LWDB) has published its annual results for the year ended 31 December 2023 during which it provided an NAV total return with debt and the Independent Professional Services (IPS) business at fair value of 9.4% (8.9% with debt at par), which LWDB says outperformed its All-Share Index that returned 7.9%. LWDB’s share price total return was 8.1% for the year, marginally ahead of the return of its benchmark. The company says that it is the leading UK Equity income sector performer over short, medium and longer term, with its chairman, Robert Hingley, commenting “Law Debenture made creditable overall progress in 2023. The share price total return of around 8% includes a further good increase in the full-year total dividend of 4.9%. Law Debenture’s long-term record of benchmark outperformance remains strong”. He goes on to say that he believes the combination of a robust and well-positioned equity portfolio and continued growth in LWDB’s IPS business will deliver attractive returns for its shareholders. LWDB has provided the following highlights for the year:
- Another good performance from IPS, with net revenue increasing by 11.8%, profit before tax up by 10.5% and valuation up 6.3% to £185 million (excluding net assets) – see further highlights for the IPS business below.
- The Company issued around 3 million new Ordinary Shares at a premium to NAV during 2023, to existing and new investors, with net proceeds of c.£24.2 million to support ongoing investment.
- Continued low ongoing charges of 0.49%, compared to the industry average of 1.20%.
- Winner 2023 Investment Company of the Year Awards in November, in association with the AIC, in the UK Income category for the third year running.
- Winner in the Active-Income category for the second year in a row at the September’s 2023 AJ Bell Investment Awards.
Dividend Highlights
- 2023 full year dividend expected to increase by 4.9% to 32.0 pence per Ordinary Share (2022: 30.5 pence per Ordinary Share).
- Proposed 2023 dividend is fully covered by retained profits earned this year with no requirement to call upon historical reserves.
- Dividend yield of 4.1% (based on its closing share price of 778 pence on 23 February 2024), proposed Q4 dividend of 9.125 pence per Ordinary Share.
- 7.9% CAGR in dividends over last ten years, reflecting strong IPS cashflow and good portfolio performance.
- 113% aggregate increase in the dividend over the last 10 years (7.9% CAGR).
- 45 years of increasing or maintaining dividends to shareholders.
Investment Portfolio Highlights
- 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 record, with share price total return outperforming FTSE Actuaries All-Share by around 48% over 5 years which compares well with its key sector peers.
- Revenue from the portfolio of £33.5m (December 2022: £34.5m).
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.20% of 2023 NAV, but has funded approximately 34% of dividends paid by the Company in the last 10 years.
- IPS has now delivered six consecutive years of growth, with a 5 year net PBT CAGR of c.8.7%.
- 2023 valuation of £185 million (excluding net assets) up 111.4% since 2018.