Duke Royalty [AIM:DUKE] the AIM-listed provider of alternative capital, published its interim results for the six-months ended 30th September 2022 and a trading update.
The Guernsey-based financier has had a reasonably good year. It saw revenues increase year-on-year by 34% to GBP10.4m with free cash flow at GBP6.6m, up 44% year-on-year. Adjusted EPS was 1.58p per share, a 14% increase and dividend were 1.4p a share, up 27% on 2021.
The company opened trading today (1st November) at 35p and the company has offered a one-year return of -16.6%, a year-to-date return of 17.1% and its shares have ranged between 27.25p and 48p over a 52-week period. The company is capitalised at GBP144.1m.
A key part of any royalty business is recurring revenue which in 2Q21/22 was GBP3.3m and had improved to GBP5.3m by 2Q22/23. The company said in its trading statement that it hopes to reach GBP5.5m by the end of 3#Q22/23, a 41% increase on recurring cash revenue from a year ago.
The company raised an additional GBP20m in equity in May and deployed GBP6m to existing royalty partners. The company had a further GBP15m of firepower in the bank for future deployments.
Duke Royalty’s expanding pipeline
The company’s chairman, Nigel Birrell said in a statement this morning: “”Looking ahead, Duke is well-positioned for growth with additional liquidity ready for deployment. While we have taken a cautious approach to additional deployments in interim 2023, we feel the current macroeconomic environment will translate to increased demand for our royalty finance solution from profitable, long-standing businesses as we compare favourably to other short term capital solutions. We look forward to expanding our portfolio over the months ahead as we execute on an exciting pipeline of new opportunities which will drive further growth in our business.”
As previously reported Duke Royalty is the only listed royalty finance company in the UK, but unlike many of its American cousins – where royalty financing is a big thing – Duke skirts away from the traditional royalty finance recipients such as the mining sector and oil and gas production and exploration, preferring to operate a more diversified portfolio including the Industrials, Healthcare, Technology, Leisure and Business Services sectors.
Duke Royalty usually offers royalty issuers between GBP5m and GBP20m with a fast turn-around (compared to banks, stock markets or private equity firms) of around seven to eight weeks. The royalty is repaid over 25 to 40 years, a bit like a mortgage and typical yields that Duke expected are in the 12% to 14% range for the capital it provided. Royalties rates are reviewed annually dependent on the issuer’s sales performance. The issuer has the option to buy back the royalty, with a 20% redemption premium.
Neil Johnson, chief executive of Duke Royalty said in another statement this morning: “In 4Q23, we expect to see continued new deployments, as shown by Duke’s recent investment into New Path Fire & Security. Duke will be opportunistic in taking advantage of the current market where we are seeing other lenders pulling back from making new investments. Duke’s access to capital and long term, aligned investment horizon is perfectly positioned for the current challenging macro environment.”