Duke Capital Limited · LSE:DUKE
Duke Capital — Duke Royalty — H1 FY2023 Earnings Presentation
32 slides from Duke Capital's earnings presentation, December 2022
Slide 1: FY2023 Interim Financial Results
FY2023 Interim Financial Results December 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 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: 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 5: Financial Highlights
Financial High > ee en , DUKE alll AWARDS 2021 ROYALTY __ WINNER
Slide 6: Financial Highlights
Financial Highlights Financial metrics strengthen as deployments scale Total cash revenue (£m) Free cash flow (£m) Net income (£m) 15.0 8.0 6.6 15.0 10.4 6.0 10.3 10.0 7.8 4.6 10.0 4.0 2.9 6.2 4.4 4.1 5.0 5.0 2.0 0.0 0.0 0.0 INT 21 INT 22 INT 23 INT 21 INT 22 INT 23 INT 21 INT 22 INT 23 Total cash r
Slide 7: Cash Flow Highlights
Cash Flow Highlights Significant increased cash flow generation creating operating leverage Quarterly operating leverage – FY21-current 6,000,000 30% 5,000,000 25% 4,000,000 20% 3,000,000 15% 2,000,000 10% 1,000,000 5% 0 0% Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY 22 Q4 FY22 Q1FY23 Q2FY
Slide 8: Investment Growth
Investment Growth Acceleration of deployments leads to increased free cash flow and reduced payout ratio 2.80p per share of current annualised dividend1 13.70p of dividends / share paid since inception Portfolio cost (£m) Free cash flow / share (p) Dividend (pence/share) 180 2.00 1.50 160 140 1.60 1
Slide 9: Balance sheet
Balance sheet Balance sheet strengthening as portfolio matures 30-Sep-20 30-Sep-21 30-Sep-22 £000 £000 £002 Royalty investments 83,485 106,839 171,944 Loan investments 8,549 1,580 4,892 Equity investments 172 4,870 11,305 Investment portfolio fair value 92,206 113,289 188,121 Net assets (£000s) NAV
Slide 10: Portfolio Highlights
Portfolio High py dure SSE awarvs 2021 i ROYALTY ____WINNER
Slide 11: Portfolio Summary
Portfolio Summary Credit metrics strengthen as portfolio grows Portfolio book cost (£m) Max single name exposure Contractual payments made 200 169 14.0% 96% 94% 157 13.1% 13.1% 100% 91% 150 13.0% 71% 12.1% 80% 95 12.0% 60% 100 88 11.0% 11.0% 40% 50 10.0% 20% 0 9.0% 0% FYE20 FYE21 FYE22 Current FYE20
Slide 12: 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 11% 18% 16% 34% 20% 15% 53% 22% 60% 16% 36% UK - 8 Industrials - 5 Acquisition Capital - 7 North Am
Slide 13: 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 Stak
Slide 14: Our Royalty Partners and their Operating Subsidiaries
Our Royalty Partners and their Operating Subsidiaries Duke’s exposure is diversified across 56 underlying operating companies Step Investments Bay Broadcasting Limited BIL 14
Slide 15: New royalty partner: New Path Fire and Security
New royalty partner: New Path Fire and Security Initial Royalty Initial obligation Annual adjustment Term Transaction type Investment (incl. principal) (based on revenue) 30 years Buy & Build £5.0m 13.5% +/-6% Company overview • New Path Fire and Security is a growing and acquisitive platform, buyin
Slide 16: Duke's Investors: Top Global Funds
Duke’s Investors: Top Global Funds Strong base of blue-chip institutional investors1 with significant management ownership 10.45% 9.06% 7.01% 6.47% 6.37% 5.64% ownership ownership ownership ownership ownership ownership Directors, Management, Insiders 5.58% 4.27% 3.93% 3.60% 3.14% 2.92% ownership ow
Slide 17: Post-Period End Highlights
Post-Period End Highlights Continued progress announced post-period end Finance Portfolio Pipeline • Record £5.3 million of • £5.5 million investment • Strong pipeline of new cash revenue in Q2 FY23 into new royalty partner opportunities under New Path Fire and review • £5.5 million of cash Security
Slide 18: 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 10% of total market downturns cash revenue i
Slide 19: Appendix
Appendix py dure SSS AWARDS 2021 ROYALTY ____WINNER
Slide 20: Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows INTERIM 2023 FY 2022 INTERIM 2022 £000 £000 £000 Receipts from royalty investments 10,234 14,701 6,419 Receipts of interest from loan investments 173 580 450 Other operating receipts 30 543 266 Operating expenses paid (1,061) (2,487) (946) Payments for royalty pa
Slide 21: Consolidated Statement of Comprehensive Income
Consolidated Statement of Comprehensive Income INTERIM 2023 FY 2022 INTERIM 2022 £000 £000 £000 Income Royalty investment income 15,079 18,037 7,584 Loan investment income 173 533 410 Equity investment income 485 9,678 1,497 Other operating income 30 543 266 Total income 15,767 28,791 9,757 Investme
Slide 22: Consolidated Statement of Financial Position
Consolidated Statement of Financial Position 30-SEP-22 31-MAR-22 30-SEP-21 £000 £000 £000 Goodwill 203 203 203 Royalty finance investments 149,853 139,648 93,232 Loan investments 3,872 3,172 1,000 Equity investments 11,305 10,820 4,810 Trade and other receivables - - 2,236 Deferred tax asset 155 156
Slide 23: 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 24: 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 25: 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 26: 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 27: 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 28: 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 29: 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 30: 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 31: 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 32: DUKE
MM DUKE ROYALTY AWARDS 2021 WINNER WY )