We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for streaming realtime charts, analysis tools, and prices.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Duke Capital Limited | LSE:DUKE | London | Ordinary Share | GG00BYZSSY63 | ORDS NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.20 | -0.64% | 31.00 | 31.00 | 31.50 | 31.25 | 31.25 | 31.25 | 747,503 | 16:35:20 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Unit Inv Tr, Closed-end Mgmt | 31.06M | 19.59M | 0.0472 | 6.62 | 129.82M |
From Apr 2019 to Apr 2024
TIDMDUKE
RNS Number : 6231B
Duke Royalty Limited
24 September 2018
24 September 2018
Duke Royalty Limited
("Duke Royalty", "Duke" or the "Company")
Final results for the full year ended 31 March 2018,
Posting of Annual Report and Notice of AGM
Duke Royalty, a provider of alternative capital solutions to a diversified range of profitable and long-established businesses in Europe and abroad, announces its final results for the ended 31 March 2018 ("FY18").
Full year highlights:
-- First three royalty partners secured, delivering total income for the year of GBP1.80 million and generating GBP0.25 million net cash inflow from operating activities
-- Successfully raised a total of GBP20 million of equity to fund investments, bringing a suite of new institutional investors onto the share register
-- Dividend yield of 2.1 pence per share, above Duke's stated target of 2 pence per share
-- Strong pipeline of potential new royalty partners developed, testament to the demand for Duke Royalty's alternative finance solution
Post period highlights
-- Two more royalty transactions completed, taking the total number of royalty partners to five -- Raised an additional GBP44 million of equity to fund current pipeline of royalty investments -- Currently in the top 5% highest AIM dividend paying stocks - dividend paid quarterly
Neil Johnson, CEO of Duke Royalty, said:
"I am delighted to report that, in the period under review, Duke has been able to prove the attractiveness of its alternative finance solution both to business owners and to institutional investors, delivering its inaugural income from our royalty investment strategy.
"The Company is now ideally positioned to build on this success and, having successfully raised an additional GBP44m of equity in August 2018, we have been able to bring the total number of royalty partners in our portfolio up to five. New royalties will be accretive to shareholders due to Duke's high operating leverage and we are delighted to have identified a range of compelling opportunities. With this in mind, I look forward to the year ahead with optimism and excitement."
Notice of AGM
The Company announces that its Annual General Meeting ("AGM") will be held at Trafalgar Court, 4th Floor, West Wing, Admiral Park, St Peter Port, Guernsey GY1 2JA on 1 November 2018 at 11:00 BST.
The full annual report and accounts, including the audit report and the notice of the Company's AGM will be posted to applicable shareholders by 28 September 2018 and will be available on the Company's website at that time.
For further information, please visit www.dukeroyalty.com, or contact:
Hot Features
Premium
Neil Johnson /
Duke Royalty Limited Charlie Cannon-Brookes +44 (0) 148 1741 240
Grant Thornton UK LLP Colin Aaronson /
(Nominated Adviser) Samantha Harrison +44 (0) 207 383 5100
Cenkos Securities plc
(Joint Broker) Julian Morse / Michael Johnson +44 (0) 207 397 8900
Mirabaud Securities Limited Peter Krens /
(Joint Broker) Edward Haig-Thomas +44 (0) 203 167 7222
Redleaf Communications Elisabeth Cowell/
(PR) Robin Tozer/ Ian Silvera +44 (0) 203 757 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.
CHAIRMAN'S REPORT
FOR THE YEARED 31 MARCH 2018
Dear Shareholder,
I am pleased to report the results for the financial year ending 31 March 2018 ("Fiscal 2018") which has been a period of significant progress and development for the Company.
Following the Company's re-admission to AIM in March 2017 and concurrent raising of its first institutional equity capital of GBP15 million to finance a pipeline of near term royalty financing transactions, we were delighted therefore that the Company was able to quickly announce that, during April 2017, it had closed its inaugural royalty investment of EUR8 million (GBP6.9 million) into Temarca, an established European river cruise operator.
The Temarca investment was followed by two further royalty transactions during Fiscal 2018. The first of these transactions was a GBP7 million investment (split into two tranches) into Lynx UK, the European subsidiary of Lynx Equity which is a Toronto-based private firm that seeks to acquire, own and operate mature, old-economy businesses in a diverse range of industries. The second was a GBP9 million investment into Trimite, a 70-year-old UK private company that formulates and manufactures high performance and technologically superior coatings and paints for speciality industrial markets.
To be able to fund the third transaction and subsequent investments, Duke closed a successful second equity fundraising of GBP20 million which was completed in December 2017. Both of our fundraisings in Fiscal 2018 were well supported by institutional investors, which underpins our confidence in the ability for us to execute our business plan of diversifying the royalty partners at a measured but focused pace.
I am also pleased to report that during Fiscal 2018, the Company has grown the quality and quantity of the pipeline of transactions the team are evaluating. Duke Royalty is the first UK quoted non-resource royalty investment company, which means the Company needs to do some education in Europe of the advantages of this alternative finance solution which is well established in North America. However, one of the most pleasing aspects of Fiscal 2018 has been that we have seen a strong demand for the Duke financing solution in our key target markets.
As referenced in the Company's IPO document, the Company announced that it would target a minimum dividend yield of five percent (or 2 pence per share) for Fiscal 2018. The actual Fiscal 2018 pay-out was above target at 2.1 pence per share with the initial quarterly dividend of 0.5p per share being increased to 0.6p per share in respect of the final quarter of Fiscal 2018. A stable and increasing dividend yield is a fundamental principle that Duke will continue to focus on in future years and I am happy to be able to report that post the financial year end the quarterly dividend was increased again to 0.7p per share in respect of the first quarter of Fiscal 2019.
Fiscal 2018 also saw the inaugural income generated from our royalty investment strategy, which is a significant step in the Company's development and we are therefore pleased to report a total income for the year of GBP1.80 million. Our total comprehensive loss for the year was GBP0.86 million, however, to understand the overall trading of the Company, we need to point out that our inaugural income coincides with the early adoption of the new IFRS 9 accounting standard for financial instruments. Due to the nature of the royalty investments, under IFRS 9 they are classified at fair value through profit or loss which requires transaction and similar costs to be expensed immediately. Accordingly, the Company has had several material items expensed in the financial statements that need to be highlighted.
Firstly, there were transactional related deal costs of GBP0.49 million that were expensed. These related to the execution of the three royalty transactions referred to above. On top of this, there is also a liability associated with the net present value of the long-term Oliver Wyman collaboration fee. This fee was expensed in full during Fiscal 2018 and was valued at GBP0.85 million, however the payments are directly tied to Duke's actual cash received over the life of its royalty investments. Finally, there was also a one-off expense associated with the 1.5 million share payment to the Support Service providers which was valued at of GBP0.59 million. This payment arose in recognition of the execution of the royalty strategy, principally the completion of royalty investments by the Group, and is now fully satisfied. If these three items were to be stripped out, then the total operating expenses of the Company would have fallen from GBP2.65 million to GBP0.72 million which is line with previous market guidance given by the Company.
As a result of the above impacts on the income statement, I would urge investors to focus their attention on the Consolidated Statement of Cash Flows to obtain a clearer picture of the Company's operating performance. In Fiscal 2018, this showed a net cash inflow from operating activities of GBP0.25 million. Because of the IFRS guidelines in valuing financial instruments as highlighted above, in the more mature Canadian royalty market, many of the independent research analysts focus much more heavily on operating cashflow per share rather than on earnings per share.
Finally, I am glad to be able to inform shareholders that post the financial year end the Company has continued its progress and growth. The Company has now successfully closed its fourth and fifth royalty investments further diversifying the existing portfolio and also has a strong pipeline of new royalty transactions that are currently under review. In order to fund this continued growth and portfolio diversification, the Company was able to successfully close a GBP44 million equity financing in August 2018 which has brought in a number of new institutional shareholders that has further strengthened the Company's share register and has provided the Company with an excellent platform for the future.
I am grateful for the support of our shareholders and am pleased to report the Chairman's statement for Fiscal 2018. I look forward to being able to report on the Company's ongoing progress and development in future periods.
Nigel Birrell
Chairman
21 September 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 MARCH 2017
Note 2018 2017
GBP GBP
Income
Net change in fair value on financial assets
and financial liabilities
at fair value through profit or loss 8,14,16 1,554,518 -
Transaction costs reimbursed 2.7 145,000 -
Net foreign currency gains 97,238 -
Bank interest receivable - 44
Total income 1,796,756 44
Expenses
Support services administration fees 15 (806,537) (375,000)
Directors' fees 15 (132,065) (218,000)
Investment Committee fees 15 (37,500) (60,000)
Legal and professional fees (229,723) (334,195)
Transaction costs 2.8 (488,308) (95,025)
Royalty participation fees 2.10,16 (848,534) -
Other operating costs (112,289) (320,450)
Bank interest payable (2) (1,956)
Total operating expenses (2,654,958) (1,404,626)
Loss for the financial year (858,202) (1,404,582)
Taxation expense 5 - -
Total comprehensive loss for the year (858,202) (1,404,582)
Basic and diluted deficit per share (pence) 6 (1.38) (15.83)
All income is attributable to the holders of the Ordinary Shares of the Company.
The notes on pages 25 to 48 form an integral part of these Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2018
Note 2018 2017
GBP GBP
Non-current assets
Financial assets at fair value through profit
or loss 8 20,782,297 -
Current assets
Financial assets at fair value through profit
or loss 8 2,786,501 -
Trade and other receivables 9 6,687,020 381,467
Cash and cash equivalents 3,165,221 14,350,154
12,638,742 14,731,621
Total assets 33,421,039 14,731,621
Equity
Shares issued 10 60,303,293 40,905,094
Share based payment reserve 11 129,977 124,412
Warrant reserve 10 125,000 -
Retained losses 12 (28,314,324) (26,523,494)
32,243,946 14,506,012
Current liabilities
Trade and other payables 13 259,693 225,609
Financial liabilities at fair value through
profit or loss 14 140,886 -
400,579 225,609
Non-current liabilities
Financial liabilities at fair value through
profit or loss 14 776,514 -
Total liabilities 1,177,093 225,609
Total equity and liabilities 33,421,039 14,731,621
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 MARCH 2018
2018 2017
GBP GBP
Cash flows from operating activities
Receipts from royalty investments 987,192 -
Receipts from transaction costs reimbursed 45,000 -
Proceeds from sale of investments - 516,535
Interest income received - 44
Operating expenses paid (785,714) (1,255,997)
Net cash inflow/(outflow) from operating
activities 246,478 (739,418)
Cash flows from investing activities
Royalty investments advanced (22,932,356) -
Transaction costs paid (277,737) (31,500)
Amounts advanced to agents pending royalty
investment
completion (6,467,500) -
Payment to acquire equity investment (250) -
Net cash outflow from investing activities (29,677,843) (31,500)
Cash flows from financing activities
Proceeds from share issue 19,840,275 14,209,425
Share issue costs (765,613) (712,148)
Dividends paid (925,468) -
Finance costs paid - (1,956)
Net cash inflow from financing activities 18,149,194 13,495,321
Net change in cash and cash equivalents (11,282,171) 12,724,405
Cash and cash equivalents at beginning
of year 14,350,154 1,625,749
Effect of foreign exchange on cash 97,238 -
Cash and cash equivalents at the end of
year 3,165,221 14,350,154
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2018
Share-based
Shares payment Warrant Retained Total
Note issued reserve reserve losses equity
GBP GBP GBP GBP GBP
At 1 April 2016 27,064,815 124,412 72,454 (25,191,366) 2,070,315
Total comprehensive loss
for the year - - - (1,404,582) (1,404,582)
Transactions with owners
Shares issued for cash 10 14,552,425 - - - 14,552,425
Share issuance costs
- 10 (1,159,721) - - - (1,159,721)
Share based payments 11 447,575 - - - 447,575
Warrants lapsed 10 - - (72,454) 72,454 -
Total transactions with
owners 13,840,279 - (72,454) (1,332,128) 12,435,697
At 1 April 2017 40,905,094 124,412 - (26,523,494) 14,506,012
Total comprehensive loss
for the year - - - (858,202) (858,202)
Transactions with owners
Shares issued for cash 10 19,507,275 - - - 19,507,275
Share issuance costs
- 10 (1,188,338) - - - (1,188,338)
Share based payments 10,11 1,079,262 5,565 - - 1,084,827
Warrants issued 10 - - 125,000 - 125,000
Dividends 7 - - - (932,628) (932,628)
Total transactions with
owners 19,398,199 5,565 125,000 (932,628) 18,603,296
At 31 March 2018 60,303,293 129,977 125,000 (28,314,324) 32,243,946
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 MARCH 2018
1. General Information
Duke Royalty Limited ("Duke Royalty" or the "Company") is a closed-ended
investment company with limited liability formed under the Companies
(Guernsey) Law, 2008. Its shares are traded on the AIM market
of the London Stock Exchange. The Company's registered office
is shown on page 49.
The Group comprised Duke Royalty Limited and its wholly owned
subsidiary Duke Royalty UK Limited, a company registered in England
and Wales.
The Group's investing policy is to invest in a diversified portfolio
of royalty finance and related opportunities.
The Company's shares are traded on AIM, a market operated by
the London Stock Exchange.
2. Significant accounting policies
2.1 Basis of preparation
The Consolidated Financial Statements of the Group have been
prepared in accordance with International Financial Reporting
Standards ("IFRS"), to the extent that they have been adopted
by the European Union, and applicable Guernsey law, and reflect
the following policies, which have been adopted and applied
consistently.
The Financial Statements have been prepared on a historical
cost basis, except for the following:
* Royalty investments - measured at fair value through
profit or loss
* Equity investments - measured at fair value through
profit or loss
* Royalty participation liabilities - measured at fair
value through profit or loss
2.2 New and amended standards adopted by the Group
The Group has elected to apply IFRS 9 'Financial instruments'
early.
IFRS 9 sets out requirements for recognising and measuring
financial assets, financial liabilities and some contracts
to buy or sell non-financial items. This standard replaces
IAS 39 'Financial instruments: recognition and measurement'.
The application of IFRS 9 has resulted in the following changes
to the classification of the Group's financial instruments:
* Trade and other receivables were classified as 'loans
and receivables' under IAS 39 and are now classified
as 'financial assets held at amortised cost'
* Cash and cash equivalents were classified as 'loans
and receivables' under IAS 39 and are now classified
as 'financial assets held at amortised cost'
The adoption of IFRS 9 has not materially impacted the measurement
basis of the opening balance sheet.
Further information can be found in note 2.10.
2.3 New standards and interpretations not yet adopted
At the date of authorisation of these Consolidated Financial
Statements, certain standards and interpretations were in issue
but not yet effective and have not been applied in these Consolidated
Financial Statements. The Directors do not expect that the
adoption of these standards and interpretations will have a
material impact on the Financial Statements of the Group in
future periods.
2.4 Basis of consolidation
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three
of the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability
of the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
All intra-group transactions, balances, income and expenses
are eliminated on consolidation. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with
the policies adopted across the Group.
The "Group" is defined as the Company and its subsidiary Duke
Royalty UK Limited.
2.5 Segmental reporting
Operating segments are reported in a manner consistent with
the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors, as
a whole. The key measure of performance used by the Board to
assess the Group's performance and to allocate resources is
the total return on the Group's net asset value, as calculated
under IFRS, and therefore no reconciliation is required between
the measure of profit or loss used by the Board and that contained
in these Consolidated Financial Statements.
For management purposes, the Group's new investment objective
is to focus on one main operating segment, which is to invest
in a diversified portfolio of royalty finance and related opportunities.
At the end of the period the Group has three investments into
this segment and has derived income from them. Due to the Group's
nature it has no customers.
2.6 Foreign currency
Functional and presentation currency
Items included in the Financial Statements of each of the Group's
entities are measured using the currency of the primary economic
environment in which the entity operates (the "functional currency").
The Consolidated Financial Statements are presented in pounds
sterling, which is also the functional currency of the Company
and its subsidiary.
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of
the transactions. Foreign currency assets and liabilities are
translated into the functional currency using the exchange
rate prevailing at the balance sheet date.
Foreign exchange gains and losses relating to cash and cash
equivalents are presented in the Consolidated Statement of
Comprehensive Income within 'net foreign currency gains'.
Foreign exchange gains and losses relating to the financial
assets and liabilities carried at fair value through profit
or loss are presented in the Consolidated Statement of Comprehensive
Income within 'net change in fair value on financial assets
and financial liabilities at fair value through profit or loss'.
2.7 Transaction costs reimbursed
Income relating to transaction costs reimbursed comprises one
off fees charged to investee companies as a reimbursement of
certain costs incurred on their behalf. The Group recognises
transaction costs reimbursed when the costs have been incurred
and right to reimbursement has been established.
2.8 Transaction costs
Transaction costs are costs incurred to acquire financial assets
at fair value through profit or loss. They include fees and
commissions paid to agents and advisers. Transaction costs,
when incurred, are recognised immediately in profit or loss
as an expense.
2.9 Income tax
The income tax expense or credit for the period is the tax
payable on the current period's taxable income based on the
applicable income tax rate for each jurisdiction adjusted by
changes in deferred tax assets and liabilities attributable
to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of
the tax laws enacted or substantively enacted at the end of
the reporting period in the countries where the Company's subsidiaries
operate and generate taxable income. Management periodically
evaluates positions taken in tax returns with respect to situations
in which applicable tax regulation is subject to interpretation.
It establishes provisions where appropriate on the basis of
amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the
Consolidated Financial Statements. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantively
enacted by the end of the reporting period and are expected
to apply when the related deferred income tax asset is realised
or the deferred income tax liability is settled.
Deferred tax assets are recognised only if it is probable that
future taxable amounts will be available to utilise those temporary
differences and losses.
Deferred tax assets and liabilities are offset when there is
a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the
same taxation authority. Current tax assets and tax liabilities
are offset where the entity has a legally enforceable right
to offset and intends either to settle on a net basis, or to
realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except
to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the
tax is also recognised in other comprehensive income or directly
in equity, respectively.
2.10 Financial instruments
Financial assets and financial liabilities are recognised in
the Consolidated Statement of Financial Position when the Group
becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are only offset
and the net amount reported in the Consolidated Statement of
Financial Position and Consolidated Statement of Comprehensive
Income when there is a currently enforceable legal right to
offset the recognised amounts and the Group intends to settle
on a net basis or realise the asset and liability simultaneously.
Financial assets
The Group financial assets are classified in the following
measurement categories:
* those to be measured subsequently at fair value or
through profit or loss; and
* those to be measured at amortised cost.
The classification depends on the entity's business model for
managing the financial assets and the contractual terms of
the cash flows.
At initial recognition, the Group measures a financial asset
at its fair value, plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs that
are directly attributable to the acquisition of the financial
asset. Transaction costs of financial assets carried at fair
value through profit or loss are expensed in profit or loss.
Financial assets held at amortised cost
Assets that are held for collection of contractual cash flows
where those cash flows represent solely payments of principal
and interest are measured at amortised cost. These assets are
subsequently measured at amortised cost using the effective
interest method.
The Group assesses on a forward looking basis the expected
credit losses associated with its financial assets held at
amortised cost. The Group has elected to apply the simplified
approach permitted by IFRS 9 in respect of trade receivables.
This approach requires expected lifetime losses to be recognised
from initial recognition of the receivables.
The Group's financial assets held at amortised cost include
trade and other receivables and cash and cash equivalents.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits and other short-term highly liquid investments with
an original maturity of three months or less that are readily
convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Financial assets at fair value through profit or loss
Royalty investments are debt instruments classified at fair
value through profit or loss under IFRS 9. The return on these
investments is linked to a fluctuating revenue stream and thus,
whilst the business model is to collect contractual cash flows,
such cash flows are not solely payments of principal and interest.
Such assets are recognised initially at fair value and remeasured
at each reporting date. The change in fair value is recognised
in profit or loss and is presented within the 'net change in
fair value on financial assets and financial liabilities' in
the Consolidated Statement of Comprehensive Income. The fair
value of these financial instruments is determined using discounted
cash flow analysis. Further details of the methods and assumptions
used in determining the fair value can be found in note 16.
Derecognition of financial assets
A financial asset (in whole or in part) is derecognised either
(i) when the Group has transferred substantially all the risks
and rewards of ownership; or (ii) when it has neither transferred
nor retained substantially all the risks and rewards and when
it no longer has control over the assets or a portion of the
asset; or (iii) when the contractual right to receive cash
flow has expired. Any gain or loss on derecognition is taken
to other income/expenses in the Consolidated Statement of Comprehensive
Income as appropriate.
Financial liabilities
The classification of financial liabilities at initial recognition
depends on the purpose for which the financial liability was
issued and its characteristics.
All financial liabilities are initially recognised at fair
value. Unless otherwise indicated the carrying amounts of the
Group's financial liabilities are approximate to their fair
values.
Financial liabilities measured at amortised cost
These consist of trade and other payables. These liabilities
are initially recognised at fair value and subsequently carried
at amortised cost using the effective interest rate method.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
comprise royalty participation liabilities. These liabilities
arise under a contractual agreement between the Group and a
strategic partner for the provision of services in connection
with the Group's royalty financing arrangements. Under this
agreement services are provided in exchange for a percentage
of gross royalties receivable. These instruments are classified
at fair value through profit or loss on the basis that the
liability is linked to the Group's royalty investments. Such
liabilities are recognised initially at fair value with the
costs being recorded immediately in profit or loss as 'royalty
participation fees' and remeasured at each reporting date in
order to avoid an accounting mismatch. The change in fair value
is recognised in profit or loss and presented within 'net change
in fair value on financial assets and financial liabilities'.
The fair value of these financial instruments is determined
using discounted cash flow analysis. Further details of the
methods and assumptions used in determining the fair value
can be found in note 16.
Derecognition of financial liabilities
A financial liability (in whole or in part) is derecognised
when the Group has extinguished its contractual obligations,
it expires or is cancelled. Any gain or loss on derecognition
is taken to other income/expenses in the Consolidated Statement
of Comprehensive Income.
Capital
Financial instruments issued by the Group are treated as equity
if the holder has only a residual interest in the assets of
the Group after the deduction of all liabilities. The Company's
Ordinary Shares are classified as equity instruments.
The Group considers its capital to comprise its Ordinary Share
Capital, share based payment reserve, warrants and retained
losses.
Equity instruments
Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction from proceeds.
2.11 Share-based payment
The Group operates an equity settled Share Option Plan for
its Directors and key advisers and a Long Term Incentive Plan
for its Directors.
The fair value of awards granted under the above plans are
recognised in profit or loss with a corresponding increase
in equity. The total amount to be expensed is determined by
reference to the fair value of the awards granted:
* including any market performance conditions (eg. the
entity's share price);
* excluding the impact of any service and non-market
performance vesting conditions (eg. increase in cash
available for distribution, remaining a Director for
a specified time period); and
* including the impact of any non-vesting conditions.
The total expense is recognised over the vesting period, which
is the period over which all of the specified vesting conditions
are to be satisfied. At the end of each reporting period, the
Group revises its estimates of the number of options that are
expected to vest based on the non-market vesting and service
conditions. It recognises the impact of the revision to original
estimates, if any, in profit or loss, with a corresponding
adjustment to equity.
The Group also settles a portion of expenses by way of share-based
payments. These expenses are settled based on the fair value
of the service received as an expense with the corresponding
amount increasing equity.
The Group issues warrants in return for services. These are
measured based on the value of the service provided and are
recognised as the service is delivered.
3. Critical accounting judgements and estimates
The preparation of the Consolidated Financial Statements in conformity
with IFRS requires management to make judgements, estimates and
assumptions that affect the application of policies and the reported
amounts of assets and liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience
and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis
of making the judgements about the carrying values of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised, if the revision affects
only that period, or in the period of revision and future periods,
if the revision affects both current and future periods. The
following judgements, estimates and assumptions that may cause
a material adjustment to the carrying amount of assets and liabilities
are:
Fair value of royalty investments
Royalty investments are valued using a discounted cash flow analysis.
The discount rate used in these valuations has been estimated
to take account of market interest rates and the credit worthiness
of the investee. Revenue growth has been estimated by the Directors
and is based on unobservable market inputs.
Where the royalty investment contains a buy-back clause, the
Directors have assessed the likelihood of this occurring. Where
occurrence of the buy-back is deemed likely, this is built into
the discounted cash flow at the appropriate point.
These assumptions are reviewed annually. The Directors believe
that the applied valuation techniques and assumptions used are
appropriate in determining the fair value of the royalty investments.
Due to the relatively short time between entering into the investments
and the year end, and having considered all relevant factors,
the Directors have used the initial implied yield in the instruments
as the year end discount rate. At the year end the Directors
did not consider that there had been any changes to the assumptions
applied at inception of the investments. Further details of the
methods and assumptions used in determining the fair value can
be found in note 16.
Fair value of royalty participation liabilities
The payments falling due under the Group's contract for royalty
participation fees are directly linked to the Group's royalty
investments and thus the same assumptions have been applied in
arriving at the fair value of these liabilities. The Directors
have considered whether any increase in discount rate is required
to represent the Group's credit risk as the payments are made
by the Group rather than the investee and have concluded that
none is required since payment under the contract is only due
once the Group has received the gross amounts from the investee.
4. Auditor's remuneration
2018 2017
GBP GBP
Audit of the Consolidated Financial Statements 28,500 28,000
5. Income tax
The Company has been granted exemption from Guernsey taxation.
The Company's subsidiary in the UK is subject to taxation in
accordance with relevant tax legislation.
Factors affecting income tax expense for the year
2018 2017
GBP GBP
Loss on ordinary activities before tax (858,202) (1,404,582)
Corporation tax at country rates (122,458) -
Tax losses not recognised 122,458 -
- (1,404,582)
Tax losses
2018 2017
GBP GBP
Unused tax losses for which no deferred tax 644,517 -
asset has been recognised
Potential tax benefit at 17% 109,568 -
The unused tax losses were incurred by the Company's subsidiary,
Duke Royalty UK Limited.
6. Deficit per share
2018 2017
Basic and diluted deficit per Ordinary Share GBP GBP
Loss for the year (858,202) (1,404,582)
Weighted average number of Ordinary Shares
in issue 62,234,062 8,874,766
Deficit per share (pence) (1.38) (15.83)
The deficit per share is based on the Group loss for the year
and on the weighted average number of Ordinary Shares in issue
for the year. The share options, warrants and Long Term Incentive
Plan awards in issue are not dilutive at the year end but could
become dilutive in future periods. For more details on the share
options see note 11.
Subsequent to the year end, 100 million new Ordinary Shares were
placed (see note 18).
7. Dividends
The Company implemented a quarterly dividend policy during the
year and paid three quarterly dividends of 0.5 pence per share,
totalling GBP932,628 (2017: GBPnil).
On 28 March 2018 a fourth interim dividend of 0.6 pence per share,
totalling GBP1,117,415, was declared and this was paid on 12
April 2018. On 12 July 2018 the Company paid a further quarterly
dividend of 0.7 pence per share, totalling GBP1,385,317. On 20
September 2018 the Company approved a further quarterly dividend
of 0.7 pence per share, to be paid on 12 October 2018.
8. Financial assets at fair value through profit or loss
2018 2017
GBP GBP
Non-current
Royalty investments 20,782,047 -
Equity investments 250 -
20,782,297 -
Current
Royalty investments 2,786,501 -
23,568,798 -
Net changes in fair value on financial assets at fair value through
profit or loss:
2018 2017
GBP GBP
On royalty investments 1,623,384 -
On equity investments - -
Total net gains 1,623,384 -
Net changes in fair value on financial assets at fair value through
profit or loss:
2018 2017
GBP GBP
Realised 987,192 -
Change in unrealised 636,192 -
Total net gains 1,623,384 -
Realised changes in fair value relate to cash amounts received
under the Group's royalty financing agreements.
Royalty investments
Temarca B.V.
In April 2017 the Group completed its first royalty financing
agreement with Temarca B.V. ("Temarca"). Under the terms of the
agreement the Group advanced EUR8 million (GBP6.9 million) to
Temarca for a term of 25 years in exchange for annualised royalty
distributions of approximately EUR1 million (GBP0.9 million).
The distributions are adjusted annually based on the percentage
change in Temarca's gross revenues compared to the prior year,
subject to a floor and cap. The financing is secured by way of
fixed and floating charges over certain assets and the Group
has provided Temarca with a buyback option. This buyback option
can be exercised at Temarca's discretion at any time during the
term of the agreement.
Lynx Equity (U.K.) Limited
In October 2017 the Group entered into a royalty financing agreement
with Lynx Equity (U.K.) Limited ("Lynx"). Under the terms of
the agreement the Group advanced GBP7 million to Lynx in perpetuity
in exchange for annualised royalty distributions of approximately
GBP0.8 million. The distributions are adjusted annually based
on the percentage change in the aggregated gross revenues of
Lynx's investee companies compared to the prior year, subject
to a floor and cap. The financing is secured over all present
and after-acquired property and assets of Lynx and shares of
the subsidiaries of Lynx. The Group has provided Lynx with a
buyback option after the expiry of a period of five years from
the date of the original investment. This buyback option is exercisable
at Lynx's discretion.
Trimite Global Coatings Limited
In March 2018 the Group entered into a royalty financing agreement
with Trimite Global Coatings Limited ("Trimite"). Under the terms
of the agreement the Group advanced GBP9 million to Trimite for
a term of 30 years in exchange for annualised distributions of
approximately GBP1.1 million. The distributions are adjusted
annually based on the percentage change in Trimite's gross revenues
compared to the prior year, subject to a floor and cap. The financing
is secured by way of fixed and floating charges over certain
assets and the Group has provided Trimite with a buyback option.
This buyback option can be exercised at Trimite's discretion
at any time during the term of the agreement.
Equity investments
At completion of the Group's royalty financing agreement with
Trimite (see above) the Group acquired a 2.5% interest in the
Trimite group for GBP250.
The Group still holds three unlisted investments in mining entities
from its previous investment objectives. The Board do not consider
there to be any future cash flows from these investments and
were fully written down to nil value.
9. Trade and other receivables
2018 2017
GBP GBP
Transaction costs reimbursed receivable 100,000 -
Prepayments and accrued income 109,520 38,467
Unpaid share capital 10,000 343,000
Amounts advanced to agents pending royalty
investment
completion (see note 18) 6,467,500 -
6,687,020 381,467
10. Share capital
No. shares GBP
Authorised
Unlimited number of shares of no par value - -
Allotted, called up and fully paid
A 1 April 2016 7,877,459 27,137,269
Shares issued for cash during the year 36,381,062 14,552,425
Shares issued in settlement of share issuance
costs 1,118,938 447,575
Share issuance costs - (1,159,721)
Warrants lapsed - (72,454)
At 31 March 2017 45,377,459 40,905,094
Shares issued for cash during the year 48,768,187 19,507,275
Shares issued in settlement of share issuance
costs 1,231,813 492,725
Share issuance costs - (1,188,339)
Shares issued in connection with support services
agreement 1,500,000 586,537
At 31 March 2018 96,877,459 60,303,292
On 22 December 2017 the Company issued 50,000,000 new Ordinary
Shares at 40p per share, comprising 48,768,187 issued for cash
and 1,231,813 issued in settlement of broker and other commission
arising on the fundraising of GBP492,725. A total of GBP18,811,661
was raised, net of issuance costs. At the year end GBP10,000
of the shares issued remained outstanding. This was settled subsequent
to the year end.
On 22 December 2017 the Company also issued 1,500,000 shares
with a fair value of GBP586,537 in respect of its support services
agreement (see note 15).
On 23 March 2017 the Company issued 37,500,000 new Ordinary
Shares at 40p per share, of which 1,118,938 were issued in settlement
of broker and other commission arising on the fundraising. At
31 March 2017 GBP343,000 of the shares issued remained outstanding.
11. Share-based payments
Warrants
On 8 November 2017 the Company issued 2,000,000 warrants to Partners
Value Investments LP to subscribe for shares at 42 pence per
share. The warrants are exercisable immediately and can be exercised
within a period of five years from the date of the agreement.
The fair value of the warrants was determined to be GBP125,000,
being the value of services provided. This was recognised in
profit or loss with GBP70,000 attributed to 'Transaction costs'
and GBP55,000 to 'Legal and professional fees'.
On 29 October 2016, 363,196 warrants with an exercise price of
GBP4.13 lapsed. The fair value of the warrants of GBP72,454 was
reclassified to reserves during the year ended 31 March 2017.
The following table shows the movements in the share-based payment
reserve during the year:
Share LTIP
options awards Total
GBP GBP GBP
At 1 April 2016 and 1 April 2017 124,412 - 124,412
LTIP awards granted in the year - 5,565 5,565
At 31 March 2018 124,412 5,565 129,977
Share option scheme
The Group operates a share option scheme ("the Scheme").
The Scheme was established to incentivise Directors, staff and
certain key advisers and consultants to deliver long-term value
creation for shareholders.
Under the Scheme, the Board of the Company will award, at its
sole discretion, options to subscribe for Ordinary Shares of
the Company on terms and at exercise prices and with vesting
and exercise periods to be determined at the time. However, the
Board of the Company has agreed not to grant options such that
the total number of unexercised options represents more than
4 per cent of the Company's Ordinary Shares in issue from time
to time. Options vest immediately and lapse 5 years from the
date of grant.
At the year end 760,000 (2017 - 760,000) options were outstanding
and exercisable at a weighted average exercise price of 75 pence
(2017 - 75 pence). The weighted average remaining contractual
life of the options outstanding at the year end was 2.43 years
(2017 - 3.43 years).
Long Term Incentive Plan
On 7 November 2017 the Remuneration Committee adopted the Duke
Royalty Limited Long Term Incentive Plan ("LTIP") which the Board
approved the framework of and described in the Admission Document
of the Company dated 20 March 2017.
Under the rules of the LTIP the Remuneration Committee may grant
Performance Share Awards ("PSAs") which vest after a period of
three years and are subject to various performance conditions.
The LTIP awards will be subject to a performance condition based
50 per cent on total shareholder return ("TSR") and 50 per cent
on total cash available for distribution ("TCAD per share").
TSR can be defined as the returns generated by shareholders based
on the combined value of the dividends paid out by the Company
and the share price performance over the period in question.
Upon vesting the awards are issued fully paid.
On 6 March 2018 1,025,000 PSAs were issued to Directors with
a fair value of GBP234,390. An expense of GBP5,565 was recognised
in these Consolidated Financial Statements in 'Directors' fees'.
Disclosure of the valuation assumptions used to value the PSAs
has not been made on the basis that the related IFRS 2 charge
in the year under review is immaterial.
At the year end 1,025,000 (2017 - nil) LTIP awards were outstanding.
The weighted average remaining vesting period of the LTIP awards
outstanding at the year end was 2.93 years (2017 - nil).
Support services agreement
During the year the Company issued 1,500,000 shares with a fair
value of GBP586,537 in respect of its support services agreement
(see note 15).
Other share-based payments
The Company also issues shares periodically in settlement of
certain share issuance costs (see note 10).
12. Distributable reserves
Pursuant to the Companies (Guernsey) Law, 2008 (as amended),
all reserves (including share capital) can be designated as distributable.
However, in accordance with the Admission Document, the Company
shall not make any distribution of capital profits or capital
reserves except by means of capitalisation issues in the form
of fully paid Ordinary Shares or issue securities by way of capitalisation
of profits or reserves except fully paid Ordinary Shares issued
to the holders of its Ordinary Shares.
13. Trade and other payables
2018 2017
GBP GBP
Trade payables 178,761 -
Accruals and deferred income 80,932 225,609
259,693 225,609
14. Financial liabilities at fair value through profit or loss
2018 2017
GBP GBP
Royalty participation liability
Current 140,886 -
Non-current 776,514 -
917,400 -
Net changes in fair value on financial liabilities at fair value
through profit or loss:
2018 2017
GBP GBP
Realised - -
Change in unrealised 68,866 -
Total net losses 68,866 -
15. Related parties
Directors' fees
The following fees were paid to the Directors during the year:
2018 2017
GBP GBP
Neil Johnson 52,715 100,000
Charles Cannon Brookes 36,900 70,000
Nigel Birrell 12,000 24,000
James Ryan 6,000 24,000
Justin Cochrane 18,450 -
Matthew Wrigley 6,000 -
Mark Le Tissier - -
132,065 218,000
During the year, the Directors voluntarily reduced their fees
in order for the Company to implement and sustain its quarterly
dividend policy. Subsequent to the year end this reduction has
ceased.
The above noted fees include the following expenses relating
to awards granted under the Group's Long Term Incentive Plan
(see note 11):
2018 2017
GBP GBP
Neil Johnson 2,715 -
Charles Cannon Brookes 1,900 -
Justin Cochrane 950 -
5,565 -
Mark Le Tissier, a Director of Trident Trust Company (Guernsey)
Limited has waived his entitlement to a fee in relation to being
Director of the Company.
Fees relating to Matthew Wrigley are paid to MJ Hudson, a law
firm in which he is a partner.
At the year end no fees remained outstanding. At 31 March 2017
GBP6,000 remained outstanding to James Ryan.
Investment Committee fees
The Group's Investment Committee assist in analysing and recommending
potential royalty transactions and its members are considered
to be key management along with the Directors. The following
fees were paid to the members of the Investment Committee during
the year:
2018 2017
GBP GBP
Andrew Carragher - 20,000
Jim Webster 37,500 40,000
37,500 60,000
Jim Webster is also the Group's Chief Investment Officer and
has an operational role in the Group beyond the Investment Committee,
which is reflected in the level of his fee.
Andrew Carragher has waived his entitlement to a fee during the
year in relation to being a member of the Group's Investment
Committee, and Jim Webster agreed to voluntarily reduce his fee,
in conjunction with the voluntary reductions of the Directors,
in order for the Company to implement and sustain its quarterly
dividend policy. Subsequent to the year end this reduction has
ceased.
During the fiscal year, the representatives of Oliver Wyman were
not paid by the Group for their service as per the terms of the
collaboration agreement.
No amounts remained outstanding at the year end (2017 - GBPnil).
Other related party transactions
The following amounts were paid to related parties during the
year in respect of support services fees:
2018 2017
GBP GBP
Payable to Abingdon Capital Corporation
Annual service fee 196,000 280,000
Share award 415,818 -
611,818 280,000
Payable to Arlington Group Asset Management
Limited
Annual service fee 24,000 95,000
Share award 170,719 -
194,719 95,000
806,537 375,000
Support Service Agreements with Abingdon Capital Corporation
("Abingdon"), a company of which Neil Johnson is a Director,
and Arlington Group Asset Management Limited ("Arlington"), a
company of which Charles Cannon Brookes is a Director, were signed
on 16 June 2015. The services to be provided by both Abingdon
and Arlington include global deal origination, vertical partner
relationships and on-going investment management, including preparation
of investment reports, performance data and compliance with the
Company's investing policy.
The Support Services Agreements also entitled Abingdon and Arlington
to be allotted up to 1,500,000 Ordinary shares in the Company,
in recognition of the execution of the royalty strategy, principally
the completion of royalty investments by the Group. These conditions
were met during the year and the shares were issued on 22 December
2017. This entitlement has now been satisfied in full and no
further shares will be issued pursuant to the Support Services
Agreements. The shares were valued at GBP586,537 based on the
20-day volume weighted average share prices preceding the dates
on which Abingdon and Arlington became entitled to them in accordance
with the terms of the agreement.
During the year, both Abingdon and Arlington agreed to voluntary
reductions in their annual service fees in order for the Company
to implement and sustain its quarterly dividend policy. Currently
these reductions are still in place.
Share options and LTIP awards
The Group's related parties have the following interests, either
directly or beneficially, in share options issued under the Group's
share option scheme and Long Term Incentive Plan:
Share options LTIP awards
2018 2017 2018 2017
No. No. No. No.
Neil Johnson 85,000 85,000 500,000 -
Charles Cannon Brookes(1) 85,000 85,000 350,000 -
Nigel Birrell 85,000 85,000 - -
James Ryan 85,000 85,000 - -
Justin Cochrane 70,000 70,000 175,000 -
(1) Includes share options issued to Arlington
The following dividends were paid to related parties:
2018 2017
GBP GBP
Neil Johnson(1) 33,636 -
Charles Cannon Brookes(2) 58,000 -
Nigel Birrell 8,500 -
Justin Cochrane 10,600 -
(1) Includes dividends paid to Abinvest Corporation, a wholly
owned subsidiary of Abingdon
(2) Includes dividends paid to Arlington
16. Fair value measurements
Fair value hierarchy
IFRS 13 requires disclosure of fair value measurements by level
of the following fair value hierarchy:
Level 1: Inputs are quoted prices (unadjusted) in active markets
for identical assets and liabilities that the entity can readily
observe.
Level 2: Inputs are inputs other than quoted prices included
within Level 1 that are observable for the asset, either directly
or indirectly.
Level 3: Inputs that are not based on observable market date
(unobservable inputs).
The Group has classified its financial instruments into the three
levels prescribed as follows:
2018 2017
Level 3 Level 3
GBP GBP
Financial assets
Financial assets at fair value through profit
or loss
- Royalty investments 23,568,548 -
- Equity investments 250 -
Total financial assets 23,568,798 -
Financial liabilities
Financial liabilities at fair value through
profit or loss
- Royalty participation instruments 917,400 -
Total financial liabilities 917,400 -
The following table presents the changes in level 3 items for
the years ended 31 March 2018 and 31 March 2017:
Financial Financial
assets liabilities Total
GBP GBP GBP
At 1 April 2016 and 1 April 2017 - - -
Additions 22,932,606 (848,534) 22,084,072
Royalty income received (987,192) - (987,192)
Net change in fair value 1,623,384 (68,866) 1,554,518
At 31 March 2018 23,568,798 (917,400) 22,651,398
Valuation techniques used to determine fair values
The fair value of the Group's financial instruments is determined
using discounted cash flow analysis and all of the resulting
fair value estimates are included in level 3.
Valuation processes
The main level 3 inputs used by the Group are derived and evaluated
as follows:
Annual adjustment factors for royalty investments and royalty
participation liabilities
These factors are estimated based upon the underlying past and
projected performance of the royalty investee companies together
with general market conditions.
Discount rates for financial assets and liabilities
These are initially estimated based upon the projected internal
rate of return of the royalty investment and subsequently adjusted
to reflect changes in credit risk determined by the Group's Investment
Committee.
Changes in level 3 fair values are analysed at the end of each
reporting period and reasons for the fair value movements are
documented.
Valuation inputs and relationships to fair value
The following summary outlines the quantitative information about
the significant unobservable inputs used in level 3 fair value
measurements:
Royalty investments
The unobservable inputs are the annual adjustment factor and
the discount rate. The range of annual adjustment factors used
is 0.0% to 6.0% and the range of risk-adjusted discount rates
is 15.4% to 17.3%.
An increase in the annual adjustment factor (subject to the collars
set under the terms of the royalty financing agreements) of 5%
would increase the fair value by GBP160,969.
A reduction in the discount rate of 25 basis points would increase
the fair value by GBP366,748.
A decrease in the annual adjustment factor (subject to the collars
set under the terms of the royalty financing agreements) of 5%
would decrease the fair value by GBP243,127.
An increase in the discount rate of 25 basis points would decrease
the fair value by GBP364,692.
Equity investments
Sensitivity analysis has not been performed on the Group's equity
investments on the basis that they are not material to the Consolidated
Financial Statements.
Royalty participation instruments
The unobservable inputs are the annual adjustment factor and
the discount rate used in the fair value calculation of the royalty
investments. The range of annual adjustment factors used is 0.0%
to 6.0% and the range of risk-adjusted discount rates is 15.4%
to 17.3%.
An increase in the annual adjustment factor (subject to the collars
set under the terms of the royalty financing agreements) of 5%
would increase the fair value of the liability by GBP6,026.
A reduction in the discount rate of 25 basis points would increase
the fair value of the liability by GBP13,755.
A decrease in the annual adjustment factor (subject to the collars
set under the terms of the royalty financing agreements) of 5%
would decrease the fair value of the liability by GBP9,092.
An increase in the discount rate of 25 basis points would decrease
the fair value of the liability by GBP13,679.
17. Financial risk management
The Group's royalty financing activities expose it to various
types of risk that are associated with the investee companies
to which it provides royalty finance. The most important types
of financial risk to which the Group is exposed are market risk,
liquidity risk and credit risk. Market risk includes price risk,
foreign currency risk and interest rate risk. The Board of Directors
has overall responsibility for risk management and the policies
adopted to minimise potential adverse effects on the Group's
financial performance.
The policies and processes for measuring and mitigating each
of the main risks are described below.
Market Risk
Market risk comprises foreign exchange risk, interest rate risk
and other price risk.
Foreign exchange risk
Currency risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of changes
in foreign currency exchange rates. The functional and presentation
currency of the Group is Sterling.
The Group is exposed to foreign exchange risk arising from foreign
currency transactions, primarily with respect to the Euro. Foreign
exchange risk arises from future commercial transactions in recognised
assets and liabilities denominated in a currency that is not
the functional currency of the Company and its subsidiary.
The Group does not consider the foreign exchange risk to be significant
and therefore no steps have been taken to mitigate this risk.
The Group's exposure to foreign currency risk at the end of the
reporting period was as follows:
2018 2017
Euro Euro
GBP GBP
Royalty investments 7,216,755 -
Cash and cash equivalents 75,663 -
Royalty participation liability (293,002) -
6,999,416 -
If Sterling strengthens by 5% against the Euro the net Euro-denominated
assets would reduce by GBP361,720. Conversely, if it weakens
by 5% the assets would increase by GBP398,634.
During the year the following foreign exchange related amounts
were recognised in profit or loss:
2018 2017
GBP GBP
Exchange gain on royalty investment included -
in net change in fair value
on financial assets and liabilities at fair
value through profit or loss 77,837
Exchange loss on royalty participation liability
included in net change in
fair value on financial assets and liabilities
at fair value through profit
or loss (8,493)
Other exchange gains included in other income/expenses 97,238 -
166,582 -
Interest rate risk
Interest rate risk is the risk that the fair value of future
cash flows of a financial asset will fluctuate because of changes
in market interest rates.
The Group's main interest rate risk arises in relation to its
royalty investments, which are carried at fair value through
profit or loss. The Group's royalty investments have a fair value
at the balance sheet date of GBP23,568,548 (2017: GBPnil). A
sensitivity analysis in respect of these assets is presented
in note 16.
Other price risk
Other price risk is the risk that the fair value of future cash
flows of a financial asset will fluctuate because of changes
in market prices (other than those arising from interest rate
risk or foreign exchange risk).
The fair value of the Group's royalty investments fluctuates
due to changes in the expected annual adjustment factor applied
to the royalties payable by each of the investee companies, which
factors are based upon the revenue growth of the investee company.
A sensitivity analysis in respect of the annual adjustment factors
applied to the royalty investments is presented in note 16.
Credit risk
Credit risk is the risk that one party to a financial instrument
will cause a financial loss for the other party by failing to
discharge an obligation.
The Group's assets subject to credit risk are as follows:
2018 2017
GBP GBP
Royalty investments 23,568,548 -
Deal fees reimbursed receivable 100,000 -
Funds held in escrow 6,467,500 -
Cash and cash equivalents 3,165,221 14,350,154
33,301,269 14,350,154
Royalty investments
The royalty investments relate to the Group's three royalty financing
agreements. At the reporting date there are no royalty receipts
that are past due.
The Group monitors the credit worthiness of the investee companies
on an ongoing basis and receives regular financial reports from
each investee company. These reports are reviewed by the Investment
Committee.
The Group also has security in respect of the royalty investments
which can be called upon if the counterparty is in default under
the terms of the agreement (see note 8).
Funds held in escrow
The Group's funds held in escrow at the reporting date were held
in a solicitor's client account pending completion of the Group's
investment in Brownhills Investment Limited (see note 18). This
royalty financing agreement was completed in April 2018 and the
funds transferred to the investee.
Cash and cash equivalents
The credit quality of the Group's cash and cash equivalents can
be assessed by reference to external credit ratings as follows:
2018 2017
Moody's credit rating: GBP GBP
Aa3 294,136 -
Baa2 - 14,350,154
Baa3 2,871,085 -
3,165,221 14,350,154
The Group considers that the credit risk relating to cash and
cash equivalents is acceptable.
Liquidity risk
Liquidity risk is the risk that the Group will encounter in realising
assets or otherwise raising funds to meet financial commitments.
The Group maintains sufficient cash to pay accounts payable and
accrued expenses as they fall due. The Group's overall liquidity
risks are monitored on a quarterly basis by the Board.
The table below analyses the Group's royalty investments and
financial liabilities into relevant maturity groupings based
on their contractual maturities:
Total
contrac-
Less than 6 - 12 Between Between Over tual cash
6 months months 1 - 2 years 2 - 5 years 5 years flows
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 31 March
2018
Royalty investments 1,473 1,515 3,132 10,044 88,712 104,876
Royalty participation (92) (57) (117) (377) (3,327) (3,970)
Trade and other
payables (260) - - - - (260)
Total 1,121 1,458 3,015 9,667 85,385 100,646
As at 31 March
2017
Trade and other
payables (226) - - - - (226)
Capital management
The Board manages the Company's capital with the objective of
being able to continue as a going concern while maximising the
return to Shareholders through the capital appreciation of its
investments. The capital structure of the Company consists of
equity as disclosed in the Consolidated Statement of Financial
Position.
18. Events after the financial reporting date
Brownhills Investments Limited
In April 2018 the Group entered into a royalty financing agreement
with Brownhills Investments Limited ("Brownhills"). Under the
terms of the agreement the Group advanced GBP6.5 million to Brownhills
for a term of 30 years in exchange for annualised distributions
of approximately GBP0.9 million. The distributions are adjusted
annually based on the percentage change in Brownhill's gross
revenues compared to the prior year, subject to a floor and cap.
The investment is secured via fixed and floating charges. The
Group has provided Brownhills with a buyback option.
Lynx Equity (U.K.) Limited
In April 2018 the Group contributed a further GBP2 million of
royalty financing to Lynx Equity (U.K.) Limited ("Lynx"). This
entitled the Group to higher distributions from Lynx from June
2018, of GBP1.08 million per annual. The terms of the agreement
are outlined in note 8 to the Consolidated Financial Statements.
InterHealth Canada Holding Corp
In August 2018 the Group entered into a royalty financing agreement
with InterHealth Canada Holding Corp ("ICHC"). Under the terms
of the agreement the Group advanced GBP10 million to ICHC for
a term of 30 years in exchange for annualised distributions of
approximately GBP1.35 million. The distributions are adjusted
annually based on the percentage change in ICHC's gross revenues
compared to the prior year, subject to a floor and cap. The investment
is secured via fixed and floating charges. The Group has provided
ICHC with a buyback option.
Secured loan
In June 2018 the Group was granted a secured loan of GBP3.5 million
by a non-related third party. This loan has an expiry date of
30 June 2019 and bears interest at 9% per annum until 31 December
2018, rising to 12% per annum for the final six-month period
ending 30 June 2019. The loan required automatic repayment in
the event of the closure of an equity issue of more than GBP3.5
million and accordingly was repaid following the fundraising
noted below.
Fundraising
On 13 July 2018 the Company announced that 100 million new Ordinary
Shares had been successfully placed or subscribed for at a price
of 44 pence per share. The net proceeds from this fundraising
were approximately GBP42 million.
Dividends
On 12 April 2018 the Company paid a quarterly dividend of 0.6
pence per share and on 12 July 2018 the Company paid a further
quarterly dividend of 0.7 pence per share. On 20 September 2018
the Company approved a further quarterly dividend of 0.7 pence
per share, to be paid on 12 October 2018.
Exclusive healthcare collaboration
On 14 June 2018 the Company announced that it has mutually agreed
with Oliver Wyman to end the exclusive healthcare collaboration.
The work that the two firms have undertaken together while developing
the Group's existing royalty portfolio has adhered to the economic
framework of the original agreement however, the sector focus
has been broader than originally envisaged by either party. As
such, the necessity of the exclusive relationship in potential
healthcare investments was deemed to be no longer relevant by
either party, given that the Group's future pipeline transactions
are mostly outside of this sector.
Going forward, the Group intends to continue working with Oliver
Wyman on a non-exclusive basis. It also plans to supplement Oliver
Wyman's due diligence efforts with relationships with additional
global consulting firms which demonstrate expertise and local
knowledge for each investment opportunity.
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 rns@lseg.com or visit www.rns.com.
END
FR UUVRRWWAKUAR
(END) Dow Jones Newswires
September 24, 2018 02:00 ET (06:00 GMT)
1 Year Duke Capital Chart |
1 Month Duke Capital Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
