Duke Royalty Limited Trading Update re: COVID-19 (4967I)
02 April 2020 - 5:00PM
UK Regulatory
TIDMDUKE
RNS Number : 4967I
Duke Royalty Limited
02 April 2020
2 April 2020
Duke Royalty Limited
("Duke Royalty", "Duke" or the "Company")
Trading Update re: COVID-19
Duke Royalty, a provider of alternative capital solutions to a
diversified range of profitable and long-established businesses in
Europe and abroad, provides the following update regarding its
response to the COVID-19 ("Covid") outbreak.
Current Trading and Covid Update
For the financial year ending 31 March 2020 ("FY20"), the
Company is pleased to report that cash revenue received from its
royalty partners was in line with market expectations at over
GBP10.0 million, with March 2020 contributing the greatest monthly
cash revenue received by the Company to date at over GBP1.0
million.
The health and wellbeing of our employees and stakeholders is
the priority for the Company at this time. In response to the
initial outbreak of Covid, Duke formulated and implemented its
business continuity plan prior to the UK government's official
request for employees to work from home where possible. From an
operational standpoint, the continuity plan is proving effective
and the Company is well placed to undertake its activities while
its employees work remotely.
During March 2020, as the impact of the spread of Covid became
prevalent across Duke's target geographical and market sectors,
management has been focused on assessing the potential impact of
Covid on its royalty partners' operations. The ongoing global
response to Covid is evolving rapidly and management is in direct
and continual contact with each of its royalty partners to assess
their business outlook.
As we enter our financial year ending 31 March 2021 ("FY21"),
the rapidly evolving Covid outbreak and the government's response
to it has created an uncertain economic outlook. We know that some
of our royalty partners have had, or will have, business
interruption. While Duke has been able to build a diversified
portfolio of royalty partners across geographies and industries,
this will no doubt lead to a reduction in its royalty payments in
the coming months. This in turn will have a negative impact on the
fair value of the portfolio assets, leading to potential write
downs in the FY20 year-end financials.
Duke would like to re-emphasise to its investors that it
continues to be a high margin and profitable business with a low
fixed cost base and is therefore well-placed to trade through this
challenging period. T he Company has strengthened its position
further in light of the outbreak by implementing a number of
cost-saving measures, including the deferral of all deployments
into new royalty partners and reducing all non-core operational
costs. These measures are not expected to materially compromise the
Company's business prospects in the medium to long term and are
expected to reduce the FY21 operating budget by over 25%,
reflecting a material saving on FY20.
Outlook and liquidity
At this stage, it is too early to accurately assess the medium
and longer-term impact of Covid across the Duke portfolio as a
whole. Therefore, the Company wishes to withdraw its market
guidance at this time, pending further clarity on the outlook.
Every royalty partner has enacted cost-reduction plans and they are
assessing what government relief funding may be available to assist
them in trading during the Covid outbreak.
Duke retains its confidence in the quality and long-term
prospects of the portfolio as a whole. If necessary to preserve
long-term value, Duke will be willing to assist cash flow by
deferring payments and/or providing additional financial support to
its royalty partners on a case-by-case basis. Duke will continue to
monitor the impact of Covid on its royalty partners and the
associated level of cash royalty payments it will receive, and will
keep the market updated accordingly.
Duke is conservatively geared; after paying its dividend
announced 11 March 2020, it will have net debt of approximately
GBP13 million and a cash balance of GBP2.7 million. Based on Duke's
internal 30% maximum loan to value limit, Duke currently has access
to additional liquidity of approximately GBP18 million. It should
also be noted that the recent drop in UK interest rates has lowered
the cost of Duke's funding and that all the Company's debt is long
term in nature with no amortisation payments due until September
2022. The Company remains compliant with its debt covenants.
Dividend
Duke recently confirmed its final quarterly dividend for Q4 FY20
at 0.75p, taking the full year pay-out to 2.95p per share. To date
Duke has paid out over GBP12.7 million in dividends to shareholders
and intends to continue to pay out a share of its operating
cashflow to shareholders in future periods. In line with its
regular reporting cycle, the Company's next quarterly dividend is
scheduled to be announced in mid-June, by which time the Board
hopes there will be better visibility on the long-term effects of
Covid.
The situation in relation to Covid continues to evolve. However,
Duke and its royalty partners are in a strong position to manage
through this period of turbulence and the Board will keep
shareholders updated as appropriate.
***ENDS***
For further information, please contact www.dukeroyalty.com , or
contact:
Neil Johnson / Charlie
Cannon Brookes / Hugo +44 (0) 1481 741
Duke Royalty Limited Evans 240
Cenkos Securities
plc Stephen Keys / Callum
(Nominated Adviser Davidson / Julian Morse +44 (0) 207 397
and Broker) / Michael Johnson 8900
Newgate Communications Elisabeth Cowell/ Ian + +44 (0) 20 3757
(PR) Silvera/ Megan Kovach 6880 dukeroyalty@newgatecomms.com
About Duke Royalty
Duke Royalty Limited provides alternative capital solutions to a
diversified range of profitable and long-established businesses in
Europe and abroad. Duke Royalty's experienced team provide
financing solutions to private companies that are in need of
capital but whose owners wish to maintain equity control of their
business. Duke Royalty's royalty investments are intended to
provide robust, stable, long term returns to its shareholders. Duke
Royalty is listed on the AIM market under the ticker DUKE and is
headquartered in Guernsey.
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
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END
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