Psst! Cash in on firm that helps whistleblowers
VICTORIAN England was not known for its progressive views. But one element of that straitlaced society was highly advanced in its thinking. The finance industry, even then, was helping companies to raise money by issuing bonds and Law Debenture Trust, founded in 1889, was a key part of that nascent market.
The group was established to ensure that bonds were administered properly and that, if companies fell into problems, investors were treated fairly.
Law Debenture still performs that task today. Over the past 130 years, however, the group has evolved considerably, not least in the past 15 months, during which time it has acquired a new chairman, chief executive and finance director. The top team are determined to galvanise growth at Law Debenture and the shares, at 576p, should respond. Dividends are a focus too. The 2018 payment rose 9.2 per cent to 18.9p and future increases are expected.
Law Debenture is a business of two halves – an investment trust, which invests primarily in UK shares, and a professional services business, which performs an array of functions for companies here and overseas.
It offers services such as accounting and company secretarial and even has an independent whistleblowing business, Safecall, which employees can call in confidence if they have issues about the company they work for.
The client list is wide-ranging, from the Football Association to Marks & Spencer, and the potential for growth is significant.
The firm acts as a trustee for bond transactions, with customers such as Sapporo beer, Radisson Hotels and Unilever. And it helps companies with pension administration, having won its first client, Demerara Sugar, back in 1969.
The way Law Debenture is structured makes it a very different business from traditional investment trusts. These tend to invest exclusively in third-party stocks, bonds and other assets. Law Debenture invests in shares too, such as GlaxoSmithKline, Prudential and HSBC, but its biggest investment is the firm’s own professional services business, whose income helps to fund dividends for shareholders.
Over the past ten years, for example, the professional services business has accounted for 40 per cent of Law Debenture’s total dividend payments.
The contribution from this division helps the investment trust side of the group to take a long-term, sometimes contrarian view of the stock market, buying shares when they are out of fashion and watching as they return to favour.
The strategy has delivered consistent outperformance and should prove even more rewarding over the coming years. Brexit nerves have hit the UK market and numerous shares are undervalued.
Once the saga is finally resolved, stocks should recover and Law Debenture’s investment trust division is likely to benefit. The professional services division is expected to improve over the next few years as well. Between 2011 and 2017, revenues from this subsidiary barely changed. Last year, revenues rose 9per cent to £29.6million.
Looking ahead, chairman Robert Hingley and chief executive Dennis Jackson are determined to maintain that momentum. Law Debenture has always been highly regarded, but the group has not always pushed itself forward so growth lapsed. Now, Jackson is on the front foot, spreading the word about his company to drum up new business and encourage existing customers to buy more services.
Many of these customers are in the UK, but Law Debenture also works with firms in Europe, the US and Asia and Jackson is keen to expand internationally, particularly in the Far East. Last week alone, he had 26 meetings during a whirlwind threeday trip to Hong Kong. That kind of dedication should yield results. MIDAS VERDICT: Law Debenture has grown or maintained its dividend for the past 25 years. The new top team wants to do even better, combining dividend growth with share price outperformance. Early signs are promising and the target is within reach. At 576p, the shares are an attractive long-term buy.