Duke Capital Limited · LSE:DUKE
Duke Capital — Duke Royalty — Investor Presentation (March 2021)
27 slides from Duke Capital's investor presentation, March 2021
Slide 1: Project Herald
Project Herald March 2021 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: Presentation team
Presentation team The management and investment committee have 70+ years of combined direct royalty experience Neil Johnson Charlie Cannon-Brookes Peter Madouros Executive Director and CEO Executive Director Chief Investment Officer Early player of UK listings for London-based Executive Director Ext
Slide 4: Investor highlights
Investor highlights We provide minimally-dilutive capital with no re-financing risk for private, owner-managed companies with strong cashflows Established portfolio ~6% 10 Royalty Partners and £115+ million annualised dividend yield1 paid in cash deployed since inception quarterly Established market
Slide 5: How are corporate royalties different?
How are corporate royalties different? A long-term participating loan with similar characteristics to traditional royalties • Duke provides a lump sum of capital to a company with a term of 25-40 years • Initial yield is 12.0-14.0% of capital, adjusted once per year with a collar of +/-6% in currenc
Slide 6: An established alternative financing solution
An established alternative financing solution Royalties appeal to owners who have a need for capital but want to retain control. Royalties compete more against debt than equity, but have characteristics of both Debt Royalty Private Equity Term 3-7 years 25-40 years Permanent dilution Refinancing ris
Slide 7: Benefits for investors
Benefits for investors Royalty company shareholders benefit from attractive returns and increasing valuation as they diversify their investment portfolios Security for downside protection Compounding opportunity High level of Senior secured Annuity-like operational revenue streams through participat
Slide 8: Our Royalty partners
Our Royalty partners Duke has proven experience investing across range of sectors, geographies and transaction types October 2017 February 2019 April 2018 November 2020 August 2018 March 2018 Carmen, Verdi & Rigoletto BUSINESS SERVICES LEISURE INDUSTRIALS RIVER BOAT VESSELS HEALTHCARE INDUSTRIALS Fa
Slide 9: Duke’s financials – cashflow business
Duke’s financials – cashflow business FY2020 FY2019 FY2021 Trading Outlook Cashflow highlights £000 £000 Cash revenue 1 10,245 5,354 • Quarterly cash revenue trending upwards Core operating expenses 2 (2,273) (1,392) • Total cash revenue for FY2021 expected to be £11.0 million, an increase year-on-y
Slide 10: Project Herald
Project Herald D DUKE ROYALTY
Slide 11: Transaction summary
Transaction summary • Proposed equity placing to raise up to £20m • Net proceeds to provide royalty financing in two new royalty partners under signed, exclusive heads of terms and one near term follow-on into current partner • Further pipeline funded by revolving line of credit which post-placing i
Slide 12: Pipeline of opportunities
Pipeline of opportunities The role of alternative financing has been on the rise since 2010 and we believe Covid-19 will increase the size of the alternative financing industry Secular tailwinds Robust pipeline • Higher capital costs for banks is creating growing demand for private • Record number o
Slide 13: New Royalty partner: IT Managed Solutions
New Royalty partner: IT Managed Solutions Company overview • UK buy & build platform for IT managed service businesses with six operating businesses already acquired • Recurring revenue generated via growing managed services offering and the reselling of hardware and software • Cost synergies from c
Slide 14: New Royalty partner: Engineering and Construction
New Royalty partner: Engineering and Construction Company overview • Canadian buy & build platform for engineering, procurement and construction (“EPC”) solutions in commercial and industrial settings • Three acquisition targets as part of the initial Group, the business units being in business sinc
Slide 15: Follow-on investment to existing partner
Follow-on investment to existing partner BIL: existing (resourcing) platform Bolt-on opportunity BIL to date New opportunity • BIL is a buy & build resourcing platform which has deployed a total of £9.4m to date • 3.8m of new capital from Duke to • This includes bring the total investment exposure t
Slide 16: Increasing portfolio diversification
Increasing portfolio diversification Pre-transaction Illustrative full deployment Lynx Lynx Miriad 6% 5% 9% UGG 6% 14% Miriad 5% UGG Duke Switzerland 5% 9% InterHealth 7% Duke Switzerland InterHealth Trimite 6% 13% BIL Trimite 8% 10% 2% Step BIL ~£95m 5% £150m+ Fabrikat Step BHP deployed Fabrikat de
Slide 17: Duke’s investors: top global funds
Duke’s investors: top global funds Strong base of blue-chip institutional investors with significant management ownership 9.81% 9.18% 7.95% 6.64% ownership ownership ownership ownership Directors, Management, Insiders 5.09% 4.29% 3.69% ~5.00% ownership ownership ownership ownership High level of liq
Slide 18: Summary
Summary • Use of proceeds are for two new deals already under exclusive Letters of Intent and one follow-on deal • Total cash revenue for FY2021 expected to see an increase year-on-year despite Covid downturn • Further potential for growth as trading environment normalises, buyouts materialize and p
Slide 19: Appendix
Appendix
Slide 20: An experienced team, including Royalty pioneers
An experienced team, including Royalty pioneers Management and investment committee have direct royalty experience of 70+ years Neil Johnson – Executive Director and CEO Jim Webster – Chairman of Investment Committee • Pioneered UK listings for Canadian and UK dual- • Pioneered world’s first drug ro
Slide 21: Duke Royalty’s Covid-19 response
Duke Royalty’s Covid-19 response Preservation of value Long term approach F21 cash revenue - Q1: £2.0m Q2: £2.4m Q3: £4.2m Forbearance agreements with hardest-hit royalty partners Cash revenue forgone has been captured as equity or deferred But deployed further capital into strong partners enabling
Slide 22: Duke’s typical investment criteria
Duke’s typical investment criteria • c.£5m - £20m Preferred sectors Investment fit within • Western Europe and North America Duke Portfolio • Appropriate Environmental, Social and Governance (ESG) standards Industrials Alignment of management goals • 10+ years of operating history with Duke’s object
Slide 23: Strong origination and due diligence
Strong origination and due diligence Origination process Origination through relationships Relationship driven, 675+ investment opportunities since 2016 management and financial strength more important than industry sector Indication of interest submitted 105+ investment opportunities Preliminary ev
Slide 24: What is Royalty financing?
What is Royalty financing? Royalties are deployed in multiple sectors and are part of the growing market in alternative financing Year listed Year listed Year listed Year listed Year listed 1983 2005 & 2020 2018 2020 2020 Exchange Exchange Exchange Exchange Exchange TSX & NYSE TSX & LSE LSE NYSE LSE
Slide 25: Benefits for owner-operators
Benefits for owner-operators Private business owners receive immediate capital without selling part of their equity stake in the company, allowing them to retain full control of the business No refinancing risk Retain control of timing for owners of any refinancing event A long term approach Unique
Slide 26: Funding solutions
Funding solutions Debt or Acquisition equity MBOs capital restructuring Allows experienced Debt refinancing or management teams to Flexible financing model shareholders exiting become majority owners enables cash drawdowns in multiple tranches We support owners We back people who without creating an
Slide 27: Duke Royalty
D DUKE ROYALTY