Duke Capital Limited · LSE:DUKE

Duke Capital — Investor Presentation (October 2024)

26 slides from Duke Capital's investor presentation, October 2024

  1. Slide 1: Investor Presentation October 2024

    Investor Presentation October 2024 AIM: DUKE

  2. Slide 2: Disclaimer

    DISCLAIMER These presentation slides and the accompanying verbal presentation (the such as “may”, “will”, “could”, “should”, “would”, “anticipate'', “believe'', “intend”, The content of the Presentation Materials has not been approved by an authorised “Presentation Materials”), are confidential and

  3. Slide 3: Introduction to Duke Capital

    INTRODUCTION TO DUKE CAPITAL Hybrid capital combines the best features of private credit and private equity Duke’s capital appeals to business owners who need capital but want to retain control PRIVATE PRIVATE CREDIT EQUITY DUKE CAPITAL Senior, mezzanine or junior vs Senior secured loan Minority equ

  4. Slide 4: Clear Investment Strategy

    CLEAR INVESTMENT STRATEGY Duke’s funding solution is used by owner-operators to drive growth and increase shareholder value Use of Proceeds MANAGEMENT BUY & BUILD SHAREHOLDER DEBT REFINANCING BUYOUTS STRATEGIES RESTRUCTURINGS What Duke looks for Key Duke Terms • Long-standing private, family / owner

  5. Slide 5: The Components of Duke's Product

    THE COMPONENTS OF DUKE’S PRODUCT Parts contribute to an overall package that meets the goals of both Duke’s investors and business owners • Fixed rate yield, with no • Annual adjustment to Duke’s yield refinancing risk based on partners’ change in • Principal paid throughout 30- revenue year term •

  6. Slide 6: The Rise of Private Credit and Direct Lending

    THE RISE OF PRIVATE CREDIT AND DIRECT LENDING Private credit is a fast-growing area of the alternative lending market, with direct lending representing 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

  7. Slide 7: Target Market vs. Other Institutional Forms of Capital

    TARGET MARKET VS. OTHER INSTITUTIONAL FORMS OF CAPITAL The Lower Mid-Market comprises of companies with less access to institutional capital than other segments No investment Duke’s point of entry Duke’s point of exit / refinance Venture Capital Lower Mid-Market Middle Market • Visionary leadership

  8. Slide 8: How Duke's Product Benefits Investors

    HOW DUKE’S PRODUCT BENEFITS INVESTORS History of attractive risk adjusted returns by adhering to 3 investment pillars Capital preservation Attractive dividend yield Upside from exits Senior secured capital Monthly cashflow stream Exit premiums and equity stakes • Light amortization of capital starti

  9. Slide 9: Current Portfolio

    CURRENT PORTFOLIO

  10. Slide 10: 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 5% 5% 14% 6% 13% 7% 34% 14% 16% 19% 58% 63% 14% 32% UK - 8 Business Services - 4 Buy & Build - 8 Ir

  11. Slide 11: Portfolio Companies

    PORTFOLIO COMPANIES Credit product provides ongoing cash returns with potential upside from growing equity portfolio Capital Forecast Investment Corporate Preference Exit Equity invested cash on cash Capital partner Date mortgage share premium stake % (£000) Cash returned to date (£000) (%) return1

  12. Slide 12: Exits to Date

    EXITS TO DATE Unlike a pure credit portfolio, our hybrid capital approach boosts IRRs on exit Term Capital Capital Investment held invested Corporate Preference Exit Equity partner Date (months) (£000) mortgage share premium stake % MOIC1 Realised gross IRR Temarca Apr-17 47 12,934 ✓ ✓   0.96x -1.

  13. Slide 13: Case Studies

    CASE STUDIES Duke provides its portfolio with hybrid capital in all market environments with the goal of achieving its three pillars Capital preservation Attractive dividend yield Upside from exits Duke’s Track Record Lynx Equity BPVA • If held to maturity, portfolio would • Lynx has paid Duke inter

  14. Slide 14: Financial Highlights

    FINANCIAL HIGHLIGHTS

  15. Slide 15: Financial Highlights

    FINANCIAL HIGHLIGHTS Highly cash generative due to annuity-like monthly cash revenue streams Total cash revenue (£m) Recurring cash revenue (£m) Free cash flow (£m) FY24 30.3 FY24 24.3 FY24 17.9 FY23 21.9 FY23 21.8 FY23 12.8 FY22 18.4 FY22 14.9 FY22 11.2 FY21 11.0 FY21 8.8 FY21 7.2 Free cash flow pe

  16. Slide 16: Operating Leverage

    OPERATING LEVERAGE Long term decrease in operating leverage as recurring revenue grows Opex % 22% 21% 14% 11% 12% 30,000 24.3 25,000 21.8 20,000 14.9 15,000 10.3 10,000 8.8 5,000 3.0 2.3 1.9 2.1 2.3 - FY20 FY21 FY22 FY23 FY24 Recurring cash revenue Cash operating costs All dates reflect the most rec

  17. Slide 17: Balance Sheet

    BALANCE SHEET Increased investment size reflects maturing portfolio and larger entry points Investment Type Cost Fair Value +/- Average hybrid credit investment size (£m) 14.0 13.5 Hybrid Credit 202,655 210,9488 4% 11.9 11.9 Term Loan 5,442 5,382 -1% 12.0 Equity 5,753 15,904 176% 10.0 Total 213,850

  18. Slide 18: 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 with a strong retail following; significant management ownership 14.33% 10.56% 8.60% 6.29% 5.57% ownership ownership ownership ownership ownership Directors, Management, Insiders 5.02

  19. Slide 19: Investment Origination

    INVESTMENT ORIGINATION Identification and assessment of investment opportunities Industry leading CRM Origination statistics • We use technology to track • Duke has reviewed information memorandums of and analyse deal flow 631 deals since January 2020 • Database of c.1,500 trusted • Out of the 631 d

  20. Slide 20: Investment Case Summary

    INVESTMENT CASE SUMMARY Why invest in Duke? Capital preservation High operational leverage Senior secured product with downside Cash operating costs were 12% of total protection recurring cash revenue in FY2024 Strong 8.5% dividend yield (@33p) Inflation hedged revenue Commitment to delivering conti

  21. Slide 21: Appendices

    APPENDICES

  22. Slide 22: Our Partners

    OUR PARTNERS Duke’s exposure is diversified across 71 underlying operating companies Step Investments Bay Broadcasting Limited BPVA Balgowan House Mulberry House Saltwood Care Centre Hythe View Betsy Clara House Southdowns PORTFOLIO 22

  23. Slide 23: Our Investment Committee

    OUR INVESTMENT COMMITTEE Investment Committee have 100+ years of experience NEIL JOHNSON: CEO CHARLIE CANNON BROOKES: JIM WEBSTER: INDEPENDENT • 30+ years of experience in CIO CHAIR mid-market companies • London-based Chief • Pioneered world’s first drug • Head of European Investment Investment Offi

  24. Slide 24: Consolidated Statement of Cashflows

    CONSOLIDATED STATEMENT OF CASHFLOWS £ in thousands FY2024 FY2023 FY2022 FY2021 Receipts from hybrid credit investments 27,267 21,634 14,701 9,931 Receipts of interest from loan investments 453 339 580 667 Other operating receipts 195 176 543 438 Operating expenses paid (4,015) (3,306) (2,487) (2,154

  25. Slide 25: Consolidated Statement of Income

    CONSOLIDATED STATEMENT OF INCOME £ in thousands FY2024 FY2023 FY2022 FY2021 Income Hybrid credit investment income 23,014 28,266 18,037 19,344 Loan investment income 453 339 533 636 Equity investment income 1,925 2,212 9,678 1,569 Other operating income 195 176 543 93 Total income 25,587 30,993 28,7

  26. Slide 26: Consolidated Statement of Financial Position

    CONSOLIDATED STATEMENT OF FINANCIAL POSITION £ in thousands 31-Mar-24 31-Mar-23 31-Mar-22 31-Mar-21 Goodwill 203 203 203 203 Hybrid credit finance investments 177,589 158,540 139,648 71,107 Loan investments 5,382 4,652 3,172 4,370 Equity investments 15,904 13,529 10,820 3,495 Trade and other receiva

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