Duke Capital Limited · LSE:DUKE
Duke Capital — Investor Presentation (November 2024)
29 slides from Duke Capital's investor presentation, November 2024
Slide 1: Investor Presentation
Investor Presentation November 2024 AIM: DUKE
Slide 2: Disclaimer
DISCLAIMER These presentation slides and the accompanying verbal presentation (the “Presentation Materials”), are Materials in other jurisdictions may be restricted by law, and persons into whose possession these securities. confidential and have been prepared by Duke Capital Limited (the “Company”)
Slide 3: Overview
OVERVIEW Over the last 3 years of wars, interest rate hikes and 40-year high inflation, Duke continues to deliver Quarterly Recurring Revenue up 66% £33.3m Returned to Shareholders Consistently increased revenue to a record 8.3p / share in dividends and dividend per high of £6.4m for Q2/FY25 share r
Slide 4: Fundraising Transaction
FUNDRAISING TRANSACTION Seeking £15m+ institutional placing of Ordinary Shares Use of Proceeds: Duke’s Relative Total Shareholder Return Performance Since 2021 Fundraising • Bolt-on M&A into our current Buy & Build portfolio 140 platforms +9.1% 120 • Already identified acquisition targets for BPVA,
Slide 5: Exits to Date
EXITS TO DATE Unlike a pure credit portfolio, our hybrid capital approach boosts IRRs on exit Components of Duke’s Product Term Capital Investment held invested Corporate Preference Exit Equity Capital partner Date (months) (£000) mortgage share premium stake % Realised gross IRR Temarca Apr-17 47 1
Slide 6: Exits to Date (Continued)
EXITS TO DATE (CONTINUED) Equity stakes drive large returns, maximising gains upon investment exits • Duke has had 8 exits over the Company’s history • Fabrikat and BHP demonstrate the returns which are possible when Duke has significant equity stakes • Our use of proceeds from this transaction will
Slide 7: Partner: BPVA
PARTNER: BPVA Experienced management team with a strong track record; healthy pipeline of M&A opportunities Pro-forma Company overview Partner - BPVA Jan-20 Sep-24 (at exit) • BPVA is a buy & build platform in the resourcing and recruitment space, and provides both permanent and Capital Deployed (£’
Slide 8: Partner: United Glass Group
PARTNER: UNITED GLASS GROUP Duke’s ability to take increased equity stakes allows for potentially increased IRRs on exit Pro-forma Company overview Partner - UGG Mar-18 Sep-24 (at exit) • UGG is a group of companies focused on glass processing, manufacturing and merchanting to Capital Deployed (£’00
Slide 9: Accessing Private Capital
ACCESSING PRIVATE CAPITAL Third-party capital eliminates cash drag, represents accretive fee-based revenue, reduces Duke’s dependence on the equity markets which minimises dilution Private Credit Market • Private Credit Market has almost tripled in a decade 2014 2023 • Duke has engaged a placement a
Slide 10: Introduction to Duke Capital
INTRODUCTION TO DUKE CAPITAL
Slide 11: Introduction to Duke Capital
INTRODUCTION TO DUKE CAPITAL Hybrid capital combines the best features of private credit and private equity Duke’s capital appeals to business owners who need capital but want to retain control PRIVATE PRIVATE CREDIT EQUITY DUKE CAPITAL Senior, mezzanine or junior vs Senior secured loan Minority equ
Slide 12: Clear Investment Strategy
CLEAR INVESTMENT STRATEGY Duke’s funding solution is used by owner-operators to drive growth and increase shareholder value Use of Proceeds MANAGEMENT BUY & BUILD SHAREHOLDER DEBT REFINANCING BUYOUTS STRATEGIES RESTRUCTURINGS What Duke looks for Business characteristics • Investment size of £5 – 30
Slide 13: The Components of Duke's Product
THE COMPONENTS OF DUKE’S PRODUCT Parts contribute to an overall package that meets the goals of both Duke’s investors and business owners • Senior secured instrument • 1.5% - 2.0% variable preference • 12.0% fixed rate yield, with no share refinancing risk • Annual adjustment to Duke’s yield • Princ
Slide 14: The Rise of Private Credit and Direct Lending
THE RISE OF PRIVATE CREDIT AND DIRECT LENDING Private credit is a fast-growing area of the alternative lending 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$0.4tn1 US$1.4tn2 US$2.3tn2 20
Slide 15: Target Market vs. Other Institutional Forms of Capital
TARGET MARKET VS. OTHER INSTITUTIONAL FORMS OF CAPITAL The Lower Mid-Market comprises of companies with less access to institutional capital than other segments No investment Duke’s point of entry Duke’s point of exit / refinance Venture Capital Lower Middle-Market Middle Market • Visionary leadersh
Slide 16: How Duke's Product Benefits Investors
HOW DUKE’S PRODUCT BENEFITS INVESTORS History of attractive risk adjusted returns by adhering to 3 investment pillars Capital preservation Attractive dividend yield Upside from exits Senior secured capital Monthly cashflow stream Exit premiums and equity stakes • Light amortization of capital starti
Slide 17: Current Portfolio
CURRENT PORTFOLIO
Slide 18: Portfolio Diversification
PORTFOLIO DIVERSIFICATION Risk mitigation and increased diversification as deployments accelerate Portfolio by region as Portfolio by sector as Portfolio concentration as % of total book value % of total book value % of total book value 6% 4% 12% 12% 4% 8% 5% 33% 6% 10% 12% 6% 22% 9% 7% 15% 61% 7% 8
Slide 19: Portfolio Companies
PORTFOLIO COMPANIES Credit product provides ongoing cash returns with potential upside from growing equity portfolio Components of Duke’s Product Capital Investment Corporate Preference Exit Equity invested Capital partner Date mortgage share premium stake % (£000) Cash returned to date (£000) (%) L
Slide 20: Exits to Date
EXITS TO DATE Unlike a pure credit portfolio, our hybrid capital approach boosts IRRs on exit Components of Duke’s Product Term Capital Investment held invested Corporate Preference Exit Equity Capital partner Date (months) (£000) mortgage share premium stake % Realised gross IRR Temarca Apr-17 47 1
Slide 21: Financial Highlights
FINANCIAL HIGHLIGHTS
Slide 22: Financial Summary
FINANCIAL SUMMARY Continuing cashflow generation Quarterly recurring cash revenue1 (£000) • Steadily increasing recurring cash revenue generated from 2 investment corporate mortgage 7,000 exits in Q4 FY24 £38 million of gross 6,414 • Over £780 million of contractual revenue due over next 30 6,500 de
Slide 23: FY25 Interim Financial Summary
FY25 INTERIM FINANCIAL SUMMARY Trading in line with market expectation All in £000s INTERIM FY25 • Record recurring revenue in Q2 FY25 of £6.4 million Recurring cash revenue 12,730 • Final tranche of Fairmed exit proceeds received Total cash revenue 13,560 • Covered dividend, total DPS paid of 1.4 p
Slide 24: Duke's Investors: Global Funds with Significant Public Ownership
DUKE’S INVESTORS: GLOBAL FUNDS WITH SIGNIFICANT PUBLIC OWNERSHIP Loyal base of blue-chip institutional investors with a strong retail following; significant management ownership 14.34% 10.61% 8.37% 6.25% 5.53% ownership ownership ownership ownership ownership Directors, Management, Insiders 4.99% 4.
Slide 25: Investment Origination
INVESTMENT ORIGINATION Identification and assessment of investment opportunities • We use technology to track and • Fully staffed offices in London and analyse deal flow Toronto ensures Duke has deal • Database of c.1,500 trusted flow from multiple jurisdictions contacts • Conferences, road shows, a
Slide 26: Investment Case Summary
INVESTMENT CASE SUMMARY Why invest in Duke? Capital Preservation High Operational Leverage Senior secured product with downside Cash operating costs were 12% of total protection recurring cash revenue in FY2024 Strong 8.5% Dividend Yield (@33p) Inflation Hedged Revenue Commitment to delivering conti
Slide 27: Appendices
APPENDICES
Slide 28: Our Partners
OUR PARTNERS Duke’s exposure is diversified across 14 capital partners with 75 underlying operating companies Step Investments BPVA Balgowan House Mulberry House Saltwood Care Centre Hythe View Betsy Clara House Southdowns PORTFOLIO 28
Slide 29: Our Board of Directors
OUR BOARD OF DIRECTORS Duke’s Board have 100+ years of experience NEIL JOHNSON: CEO CHARLIE CANNON BROOKES: MAREE WILMS: • 30+ years of experience in CIO NON-EXEC DIRECTOR mid-market companies • London-based Chief • Co-founder and CEO of Zeta • Head of Corporate Finance Investment Officer Asset Mana