Duke Capital Limited · LSE:DUKE
Duke Capital — Duke Royalty — FY2020 Earnings Presentation
25 slides from Duke Capital's earnings presentation, September 2020
Slide 1: FY2020 Financial Results Presentation
FY2020 Financial Results Presentation September 2020 AIM: DUKE
Slide 2: Disclaimer
Disclaimer These presentation slides and the accompanying verbal presentation (the “Presentation Materials”), are confidential and have been prepared by Duke Royalty Limited (the “Company”). They do not constitute or form part of any offer for sale or subscription or any solicitation for any offer t
Slide 3: FY2020 Highlights
FY2020 Highlights Cash Net cash inflow distributions from from operating Dividend royalty partners activities per share +91% +65% +5% 2020: £10.2m 2020: £6.8m 2019: 2.80p 2019: £5.4m 2019: £4.1m Further capital Additional equity Revolving credit deployed into existing raised in facility increased, o
Slide 4: Investor Highlights
Investor Highlights Duke, the first mover in UK and European owner-managed royalty financing, provides capital with no re-financing risk for private companies High operational 11 leverage ~ £100 million Royalty Partners deployed capital --- --- Additional deployments --- 22% continue to reduce ~£20
Slide 5: Post-period end: our Covid-19 response
Post-period end: our Covid-19 response • Q1 FY21 cash revenue still totalled over £2.0 million, less than 30% Revenue down from Q4FY20 • Q2 FY21 cash revenue increasing to £2.4 million Operating costs • Operating cash costs reduced by ~18% from FY2020 • Long term approach taken. Where necessary, ent
Slide 6: FY2020 – Cashflow Highlights
FY2020 – Cashflow Highlights FY2020 FY2019 Cashflow Highlights £000 £000 • Net cash inflow from operating Royalty and loan interest 10,245 5,354 activities increased to £6.8m, increase of 65% on FY19 Operating expenses (2,811) (1,392) Other cash (expenses) / receipts (78) 148 • Operating cashflow pe
Slide 7: FY2020 – Income Statement Highlights
FY2020 – Income Statement Highlights FY2020 FY2019 • Royalty and loan interest of £10.2m v Income Statement Highlights £000 £000 £5.3m in FY19, up 91% Royalty and loan interest 10,212 5,352 • Non-cash write-downs of £15.6m Fair value movements and impairments (12,641) 490 across investment portfolio
Slide 8: Portfolio Cost
Portfolio Cost Total invested at 1 Apr 2019 - £74m Total invested at 16 Sept 2020 - £98m Welltel refinanced in Dec-19 £5.3m of follow-ons in FY21 £16m BIL refinanced in Jan-20 £7.7m of new capital invested £14m XtremePush repaid in Sep-20 £12m Duke’s 1st successful exit £10m £8m £6m £4m £2m £m At 1
Slide 9: Our Royalty Partners
Our Royalty Partners Duke has proven experience investing across range of sectors, geographies and transaction types June 2017 October 2017 April 2017 August 2018 February 2019 March 2018 Temarca B.V. Telecoms Business Services Leisure Healthcare Leisure Industrials Fair value1: £13,210,000 Fair val
Slide 10: Portfolio Fair Value Progression
Portfolio Fair Value1 Progression £120m £100m £80m £60m £40m £20m £0m 31-Mar-18 Additions Fair Value 31-Mar-19 Additions Fair Value 31-Mar-20 Additions 16-Sep-20 Total Increase Decrease 1 Fair value refers to the unaudited pro-forma fair value, which reflects the fair value at 31-Mar-20 adjusted for
Slide 11: Portfolio Fair Values as a % of Cost
Portfolio Fair Values as a % of Cost • Post FY21 follow-ons, Welltel the largest investment by fair value and cost • Despite material write downs in FY20, fair value of total investment portfolio more than 90% of cost Total cost at 16 Sep 2020 - £98m Total fair value1 at 16 Sep 2020 - £88m 14,000 (2
Slide 12: Summary
Summary • Cash revenue grew 91% to £10.2 million • Operating Cash flow grew 65% to £6.8 million • Follow-up investments into Welltel Ireland, Lynx Equity, Bakhchysarai, Step Investments, Temarca and Trimite, totalling £20.4 million • Increased debt facility to £30m reducing interest rate from one-mo
Slide 13: Appendix
Ea Wygider [A D U K E AWARDS 2019 E SMALL BUSINESS Ss SHORTLISTED ‘AWARDS 2018 O Vi A ~~ Alternative Finance R LTY Funderof they ear Provider ofthe Year
Slide 14: Consolidated Statement of Cashflows
Consolidated Statement of Cashflows FY20 FY19 £000 £000 Receipts from royalty investments 8,977 5,097 Receipts of interest from loan investments 1,268 257 Receipts from transaction costs reimbursed 90 308 Other interest income received - 1 Payments for royalty participation fees (168) (161) Operatin
Slide 15: Consolidated Statement of Comprehensive Income
Consolidated Statement of Comprehensive Income FY20 FY19 £000 £000 Income Royalty investment income (2,994) 5,611 Loan investment income 1,235 256 Impairment loss on loan investments (2,947) - Equity investment income (670) 65 Other operating income 356 167 Total income (5,040) 6,099 Investment Cost
Slide 16: Consolidated Statement of Financial Position
Consolidated Statement of Financial Position 31-Mar-20 31-Mar-19 £000 £000 Goodwill 203 203 Royalty finance investments 59,435 61,989 Loan investments 4,418 8,993 Equity investments 507 1,178 Deferred tax asset 675 - Total Non-Current assets 65,238 72,363 Royalty finance investments 16,124 8,065 Loa
Slide 17: What Is Royalty Financing?
What Is Royalty Financing? • A long-term contractual interest which Royalty Industry Overview generates a consistent monthly cash • Began in the 1980s - commodities flow stream and pharmaceuticals • Can be viewed as a corporate • Sector is worth £50bn in North mortgage America • In 2000s - expanded
Slide 18: Why Duke Royalty?
Why Duke Royalty? Royalty financing allows private business owners to receive capital while retaining control of their businesses Debt Royalty Private Equity Permanent Term 3 – 7 Years 25 – 40 Years dilution Refinancing Significant None Pressure to exit Risk Control Passive Passive Loss of control C
Slide 19: How Do Investors Make Money?
How Do Investors Make Money? Royalty companies benefit from attractive returns and increasing valuation as they diversify their investment portfolios • Annuity like revenue streams Cumulative cash flow: £45m investment • Compounding opportunity – Annual Revenue Growth through royalty partners’ reven
Slide 20: Duke's Typical Investment Criteria
Duke’s Typical Investment Criteria Primary Criteria Secondary Criteria Description Preferred sectors Deal Size £5m - £20m Investment InvestmentFitFitWithin WithinDuke Duke Hospitality & Leisure Portfolio Portfolio Geographical Focus Western Europe and North America Industrials Track Record 10+ years
Slide 21: Strong Origination and Due Diligence
Strong Origination and Due Diligence • Multiple networks and deal finders sourcing new opportunities • Preliminary Evaluation – scored against our investment criteria and reviewed by independent investment committee • Term sheets prior to in-depth due diligence • Internal processes supplemented by i
Slide 22: Why Duke Appeals to Certain Owner-Managers
Why Duke Appeals to Certain Owner-Managers Select examples of how Duke’s funding solution can be used along with providing Growth Capital Shareholder Restructuring Acquisition Capital ▪ Where one or more shareholders wish to exit ▪ Acquisition capital is a common use case, (retirement, cash-out, etc
Slide 23: Our Team
Our Team Management and investment committee have direct royalty experience of 60+ years Neil Johnson – Executive Director and CEO Rael Sarembock – VP, Investments ➢Pioneered UK listings for Canadian and UK dual-listed companies ➢Co-founder of Capital Step between 2000 and 2010 ➢£3 billion raised fo
Slide 24: Duke's Investors – Top Global Funds
Duke’s Investors – Top Global Funds Shareholders % Ownership 16.05% 9.87% 8.18% 5.86% 4.51% 3.76% 3.59% 3.28% Directors / Management / Insiders ~5.00% Duke has a suite of blue-chip institutional investors and significant management and insider ownership As at 1 September 2020 24
Slide 25: Duke Royalty
DUKE ROYALTY