1 December 2022

Duke Royalty Limited

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

Interim Results for the six months ended 30 September 2022

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 2022 ("Interim 2023").

Financial Highlights

·        Total cash revenue* of £10.4 million, up 34% from the prior period (Interim 2022: £7.8 million)

·        Recurring cash revenue**, also £10.4 million, increased 67% (Interim 2022: £6.3 million)

·        Free cash flow of £6.6 million, up 44% (Interim 2022: £4.6 million)

·        Net profit generated of £10.3 million, a 66% increase (Interim 2022: £6.2 million)

·        Adjusted earnings of 1.58 pence per share, a 14% increase (Interim 2022: 1.39 pence per share)

·        Cash dividends of 1.40 pence per share paid to shareholders, a 27% increase (Interim 2022: 1.10 pence per share)

Operational Highlights

·        Raised £20 million of new equity capital in May 2022

·        Deployed over £6 million of capital into existing Royalty Partners

·        The portfolio as a whole has proven resilient as trading continues to be in line with expectations during the current macroeconomic headwinds

·        During this period of inflation, the portfolio has produced five out of five maximum positive adjustments

·        Post period end, invested £5.5 million into new royalty partner New Path Fire & Security

·        Currently over £15 million of available liquidity for future deployments

*    Total cash revenue is monthly cash distributions from Duke's royalty partners plus cash gains received from the sales of equity assets and buyout premiums

**    Recurring cash revenue excludes buyout premium receipts and cash gains from equity sales (formerly termed 'normalised' revenue)

Nigel Birrell, Chairman of Duke Royalty, said:

"I am pleased to report that Duke Royalty's results for the six-month period show a continuation of increasing recurring cash revenue and higher cash flow per share metrics, which are both core KPIs for the Company. This strong underlying operating performance allowed Duke to pay two quarterly dividends of 0.70 pence each during Interim 2023, equating to an annualised dividend of 2.80 pence which represents a material increase from the 2.25 pence per share of dividends paid out in FY22. These are pleasing results given the challenging economic and political backdrop globally and the portfolio debt coverage ratio remains comfortable. With this in mind, I would like to thank the Duke team for their ongoing efforts in creating a diversified portfolio of royalty investments that have proven resilient during the current macroeconomic headwinds.

"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."

Investor Webinars

Investor Meet Company

Neil Johnson, CEO, and Hugo Evans, Finance Director, will deliver a live presentation relating to the Interim Results via the Investor Meet Company platform on Thursday 8 December 2022 at 4pm GMT.

The online presentation is open to all existing and potential shareholders.

Investors can sign up to Investor Meet Company for free and add to meet Duke Royalty via:

https://www.investormeetcompany.com/duke-royalty-limited/register-investor

Mello Monday

The Company will be presenting at MelloMonday on Monday 12 December 2022, taking place from 5pm to 9.30pm. Both Neil Johnson and Hugo Evans will be presenting and taking questions from participants.

If you would like to attend, you can register here for the event.

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

CHAIRMAN'S REPORT

Dear Shareholder,

I am pleased to report that Duke Royalty's results for Interim 2023 show a continuation of increasing recurring cash revenue and higher cash flow per share metrics, which are both core KPIs for the Company. These are pleasing results given the challenging economic and political backdrop globally. With this in mind, I would like to thank the Duke team for their ongoing efforts in creating a diversified portfolio of royalty investments that have proven resilient during the current macroeconomic headwinds.

I note that there has only been a short period since the Company released its full year results for the 12 months ended 31 March 2022 ("FY 2022"). However, in this short period we have witnessed two different UK Prime Ministers, an escalation in the Russia/Ukraine conflict, significantly higher interest rates and more mainstream commentary about the possible onset of a global recession. Against this undeniably bearish market backdrop, Duke has continued to selectively deploy its capital and will continue to be opportunistic at a time when other lenders are pulling back from the market, thereby providing an opportunity for Duke to expand and increase its market share.

Duke's simple investment philosophy of providing long dated, senior secured royalty investments to established and profitable SME owner-operated business will see it through these challenging times, and I am pleased to report a strong set of financial results for Interim 2023 alongside an optimistic outlook for the rest of the financial year.

Operational Review

In May 2022, Duke announced a £20 million equity placing from both institutional and retail investors. Net proceeds from this fundraising were used to repay the existing debt and provide additional liquidity headroom, allowing the Company both to invest further capital into its existing Royalty Partners as well into new opportunities. In that regard, Duke invested £6.6m into Intec and Tristone during Interim 2023, both of which are undertaking buy and build strategies in their respective sectors of I.T. managed services and specialist residential and domiciliary care. However, given the volatile macroeconomic back drop, the general feeling in the period was one of caution whilst positioning the Company to take advantage of an ever-expanding deal pipeline and market opportunity.

Based on our current deal pipeline, we expect to deliver an acceleration in deployments over the next six months, and I am pleased to note that Duke had £21m of liquidity available for deployment into this pipeline of new deal opportunities at 30 September 2022. In that regard, post period end the Company announced a £5.5 million new deployment into New Path Fire & Security, a specialist Fire and Security business, that is undertaking a buy and build strategy in the highly fragmented Fire and Security sector. I look forward to announcing further follow-on investments into New Path Fire in due course as they execute on their business plan.

In terms of the existing portfolio, a further five positive adjustment resets have been recorded in the first six months of the financial year, driven by the current high levels of inflation which have increased the average yield on the Duke portfolio to record levels. These positive resets, when taken alongside a period of high deployment in FY 2022, has allowed Duke to continue to announce record consecutive quarters of recurring cash revenue during Interim 2023, a trend we again expect to continue in the coming quarters. Clearly the current falling levels of discretionary consumer spending remain a key area of focus for the Company but in general, Duke's stated focus on investing in B2B businesses has meant that this has had less of a direct impact. To date, the Company's portfolio as a whole continues to trade robustly. In that regard, it is pleasing to note that the portfolio debt service coverage ratio remains at a level above 2x, thereby providing a good degree of insulation during these volatile times. As previously discussed in prior Chairman's Statements, as Duke deploys more capital the ongoing advantages of operational leverage will increasingly benefit shareholders and this is a trend that I look forward to reporting on in future periods.

Financial Review

The financial results for Interim 2023 reflect the resilience of Duke's business model and its ability to withstand stresses in the global financial system. I am delighted to report that the Company's cash revenue, being cash distributions from Royalty Partners and cash gains from the sale of equity investments, grew to £10.4 million during the Period under review, a 34% increase over the £7.8 million generated in Interim 2022. However, it should be noted that Interim 2022 benefited from the BHP buyout, which delivered over £1.5 million of premiums and realised equity gains. On a like-for-like basis, Interim 2023 produced £10.4 million of recurring cash revenue against £6.2 million in FY 2022, a 67% increase.

Free cash flow, which represents the Company's ability to pay out quarterly cash dividends to its shareholders and is defined as net operating cash inflow plus cash gains from the sale of equity investments less its interest on debt financing, grew by 27% to £6.6 million. This equates to 1.71 pence per share, up from £4.6 million and 1.36 pence per share in Interim 2022.   

Total income, which includes non-cash fair value movements on the Company's investment portfolio, grew to £15.8 million, a 62% increase over Interim 2022. This generated total earnings after tax of £10.3 million and earnings per share of 2.65 pence against £6.2 million in Interim 2022 and earnings per share of 1.84 pence. Adjusted earnings, which strips out the fair value movements and represents a truer reflection of Duke's operating performance, rose to £6.2 million from £4.7 million, a 32% increase.

Dividend

This strong underlying operating performance allowed Duke to pay two quarterly dividends of 0.70 pence each during Interim 2023, equating to an annualised dividend of 2.80 pence which represents a material increase from the 2.25 pence per share of dividends paid out in FY22. It is pleasing to note that at the current 2.80 pence annualised rate, the dividend is well covered by free cash flow, and it is the intention of Duke to increase its dividend at a measured pace over time while at the same time reducing the Company's payout ratio, thereby allowing more cash to be reinvested into new deal opportunities.

Outlook

Duke is well-positioned for growth having created a large and diversified portfolio of royalty investments, an exciting pipeline of new opportunities and a strong liquidity position ready for deployment. Additionally, the current macroeconomic climate means that demand for our solution from profitable, long-standing businesses, is as high as ever.

As always, I am appreciative of the ongoing support of our shareholders and am pleased to report the Chairman's Statement for Interim 2023. Our existing partners have traded resiliently during the period and the Group's business model is well insulated to withstand the current economic headwinds and to grow its market share.

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

CONDENSED CONSOLIDATED STATEMENT OF INCOME

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION