14 May 2019
Duke Royalty Limited
("Duke Royalty", "Duke" or the "Company")
Modification of Terms with Recently Acquired Royalty Partners
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 modifications to the terms of the following agreements which will increase near term revenues for the Company.
The Company has reached agreements with royalty partners Welltel (Ireland) Limited ("Welltel"), a telecommunications services company, media company Pearl & Dean Cinemas Limited ("the Pearl & Dean Group"), and Xtremepush Limited ("Xtremepush"), a technology solutions company, all of which were acquired via the recent Capital Step acquisition, to modify the terms of existing agreements. This is expected to increase gross revenues to Duke by at least £3.7 million in aggregate over the next five years.
Capital Step was acquired by Duke Royalty in February 2019, prior to which it offered a 'unitranche' solution, which is a perpetual royalty paired with a senior secured loan, which amortises over a three to five year term. Pursuant to the existing arrangements with these three royalty partners, a total of £5.5 million of capital deployed amongst them was due to begin repayments in various instalments starting from December 2018, with the entire £5.5 million of capital expected to be repaid by 31 March 2022.
Modifications of terms have now been agreed; for Welltel and Xtremepush, the maturity dates of the senior loan facilities have been extended until 30 April 2024, when the full repayment of principal will be due. For the Pearl and Dean Group, the original agreement saw half of the royalty amortising over three years, and the other half as a perpetual term. The parties have agreed to make the entire amount a perpetual royalty, with the return calculated as a fixed percentage of gross revenues, subject to a floor and a cap. All other terms of the agreements remain the same.
As a result of removing the capital repayments, Duke has increased the gross revenues that it expects to receive, assuming the agreements are in place until 30 April 2024, by at least £3.7 million. By extending the royalty agreement in perpetuity, the actual revenue could exceed this figure depending on future revenue growth of the Pearl & Dean Group, as £3.7 million only includes the minimum contractual royalties (ie. the 'floor') due in the next five years.
These modifications represent an increase of more than 25% to the Capital Step portfolio's expected revenues per year for the next five years and need no additional overhead costs. Importantly, these contract modifications are excluded from the 'performance related milestones for the period ended 31 March 2021' which the Capital Step portfolio needs to deliver in order to receive a deferred payment from Duke Royalty, as announced by the Company on 4th February.
Neil Johnson, CEO of Duke Royalty, said:
"We are pleased to agree these modifications, which means that our royalty partners can increase short term cash flow and Duke can maximise near term revenues. We recognised the strength and credit quality of the acquired royalty partners and the Board identified this as a way of unlocking value of the Capital Step royalty agreements for Duke Royalty shareholders. We are also looking at the opportunity to deploy further capital at accretive returns via follow-on investments into the acquired royalty partners and look forward to updating the market in due course."
For further information, please contact www.dukeroyalty.com, or contact:
Duke Royalty Limited
Neil Johnson / Charlie Cannon-Brookes
+44 (0) 1481 741 240
Cenkos Securities plc
(Nominated Adviser and Broker)
Julian Morse / Michael Johnson / Stephen Keys / Callum Davidson
+44 (0) 207 397 8900
Elisabeth Cowell / Ian Silvera / Tom Carnegie
+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 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.
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, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact firstname.lastname@example.org or visit www.rns.com.