22 November 2023

Duke Royalty Limited

("Duke Royalty", "Duke" or the "Company")

Interim Results for the six months ended 30 September 2023

Duke Royalty Limited (AIM: DUKE), a provider of alternative capital solutions to a diversified range of profitable and long-established businesses in Europe and abroad, is pleased to announce its interim results for the six-months ended 30 September 2023 ("Interim 2024").

Financial Highlights

·           Total cash revenue up 35% from the prior period to £14.1 million (Interim 2023: £10.4 million)

·           Recurring cash revenue* totalled £12.2 million, up 17% from Interim 2023 (£10.4 million)

·           Free cash flow** up 23% to £7.9 million (Interim 2023: £6.5 million)

·           Adjusted earnings up 23% to 1.95 pence per share (Interim 2023: 1.58 pence per share)

·           Cash dividends of 1.40 pence per share paid to shareholders (Interim 2023: 1.40 pence per share)

Operational Highlights

·           Deployed over £18 million of capital into new and existing Royalty Partners

·           One new royalty partner added to the portfolio, taking total to 15

·           One investment buyback with Instor delivering a triple digit IRR

·           Over £40 million of available liquidity for future deployments

* Recurring cash revenue excludes buyback premiums, cash gains from the sale of equity investments and one-off fee income

** Free cashflow is defined as operating cashflow, plus cash gains from the sale of equity investments, less investment costs less interest payable of Duke's debt facility

Nigel Birrell, Chairman of Duke Royalty, said:

"During the interim period Duke was able to post its twelfth consecutive quarter of increasing recurring cash revenue which was a fantastic achievement for the Company. In line with this strong financial performance, the Company also maintained its quarterly dividend of 0.70p per share. Investors can be reassured that the dividend payout remains well covered by operating cashflow with the attractive yield representing a pillar of Duke's ongoing business model and its overall financial discipline.

"Looking forward, I am pleased to say that Duke remains well-positioned for growth. We believe that we have an attractive offering through our private credit and private equity hybrid product, as well as a philosophy that resonates with SME business owners due to our ability to offer a long-term, partnership-based solution which keeps owners in control of their company."

This announcement contains inside information.

For further information, please contact www.dukeroyalty.com, or contact:

About Duke Royalty

Duke Royalty Limited provides alternative capital solutions to a diversified range of profitable and long-established businesses in Europe and abroad. Duke Royalty's experienced team provide financing solutions to private companies that are in need of capital but whose owners wish to maintain equity control of their business. Duke Royalty's royalty investments are intended to provide robust, stable, long-term returns to its shareholders. Duke Royalty is listed on the AIM market under the ticker DUKE and is headquartered in Guernsey.

Chairman's Report

Dear Shareholder,

I am pleased to report that Duke Royalty's results for Interim 2024 have once again highlighted the robust nature of the Company's business model in the face of significant ongoing global economic and political challenges. In particular, I am delighted to say that Duke was able to post its twelfth consecutive quarter of increasing recurring cash revenue during the Interim period.

Duke's simple investment philosophy of providing long dated, senior secured debt capital into long established, profitable SME owner-operated businesses has largely protected the Company from the high levels of volatility that have been witnessed in the public equity markets during the period. The predictable nature of Duke's monthly cashflows alongside its own tight internal cost controls has allowed Duke to report a strong financial performance for Interim 2024. In line with this strong financial performance, the Company also maintained its quarterly dividend of 0.7p per share. Investors can be reassured that the dividend payout remains well covered by operating cashflow with the attractive yield representing a pillar of Duke's ongoing business model and its overall financial discipline.

This strong set of results has been achieved despite the challenging business environment we are operating in. In the last two years, the UK experienced a record-breaking 14 consecutive interest rate increases, a trend that has largely been mirrored in both the EU and North America. Central banks have taken a pause from additional near-term interest hikes with inflation rates now trending back towards their longer-term norms. However, we believe the current elevated level of interest rates are set to remain for some time and we are not expecting to see any cuts until well into the Company's FY25 period. For Duke, the higher cost of borrowing has had a few core effects.

First, it has increased Duke's own debt servicing costs which have put a squeeze on free cashflow margins and second, it has resulted in a general reduction in consumer discretionary spend. Furthermore, there is no question that businesses have become increasingly burdened by wage inflation and a period of stubbornly high power costs. This backdrop has had an inevitable effect on both revenue and profit expectations for some of Duke's partners but, as long term, supportive investors, our investment team is working diligently to ensure they are given whatever help is required.

However, overall I am pleased to be able to report that the Duke portfolio remains well insulated and in a healthy position, protected by its increasing level of diversification. A positive effect that has resulted from the elevated level of interest rates has been the material increase in the cost of all other competing forms of debt. As I have mentioned before, Duke's permanent equity capital base and its long-term lending approach throughout economic cycles have enabled it to refrain from significantly increasing the cost of its offering in the short-term. The deliberate decision to not significantly raise the initial cost allows Duke to evaluate more opportunities through the lens of that company's ability to weather continued economic headwinds.

Unsurprisingly, Duke was cautious on making new deployments in Interim 2024 given the high level of uncertainty in the markets as well as a general declining trend in valuations that we are seeing across the board. The Company did welcome Glasshouse Products LLC as a new partner by entering into an US$11.5 million financing agreement. Founded in 2002 in Texas, Glasshouse is a long-established provider of custom glass solutions including the design, fabrication, sale and installation of glass architectural products and I hope that Glasshouse will become a long-standing core holding in the Duke portfolio as it executes its buy and build strategy. During the period, Duke also announced the successful exit of its investment in Instor Solutions, Inc., a California-based product reseller and service provider for work related to the build-out and migration of data centres. The exit represented the sixth and most profitable exit for Duke to date, delivering a triple digit IRR.

Outlook

Duke remains well-positioned for growth, having created a large and diversified portfolio of royalty investments alongside an exciting pipeline of new deal opportunities. The Company's liquidity position remains robust and the current macroeconomic climate means that demand for Duke's low amortising, patient capital remains strong. Our approach to monitoring our existing investments is collaborative and thorough. We evaluate monthly management accounts and look for signs of stress and aim to be proactive in working with a partner to address any issues. Having good visibility into our portfolio allows us to be cautiously optimistic for the rest of the year. 

Looking more broadly, we constantly review the trends in the financing industry and we are pleased to report that Duke's core product is unique in the market due to its long duration and low amortisation qualities. The Private Credit market is a large and growing segment of the financing sector, and part of its growth has been from Private Equity players expanding into credit. What used to be the domain of the high street banks is increasingly supplemented by alternative financing providers, of which Duke is one. Our growing pipeline underpins our belief that we have a philosophy that resonates with SME business owners due to our ability to offer a long-term, partnership-based solution which keeps owners in control of their company.

Our product is essentially a hybrid between Private Credit and Private Equity, and as the Private Credit explosion has become mainstream in SME lending, we aim to ensure our 'best of both worlds' approach is articulated to business owners in a way they can compare. Therefore, we have embarked on a review of how best to show business owners the advantages of Duke when they are looking for capital. This review is ongoing and we will share the exciting changes with our shareholders in the period to come when they have been finalised. Our product remains the same to new business owners, but how we will engage with them will open up more opportunities for Duke and the goal is to broaden our appeal. We believe we are at the forefront of a large opportunity as Private Credit solutions become more accepted in SME lending.

As always, I am appreciative of the ongoing support of our shareholders and, on the back of a period of continued resilience and growth, I look forward to reporting on the Group's ongoing progress and development in future periods.

Nigel Birrell

Chairman

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

The notes form an integral part of these Condensed Consolidated Financial Statements.