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22 November 2023
Duke Royalty Limited
("Duke Royalty", "Duke" or the "Company")
Interim Results for the six months ended 30 September 2023
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 its interim results for the six-months ended 30 September 2023 ("Interim 2024").
Financial Highlights
· Total cash revenue up 35% from the prior period to £14.1 million (Interim 2023: £10.4 million)
· Recurring cash revenue* totalled £12.2 million, up 17% from Interim 2023 (£10.4 million)
· Free cash flow** up 23% to £7.9 million (Interim 2023: £6.5 million)
· Adjusted earnings up 23% to 1.95 pence per share (Interim 2023: 1.58 pence per share)
· Cash dividends of 1.40 pence per share paid to shareholders (Interim 2023: 1.40 pence per share)
Operational Highlights
· Deployed over £18 million of capital into new and existing Royalty Partners
· One new royalty partner added to the portfolio, taking total to 15
· One investment buyback with Instor delivering a triple digit IRR
· Over £40 million of available liquidity for future deployments
* Recurring cash revenue excludes buyback premiums, cash gains from the sale of equity investments and one-off fee income
** Free cashflow is defined as operating cashflow, plus cash gains from the sale of equity investments, less investment costs less interest payable of Duke's debt facility
Nigel Birrell, Chairman of Duke Royalty, said:
"During the interim period Duke was able to post its twelfth consecutive quarter of increasing recurring cash revenue which was a fantastic achievement for the Company. In line with this strong financial performance, the Company also maintained its quarterly dividend of 0.70p per share. Investors can be reassured that the dividend payout remains well covered by operating cashflow with the attractive yield representing a pillar of Duke's ongoing business model and its overall financial discipline.
"Looking forward, I am pleased to say that Duke remains well-positioned for growth. We believe that we have an attractive offering through our private credit and private equity hybrid product, as well as a philosophy that resonates with SME business owners due to our ability to offer a long-term, partnership-based solution which keeps owners in control of their company."
This announcement contains inside information.
For further information, please contact www.dukeroyalty.com, or contact:
Duke Royalty Limited | Neil Johnson / Charles Cannon Brookes / Hugo Evans
| +44 (0) 1481 231 816 |
Cavendish Securities plc (Nominated Adviser and Joint Broker)
| Stephen Keys / Callum Davidson / Michael Johnson
| +44 (0) 207 397 8900 |
Canaccord Genuity (Joint Broker)
| Adam James / Harry Rees | +44 (0) 207 523 8000 |
SEC Newgate (Financial Communications) | Elisabeth Cowell / Alice Cho / Matthew Elliott | +44 (0) 20 3757 6880 dukeroyalty@secnewgate.co.uk |
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
Dear Shareholder,
I am pleased to report that Duke Royalty's results for Interim 2024 have once again highlighted the robust nature of the Company's business model in the face of significant ongoing global economic and political challenges. In particular, I am delighted to say that Duke was able to post its twelfth consecutive quarter of increasing recurring cash revenue during the Interim period.
Duke's simple investment philosophy of providing long dated, senior secured debt capital into long established, profitable SME owner-operated businesses has largely protected the Company from the high levels of volatility that have been witnessed in the public equity markets during the period. The predictable nature of Duke's monthly cashflows alongside its own tight internal cost controls has allowed Duke to report a strong financial performance for Interim 2024. In line with this strong financial performance, the Company also maintained its quarterly dividend of 0.7p per share. Investors can be reassured that the dividend payout remains well covered by operating cashflow with the attractive yield representing a pillar of Duke's ongoing business model and its overall financial discipline.
This strong set of results has been achieved despite the challenging business environment we are operating in. In the last two years, the UK experienced a record-breaking 14 consecutive interest rate increases, a trend that has largely been mirrored in both the EU and North America. Central banks have taken a pause from additional near-term interest hikes with inflation rates now trending back towards their longer-term norms. However, we believe the current elevated level of interest rates are set to remain for some time and we are not expecting to see any cuts until well into the Company's FY25 period. For Duke, the higher cost of borrowing has had a few core effects.
First, it has increased Duke's own debt servicing costs which have put a squeeze on free cashflow margins and second, it has resulted in a general reduction in consumer discretionary spend. Furthermore, there is no question that businesses have become increasingly burdened by wage inflation and a period of stubbornly high power costs. This backdrop has had an inevitable effect on both revenue and profit expectations for some of Duke's partners but, as long term, supportive investors, our investment team is working diligently to ensure they are given whatever help is required.
However, overall I am pleased to be able to report that the Duke portfolio remains well insulated and in a healthy position, protected by its increasing level of diversification. A positive effect that has resulted from the elevated level of interest rates has been the material increase in the cost of all other competing forms of debt. As I have mentioned before, Duke's permanent equity capital base and its long-term lending approach throughout economic cycles have enabled it to refrain from significantly increasing the cost of its offering in the short-term. The deliberate decision to not significantly raise the initial cost allows Duke to evaluate more opportunities through the lens of that company's ability to weather continued economic headwinds.
Unsurprisingly, Duke was cautious on making new deployments in Interim 2024 given the high level of uncertainty in the markets as well as a general declining trend in valuations that we are seeing across the board. The Company did welcome Glasshouse Products LLC as a new partner by entering into an US$11.5 million financing agreement. Founded in 2002 in Texas, Glasshouse is a long-established provider of custom glass solutions including the design, fabrication, sale and installation of glass architectural products and I hope that Glasshouse will become a long-standing core holding in the Duke portfolio as it executes its buy and build strategy. During the period, Duke also announced the successful exit of its investment in Instor Solutions, Inc., a California-based product reseller and service provider for work related to the build-out and migration of data centres. The exit represented the sixth and most profitable exit for Duke to date, delivering a triple digit IRR.
Outlook
Duke remains well-positioned for growth, having created a large and diversified portfolio of royalty investments alongside an exciting pipeline of new deal opportunities. The Company's liquidity position remains robust and the current macroeconomic climate means that demand for Duke's low amortising, patient capital remains strong. Our approach to monitoring our existing investments is collaborative and thorough. We evaluate monthly management accounts and look for signs of stress and aim to be proactive in working with a partner to address any issues. Having good visibility into our portfolio allows us to be cautiously optimistic for the rest of the year.
Looking more broadly, we constantly review the trends in the financing industry and we are pleased to report that Duke's core product is unique in the market due to its long duration and low amortisation qualities. The Private Credit market is a large and growing segment of the financing sector, and part of its growth has been from Private Equity players expanding into credit. What used to be the domain of the high street banks is increasingly supplemented by alternative financing providers, of which Duke is one. Our growing pipeline underpins our belief that we have a philosophy that resonates with SME business owners due to our ability to offer a long-term, partnership-based solution which keeps owners in control of their company.
Our product is essentially a hybrid between Private Credit and Private Equity, and as the Private Credit explosion has become mainstream in SME lending, we aim to ensure our 'best of both worlds' approach is articulated to business owners in a way they can compare. Therefore, we have embarked on a review of how best to show business owners the advantages of Duke when they are looking for capital. This review is ongoing and we will share the exciting changes with our shareholders in the period to come when they have been finalised. Our product remains the same to new business owners, but how we will engage with them will open up more opportunities for Duke and the goal is to broaden our appeal. We believe we are at the forefront of a large opportunity as Private Credit solutions become more accepted in SME lending.
As always, I am appreciative of the ongoing support of our shareholders and, on the back of a period of continued resilience and growth, I look forward to reporting on the Group's ongoing progress and development in future periods.
Nigel Birrell
Chairman
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
| Note | Period to | | Year to | | Period to |
| | 30-Sep-23 | | 31-Mar-23 | | 30-Sep-22 |
| | (unaudited) | | (audited) | | (unaudited) |
| | £000 | | £000 | | £000 |
Cash flows from operating activities | | | | | | |
Receipts from royalty investments | 6 | 13,720 | | 21,364 | | 10,234 |
Receipts of interest from loan investments | 7 | 259 | | 339 | | 173 |
Other operating income | | 45 | | 176 | | 30 |
Operating expenses paid | | (2,383) | | (3,306) | | (1,061) |
Payments for royalty participation fees | 9 | (68) | | (112) | | (57) |
Tax paid | | (498) | | (1,346) | | (813) |
Net cash inflow from operating activities | | 11,075 | | 17,115 | | 8,506 |
| | | | | | |
Cash flows from investing activities | | | | | | |
Royalty investments advanced | 6 | (17,102) | | (23,809) | | (6,550) |
Royalty investments received | 6 | 7,041 | | - | | - |
Loan investments advanced | 7 | - | | (2,500) | | (700) |
Loan investments received | 7 | - | | 2,000 | | - |
Equity investments advanced | 8 | (926) | | (500) | | - |
Equity dividends received | 8 | 48 | | 3 | | - |
Receipt of deferred consideration | 10 | 750 | | - | | - |
Investment costs paid | | (358) | | (357) | | (173) |
Net cash outflow from investing activities | | (10,547) | | (25,163) | | (7,423) |
| | | | | | |
Cash flows from financing activities | | | | | | |
Proceeds from share issue | 14 | - | | 20,000 | | 20,000 |
Share issue costs | 14 | - | | (1,115) | | (1,115) |
Dividends paid | 17 | (5,709) | | (10,979) | | (5,282) |
Proceeds from loans | 12 | 5,000 | | 71,250 | | 5,050 |
Loans repaid | 12 | - | | (61,450) | | (18,500) |
Interest paid | 12 | (2,819) | | (3,976) | | (1,872) |
Other finance costs paid | | - | | (2,426) | | (30) |
Net cash (outflow) / inflow financing activities | | (3,528) | | 11,304 | | (1,749) |
| | | | | | |
Net change in cash and cash equivalents | | (3,000) | | 3,256 | | (666) |
| | | | | | |
Cash and cash equivalents at beginning of period/year | | 8,939 | | 5,707 | | 5,707 |
Effect of foreign exchange on cash | | 32 | | (24) | | 31 |
| | | | | | |
Cash and cash equivalents at the end of period/year | | 5,971 | | 8,939 | | 5,072 |
The notes form an integral part of these Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| | Period to | | Year to | | Period to |
| | 30-Sep-23 | | 31-Mar-23 | | 30-Sep-22 |
| Note | (unaudited) | | (audited) | | (unaudited) |
| | £000 | | £000 | | £000 |
Income | | | | | | |
Royalty investment net income | 6 | 13,514 | | 28,266 | | 15,079 |
Loan investment net income | 7 | 259 | | 339 | | 173 |
Equity investment net income | 8 | (3,442) | | 2,212 | | 485 |
Other operating income | | 45 | | 176 | | 30 |
Total income | | 10,376 | | 30,993 | | 15,767 |
| | | | | | |
Investment costs | | | | | | |
Transaction costs | | (21) | | (66) | | (28) |
Due diligence costs | | (309) | | (620) | | (455) |
Total investment costs | | (330) | | (686) | | (483) |
| | | | | | |
Operating costs | | | | | | |
Administration and personnel | | (2,033) | | (2,627) | | (1,811) |
Legal and professional | | (274) | | (456) | | (232) |
Other operating costs | | (131) | | (223) | | (100) |
Expected credit losses | 7 | - | | (20) | | - |
Share-based payments | 15 | (537) | | (969) | | (458) |
Total operating costs | | (2,975) | | (4,295) | | (2,601) |
| | | | | | |
Operating profit | | 7,071 | | 26,012 | | 12,683 |
| | | | | | |
Net foreign currency gains | | 55 | | 66 | | 177 |
Finance costs | 3 | (3,326) | | (5,644) | | (1,951) |
| | | | | | |
Profit for the period before tax | | 3,800 | | 20,434 | | 10,909 |
| | | | | | |
Taxation expense | 4 | (408) | | (842) | | (614) |
| | | | | | |
Total comprehensive income for the period | | 3,392 | | 19,592 | | 10,295 |
| | | | | | |
Basic earnings per share (pence) | 5 | 0.83 | | 4.92 | | 2.65 |
Diluted earnings per share (pence) | 5 | 0.83 | | 4.92 | | 2.65 |
All income is attributable to the holders of the Ordinary Shares of the Company.
The notes form an integral part of these Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| | 30-Sep-23 | | 31-Mar-23 | | 30-Sep-22 |
| Note | (unaudited) | | (audited) | | (unaudited) |
| | £000 | | £000 | | £000 |
Non-current assets | | | | | | |
Goodwill | 13 | 203 | | 203 | | 203 |
Royalty finance investments | 6 | 174,149 | | 158,540 | | 149,853 |
Loan investments | 7 | 4,652 | | 4,652 | | 3,872 |
Equity investments | 8 | 11,564 | | 13,529 | | 11,305 |
Deferred tax asset | 18 | 200 | | 200 | | 155 |
| | 190,768 | | 177,124 | | 165,388 |
Current assets | |
| | | | |
Royalty finance investments | 6 | 26,521 | | 32,793 | | 22,091 |
Loan investments | 7 | - | | - | | 1,000 |
Trade and other receivables | 10 | 1,529 | | 2,290 | | 2,294 |
Cash and cash equivalents | | 5,971 | | 8,939 | | 5,072 |
Current tax asset | | 463 | | 373 | | 111 |
| | 34,484 | | 44,395 | | 30,568 |
| |
| | | | |
Total Assets | | 225,252 | | 221,519 | | 195,956 |
| |
| | | | |
Current liabilities | |
| | | | |
Royalty debt liabilities | 9 | 167 | | 154 | | 165 |
Trade and other payables | 11 | 454 | | 433 | | 1,423 |
Borrowings | 12 | 527 | | 441 | | 337 |
| | 1,148 | | 1,028 | | 1,925 |
Non-current liabilities | |
| | | | |
Royalty debt liabilities | 9 | 988 | | 988 | | 960 |
Trade and other payables | 11 | 1,286 | | 1,314 | | 1,331 |
Borrowings | 12 | 59,351 | | 53,930 | | 34,363 |
| | 61,625 | | 56,232 | | 36,654 |
| |
| | | | |
Net Assets | | 162,479 | | 164,259 | | 157,377 |
| |
| | | | |
Equity | |
| | | | |
Shares issued | 14 | 172,939 | | 172,939 | | 172,939 |
Share based payment reserve | 15 | 3,984 | | 3,447 | | 2,936 |
Warrant reserve | 15 | 3,036 | | 3,036 | | 265 |
Retained losses | 16 | (17,480) | | (15,163) | | (18,763) |
| |
| | | | |
Total Equity | | 162,479 | | 164,259 | | 157,377 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| | | | Share-based | | | | | | |
| | Shares | | payment | | Warrant | | Retained | | Total |
| Note | issued | | reserve | | reserve | | losses | | equity |
| | £000 | | £000 | | £000 | | £000 | | £000 |
| | | | | | | | | | |
At 1 April 2022 | | 153,974 | | 2,478 | | 265 | | (23,776) | | 132,941 |
| | | | | | | | | | |
Total comprehensive income for the period | | - | | - | | - | | 10,295 | | 10,295 |
| | | | | | | | | | |
Transactions with owners | | | | | | | | | | |
Shares issued for cash | 14 | 20,000 | | - | | - | | - | | 20,000 |
Share issuance costs | 14 | (1,115) | | - | | - | | - | | (1,115) |
Shares issued to key advisers as remuneration | 14 | 80 | | - | | - | | - | | 80 |
Share based payments | 15 | | | 458 | | - | | - | | 458 |
Dividends | 17 | - | | - | | - | | (5,282) | | (5,282) |
Total transactions with owners | | 18,965 | | 458 | | - | | (5,282) | | 14,141 |
| | | | | | | | | | |
At 30 September 2022 | | 172,939 | | 2,936 | | 265 | | (18,763) | | 157,377 |
| | | | | | | | | | |
Total comprehensive income for the period | | - | | - | | - | | 9,297 | | 9,297 |
| | | | | | | | | | |
Transactions with owners | | | | | | | | | | |
Share based payments | 15 | - | | 511 | | - | | - | | 511 |
Warrants issued | 15 | - | | - | | 2,771 | | - | | 2,771 |
Dividends | 17 | - | | - | | - | | (5,697) | | (5,697) |
Total transactions with owners | | - | | 511 | | 2,771 | | (5,697) | | (2,415) |
| | | | | | | | | | |
At 31 March 2023 | | 172,939 | | 3,447 | | 3,036 | | (15,163) | | 164,259 |
| | | | Share-based | | | | | | |
| | Shares | | payment | | Warrant | | Retained | | Total |
| Note | issued | | reserve | | reserve | | losses | | equity |
| | £000 | | £000 | | £000 | | £000 | | £000 |
| | | | | | | | | | |
At 1 April 2023 | | 172,939 | | 3,447 | | 3,036 | | (15,163) | | 164,259 |
| | | | | | | | | | |
Total comprehensive income for the period | | - | | - | | - | | 3,392 | | 3,392 |
| | | | | | | | | | |
Transactions with owners | | | | | | | | | | |
Share based payments | 15 | - | | 537 | | - | | - | | 537 |
Dividends | 17 | - | | - | | - | | (5,709) | | (5,709) |
Total transactions with owners | | - | | 537 | | - | | (5,709) | | (5,172) |
| | | | | | | | | | |
At 30 September 2023 | | 172,939 | | 3,984 | | 3,036 | | (17,480) | | 162,479 |
The notes form an integral part of these Condensed Consolidated Financial Statements.
1. General Information
Duke Royalty Limited ("Duke Royalty" or the "Company") is a company limited by shares, incorporated in Guernsey under the Companies (Guernsey) Law, 2008. Its shares are traded on the AIM market of the London Stock Exchange.
The "Group" comprised Duke Royalty Limited and its wholly owned subsidiaries; Duke Royalty UK Limited, Capital Step Holdings Limited, Capital Step Investments Limited, Capital Step Funding Limited, Capital Step Funding 2 Limited and Duke Royalty Employee Benefit Trust. During the period, Capital Step Holdings Limited, Capital Step Investments Limited, Capital Step Funding Limited, Capital Step Funding 2 Limited were dissolved via voluntarily strike offs. Also during the period, the Group incorporated Duke Royalty US Holdings, Inc., a company registered in Delaware, USA.
The Group's investing policy is to invest in a diversified portfolio of royalty finance and related opportunities.
2. Significant accounting policies
2.1 Basis of preparation
The interim Condensed Consolidated Financial Statements of the Group have been prepared in accordance with UK adopted international accounting standards, and applicable Guernsey law, and reflect the following policies, which have been adopted and applied consistently.
On 31 December 2020, IFRS as adopted by the European Union at that date was brought into the UK law and became UK-adopted international accounting standards, with future changes being subject to endorsement by the UK Endorsement Board. The group transitioned to UK-adopted international accounting standards in its consolidated financial statements on 1 April 2021. There was no impact or changes in accounting from the transition.
The accounting policies adopted in the preparation of the interim Condensed Consolidated Financial Statements are consistent with those followed in the preparation of the Consolidated Financial Statements of the Group for the year ended 31 March 2023.
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
The Directors consider that the Group has adequate financial resources to enable it to continue operations for a period of no less than 12 months from the date of approval of the financial statements. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.
2.2 New and amended standards adopted by the Group
There were no new standards adopted by the Group during the reporting period.
2.3 New standards and interpretations not yet adopted
At the date of authorisation of these interim Condensed Consolidated Financial Statements, certain standards and interpretations were in issue but not yet effective and have not been applied in these interim Condensed Consolidated Financial Statements. The Directors do not expect that the adoption of these standards and interpretations will have a material impact on the interim Condensed Consolidated Financial Statements of the Group in future periods.
2.4 Going concern
In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council. After making enquiries and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future.
The cash flow needs of the Group have been assessed taking account the need for further funding for any of the existing royalty partners and the ongoing working capital needs of the business against the current cash and liquidity of the Group.
Furthermore, there is adequate headroom in terms of the uncalled loan facility in place should it be required.
3. Finance Costs
| Period to |
| Year to | | Period to |
| 30-Sep-23 |
| 31-Mar-23 | | 30-Sep-22 |
| (unaudited) |
| (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
Interest payable on borrowings | 2,905 | | 3,861 | | 1,750 |
Non-utilisation fees | - | | 194 | | 112 |
Deferred finance costs released to P&L | 421 | | 1,558 | | 89 |
Other finance costs | - | | 31 | | - |
| 3,326 |
| 5,644 |
| 1,951 |
4. 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.
| Period to |
| Year to | | Period to |
| 30-Sep-23 |
| 31-Mar-23 | | 30-Sep-22 |
| (unaudited) |
| (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
Current tax | | | | | |
Income tax expense | 408 | | 886 |
| 613 |
|
| | |
| |
Deferred tax |
| | |
| |
Decrease in deferred tax assets | - | | (44) |
| 1 |
| - | | (44) |
| 1 |
|
| | |
| |
Income tax expense | 408 | | 842 |
| 614 |
Factors affecting income tax expense for the period
| Period to |
| Year to | | Period to |
| 30-Sep-23 |
| 31-Mar-23 | | 30-Sep-22 |
| (unaudited) |
| (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
Profit on ordinary activities before tax | 3,800 | | 20,434 | | 10,910 |
|
| | | | |
Tax using the Groups effective tax rate of 10.73% (30 September 2022: 5.63%, 31 March 2023: 4.12%) | 408 | | 842 | | 614 |
Income tax expense | 408 | | 842 | | 614 |
5. Earnings per share
| Period to |
| Year to | | Period to |
| 30-Sep-23 |
| 31-Mar-23 | | 30-Sep-22 |
| (unaudited) |
| (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
Total comprehensive income (£000) | 3,392 | | 19,592 | | 10,295 |
Weighted average number of Ordinary Shares in issue, excluding treasury shares (000s) | 410,484 | | 397,991 | | 388,412 |
Basic earnings per share (pence) | 0.83 | | 4.92 | | 2.65 |
| Period to |
| Year to | | Period to |
| 30-Sep-23 |
| 31-Mar-23 | | 30-Sep-22 |
| (unaudited) |
| (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
Total comprehensive income (£000) | 3,392 | | 19,592 | | 10,295 |
Diluted weighted average number of Ordinary Shares in issue, excluding treasury shares (000s) | 410,484 | | 397,991 | | 388,412 |
Diluted earnings per share (pence) | 0.83 | | 4.92 | | 2.65 |
Basic earnings per share is calculated by dividing total comprehensive income for the period by the weighted average number of shares in issue throughout the period, excluding treasury shares (see Note 14). Diluted earnings per share represents the basic earnings per share adjusted for the effect of dilutive potential shares issuable on exercise of share options under the Company's share-based payment schemes, weighted for the relevant period.
All share options, warrants and Long-Term Incentive Plan awards in issue are not dilutive at the year-end as the exercise prices were above the average share price for the period. However, these could become dilutive in future periods.
Adjusted earnings per share
Adjusted earnings represent the Group's underlying performance from core activities. Adjusted earnings is the total comprehensive income adjusted for unrealised and non-core fair value movements, non-cash items and transaction-related costs, including due diligence fees, together with the tax effects thereon. Given the sensitivity of the inputs used to determine the fair value of its investments, the Group believes that adjusted earnings is a better reflection of its ongoing financial performance.
Valuation and other non-cash movements such as those outlined are not considered by management in assessing the level of profit and cash generation of the Group. Additionally, IFRS 9 requires transaction-related costs to be expensed immediately whilst the income benefit is over the life of the asset. As such, an adjusted earnings measure is used which reflects the underlying contribution from the Group's core activities during the year.
| Period to |
| Year to | | Period to |
| 30-Sep-23 |
| 31-Mar-23 | | 30-Sep-22 |
| (unaudited) |
| (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
Total comprehensive income for the period | 3,392 | | 19,592 | | 10,295 |
|
| | | | |
Unrealised fair value movements | 4,295 | | (9,111) | | (5,330) |
Expected credit losses | - | | 20 | | - |
Share-based payments | 537 | | 969 | | 458 |
Investment costs | 330 | | 686 | | 483 |
Tax effect of the adjustments above at Group effective rate | (553) | | 306 | | 247 |
Adjusted earnings | 8,001 | | 12,462 | | 6,153 |
| Period to |
| Year to | | Period to |
| 30-Sep-23 |
| 31-Mar-23 | | 30-Sep-22 |
| (unaudited) |
| (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
Adjusted earnings for the year (£000) | 8,001 | | 12,462 | | 6,153 |
Weighted average number of Ordinary Shares in issue, excluding treasury shares (000s) | 410,484 | | 397,991 | | 388,412 |
Adjusted earnings per share (pence) | 1.95 | | 3.13 | | 1.58 |
| Period to |
| Year to | | Period to |
| 30-Sep-23 |
| 31-Mar-23 | | 30-Sep-22 |
| (unaudited) |
| (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
Diluted adjusted earnings for the year (£000) | 8,001 | | 12,462 | | 6,153 |
Diluted weighted average number of Ordinary Shares in issue, excluding treasury shares (000s) | 410,484 | | 397,991 | | 388,412 |
Diluted adjusted earnings per share (pence) | 1.95 | | 3.13 | | 1.58 |
6. Royalty investments
Royalty investments are financial assets held at FVTPL that relate to the provision of royalty capital to a diversified portfolio of companies.
| 30-Sep-23 |
| 31-Mar-23 | | 30-Sep-22 |
| (unaudited) |
| (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
Brought forward | 191,333 | | 160,479 | | 160,479 |
Additions | 17,102 | | 23,809 | | 6,550 |
Buybacks | (7,041) | | - | | - |
(Loss) / profit on financial assets at FVTPL | (724) | | 7,045 | | 4,915 |
| 200,670 | | 191,333 | | 171,944 |
Royalty finance investments are comprised of:
| 30-Sep-23 |
| 31-Mar-23 | | 30-Sep-22 |
| (unaudited) |
| (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
Non-current | 174,149 | | 158,540 | | 149,853 |
Current | 26,521 | | 32,793 | | 22,091 |
| 200,670 | | 191,333 | | 171,944 |
Royalty investment net income on the face of the consolidated statement of comprehensive income comprises:
| Period to |
| Year to | | Period to |
| 30-Sep-23 |
| 31-Mar-23 | | 30-Sep-22 |
| (unaudited) |
| (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
Royalty interest | 12,559 | | 21,364 | | 10,234 |
Royalty premiums | 1,760 | | - | | - |
(Loss) / gain on royalty assets at FVTPL | (724) | | 7,045 | | 4,916 |
Loss on royalty liabilities at FVTPL | (81) | | (143) | | (71) |
| 13,514 | | 28,266 | | 15,079 |
All financial assets held at FVTPL are mandatorily measured as such.
The Group's royalty investment assets comprise royalty financing agreements with 15 (30 September 2022: 13, 31 March 2023: 15) investees. Under the terms of these agreements the Group advances funds in exchange for annualised royalty distributions. The distributions are adjusted based on the change in the investees' revenues, subject to a floor and a cap. The financing is secured by way of fixed and floating charges over certain of the investees' assets. The investees are provided with buyback options, exercisable at certain stages of the agreements.
7. Loan investments
Loan investments are financial assets held at amortised cost which the exception of the £2.2 million loan issued at 0% interest. The impact of discounting is immaterial to the financial statements. The below table shows both the loans at amortised cost and fair value.
| 30-Sep-23 |
| 31-Mar-23 | | 30-Sep-22 |
| (unaudited) |
| (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
Brought forward | 4,652 | | 4,172 | | 4,172 |
Additions | - | | 2,500 | | 700 |
Buybacks | - | | (2,000) | | - |
Expected credit losses | - | | (20) | | - |
| 4,652 | | 4,652 | | 4,872 |
The Group's loan investments comprise secured loans advanced to two entities (30 September 2022: two, 31 March 2023: two) in connection with the Group's royalty investments.
The loans comprise fixed rate loans of £4,652,000 (30 September 2022: £4,872,000, 31 March 2023: £4,652,000) which bear interest at rates of between 0% and 15%.
The loans mature as follows:
| 30-Sep-23 |
| 31-Mar-23 | | 30-Sep-22 |
| (unaudited) |
| (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
In less than one year | - | | - | | 1,000 |
In one to two years | - | | - | | - |
In two to five years | 4,652 | | 4,652 | | 3,872 |
| 4,652 | | 4,652 | | 4,872 |
Loan investment net income on the face of the consolidated statement of comprehensive income comprises:
| Period to |
| Year to | | Period to |
| 30-Sep-23 |
| 31-Mar-23 | | 30-Sep-22 |
| (unaudited) |
| (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
Loan interest | 259 | | 339 | | 173 |
ECL Analysis
The measurement of ECLs is primarily based on the product of the instrument's probability of default ("PD"), loss given default ("LGD"), and exposure at default ("EAD"). The Group analyses a range of factors to determine the credit risk of each investment. These include, but are not limited to:
· liquidity and cash flows of the underlying businesses
· security strength
· covenant cover
· balance sheet strength
If there is a material change in these factors, the weighting of either the PD, LGD or EAD increases, thereby increasing the ECL impairment.
The disclosure below presents the gross and net carrying value of the Group' loan investments by stage:
| Gross carrying amount |
| Allowance for ECLs | | Net Carrying amount |
As at 30 September 2023 | £000 | | £000 | | £000 |
| | | | | |
Stage 1 | 4,692 |
| (40) |
| 4,652 |
Stage 2 | - |
| - |
| - |
Stage 3 | - |
| - |
| - |
| 4,692 |
| (40) |
| 4,652 |
| Gross carrying amount | | Allowance for ECLs | | Net Carrying amount |
As at 31 March 2023 | £000 | | £000 | | £000 |
| | | | | |
Stage 1 | 4,692 | | (40) | | 4,652 |
Stage 2 | - | | - | | - |
Stage 3 | - | | - | | - |
| 4,692 | | (40) | | 4,652 |
| Gross carrying amount | | Allowance for ECLs | | Net Carrying amount |
As at 30 September 2022 | £000 | | £000 | | £000 |
| | | | | |
Stage 1 | 4,892 | | (20) | | 4,872 |
Stage 2 | - | | - | | - |
Stage 3 | - | | - | | - |
| 4,892 | | (20) | | 4,872 |
Under the ECL model introduced by IFRS 9, impairment provisions are driven by changes in credit risk of instruments, with a provision for lifetime expected credit losses recognised where the risk of default of an instrument has increased significantly since initial recognition.
The credit risk profile of the investments has not increased materially and they remain Stage 1 assets. No ECLs have been charged in the period on these assets as they are not deemed material.
The following table analyses Group's provision for ECL's by stage for the period ended 30 September 2023:
| Stage 1 |
| Stage 2 |
| Stage 3 |
| Total |
| £000 |
| £000 |
| £000 |
| £000 |
|
|
|
|
|
| |
|
At 1 April 2022 and 30 September 2022 | 72 | | - | | - | | 72 |
Expected credit losses on loan investments in period | 22 | | - | | - | | 22 |
Refinanced loans | (2) | | | | | | (2) |
Carrying value at 31 March 2023 and 30 September 2023 | 92 | | - | | - | | 92 |
8. Equity investments
Equity investments are financial assets held at FVTPL.
| 30-Sep-23 | | 31-Mar-23 | | 30-Sep-22 |
| (unaudited) | | (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
Brought forward | 13,529 | | 10,820 | | 10,820 |
Additions | 1,525 | | 500 | | - |
(Loss) / gain on equity assets held at FVTPL | (3,490) | | 2,209 | | 485 |
| 11,564 | | 13,529 | | 11,305 |
The Group's equity investments comprise unlisted shares in 12 of its royalty investment companies (30 September 2022: 10, 31 March 2023: 11).
The Group also still holds two (30 September 2022: two, 31 March 2023: two) unlisted investments in mining entities from its previous investment objectives. The Board does not consider there to be any future cash flows from the remaining investments and they are fully written down to nil value.
Equity investment net income on the face of the consolidated statement of comprehensive income comprises:
| Period to |
| Year to | | Period to |
| 30-Sep-23 | | 31-Mar-23 | | 30-Sep-22 |
| (unaudited) | | (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
(Loss) / gain on equity investments at FVTPL | (3,490) | | 2,209 | | 485 |
Dividend income | 48 | | 3 | | - |
| (3,442) | | 2,212 | | 485 |
9. Royalty debt liabilities
Royalty debt liabilities are financial liabilities held at FVTPL.
| 30-Sep-23 |
| 31-Mar-23 | | 30-Sep-22 |
| (unaudited) |
| (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
Brought forward | 1,142 | | 1,111 | | 1,111 |
Payments made | (68) | | (112) | | (57) |
Loss on financial assets held at FVTPL | 81 | | 143 | | 71 |
| 1,155 | | 1,142 | | 1,125 |
Royalty debt liabilities are comprised of:
| 30-Sep-23 | | 31-Mar-23 | | 30-Sep-22 |
| (unaudited) | | (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
Current | 167 | | 154 | | 165 |
Non-current | 988 | | 988 | | 960 |
| 1,155 | | 1,142 | | 1,125 |
10. Trade and other receivables
| 30-Sep-23 | | 31-Mar-23 | | 30-Sep-22 |
| (unaudited) | | (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
Current | | | | | |
Prepayments and accrued income | 25 | | 59 | | 8 |
Other receivables | 1,504 | | 2,231 | | 2,286 |
| 1,529 | | 2,290 | | 2,294 |
The other receivable balance consists of funds due on the sale of Duke Royalty Switzerland Gmbh, incorporated to hold the riverboat assets. On 31 March 2021, Duke sold its Swiss subsidiary to Starling Fleet AG for €11,600,000. The deal was structured so that €5,000,000 was payable on or before 30 September 2021 and €4,000,000 was due on or before 30 September 2022. Of the remaining €2,600,000, €867,000 was paid in September 2023, with the remainder due on or before 30 September 2024. The outstanding balance is accruing interest at 10% er annum.
Using the same methodology as laid out in note 7 for the loan investments, the deferred consideration has been subject to ECL impairment. The financial strength of the counterparty has been reviewed in conjunction with current and future outlook for river cruising, while also considering the charges that the Group owns over the riverboats. No impairment was recognised in the period to 30 September 2023.
11. Trade and other payables
| 30-Sep-23 | | 31-Mar-23 | | 30-Sep-22 |
| (unaudited) | | (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
Current | | | | | |
Trade payables | 20 | | 6 | | 8 |
Transaction costs | 316 | | 315 | | 279 |
Accruals and deferred income | 118 | | 112 | | 1,136 |
| 454 | | 433 | | 1,423 |
Non-current |
| | | | |
Transaction costs | 1,286 | | 1,314 |
| 1,331 |
|
| | | | |
| 1,740 | | 1,747 | | 2,754 |
12. Borrowings
| 30-Sep-23 | | 31-Mar-23 | | 30-Sep-22 |
| (unaudited) | | (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
Secured loan |
| | | | |
Current - accrued interest | 527 | | 441 | | 337 |
Non-current | 59,351 | | 53,930 | | 34,363 |
| 59,878 | | 54,371 | | 34,700 |
In January 2023, the Group entered into a new credit facility agreement with Fairfax Financial Holdings Limited and certain of its subsidiaries ("Fairfax") and issued Fairfax 41,615,134 warrants. Refer to Note 15 for details. The facility term is up to £100m to replace Duke's existing £55m million term and revolving facilities. The credit facility has a five-year term, expiring in January 2028 with a bullet repayment on expiry and no amortisation payments during the five-year term. Furthermore, the interest rate is equal to SONIA plus 5.00% per annum.
The Group has adopted Interest Rate Benchmark Reform - IBOR 'phase 2' (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and 16). Applying the practical expedient introduced by the amendments, when the benchmarks affecting the Group's loans are replaced, the adjustments to the contractual cash flows will be reflected as an adjustment to the effective interest rate. Therefore, the replacement of the loans' benchmark interest rate will not result in an immediate gain or loss recorded in profit or loss, which may have been required if the practical expedient was not available or adopted.
At 30 September 2023, £37,000,000 was undrawn on the facility (30 September 2022: £20,250,000, 31 March 2023: £42,000,000).
Costs and fees of £1,439,000 were capitalised against the new credit facility. At 30 September 2023, £1,247,000 of unamortised fees were outstanding (30 September 2022: £387,000, 31 March 2023: £1,391,000).
The table below sets out an analysis of net debt and the movements in net debt for the period ended 30 September 2023, the prior period and the year ended 31 March 2023.
| Interest Payable | | Borrowings |
| £000 | | £000 |
| | | |
At 1 April 2022 | 362 | | 47,740 |
Cash movements | | | |
Loan advanced | - | | 5,050 |
Loan repaid | - | | (18,500) |
Interest paid | (1,872) | | - |
Other finance costs paid | (30) | | - |
Non-cash movements | | | |
Deferred finance costs released to P&L | - | | 73 |
Interest charged | 1,862 | | - |
Other finance costs charged | 15 | | - |
As at 30 September 2022 | 337 | | 34,363 |
| | | |
Cash movements | | | |
Loan advanced | - | | 66,200 |
Loan repaid | - | | (42,950) |
Deferred finance costs paid | - | | (2,347) |
Interest paid | (2,104) | | - |
Non-cash movements | | | |
Deferred finance costs released to P&L - old facility | | | 1,343 |
Deferred finance costs released to P&L - new facility | - | | 92 |
Issue of warrants | - | | (2,771) |
Interest charged | 2,193 | | - |
Other finance costs charged | 15 | | - |
As at 31 March 2023 | 441 | | 53,930 |
| Interest Payable |
| Borrowings |
| £000 |
| £000 |
|
|
|
|
At 1 April 2023 | 441 |
| 53,930 |
|
|
|
|
Cash movements |
|
|
|
Loan advanced | - |
| 5,000 |
Loan repaid | - |
| - |
Interest paid | (2,819) |
| - |
Non-cash movements |
|
|
|
Deferred finance costs released to P&L | - |
| 421 |
Interest charged | 2,905 |
| - |
As at 30 September 2023 | 527 |
| 59,351 |
13. Goodwill
| 30-Sep-23 | | 31-Mar-23 | | 30-Sep-22 |
| (unaudited) | | (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
| | | | | |
Goodwill arising on business combination | 203 | | 203 | | 203 |
14. Share capital
| External Shares No. |
| Treasury Shares No. |
| Total shares No. | | £000 |
Allotted, called up and fully paid |
|
|
|
|
| |
|
At 31 March 2022 | 348,614 | | 10,190 | | 358,804 | | 153,974 |
Shares issued for cash during the period | 57,143 | | - | | 57,143 | | 20,000 |
Share issuance costs | - | | - | | - | | (1,115) |
Shares issued to directors and key advisers as remuneration | 205 | | - | | 205 | | 80 |
At 30 September 2022 | 405,962 | | 10,190 | | 416,152 | | 172,939 |
Shares issued to Employee Benefit Trust during the period | - | | 1,382 | | 1,382 | | - |
PSA shares vested during the year | 1,800 | | (1,800) | | - | | - |
At 31 March 2023 | 407,762 | | 9,772 | | 417,534 | | 172,939 |
|
|
|
|
|
|
|
|
Shares issued to Employee Benefit Trust during the period | - |
| 3,955 |
| 3,955 |
| - |
PSA shares vested during the year | 7,665 |
| (7,665) |
| - |
| - |
At 31 September 2023 | 415,427 |
| 6,062 |
| 421,489 |
| 172,939 |
There is a single class of shares. There are no restrictions on the distribution of dividends and the repayment of capital with respect to externally held shares. The shares held by the Duke Royalty Employee Benefit Trust are treated as treasury shares. The rights to dividends and voting rights have been waived in respect of these shares.
15. Equity-settled share-based payments
Warrant reserve
There were no movements in the warrant reserve during the period:
| Warrants | ||
| No. (000) |
| £000 |
|
| |
|
At 1 April and 30 September 2022 | 4,375 | | 265 |
Issued during the period | 41,615 | | 2,771 |
Lapsed during the period | (2,000) | | - |
At 31 March 2023 | 43,990 | | 3,036 |
|
|
|
|
Lapsed during the period | (2,375) |
| - |
At 30 September 2023 | 41,615 |
| 3,036 |
In January 2023, Duke issued 41,615,134 warrants to Fairfax. The warrants expire in January 2028 and have an exercise price of 45 pence. As per IFRS 2, the warrants have been valued using the Black Scholes model. A total expense of £2,771,000 has been capitalised and will be amortised over the life of the warrants. In the period to 30 September 2023, an expense of £277,000 (30 September 2022: £nil, 31 March 2023: £92,000) was recognised through finance costs in relation to the warrants.
At 30 September 2023, 41,615,000 (30 September 2022: 4,375,000, 31 March 2023 43,990,000) warrants were outstanding and exercisable at a weighted average exercise price of 45 pence (30 September 2022: 46 pence, 31 March 2023: 45 pence). The weighted average remaining contractual life of the warrants outstanding was 4.26 years (30 September 2022: 0.50 years, 31 March 2023: 4.56 years).
Share-based payment reserve
The following table shows the movements in the share-based payment reserve during the period:
| Share options |
| LTIP |
| Total |
| £000 |
| £000 |
| £000 |
|
|
|
|
|
|
At 1 April 2022 | 136 | | 2,342 | | 2,478 |
LTIP awards | - | | 458 | | 458 |
At 30 September 2022 | 136 | | 2,800 | | 2,936 |
|
|
|
| | |
LTIP awards | - | | 511 | | 511 |
At 31 March 2023 | 136 | | 3,311 | | 3,447 |
|
|
|
| | |
LTIP awards | - |
| 537 | | 537 |
At 30 September 2023 | 136 |
| 3,848 | | 3,984 |
Share option scheme
The Group operates a share option scheme ("the Scheme"). The Scheme was established to incentivise Directors, staff and 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 four per cent of the Company's Ordinary Shares in issue from time to time. Options vest immediately and lapse five years from the date of grant.
No share options were granted during the period to 30 September 2023.
At 30 September 2023, 200,000 options (30 September 2022: 200,000, 31 March 2023: 200,000) were outstanding and exercisable at a weighted average exercise price of 50 pence (30 September 2022: 50 pence, 31 March 2023: 50 pence). The weighted average remaining contractual life of the options outstanding at the period end was 0.10 year (30 September 2022: 1.00 year, 31 March 2023: 1.50 years).
Long Term Incentive Plan
Under the rules of the Long-Term Incentive Plan ("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.
The fair value of the LTIP awards consists of (a) the fair value of the TSR portion; and (b) the fair value of the TCAD per share portion. Since no consideration is paid for the awards, the fair value of the awards is based on the share price at the date of grant, as adjusted for the probability of the vesting of the performance conditions. Since the performance condition in respect of the TSR portion is a market condition, the probability of vesting is not revisited following the date of grant. The probability of vesting of the TCAD per share portion, containing a non-market condition, is reassessed at each reporting date. The resulting fair values are recorded on a straight-line basis over the vesting period of the awards.
3,663,000 performance share awards (PSAs) were granted during the period to 30 September 2023 (30 September 2022: nil, 31 March 2023: 3,955,000).
At 30 September 2023, 9,726,000 (30 September 2022: 12,298,000, 31 March 2023: 13,727,000) PSAs were outstanding. The weighted average remaining vesting period of these awards outstanding was 1.49 years (30 September 2022: 1.44 years, 31 March 2023: 1.20 years).
16. Distributable reserves
Under Guernsey law, the Company can pay dividends provided it satisfies the solvency test prescribed by the Companies (Guernsey) Law, 2008. The solvency test considers whether the Company is able to pay its debts when they fall due, and whether the value of the Company's assets is greater than its liabilities. The Company satisfied the solvency test in respect of the dividends declared in the period.
17. Dividends
The following interim dividends have been recorded in the period to 30 September 2023, 31 March 2023 and 30 September 2022:
| | Dividend per |
| Dividends |
| | share |
| payable |
Record date | Payment date | pence/share |
| £000 |
|
|
|
|
|
25-Mar-22 | 12-Apr-22 | 0.70 | | 2,440 |
01-Jul-22 | 12-Jul-22 | 0.70 | | 2,842 |
Dividends payable for the period ended 30 September 2022 | | 5,282 | ||
| |
| |
|
| | Dividend per |
| Dividends |
| | share |
| payable |
Record date | Payment date | pence/share |
| £000 |
|
|
|
|
|
30-Sep-22 | 12-Oct-22 | 0.70 | | 2,842 |
23-Dec-22 | 12-Jan-23 | 0.70 | | 2,854 |
Dividends payable for the period ended 31 March 2023 | | 5,696 | ||
|
|
| |
|
31-Mar-23 | 12-Apr-23 | 0.70 |
| 2,854 |
23-Jun-23 | 12-Jul-23 | 0.70 |
| 2,855 |
Dividends payable for the period ended 30 September 2023 |
| 5,709 |
On 29 September 2023 the Company approved a further quarterly cash dividend of 0.70 pence per share, totalling £2,908,000, which was paid on 12 October 2023.
18. Deferred tax
| Total |
| £000s |
|
|
1 April 2022 | 156 |
Credited / (charged) to profit & loss | (1) |
At 30 September 2022 | 155 |
| |
Credited / (charged) to profit & loss | 45 |
At 31 March 2023 | 200 |
| |
Charged to profit & loss | - |
At 30 September 2023 | 200 |
A deferred tax asset has been recognised as it is expected that future available taxable profits will be available against which the Group can use against the tax losses.
19. Related parties
Directors' fees
The following fees were payable to the Directors during the period:
| Period to |
| Year to | | Period to |
| 30-Sep-23 | | 31-Mar-23 | | 30-Sep-22 |
| (unaudited) | | (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
|
| | | | |
Short term remuneration | 831 | | 1,012 | | 734 |
Share-based payments | 256 | | 464 | | 211 |
| 1,087 | | 1,476 | | 945 |
Other related party transactions
The following amounts were paid to related parties during the period in respect of support services fees:
| Period to |
| Year to | | Period to |
| 30-Sep-23 | | 31-Mar-23 | | 30-Sep-22 |
| (unaudited) | | (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
|
| | | | |
Abingdon Capital Corporation | 263 | | 425 | | 205 |
Arlington Group Asset Management Limited | 50 | | 93 | | 43 |
| 313 | | 518 | | 248 |
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. Fees paid to these companies relate to the recharge of office rental costs. Abingdon fees also includes fees relating to remuneration of staff residing in North America.
Dividends
The following dividends were paid to related parties:
| Period to |
| Year to | | Period to |
| 30-Sep-23 | | 31-Mar-23 | | 30-Sep-22 |
| (unaudited) | | (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
|
| | | | |
Directors 1 | 196 | | 354 | | 186 |
Other related parties | 50 | | 92 | | 27 |
| 246 | | 446 | | 213 |
1 Includes dividends paid to Abinvest Corporation, a wholly owned subsidiary of Abingdon Capital Corporation, and to Arlington Group Asset Management
20. 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:
| 30-Sep-23 | | 31-Mar-23 | | 30-Sep-22 |
| (unaudited) | | (audited) | | (unaudited) |
| £000 | | £000 | | £000 |
Financial assets | | | | | |
Financial assets at FVTPL | | | | | |
- Royalty finance investments | 200,670 | | 191,333 | | 171,944 |
- Equity investments | 11,564 | | 13,529 | | 11,305 |
| 212,234 | | 204,862 | | 183,249 |
| | | | | |
Financial liabilities | | | | | |
Financial liabilities at FVTPL | | | | | |
- Royalty debt liabilities | 1,155 | | 1,142 | | 1,125 |
The following table presents the changes in level 3 items for the periods ended 30 September 2023, 31 March 2023 and 30 September 2022:
| Financial |
| Financial |
|
|
| Assets |
| Liabilities |
| Total |
| £000 |
| £000 |
| £000 |
|
| | | | |
At 31 March 2022 | 171,299 | | (1,111) | | 170,188 |
Additions | 6,550 | | - | | 6,550 |
Royalty income received | (15,079) | | - | | (15,079) |
RP liability paid | - | | 57 | | 57 |
Net change in FV | 20,479 | | (70) | | 20,409 |
At 30 September 2022 | 183,249 | | (1,124) | | 182,125 |
Additions | 17,759 | | | | 17,759 |
Royalty income received | (13,187) | | | | (13,187) |
RP liability paid | - | | 55 | | 55 |
Net change in FV | 17,041 | | (73) | | 16,968 |
At 31 March 2023 | 204,862 | | (1,142) | | 203,720 |
Additions | 18,628 |
| - |
| 18,628 |
Repayments | (7,041) |
| - |
| (7,041) |
Royalty income received | 11,959 |
| - |
| 11,959 |
RP liability paid | - |
| 68 |
| 68 |
Net change in FV | (16,174) |
| (81) |
| (16,255) |
At 30 September 2023 | 212,234 |
| (1,155) |
| 211,079 |
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 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 -6.0% to 6.0% and the range of risk-adjusted discount rates is 14.7% to 17.4%.
Equity investments
The unobservable inputs are the EBITDA multiples and forward-looking EBITDA. The range of EBITDA multiples used is 5.3x to 10.0x (5.0x to 7.8x).
Royalty participation instruments
The unobservable inputs are the annual adjustment factor and the discount rate. The range of annual adjustment factors used is -6.0% to 6.0% and the range of risk-adjusted discount rates is 16.3% to 17.4%.
21. Events after the financial reporting date
Dividends
On 12 October 2023, the Company paid a quarterly dividend of 0.70 pence per share.
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