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‘Corporate mortgage’ provider Duke Royalty displays impressive growth

David Stevenson, 06/12/2019

While bank loans may be the most popular way for small to medium size businesses to gain financing, AIM-listed Duke Royalty's method of lending against a company’s future revenues appears to be paying off looking at their results for the first half of 2019.

In what CEO Neil Johnson describes as a ‘corporate mortgage’, companies can secure lending from Duke Royalty and it doesn’t matter if the company goes through some tough times, agreements can be for as long as 40 years and as long as it is still generating some sales, Duke gets paid.

Its results for the six months to 30 September show that the model is proving popular. Its revenues increased by 119 percent to £5.9 million, with cash generation up 195 percent to £3.9 million, both on a year-on-year basis. The company has more than tripled its pre-tax profits compared to last year as well, bringing in £3.7 million.

The way Duke Royalty works is that it has an annual reset of the money it will take back as repayment that is reflective of the movement of the investees’ revenue in the last 12 months. The reset is restricted to plus or minus 6 percent of the original deal agreed between the two parties. Therefore, although the company is not impacted by the investee’s profit figure, it has the ability to help out when times are tough.

The company can also make follow-up loans existing clients and in its results reports two such agreements with contact centre provider Welltel Ireland and Step Investments completed, totalling £1.65 million.

Mr Johnson said in a statement: "I am delighted to report that H1 2019's activities have materially increased our revenue, profitability and cashflow. Having entered the second half of the year with a strong pipeline of new royalty opportunities and greater financial flexibility, thanks to our new credit facility and our recent successful equity raise, we are confident that we can continue the rapid growth achieved to date. Importantly, we increased our dividend for the third time since inception, in line with our strategy, due to the follow-on investments made in existing royalty partners. We look forward to supporting our existing royalty partners further and making additional investments during the period to build on the rapid growth achieved to date."

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