24 April 2018
Duke Royalty Limited
("Duke Royalty", "Duke" or the "Company")
New Royalty Agreement with a UK Based Glass Merchant and Processor
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 that it has entered into a royalty financing agreement (the "Financing") of up to GBP 7.5 million (with GBP 6.5 million drawn down immediately) with Brownhills Investments Limited ("Brownhills"), the holding company for a UK based group which represents one of the UK's leading independent glass merchants and processors, established in the 1970s.
· As Duke's fourth European Royalty Partner, this broadens its revenue base and demonstrates its value proposition as a viable alternative finance solution for well established, profitable businesses in UK and Europe
· Initial cash-on-cash yield of more than 13 per cent per annum via monthly payments immediately post investment
· 30 year secured financing - distributions to be adjusted annually to reflect Brownhills' revenue growth
· Duke closed on an initial commitment of GBP 6.5 million, with a further option for up to GBP 1.0 million until 31 December 2019
· Brownhills has drawn down the funds and used the proceeds to refinance most of its outstanding debt and to complete the buyout of the remaining 70% equity stake (from its current 30% stake) of an operating subsidiary, Tufwell Glass ("Tufwell")
· Immediately earnings accretive for Brownhills through the acquisition of Tufwell
· Brownhills has 130 employees across three UK plants and majority owned and managed by a family which has owned the group for a number of years
Neil Johnson, CEO of Duke Royalty, said:
"We are delighted that yet another private, successful industrial company, also based in the UK, has chosen Duke to be a capital partner over other options. This underpins our plan to bring an alternative finance solution, which represents a £50 billion sector in North America and does not carry re-financing risk and is non-dilutive for owners, to UK and European businesses.
"In terms of our investors, this deal once again provides access to a well-run private company. Mark and Nick Harrison's proven business acumen and increased equity ownership means that they are aligned with us to deliver continued growth over the long term.
"With four royalty agreements now in place, and more in the pipeline via our relationship with our Fortune 500 partner, Oliver Wyman, investors stand to benefit from the robust, predictable, long term returns and a strong associated yield, delivered by Duke Royalty."
Mark Harrison, Group Managing Director of Brownhills, said:
"The main attraction for choosing Duke as our new financing partner was the long term participating nature of its capital. At Brownhills, we have a clear plan to grow both organically and via acquisition and we are happy to have a supportive and aligned financing partner in place for the long term."
New Royalty Partner - Brownhills Investments Limited
Duke has committed up to GBP 7.5 million to Brownhills, providing it with the necessary funds to refinance a large portion of its outstanding debt and to complete the buyout of the 70% of Tufwell Glass ("Tufwell") it did not already own. This thereby increases Brownhill's equity ownership in Tufwell from 30% to 100%. Post investment, Brownhills will own 100% of all three of its operating subsidiaries - Tufwell, PeterLee Glass ("PLG") and Brownhills Glass Company ("BGC") which operate in different UK geographical locations and focus on different end markets.
Brownhills is the holding company to these operating subsidiaries which together represent one of the UK's leading independent glass merchants and processors. The Group has supplied glass to prominent projects such as the Shard skyscraper, London's Olympic Park, the British Museum, the Bowes Museum, Sage Gateshead, as well as Fenwicks and Selfridges department stores.
BGC, established in 1979, is based in the Midlands and serves trade customers, architects, interior designers, construction professionals and private home owners throughout the West Midlands and beyond. Its products and services range from the supply of plain glass from stock to sophisticated processing, and it holds extensive stocks of plain glass, safety glass, fire glass and horticultural glass, available for next day delivery using its own fleet of vehicles.
Tufwell, established in the 1980s, is based in West Sussex and, with its own dedicated glass tempering facility, is a specialist glass supplier of glazed partitioning, primarily servicing the London office market. By using state-of-the-art machinery, coupled with a highly skilled workforce, Tufwell is able to compete in the demanding market of London's commercial building sector. Many of its products and services are used to supply the architectural glazing and interiors markets, with order to delivery completed in a short period of time.
PLG, established in 1977, is based in North East England and has a state of the art processing facility which caters to the most demanding commercial glass installations including oversized and/or curved glass. Its commercial glass services include internal and external glass doors, screens, shop fronts, glass balustrades, glass staircases, glass entrances and other bespoke architectural glass installations.
About the Financing
Duke has committed to providing Brownhills with up to GBP 7.5 million, with GBP 6.5m provided immediately upon closing and a further GBP 1.0 million via an option at Duke's sole discretion until December 31, 2019.
The terms of the Financing are in line with Duke's typical investment criteria. The Financing is provided through a secured loan and preference shares and Duke will be entitled to monthly distributions (the "Distribution") beginning in May 2018. On an annual basis, based on the GBP 6.5 million initial investment amount, the Year 1 annual distribution is expected to total approximately GBP 0.88 million, equating to a cash-on-cash yield of over 13 per cent.
In line with Duke's other investments and reflective of the participating nature of the Duke investment, the Distribution will be adjusted annually with the first adjustment occurring in April 2019 based on the percentage change in Brownhill's gross revenues for the year to 30 November 2018 compared with the prior financial year. The annual adjustment in the Distribution will be subject to a collar.
The Financing is for a period of 30 years, with the Distribution payable to Duke throughout the duration of this term, unless Brownhills utilises an early buyback option.
Duke Royalty Portfolio
Following the completion of the Brownhill Financing, the Company's portfolio of royalty investments is as follows with approximately GBP 30 million of capital deployed to date:
Royalty Investment Amount
Date of Royalty Agreement
Lynx Equity (UK) Limited
Trimite Global Coatings Limited
Brownhills Investments Limited
For further information, please contact www.dukeroyalty.com, or contact:
Duke Royalty Limited
Neil Johnson/ Charlie Cannon-Brookes
+44 (0) 1481 741 240
Grant Thornton UK LLP
Colin Aaronson/ Samantha
+44 (0) 20 7383 5100
Cenkos Securities plc
Julian Morse/ Michael Johnson
+44 (0) 207 397 8900
Mirabaud Securities Limited
Peter Krens/ Edward Haig-Thomas
+44 (0) 20 3167 7222
Elisabeth Cowell/ Robin Tozer/ Ian Silvera
+44 (0) 20 3757 6880
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 and exclusive partnership 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.
Brownhills Investments Limited is the holding company to its three operating subsidiaries - Tufwell, PLG and BGC and as a group is one of the UK's leading independent glass merchants and processors.
For further information, please see the websites for the group:
The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
This information is provided by RNS