Duke Capital Limited · LSE:DUKE
Duke Capital — Duke Royalty — Investor Presentation (April 2022)
27 slides from Duke Capital's investor presentation, April 2022
Slide 1: Duke Royalty Pre-Capital Raise Investor Presentation
Duke Royalty Pre-Capital Raise Investor Presentation April 2022 AIM: DUKE
Slide 2: Disclaimer
Disclaimer These presentation slides and the accompanying verbal presentation (the “Presentation or in part, for any purposes whatsoever. In particular, they should not be distributed to or Materials”), are confidential and have been prepared by Duke Royalty Limited (the “Company”). otherwise made a
Slide 3: Corporate Highlights
Corporate Highlights Corporate Royalties are a hybrid between private credit and private equity, for owner-operators who want to maintain control of their business Capital Preservation Attractive Dividend Upside from Buyouts Yield Long term investment horizon Two quarters of dividend increases Buyou
Slide 4: Duke Royalty's Terms and Criteria
Duke Royalty’s Terms and Criteria Minimally-dilutive capital with no re-financing risk for long-standing, profitable, owner-managed companies • 30-year participating loan, no bullet repayment Corporate royalty terms • Annual adjustments of +/-6% based on revenue change • Senior security sought on av
Slide 5: Duke Royalty's Formula for Success
Duke Royalty’s Formula for Success Five years of building the European leader in corporate royalties • Build the equity base Focus on cash `` FY18-FY20 • Build the portfolio flow & Establish • Build the cash flow dividends presence • Demonstrate downside protection during crisis Define market Prove
Slide 6: Cashflow Highlights
Cashflow Highlights Significant cash flow generation creating operating leverage Opex % 27% 19% 20% 14% 16% 15% 13% 12% 178% 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 26% 1,000,000 500,000 0 Q2 FY21 - Q3 FY21 - Q4 FY21 - Q1 FY22 - Q2 FY22 - Q3 FY22 - Q4 FY22 - Q
Slide 7: Investment Growth
Investment Growth Acceleration of deployments leads to increased free cash flow Portfolio cost (£m) Free cash flow / share (p) 250 5.00 4.50 X 200 4.00 3.50 2.80p 150 3.00 2.50 per share of 100 2.00 current 1.50 annualised 50 1.00 0.50 dividend 0 0.00 FY18 FY19 FY20 FY21 FY22 Pro FY18 FY19 FY20 FY21
Slide 8: Portfolio Diversification
Portfolio Diversification Risk mitigation and increased diversification as deployments accelerate Portfolio by region Portfolio by sector Use of capital % of total cost % of total cost % of total cost 9% 7% 19% 10% 19% 37% 12% 51% 58% 23% 20% 35% UK - 7 Industrials - 5 Acquisition Capital - 6 North
Slide 9: Our Royalty Partners
Our Royalty Partners Duke has proven experience investing across range of sectors, geographies and transaction types December 2021 December 2021 July 2021 July 2021 June 2021 SPECIALIST CARE INDUSTRIALS INDUSTRIALS I.T. SERVICES HEALTHCARE Equity Stake: Equity Stake: Equity Stake: Equity Stake: Equi
Slide 10: Our Royalty Partners and their Operating Subsidiaries
Our Royalty Partners and their Operating Subsidiaries Duke’s exposure is to 48 underlying operating companies Step Investments Bay Broadcasting Limited BIL 10
Slide 11: Use of Proceeds: New Partners
Use of Proceeds: New Partners Royalties and Hybrid capital are increasingly gaining market share, we intend to capture the market for our chosen segment Robust Pipeline deal in pipeline late stage negotiations • Increased acceptance in an expanding network of • Non-emergency medical transportation p
Slide 12: Use of Proceeds: Buy and Builds
Use of Proceeds: Buy and Builds Duke Royalty is a one-stop shop for acquisitive companies; our long-dated, patient capital allows business owners to purse M&A without refinancing risk • Additional deployments at Duke’s discretion, with strict criteria being followed for follow-on investments • Acqui
Slide 13: Life Cycle of Investments – Buy & Build
Life Cycle of Investments – Buy & Build Duke’s Buy & Build portfolio is continuing to grow and mature, with exits already demonstrated IRR: 27% IRR: 22% IRR: 29% BIL March 2017 March 2018 March 2019 March 2020 March 2021 March 2022 2025+ Denotes acquisitions funded with additional tranches of Duke R
Slide 14: Illustrative Buyout Upside for Portfolio NAV
Illustrative Buyout Upside for Portfolio NAV Statutory NAV overlooks buyout premiums and upside from equity stakes • £36m+ of buyout premiums1 currently excluded from NAV • Equity stakes currently valued at £2.4m, potential upside from EBITDA multiple growth 60 Royalty partner Equity stake 4.7p 50.0
Slide 15: Duke's Investors: Top Global Funds
Duke’s Investors: Top Global Funds Strong base of blue-chip institutional investors1 with significant management ownership 10.46% 6.97% 6.94% 6.56% 6.53% 6.23% ownership ownership ownership ownership ownership ownership Directors, Management, Insiders 5.62% 4.55% 4.32% 3.77% 3.74% 3.22% ownership ow
Slide 16: Summary
Summary Duke is the only corporate royalty company with a focus in Europe and listed in London Capital preservation High operational leverage Downside protection evident from previous Normalised cash revenue up 178%, core market downturns operating costs only up 26% since Q2 FY21 Strong dividend yie
Slide 17: Appendix
Appendix py dure SSS AWARDS 2021 ROYALTY ____WINNER
Slide 18: An Experienced Team, Including Royalty Pioneers
An Experienced Team, Including Royalty Pioneers Management and investment committee have royalty experience of 70+ years Neil Johnson – Executive Director and CEO Charlie Cannon-Brookes – Executive Jim Webster – Chairman of Investment • Pioneered UK listings for Canadian and UK Director Committee du
Slide 19: What is Royalty Financing?
What is Royalty Financing? A long-term participating loan with similar characteristics to traditional royalties • Alternative financing with features of debt and equity, which allows company owners to keep control of their business without refinancing risk • Duke provides a lump sum of capital to a
Slide 20: An Established Alternative Financing Solution
An Established Alternative Financing Solution Corporate royalties appeal to owners who need capital but want to retain control Debt Royalty Private Equity Term 3-7 years 25-40 years Permanent dilution Refinancing risk Significant None Pressure to exit Control Passive Passive Loss of control Covenant
Slide 21: How our Model Benefits Investors
How our Model Benefits Investors Royalty company shareholders benefit from attractive returns and increasing valuation as they diversify their investment portfolios Compounding Annuity-like opportunity High level of through participation revenue streams in growth by annual operational gearing adjust
Slide 22: Funding Solutions
Funding Solutions Key examples of how Duke’s funding solution has been used by owner-operators to drive growth and increase shareholder value Debt or Acquisition equity MBOs capital restructuring Allows experienced Debt refinancing or management teams to Flexible financing model shareholders exiting
Slide 23: ESG Considerations
ESG Considerations Duke Royalty’s ESG Assessment Framework Category Duke’s Policy Duke’s Evaluation of Company’s ESG Policies Risks: 1) What environmental risks has Duke identified that are associated with [Company’s] business model & industry? ▪ We encourage companies to 2) What challenges does [Co
Slide 24: Strong Origination and Due Diligence
Strong Origination and Due Diligence Origination process Origination through relationships Relationship driven, Healthy pipeline of investment opportunities management and financial strength more important than industry sector Indication of interest submitted Initial analysis of investment opportuni
Slide 25: Duke Royalty's Covid-19 Response
Duke Royalty’s Covid-19 Response Preservation of value Long term approach FY21 cash revenue - Q1: £2.0m Q2: £2.4m Q3: £4.2m Forbearance agreements with hardest-hit royalty partners Cash revenue forgone has been captured as equity or deferred But deployed further capital into strong partners enabling
Slide 26: Withstanding Challenges
Withstanding Challenges Royalty industry resilient in turbulent market conditions Brexit and Supply Chain Ukraine / Inflation COVID-19 Issues Russia War • Portfolio has withstood • Portfolio has been working to • No direct impact to any of • The annual yield adjustment shocks of Brexit and Covid-19
Slide 27: DUKE
7) DUKE ROYALTY a N h N N N ‘y : a ee 2021 WINNER