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Duke Royalty seeks to raise up to £15m and re-admission to AIM

Duke Royalty (DUKE) has announced proposals for a conditional placing to raise up to £15.0 million, before expenses, by way of a fundraising. This to comprise a placing and subscription of up to 37.5 million New Shares at a price of 40 pence per share. DUKE says that the net proceeds of the fundraising, which it expects to be approximately £13.8 million, will allow it to commence investing in its pipeline of royalty financing opportunities. The fundraising is conditional on admission of the Placing Shares and the Subscription Shares to trading on AIM becoming effective

DUKE says that the placing will be conducted by way of an accelerated bookbuild process with which will be launched immediately following this announcement, in accordance with the terms and conditions set out in the Appendix to this announcement. Cantor Fitzgerald and Mirabaud are acting as joint bookrunners in connection with the Placing. The Issue Price of 40p per share represents a discount of approximately 15.8 per cent. to the price of 47.5 pence per Existing Ordinary Share.

DUKE’s Directors say that they believe that royalty finance is an attractive funding opportunity for privately owned businesses, with the potential to generate attractive returns uncorrelated to general equity market performance. The Directors believe that there is a substantial addressable market for royalty finance and that the Company will benefit from the combined talent and experience of the Board and executive team, coupled with the exclusive collaboration that the Company has with Oliver Wyman to assist it to source and assess royalty financing opportunities. The Directors say that there strategy is to build a diversified portfolio of royalty streams from companies, focusing on income growth through the deployment of the proceeds of the Fundraising to take advantage of a pipeline of near term royalty opportunities in the SME market. It is an objective of the Company to pay a significant proportion of its free cash flow from the royalty revenues it receives to Shareholders as dividends.

Duke will provide its Royalty Partners with long term financing which is expected to have a term of between 25 and 40 years (or even, in certain circumstances, a perpetual term). The contemplated terms of the royalty agreements are such that in the first year, the Royalty Partner would typically pay Duke a monthly distribution or royalty (typically 12-15 per cent. per annum of the financing amount). In the second year, and each year going forward, the monthly distribution would then be linked to the year on year growth in the revenue of the Royalty Partner collared at six per cent. per year of the total increase or decrease in revenue over the prior year.

DUKE has never paid a dividend, but the board says that it is its intention to start paying dividends in the financial year ending 31 March 2018 and that the Company will, in normal circumstances, pay out approximately 80 – 100 per cent. of its free cash flow to its shareholder in the form of dividends. With the proceeds of the Fundraising, the Company is targeting an annualised dividend yield of between 7 and 8 per cent. once fully invested with a minimum targeted dividend yield of at least 5 per cent in the financial year to 31 March 2018.  It is intended that, any dividend paid by the Company will be paid on a quarterly basis on or around, the end of each calendar quarter.

Duke Royalty seeks to raise up to £15m and re-admission to AIM : DUKE

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