Duke Capital Limited · LSE:DUKE
Duke Capital — Duke Royalty — FY2023 Earnings Presentation
30 slides from Duke Capital's earnings presentation, July 2023
Slide 1: FY2023 Financial Results
FY2023 Financial Results July 2023 AIM: DUKE Duke Royalty Limited Flexible Funding For Business Owners Of The Year 2022
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 Overview
Corporate Overview 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 Quarterly dividend payment and Buyouts typ
Slide 4: Financial Highlights
Financial Highlight: > ae D DUKE ROYALTY ee Lp insider tlt AWARDS 2021 WINNER
Slide 5: Cashflow Highlights
Cashflow Highlights FY23 cash flow KPIs driven by increasing recurring cash revenue Total cash revenue (£m) Free cash flow (£m) Free cash flow per share (pence) 30.0 15.0 12.1 13.1 4.0 3.5 3.3 21.9 3.1 18.4 3.0 2.5 20.0 10.0 7.5 10.3 11.0 5.4 2.0 10.0 5.0 1.0 0.0 0.0 0.0 FY20 FY21 FY22 FY23 FY20 FY2
Slide 6: Operating Leverage
Operating Leverage Recurring cash flow generation continues to reduce operating leverage Opex % 22% 21% 14% 11% 25,000,000 21.8 20,000,000 14.9 15,000,000 10.3 10,000,000 8.8 5,000,000 2.3 1.9 2.1 2.3 - FY20 FY21 FY22 FY23 Recurring cash revenue Cash operating costs • 15.1 pence of dividends paid ou
Slide 7: Balance Sheet
Balance Sheet NAV steadily increasing 31-Mar-20 31-Mar-21 31-Mar-22 31-Mar-23 £000 £000 £000 £000 Royalty investments 75,559 85,301 160,479 191,694 Loan investments 9,517 4,949 4,172 4,652 Equity investments 507 3,495 10,820 13,529 Investment portfolio fair value 85,583 93,745 175,471 209,898 Net as
Slide 8: Portfolio Returns
Portfolio Returns Credit like returns with further potential equity upside Capital Cash returned Cash return as % of Unrealised Total return on Portfolio company invested to date capital invested fair value1 capital invested2 Lynx 15,000 8,670 58% 15,261 1.6x Trimite 12,500 4,381 35% 12,683 1.2x UGG
Slide 9: Contractual Revenue Building
Contractual Revenue Building Total cash revenue growing as deployments scale 30 90 25 75 20 60 15 45 10 30 5 15 0 0 FY20 FY21 FY22 FY23 FY24e * Total cash revenue - £m (LHS) Gross annual deployments - £m (RHS) • Current average term of legally contracted revenue is 27+ years, totalling £800m+ • Full
Slide 10: Portfolio Highlights
Portfolio Highlights > ae D DUKE ROYALTY ee Lp insider tlt AWARDS 2021 WINNER
Slide 11: Our Royalty Partners
Our Royalty Partners Duke has proven experience investing across range of sectors, geographies and transaction types November 2022 December 2021 December 2021 July 2021 July 2021 FIRE & SECURITY SPECIALIST CARE INDUSTRIALS INDUSTRIALS I.T. SERVICES Equity Stake: Equity Stake: Equity Stake: Equity St
Slide 12: Our Royalty Partners and their Operating Subsidiaries
Our Royalty Partners and their Operating Subsidiaries Duke’s exposure is diversified across 62 underlying operating companies Step Investments Bay Broadcasting Limited BPVA 12
Slide 13: Portfolio Performance – Investment Exits
Portfolio Performance – Investment Exits Track record with six exits to date IRR of exits to date +200% 50.0% 200.0% 40.0% 100.0% 28.5% 26.9% 30.0% 22.0% 16.2% 20.0% 10.0% -1.4% 0.0% Temarca Berkley XtremePush Welltel BHP Instor -10.0% Royalty Royalty + premium Royalty + premium + equity • Indicativ
Slide 14: Post-Period End Highlights
Post-Period End Highlights Continued progress announced post-period end ➢ Record £6 million of recurring cash revenue generated in Q1 FY24 Finance ➢ £1.8 million premium received on exit of Instor ➢ Further 0.70p dividend paid April 2023, Q1 dividend declared at 0.70p ➢ Instor buyout in May-23 deliv
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 11.00% 9.03% 7.67% 6.45% 6.35% 5.62% ownership ownership ownership ownership ownership ownership Directors, Management, Insiders 5.59% 4.25% 3.63% 3.32% 3.15% 3.15% ownership ow
Slide 16: Summary
Summary As the only London listed corporate royalty company, Duke Royalty has pioneered corporate royalty financing in the UK and Europe. Capital preservation High operational leverage Downside protection evident from previous Cash operating costs down to 11% of total market downturns cash revenue i
Slide 17: Appendix
Appendix > ae py dure SSE awarvs 2021 ROYALTY ____WINNER
Slide 18: Consolidated Statement of Cashflows
Consolidated Statement of Cashflows FY2023 FY2022 FY2021 FY2020 £000 £000 £000 £000 Receipts from royalty investments 21,634 14,701 9,931 8,977 Receipts of interest from loan investments 339 580 667 1,268 Other operating receipts 176 543 438 90 Operating expenses paid (3,306) (2,487) (2,154) (2,811)
Slide 19: Consolidated Statement of Comprehensive Income
Consolidated Statement of Comprehensive Income FY2023 FY2022 FY2021 FY2020 £000 £000 £000 £000 Income Royalty investment income 28,266 18,037 19,344 (2,994) Loan investment income 339 533 636 1,235 Equity investment income 2,212 9,678 1,569 (670) Other operating income 176 543 93 90 Impairment loss
Slide 20: Consolidated Statement of Financial Position
Consolidated Statement of Financial Position 31-Mar-23 31-Mar-22 31-Mar-21 31-Mar-20 £000 £000 £000 £000 Goodwill 203 203 203 203 Royalty finance investments 158,540 139,648 71,107 59,435 Loan investments 4,652 3,172 4,370 4,418 Equity investments 13,529 10,820 3,495 507 Trade and other receivables
Slide 21: An Experienced Team with a collective track record
An Experienced Team with a collective track record Management and investment team have 5 years together at Duke Neil Johnson – Executive Director and CEO Charlie Cannon-Brookes – Executive Hugo Evans – CFO • 30 years of experience in financial Director and CIO • Extensive experience in senior financ
Slide 22: 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 23: 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 24: 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 25: 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 26: 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 27: 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 28: Due Diligence Process
Due Diligence Process Origination Statistics • ~600 business plans per year are evaluated Origination through relationships Healthy pipeline of investment opportunities • ~100 Non Disclosure Agreements signed per year • ~40 Indications of Interest letter issued Indication of interest submitted Initi
Slide 29: Withstanding Challenges
Withstanding Challenges Duke’s proven resilience 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 mi
Slide 30: — i ler
M. — i ler y DUKE = AWARDS 2021 |“) ROYALTY WINNER