Duke Capital Limited · LSE:DUKE
Duke Capital — FY2024 Earnings Presentation
26 slides from Duke Capital's earnings presentation, June 2024
Slide 1: FY24 Results Presentation
FY24 Results Presentation June 2024 AIM: Duke
Slide 2: Disclaimer
DISCLAIMER These presentation slides and the accompanying verbal presentation (the objectives. Such statements are generally identifiable by the terminology used, The content of the Presentation Materials has not been approved by an authorised “Presentation Materials”), are confidential and have bee
Slide 3: Introduction
INTRODUCTION FY24 Results include record financial results and re-naming our product as hybrid capital • Leading provider of a unique hybrid capital solution to business owners since 2017 • Investment Pillars: Capital Preservation; Attractive Yield through dividends and Upside through Exits • Curren
Slide 4: The Big Picture – The Rise of Private Credit
THE BIG PICTURE – THE RISE OF PRIVATE CREDIT Private credit is a fast-growing area of the alternative market, with direct lending representing the biggest part of the asset class 2014 Market Size 2023 Market Size 2027E Market Size US$100bn US$650bn US$1.15tn US$0.5tn1 US$1.4tn1 US$2.3tn2 20% 42% 50%
Slide 5: Our Unique Attributes - Hybrid Capital
OUR UNIQUE ATTRIBUTES - HYBRID CAPITAL Combining the best features of both equity and debt PRIVATE PRIVATE CREDIT EQUITY DUKE CAPITAL 5-year term, amortisation or bullet Unsecured Senior, mezzanine or junior 30-year amortising Intensive due diligence Majority equity control Floating rate: % over SON
Slide 6: Target Market v. Other Institutional Forms of Capital
TARGET MARKET V. OTHER INSTITUTIONAL FORMS OF CAPITAL Lower mid-market comprises large number of companies with less institutional capital than other segments VISIONARIES ENTREPRENEURS MANAGERS INSTITUTIONAL OWNERS Revenue £50m – £1bn EBITDA £10m+ Growth both organic and by Venture Capital / Venture
Slide 7: Our Unique Attributes - Hybrid Capital
OUR UNIQUE ATTRIBUTES - HYBRID CAPITAL Combining the best features of both equity and debt • HYBRID CREDIT PRODUCT with equity features • Unique differentiator is our CORPORATE MORTGAGE • Light amortisation over 30 years • Fixed rate, monthly payments from company Fixed rate corporate Variable rate
Slide 8: Investor Highlights
INVESTOR HIGHLIGHTS Being a public company benefits investors as well as business owners HIGHLY PREDICTABLE EXITS HAVE UPSIDE UNIQUE EXPOSURE TO ATTRACTIVE RISK REVENUE STREAMS POTENTIAL LOWER MID-MARKET RETURN PROFILE • Monthly distributions • We take minority equity • Innovative ‘corporate • Robus
Slide 9: Financial Highlights
FINANCIAL HIGHLIGHTS
Slide 10: Financial Highlights
FINANCIAL HIGHLIGHTS Continued growth in core KPI metrics Total cash revenue (£m) Recurring cash revenue (£m) Free cash flow (£m) FY24 30.3 FY24 24.3 FY24 17.9 FY23 21.9 FY23 21.8 FY23 12.8 FY22 18.4 FY22 14.9 FY22 11.2 FY21 11.0 FY21 8.8 FY21 7.2 Free cash flow per share (pence) Dividend per share
Slide 11: Operating Leverage
OPERATING LEVERAGE Long term decrease in operating leverage as recurring revenue grows Opex % 22% 21% 14% 11% 12% 30,000 24.3 25,000 21.8 20,000 14.9 15,000 10.3 10,000 8.8 5,000 3.0 2.3 1.9 2.1 2.3 - FY20 FY21 FY22 FY23 FY24 Recurring cash revenue Cash operating costs Recurring cash revenue exclude
Slide 12: Balance Sheet
BALANCE SHEET Increased investment size reflects maturing portfolio and larger entry points Investment Type Cost Fair Value +/- Average hybrid credit investment size (£m) 14.0 13.5 Hybrid Credit 202,655 210,9488 4% 11.9 11.9 Term Loan 5,442 5,382 -1% 12.0 Equity 5,753 15,904 176% 10.0 Total 213,850
Slide 13: Hybrid Credit Returns
HYBRID CREDIT RETURNS Credit product provides ongoing cash returns with potential upside from growing equity portfolio Cash return as Indicative cash Indicative cash Investment Capital Cash returned % of capital Unrealised on cash return on cash return Capital partner Date invested Equity % to date
Slide 14: Portfolio
PORTFOLIO
Slide 15: Our Partners
OUR PARTNERS March 2024 July 2023 November 2022 December 2021 December 2021 Invested capital: £14.5m Invested capital: US$11.5m Invested capital: £11.3m Invested capital: £19.4m Invested capital: US$21.0m Buy & Build MBO Buy & Build Buy & Build Debt Refinancing Specialist Care Industrials Fire & Sec
Slide 16: Our Partners
OUR PARTNERS Duke’s exposure is diversified across 71 underlying operating companies Step Investments Bay Broadcasting Limited BPVA Balgowan House Mulberry House Saltwood Care Centre Hythe View Betsy Clara House Southdowns PORTFOLIO 16
Slide 17: Exits to Date
EXITS TO DATE Unlike a pure credit portfolio, our hybrid capital approach boosts IRRs on exit Indicative IRRs Credit only 30% Credit + exit fee -1.4% Credit + exit fee + equity 5% 25% 16% 5% 20% 19% 3% 22% 15% 12% 27% 10% 29% 5% 36% 0% +200% Fixed loan Pref share Exit premium Equity PORTFOLIO 17
Slide 18: Illustrative IRR Benefits with Buy and Build - BPVA
ILLUSTRATIVE IRR BENEFITS WITH BUY AND BUILD - BPVA Multiple arbitrage boosts IRRs on exit • Duke’s return benefits from the following key elements during a buy and build investment: – Multiple arbitrage: Duke is able to acquire entities at a valuation multiples less than that by which the group is
Slide 19: Illustrative IRR Benefits with Increased Equity Stakes - UGG
ILLUSTRATIVE IRR BENEFITS WITH INCREASED EQUITY STAKES - UGG Duke’s ability to take increased equity stakes allows for potentially increased IRRs on exit • Although Duke’s IRR is expected to benefit from multiple arbitrage, akin to that shown on the prior page for BPVA, Duke’s return will also benef
Slide 20: Duke's Investors: Top Global Funds with Significant Public Ownership
DUKE’S INVESTORS: TOP GLOBAL FUNDS WITH SIGNIFICANT PUBLIC OWNERSHIP Loyal base of blue-chip institutional investors – strong retail following - significant management ownership 13.62 9.90% 8.71% 6.29% 5.57% ownership ownership ownership ownership ownership Directors, Management, Insiders 5.02% 4.39
Slide 21: Summary
SUMMARY Record results despite macro headwinds • Renewed messaging and change of name completed • Record cash flow metrics including: - total cash revenue of £30.3 million (up 38%) - free cash flow of £17.9 million (up 40%) - free cash flow per share of 4.34 pence (up 35%) • Total dividend paid of 2
Slide 22: Appendices
APPENDICES
Slide 23: Consolidated Statement of Cashflows
CONSOLIDATED STATEMENT OF CASHFLOWS £ in thousands FY2024 FY2023 FY2022 FY2021 Receipts from hybrid credit investments 27,267 21,634 14,701 9,931 Receipts of interest from loan investments 453 339 580 667 Other operating receipts 195 176 543 438 Operating expenses paid (4,015) (3,306) (2,487) (2,154
Slide 24: Consolidated Statement of Income
CONSOLIDATED STATEMENT OF INCOME £ in thousands FY2024 FY2023 FY2022 FY2021 Income Hybrid credit investment income 23,014 28,266 18,037 19,344 Loan investment income 453 339 533 636 Equity investment income 1,925 2,212 9,678 1,569 Other operating income 195 176 543 93 Total income 25,587 30,993 28,7
Slide 25: Consolidated Statement of Financial Position
CONSOLIDATED STATEMENT OF FINANCIAL POSITION £ in thousands 31-Mar-24 31-Mar-23 31-Mar-22 31-Mar-21 Goodwill 203 203 203 203 Hybrid credit finance investments 177,589 158,540 139,648 71,107 Loan investments 5,382 4,652 3,172 4,370 Equity investments 15,904 13,529 10,820 3,495 Trade and other receiva
Slide 26: Our Team
OUR TEAM An experienced management team NEIL JOHNSON – CEO CHARLIE CANNON- HUGO EVANS – CFO ALEX HIBBARD – PRINCIPAL, BROOKES – CIO INVESTMENTS • Extensive experience in • 30 years of experience in • London-based Chief • 10 years of private equity senior finance roles financial services including In