Duke Capital Limited · LSE:DUKE
Duke Capital — Duke Royalty — Investor Presentation (January 2021)
28 slides from Duke Capital's investor presentation, January 2021
Slide 1: Investor Presentation
Investor Presentation January 2021 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: Investor Highlights
Investor Highlights We provide minimally-dilutive capital with no re-financing risk for private, owner-managed companies with strong cashflows Established Established Covid-19 Portfolio Market Resilience 10 Royalty Partners and demonstrated by NAV and £110 million deployed Presence cash flow preserv
Slide 4: What is Royalty Financing?
What is Royalty Financing? Royalties are deployed in multiple sectors, growing in popularity for financing, most business models put royalties on long term depreciating assets Year Market Name Sector Founded Cap. 1 1983 Mining £19.5b 1996 Pharmaceutical £18.5b 2004 & New LSE listings in £18.0b 2010
Slide 5: How are Corporate Royalties Different?
How are Corporate Royalties Different? A long-term participating loan with similar characteristics as traditional royalties • Duke provides a lump sum of capital to a company with a term of 25-40 years • Initial yield is 12.0 – 13.5% of capital, adjusted once per year with a collar of +/-6% in curre
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
Slide 7: Benefits for Investors
Benefits for Investors Royalty company shareholders benefit from attractive returns and increasing valuation as they diversify their investment portfolios Compounding High Level of Annuity-like Opportunity Operational Revenue Streams through participation in Gearing growth by annual adjustments Yiel
Slide 8: 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 A Long Term Retain Control of Risk Approach the Board for owners to the business and strategic
Slide 9: Business Situations where Royalties Succeed
Business Situations where Royalties Succeed Debt or Equity Restructuring Acquisition Capital Debt refinancing or Flexible financing model shareholders exiting enables cash drawdowns in multiple tranches We support owners Used for bolt-on without creating another acquisitions future exit event MBOs A
Slide 10: Duke's Typical Investment Criteria
Duke’s Typical Investment Criteria Criteria Description • c.£5m - £20m Investment Fit Within Duke Portfolio • Western Europe and North America • 10+ years of operating history Alignment of Management Goals • Back management with a track record of delivery and not looking with Duke’s Objectives to se
Slide 11: Our Royalty Partners
Our Royalty Partners February 2019 October 2017 April 2017 August 2018 April 2018 March 2018 Temarca B.V. LEISURE BUSINESS SERVICES LEISURE HEALTHCARE INDUSTRIALS INDUSTRIALS Fair value: Fair value: Fair value: Fair value: Fair value: Fair value: £11,751,000 £11,593,000 £10,360,000 £9,425,000 £6,403
Slide 12: Current Portfolio Diversification
Current Portfolio Diversification Investment by Geography Investment by Industry Segment European Healthcare Union 11% 13% Business services Offshore TMT 30% 11% 15% United Kingdom 48% Industrials Ireland 20% 28% Leisure 24% Our portfolio is well diversified amongst region and sectors 12
Slide 13: Financials – Cashflow Business
Financials – Cashflow Business FY2020 FY2019 Cashflow Highlights £000 £000 • Net cash inflow from operating Cash revenue 1 10,245 5,354 activities increased to £6.8m, increase of 65% on FY19 Core Operating expenses 2 (2,273) (1,392) Other cash (expenses) / receipts 3 (1,189) 148 • Operating cashflow
Slide 14: Financials - Portfolio Robustness
Financials - Portfolio Robustness Balance Sheet Upside Total NAV £77m (INT21) 7 equity stakes valued <£200k NAV / share of 31.1p (INT21) Redemption premiums 16% discount @ 26p share >£15m price Gradual re-rating of FV portfolio Portfolio Portfolio cost - £98m Portfolio fair value - £88m Significant
Slide 15: Duke's Investors – Top Global Funds
Duke’s Investors – Top Global Funds Shareholders % Ownership 16.05% Shareholder base 9.87% • Strong base of blue-chip institutional investors 8.18% • Significant management and 5.86% insider ownership 4.51% 3.76% Liquidity 3.59% • Focus on marketing and communication to retail market 3.28% • Duke in
Slide 16: An Experienced Team, Including Royalty Pioneers
An Experienced Team, Including Royalty Pioneers Management and investment committee have direct royalty experience of 60+ years Neil Johnson – Executive Director and CEO Jim Webster – Chairman of Investment Committee ➢ Pioneered UK listings for Canadian and UK dual-listed ➢ Pioneered world’s first d
Slide 17: Strong Origination and Due Diligence
Strong Origination and Due Diligence Origination through Relationships 625+ Investment Opportunities since 2016 Origination Process Relationship driven, Indication of Interest Submitted management and financial 65+ Investment Opportunities strength more important than industry sector Preliminary Eva
Slide 18: Opportunities for the future
Opportunities for the future The role of alternative financing has been on a dramatic rise since 2010 And Covid-19 will increase the size of the alternative financing industry Aggregate Private Debt, Worldwide All Sectors, in US$bn • Asset impairments driven by Covid-19 will $900 reduce risk-bearing
Slide 19: Summary
Summary • Undervalued on a NAV basis and the resumption of cash dividends has been announced with room to grow • Operational leverage – Established and diversified portfolio and a stable cost base • Embedded upside from equity stakes acquired while full reinstatement of cash flows resumes • Duke has
Slide 20: Appendix
Ea [_sionruste Fon] es D U KE Bad AWARDS 2019 | SMALL BUSINESS SS AWARDS 2018 SHORTLISTED “iterative Finance ROYALTY Funderofthe ear Prowderotthe ea
Slide 21: 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 22: 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 across Fair value movements and (12,641) 490 investment portfolio due to Covi
Slide 23: 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 24: Duke Royalty's Covid-19 response
Duke Royalty’s Covid-19 response • Cash revenue forgone has been captured as equity or deferred Preservation of Value • Cash on balance sheet has increased by 122% to £6.0 million • Cash receipts increasing from Q1/F21 to current quarter • With meaningful equity stakes up to 30% in most of the portf
Slide 25: Partner Case Study: Miriad (Shareholder Restructuring)
Partner Case Study: Miriad (Shareholder Restructuring) Use of Proceeds Annual Adjustment Initial Obligation Security Investment Term Shareholder (based on Revenue) (Incl. Principal) Secured interest on all £10.0m 30 years Partial Sale +/-6% 13.2% assets other than CID Company Overview Owner Experien
Slide 26: Partner Case Study: UGG (Debt Refinancing)
Partner Case Study: UGG (Debt Refinancing) Use of Proceeds Annual Adjustment Initial Obligation Security Investment Term Debt refinancing & (based on Revenue) (Incl. Principal) Senior accrued interest £6.5m 30 years acquisition +/-6% 13.5% in all assets Company Overview Owner Experience • Privately-
Slide 27: 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 28: DUKE ROYALTY
DUKE ROYALTY