Duke Capital Limited (LON: DUKE), a leading provider of hybrid capital solutions for SME business owners in Europe and North America, has announced its interim results for the six-months ended 30 September 2024.
Financial Highlights
· Recurring cash revenue* totalled £12.7 million, an increase of 4% on Interim 2024 (£12.2 million)
· Total cash revenue of £13.5 million, down 4% from the prior period (Interim 2024: £14.1 million)
· Free cash flow** of £5.9 million, down 26% from Interim 2024 (£7.9 million) – fewer investment exits delivered in the current period compared to Interim 2024
· Cash dividends of 1.40 pence per share paid to shareholders (Interim 2024: 1.40 pence per share)
Operational Highlights
· Deployed over £15 million of capital into existing Capital Partners
· Completed a £23.5 million fundraise post period end to support portfolio M&A and progress Duke’s third party, non-dilutive funding strategy to accelerate scale
· Positive outlook with a number of buy and build opportunities in the portfolio’s pipeline and a diversified portfolio positioned for continued resilience
*Recurring cash revenue excludes exit premiums and cash gains from the sale of equity investments
** Free cashflow is defined as net cash inflows from operations plus cash gains from the sale of equity investments less investment costs less interest paid on borrowings
Nigel Birrell, Chairman of Duke Capital, said:
“During the first six months of FY 2025, we have continued to prove our ability to deliver. We continue to increase recurring cash revenue, driven by the team’s successful execution on several growth opportunities. This is testament to the quality of the portfolio we have established and the significant potential it holds for continued capital appreciation. With a strong, well-funded balance sheet and numerous growth opportunities under review, we have a positive outlook for the months ahead. The private credit and direct lending markets continue to go from strength to strength and we have confidence that our diversified portfolio is well positioned for continued resilience. We look forward to updating the markets on our progress.”
CHAIRMAN’S REPORT
Dear Shareholder,
During the six-month period, I am pleased to report that Duke Capital has continued to build on its consistent track record of delivery, particularly in terms of increasing its quarterly recurring cash revenue. Notably, the Company completed seven follow-on investments during the period to enable our capital partners to deliver on their buy and build strategies, deploying over £15 million of capital and resulting in an increase in the maturity and profitability of the underlying portfolio. It is our belief that this maturing of the portfolio, with Duke “staying in for longer”, will benefit shareholders by positioning us to attract higher EBITDA multiples upon exit. As has been the case for the past two and a half years, the growth we delivered during the period was funded by non-dilutive means, drawing down on the Company’s debt line with Fairfax alongside the reinvestment of proceeds from the high IRR exits we have achieved.
Building on the strategic review we undertook in the last financial year, we have been developing a long-term funding strategy which is not reliant on raising equity via the UK public equity markets. Alongside a unique and compelling product, we now have an almost eight-year track record of resilience which clearly showcases the highly attractive fundamentals of our business model in terms of the exposure it offers to a unique segment of the private markets and the strong recurring cash revenue and free cash flow it supports.
This underpins the Board’s belief that the time is right to move towards a third-party capital model and as such, we intend to raise future additional capital via new Managed Account / Joint Venture structures. The clear benefits of this strategy will be to eliminate cash drag, deliver accretive fee-based revenue and reduce Duke’s dependence on the UK public equity markets, thereby minimising dilution and enabling us to execute on strategic growth opportunities more rapidly and at scale. With this in mind, during the period, Duke engaged a placement agent to approach potential capital providers and, as previously announced, has received indicative term sheets from Tier-1 capital providers on potential new funding, with further term sheets expected.
In the meanwhile, as we progress towards this goal, we took the strategic decision to undertake a targeted fundraise via the public markets post period end. This decision was not taken lightly and reflected the near-term investment opportunities and requirements from inside the Company’s existing portfolio specifically in relation to Duke’s buy and build platforms. The fundraising included an offer to our retail shareholder base and delivered £23.5 million of new funding by way of a Placing, Subscription, Retail Offer and Broker Option. The proceeds will be used to provide additional capital to our current partners, enabling them to deliver bolt-on M&A to build their EBITDA and increasing our equity participation where possible.
Outlook
With a strong, well-funded balance sheet and numerous growth opportunities we maintain a positive outlook for the months ahead, albeit we recognise the need for caution in relation to the UK economy. Positively, we have witnessed good growth in our Irish and North American partners and have confidence that our diversified portfolio is well positioned to continue its resilience. The private credit and direct lending markets continue to go from strength to strength, and we have a clear strategy to meaningfully drive future scale. I would like to take this opportunity to thank our shareholders, team and advisers for their continued support.
Nigel Birrell
Chairman, Duke Capital Limited
CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS
| Note | Period to | Year to | Period to | |||
| 30-Sep-24 | 31-Mar-24 | 30-Sep-23 | ||||
| (unaudited) | (audited) | (unaudited) | ||||
| £000 | £000 | £000 | ||||
| Cash flows from operating activities | ||||||
| Receipts from hybrid credit investments | 6 | 12,775 | 27,267 | 13,720 | ||
| Receipts of interest from term credit investments | 7 | 117 | 453 | 259 | ||
| Other operating receipts | 652 | 195 | 45 | |||
| Operating expenses paid | (2,614) | (4,015) | (2,383) | |||
| Payments for hybrid credit participation fees | 9 | (46) | (130) | (68) | ||
| Tax paid | (607) | (673) | (498) | |||
| Net cash inflow from operating activities | 10,277 | 23,097 | 11,075 | |||
| Cash flows from investing activities | ||||||
| Hybrid credit investments advanced | 6 | (15,322) | (42,012) | (17,102) | ||
| Hybrid credit investments repaid | 6 | 3,987 | 17,636 | 7,041 | ||
| Term credit investments advanced | 7 | – | (750) | – | ||
| Equity investments purchased | 8 | – | (3,799) | (926) | ||
| Equity investments sold | 8 | – | 2,326 | |||
| Equity dividends received | 8 | 21 | 48 | 48 | ||
| Receipt of deferred consideration | 10 | 742 | 1,512 | 750 | ||
| Investments costs paid | (273) | (1,344) | (358) | |||
| Net cash outflow from investing activities | (10,845) | (26,383) | (10,547) | |||
| Cash flows from financing activities | ||||||
| Dividends paid | 17 | (5,817) | (11,524) | (5,709) | ||
| Proceeds from loans | 12 | 17,000 | 15,000 | 5,000 | ||
| Interest paid | 12 | (4,162) | (6,222) | (2,819) | ||
| Other finance costs paid | (4) | – | – | |||
| Net cash inflow / (outflow) financing activities | 7,017 | (2,746) | (3,528) | |||
| Net change in cash and cash equivalents | 6,449 | (6,032) | (3,000) | |||
| Cash and cash equivalents at beginning of period / year | 2,896 | 8,939 | 8,939 | |||
| Effect of foreign exchange on cash | (164) | (11) | 32 | |||
| Cash and cash equivalents at the end of period / year | 9,181 | 2,896 | 5,971 |
