2 April 2020
Duke Royalty Limited
("Duke Royalty", "Duke" or the "Company")
Trading Update re: COVID-19
Duke Royalty, a provider of alternative capital solutions to a diversified range of profitable and long-established businesses in Europe and abroad, provides the following update regarding its response to the COVID-19 ("Covid") outbreak.
Current Trading and Covid Update
For the financial year ending 31 March 2020 ("FY20"), the Company is pleased to report that cash revenue received from its royalty partners was in line with market expectations at over £10.0 million, with March 2020 contributing the greatest monthly cash revenue received by the Company to date at over £1.0 million.
The health and wellbeing of our employees and stakeholders is the priority for the Company at this time. In response to the initial outbreak of Covid, Duke formulated and implemented its business continuity plan prior to the UK government's official request for employees to work from home where possible. From an operational standpoint, the continuity plan is proving effective and the Company is well placed to undertake its activities while its employees work remotely.
During March 2020, as the impact of the spread of Covid became prevalent across Duke's target geographical and market sectors, management has been focused on assessing the potential impact of Covid on its royalty partners' operations. The ongoing global response to Covid is evolving rapidly and management is in direct and continual contact with each of its royalty partners to assess their business outlook.
As we enter our financial year ending 31 March 2021 ("FY21"), the rapidly evolving Covid outbreak and the government's response to it has created an uncertain economic outlook. We know that some of our royalty partners have had, or will have, business interruption. While Duke has been able to build a diversified portfolio of royalty partners across geographies and industries, this will no doubt lead to a reduction in its royalty payments in the coming months. This in turn will have a negative impact on the fair value of the portfolio assets, leading to potential write downs in the FY20 year-end financials.
Duke would like to re-emphasise to its investors that it continues to be a high margin and profitable business with a low fixed cost base and is therefore well-placed to trade through this challenging period. The Company has strengthened its position further in light of the outbreak by implementing a number of cost-saving measures, including the deferral of all deployments into new royalty partners and reducing all non-core operational costs. These measures are not expected to materially compromise the Company's business prospects in the medium to long term and are expected to reduce the FY21 operating budget by over 25%, reflecting a material saving on FY20.
Outlook and liquidity
At this stage, it is too early to accurately assess the medium and longer-term impact of Covid across the Duke portfolio as a whole. Therefore, the Company wishes to withdraw its market guidance at this time, pending further clarity on the outlook. Every royalty partner has enacted cost-reduction plans and they are assessing what government relief funding may be available to assist them in trading during the Covid outbreak.
Duke retains its confidence in the quality and long-term prospects of the portfolio as a whole. If necessary to preserve long-term value, Duke will be willing to assist cash flow by deferring payments and/or providing additional financial support to its royalty partners on a case-by-case basis. Duke will continue to monitor the impact of Covid on its royalty partners and the associated level of cash royalty payments it will receive, and will keep the market updated accordingly.
Duke is conservatively geared; after paying its dividend announced 11 March 2020, it will have net debt of approximately £13 million and a cash balance of £2.7 million. Based on Duke's internal 30% maximum loan to value limit, Duke currently has access to additional liquidity of approximately £18 million. It should also be noted that the recent drop in UK interest rates has lowered the cost of Duke's funding and that all the Company's debt is long term in nature with no amortisation payments due until September 2022. The Company remains compliant with its debt covenants.
Duke recently confirmed its final quarterly dividend for Q4 FY20 at 0.75p, taking the full year pay-out to 2.95p per share. To date Duke has paid out over £12.7 million in dividends to shareholders and intends to continue to pay out a share of its operating cashflow to shareholders in future periods. In line with its regular reporting cycle, the Company's next quarterly dividend is scheduled to be announced in mid-June, by which time the Board hopes there will be better visibility on the long-term effects of Covid.
The situation in relation to Covid continues to evolve. However, Duke and its royalty partners are in a strong position to manage through this period of turbulence and the Board will keep shareholders updated as appropriate.
For further information, please contact www.dukeroyalty.com, or contact:
Duke Royalty Limited
Neil Johnson / Charlie Cannon Brookes / Hugo Evans
+44 (0) 1481 741 240
Cenkos Securities plc
(Nominated Adviser and Broker)
Stephen Keys / Callum Davidson / Julian Morse / Michael Johnson
+44 (0) 207 397 8900
Newgate Communications (PR)
Elisabeth Cowell/ Ian Silvera/ Megan Kovach
+ +44 (0) 20 3757 6880 firstname.lastname@example.org
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.
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