Duke Capital Limited · LSE:DUKE
Duke Capital — Investor Presentation (February 2024)
27 slides from Duke Capital's investor presentation, February 2024
Slide 1: Investor Presentation
Investor Presentation February 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, United States except pursuant to an exemption from, or in a transaction not “Presentation Materials”), are confidential and have been pre
Slide 3: Duke Royalty has become Duke Capital
DUKE ROYALTY HAS BECOME DUKE CAPITAL Our product and focus will not change ✓ Established company providing 15 Current £46m unique capital solution for the Admission current capital £200m annualised lower mid market to AIM partners of current capital divided of dividends yield1 of paid to since 2017
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 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% Direct Direc
Slide 5: Direct Lending Market Outperformance
DIRECT LENDING MARKET OUTPERFORMANCE Direct Lending has outperformed corporate bonds and leveraged loans for 12 of the last 17 years Morningstar LSTA Cliffwater Direct Lending Bloomberg USD HY USD Leveraged Loan Index (CDLI) 1 Corp Bond Index Index “The relative resilience of direct lending has been
Slide 6: 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 7: Our Offering – A Blend of Capital Types
OUR OFFERING – A BLEND OF CAPITAL TYPES Long-term solution to short-term uncertainty for business owners and investors alike • HYBRID CREDIT PRODUCT with equity features • Unique differentiator is our CORPORATE MORTGAGE • Light amortisation over 30 years • Fixed rate, monthly payments from company c
Slide 8: Our Target Market vs. Other Institutional Forms of Capital
OUR TARGET MARKET VS. 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 / Ve
Slide 9: 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 10: 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 12.95% 9.05% 8.71% 6.29% 5.85% ownership ownership ownership ownership ownership Directors, Management, Insiders 5.57% 5.0
Slide 11: Clear Investment Strategy and Well-Defined Use Cases
CLEAR INVESTMENT STRATEGY AND WELL-DEFINED USE CASES Use of Proceeds has refined, but criteria for new investments has remained the same since inception. We allow experienced management teams to WHAT DO WE LOOK FOR? MANAGEMENT become majority owners, backing people who BUYOUTS • Long-standing privat
Slide 12: Our Partners
OUR PARTNERS July 2023 November 2022 December 2021 December 2021 August 2021 Invested capital: US$11.5m Invested capital: £6.9m Invested capital: £19.4m Invested capital: US$21.0m Invested capital: CA$27.1m MBO Acquisition Capital Acquisition Capital Debt Refinancing Acquisition Capital Industrials
Slide 13: Our Partners
OUR PARTNERS Duke’s exposure is diversified across 63 underlying operating companies Step Investments Bay Broadcasting Limited BPVA INVESTMENT 13
Slide 14: Attractive Risk-Adjusted Returns
ATTRACTIVE RISK-ADJUSTED RETURNS Core IRRs boosted on exit by equity like features Indicative IRRs Credit only Credit + exit fee 25.0% -1.4% Credit + exit fee + equity • Equity stakes provide upside on 5%+ exit at owners control 20.0% 16% • Exit fees can increase IRR to 5% 20%+ depending on timings
Slide 15: Cashflow Generation
CASHFLOW GENERATION Steady recurring cash revenue growth with material upside on exit from equity features 2020 – Q3 FY24: 30% CAGR ON RECURRING CASH REVENUE1 8,000 7,000 6,000 6-month • CAGR boosted by 5,000 decrease in revenue-linked annual recurring due adjustments 4,000 to Covid • 78% of adjustm
Slide 16: Operating Leverage
OPERATING LEVERAGE As recurring revenue grows, operating leverage allows more cashflow to be recycled into investment deployments Opex %1 FY20: 22% FY21: 21% FY22: 14% FY23: 10% FY242: 11% 7,000 35.0% 6,000 30.0% 5,000 25.0% 4,000 20.0% 3,000 15.0% 2,000 10.0% 1,000 5.0% - 0.0% Q1 FY20 Q2 FY20 Q3 FY
Slide 17: Hybrid Returns
HYBRID RETURNS Credit like returns generated from month 1 with further potential equity upside Capital Invested1 Cash returned to date1 Cash return as % of Unrealised fair value2 Total return on capital Investment date Capital Partner (£000) (£000) capital invested (£000) invested3 Oct-17 Lynx 15,00
Slide 18: Balance Sheet Strength
BALANCE SHEET STRENGTH Balance sheet remains healthy and well insulated Hybrid credit portfolio – fair value premium/discount NAV per share (pence) 250,000 10% 6% Sep-23 39.1 200,000 7% 5% 4% Mar-23 40.3 150,000 0% -10% 2% 100,000 -5% Mar-22 38.1 50,000 -10% Mar-21 33.3 - -15% Mar-20 30.9 Mar-20 Mar
Slide 19: Investment Origination
INVESTMENT ORIGINATION Renewed messaging launch has been synched with the additional resources dedicated to origination Industry Leading CRM • Our origination will benefit We use technology to track and from our renewed analyse deal flow messaging as ‘direct lender’ Database of 2,000+ trusted contac
Slide 20: Investment Process
Investment Process Duke has partnered with top tier management consulting firms to expedite due diligence and aims to complete transactions within two to three months • PE style in-depth due diligence Non-Disclosure Preliminary conducted pre-investment Deal Originated Agreements Signed Evaluation •
Slide 21: Summary
Summary Duke Royalty has become Duke Capital WHAT CHANGES WHAT DOESN’T • New name and positioning as a ‘direct • Our unique ‘corporate mortgage’ 30- lender to the lower mid-market’ year product is our sustainable advantage • We define hybrid capital as a flexible solution which combines best feature
Slide 22: Appendices
r DUKE CAPITAL
Slide 23: Consolidated Statement of Cashflows
CONSOLIDATED STATEMENT OF CASHFLOWS £ in thousands FY2023 FY2022 FY2021 FY2020 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) Paym
Slide 24: Consolidated Statement of Income
CONSOLIDATED STATEMENT OF INCOME £ in thousands FY2023 FY2022 FY2021 FY2020 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 on loan investments
Slide 25: Consolidated Statement of Financial Position
CONSOLIDATED STATEMENT OF FINANCIAL POSITION £ in thousands 31-Mar-23 31-Mar-22 31-Mar-21 31-Mar-20 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 - - 5
Slide 26: ESG Considerations
ESG CONSIDERATIONS Duke’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 [Company] f
Slide 27: Our Team
OUR TEAM NEIL JOHNSON – CEO CHARLIE CANNON-BROOKES – HUGO EVANS – CFO ALEX HIBBARD – PRINCIPAL, CIO INVESTMENTS • 30 years of experience in • Extensive experience in • London-based Chief senior finance roles within • 8 years of private equity financial services including Investment Officer experienc