Duke Capital Limited · LSE:DUKE
Duke Capital — Duke Royalty — FY2021 Earnings Presentation
27 slides from Duke Capital's earnings presentation, September 2021
Slide 1: FY2021 Financial Results Presentation
FY2021 Financial Results Presentation September 2021 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: Snapshot: high-yielding & resilient with a compelling market opportunity
Snapshot: high-yielding & resilient with a compelling market opportunity We provide minimally-dilutive capital with no re-financing risk for private, owner-managed companies with strong cashflows Established portfolio Strong dividend yield 11 Royalty Partners and £140+ million annualised dividend yi
Slide 4: Corporate royalties revisited
Corporate royalties revisited A long-term participating loan with similar characteristics to traditional royalties • Duke provides a lump sum of capital to a company with a term of 25-40 years • Initial yield is 12.0-14.0% of capital, adjusted once per year with a collar of +/-6% in currency terms (
Slide 5: FY21 Operational review
FY21 Operational review Reinforcing our supportive model and culture Duke focused on supporting partners and employees and remaining cash flow positive at all times: • Structured forbearance agreements with certain partners to alleviate short term liquidity constraints following initial Covid-19 loc
Slide 6: Financial Highlights
Financial Highlights
Slide 7: FY2021 financial highlights
FY2021 financial highlights Increased cash generation despite turbulence Cash revenue (i) Operating cashflow per share Adjusted earnings per share (ii) £000 pence per share pence per share 11,035 3.68 2.70 10,335 3.17 2.44 2.52 1.83 5,751 FY2019 FY2020 FY2021 FY2019 FY2020 FY2021 FY2019 FY2020 FY202
Slide 8: Cashflow highlights
Cashflow highlights Remained cash flow positive at all times during FY21 FY2021 FY2020 FY2019 £000 £000 £000 Cash revenue 1 11,035 10,335 5,354 Core operating expenses 2 (1,861) (2,273) (1,392) Other cash (expenses) / receipts 3 (238) (1,279) 148 Net cash inflow from operating activities 8,936 6,783
Slide 9: Summary balance sheet
Summary balance sheet Fair value of investments rebounded post-COVID FY2021 FY2020 FY2019 £000 £000 £000 Royalty investments 85,301 75,559 70,054 Loan investments 4,950 9,516 9,626 Equity investments 3,495 507 1,177 Total investment portfolio 93,746 85,583 80,857 Cash and cash equivalents 1,766 4,48
Slide 10: Cost v fair value by royalty partner
Cost v fair value by royalty partner Total fair value at 16 Sep 2021 - £110m Total fair value at 16 Sep 2020- £88m Total cost at 16 Sep 2021 - £105m Total cost at 16 Sep 2020 - £98m Royalty Partner Fair value Cost +/- Miriad 13,716,000 12,750,000 7.6% Interhealth 10,707,000 10,000,000 7.1% UGG 12,42
Slide 11: Our Royalty Partners
Our Royalty Partners D DUKE ROYALTY
Slide 12: Our royalty partners
Our royalty partners Duke has proven experience investing across a diversified range of sectors, geographies and transaction types October 2017 March 2018 April 2018 June 2018 August 2018 September 2018 Step Investments BIL BUSINESS SERVICES INDUSTRIALS INDUSTRIALS EDUCATION & MEDIA HEALTHCARE BUSIN
Slide 13: Successful exit strategy proven
Successful exit strategy proven Partner exits form part of Duke’s funding model & validates the flexible form of capital December 2020 • Capital funded ambitious M&A strategy September 2020 • Capital supported organic growth and acquisition strategy in technology sector • Work from Home trend benefi
Slide 14: Future Growth
Future Growth D DUKE ROYALTY
Slide 15: A strengthened market opportunity for long-term SME finance
A strengthened market opportunity for long-term SME finance Uniquely positioned to provide capital and stability to SMEs facing funding uncertainty • Duke’s solution fills an ever-increasing need from SMEs for long term, flexible capital • The attractiveness of alternative finance is expected to ris
Slide 16: An established alternative financing solution
An established alternative financing solution Royalties appeal to owners who have a need for capital but want to retain control. Typical examples are Management Buyouts (MBO), Equity Recapitalisations and Buy & Build Strategies Debt Royalty Private Equity Term 3-7 years 25-40 years Permanent dilutio
Slide 17: New royalty partner: Fabrikat
New royalty partner: Fabrikat Initial obligation Annual adjustment Initial Investment Term Transaction type (incl. principal) (based on revenue) £6.2m 30 years MBO 14.0% +/-6% Company overview • 35 year history and now the largest independently owned manufacturer of lighting columns and guardrails i
Slide 18: Strong position to capitalise on our market leading position
Strong position to capitalise on our market leading position • Raised £35m of new equity in April 2021 to execute pipeline, and enhanced investment team • Hit record quarterly cash revenue, surpassing pre-pandemic levels, in Q1 FY22 • Gaining momentum with four new royalty partners secured to date i
Slide 19: Appendix
Appendix
Slide 20: Consolidated Statement of Cashflows
Consolidated Statement of Cashflows FY2021 FY2020 FY2019 £000 £000 £000 Receipts from royalty investments 9,931 8,977 5,097 Receipts of interest from loan investments 667 1,268 257 Receipts of interest from equity investments 345 - - Other operating receipts 93 90 308 Operating expenses paid (2,154)
Slide 21: Consolidated Statement of Comprehensive Income
Consolidated Statement of Comprehensive Income FY2021 FY2020 FY2019 £000 £000 £000 Income Royalty investment income 19,344 (2,994) 5,611 Loan investment income 636 1,235 256 Impairment loss on loan investments - (2,947) - Equity investment income 1,569 (670) 65 Other operating income 93 90 167 Total
Slide 22: Consolidated Statement of Financial Position
Consolidated Statement of Financial Position 31-Mar-21 31-Mar-20 31-Mar-19 £000 £000 £000 Goodwill 203 203 203 Royalty finance investments 71,107 59,435 61,989 Loan investments 4,370 4,418 8,993 Equity investments 3,495 507 1,178 Trade and other receivables 5,618 - - Deferred tax asset 158 675 - Tot
Slide 23: 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 Security for downside protection Compounding opportunity High level of Senior secured Annuity-like operational revenue streams through
Slide 24: Duke's typical investment criteria
Duke’s typical investment criteria • c.£5m - £20m Preferred sectors Investment fit within • Western Europe and North America Duke Portfolio • Appropriate Environmental, Social and Governance (ESG) standards Industrials Alignment of management goals • 10+ years of operating history with Duke’s object
Slide 25: Strong origination and due diligence
Strong origination and due diligence Origination process Origination through relationships Relationship driven, 675+ investment opportunities since 2016 management and financial strength more important than industry sector Indication of interest submitted 105+ investment opportunities Preliminary ev
Slide 26: An experienced team, including Royalty pioneers
An experienced team, including Royalty pioneers Management and investment committee have direct royalty experience of 70+ years Neil Johnson – Executive Director and CEO Jim Webster – Chairman of Investment Committee • Pioneered UK listings for Canadian and UK dual- • Pioneered world’s first drug ro
Slide 27: Duke Royalty
D DUKE ROYALTY