Earnings Call: H2 2025

Jun 30, 2025

Good afternoon and welcome to the Duke Capital Limited Investor Presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time by the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll, and I'd now like to hand over to Neil Johnson, CEO. Good afternoon, sir. Good afternoon, everyone, for Duke Capital's Fiscal Year 2025 results presentation. I'm Neil Johnson, the CEO, as Olivia's just said, and joined by Hugo Evans, the CFO of the business. Afternoon, everyone. We have a very good set of results. We're going to lead you through a little bit about Duke Capital. For those of you who haven't joined us, this is Duke Royalty. About 18 months ago, we changed our name to really have a leading hybrid credit provider as how we define the business. Really it's combining the best of private credit and private equity for both investors and business owners. Don't be worried, our product is still the same. Our team is still the same, and the benefits for investors are still the same. We're really pleased. This is a solid set of results that our recurring cash revenue is up in fiscal 2025. Our total cash revenue that Hugo will explain, is the difference between recurring and total, is the amount of revenue we get when we get bought out of our positions. Those are the exit fees that bump our revenue up. We enjoy all our capital back and the excess is that non-recurring revenue. However, if you've followed Duke Royalty in the past, we now are the same product and we are not in control of the exits. That's one of the main reasons why business owners will give Duke the opportunity to be partners with them. That's recurring cash revenue. It's a record recurring cash revenue for our company. And importantly, there's a covered dividend of 2.8 P, which is a quarterly dividend, and what we give annually is 2.8 P. And, so that's a core investment pillar to Duke. Of course, the three are having preservation of capital, current yield, and the upside from exits, which we really wanted to lean into this year and we'll be talking more about that. And that's what we were executing against and for fiscal 25. I hate saying this every year, but we still have economic headwinds. I'm sure everyone's portfolio is suffering from that. But we're happy to be here and tell you that Duke has continued to deliver, even though we do have the economic headwinds. We'll tell you that the national insurance increases hurt us more than tariffs because our companies are on the lower mid-market end and not internationally. And then, building future value. Just go tell him, yeah. Sorry about that, guys. Building future value. This is what we want to talk about today is really how we've executed the strategy of increasing equity ownership, but also maintaining that alignment with the business owners and the management groups of our partnership. I believe we're seeing the green shoots of macro stability. We have had interest rate eases, albeit small and few and far between in the U.K. When we go through our portfolio, we'll tell you how that's diversified. Interest rate easing gives us benefit to our shareholders and our partners in multiple ways. Our free cash flow goes up because our interest costs go down, and our dividend yield will see compression when the risk-free rate goes down. I think we are susceptible to the interest rate movements, and we're benefiting from lower interest rates as we move into fiscal 2026. I want to have a brief summary of Duke Capital and for all the newcomers that are here today. This encapsulates our product. It appeals to business owners who need capital but want to retain control of their business. We have this kind of merging of a debt product and a capital provider owner that is more like private equity. As you can see in the middle there, that is on the blend of our product. We have senior secured loans. They amortize over a very long period of time, not like the five-year loans that most banks and other alternative credit providers will provide. We do our intensive due diligence. We have partners like McKinsey & Company that give us commercial due diligence, and we spend a lot of time with these owners and management teams to understand their business and that they will be around for a long time and understand their motivations. What also we do, which I think is in the best interest of shareholders and really being that value-added provider for the business owner, because we bring more than just capital to the table for them, is we have board representation. We have this unitranche capital. Most banks will only have 2.5, maybe 3x EBITDA that they will lend to. That's the amount of their capital. We have always said we can lend up to 4x EBITDA, which aligns us. It actually makes it more palatable, especially for acquisition capital for business owners, and they're not diluting their equity stakes. We will want minority equity stakes if we can get them, but it's not dependent on that. We become economically incentivized for these business owners, with this royalty component, which is an inflation-hedged return. We don't take majority equity control. We don't take board control. Most importantly for the business owner, the exit timing is in the owner's control. That is the form of control that the business owner wants to keep. He doesn't want to be on this refinancing treadmill over and over for a five-year debt, and he doesn't want to sell a majority of his company and work for a private equity firm. If those two things exist, we have a very good chance of becoming partners with those business owners. The investment strategy, again, this hasn't changed in the eight years that we've been operational. We look for investment size of GBP 5. We're now up to GBP 30 million if we see a really good company. We need companies that are long-standing, profitable with EBITDA and over a long period of time. We want to know how they survived COVID. We want to know how they survived the credit crisis of 2008. We want the business owners to continue with the business. We don't want them to be selling. That's the control aspect. If we can partner with a long-standing profitable business that will just continue to chuck off cash flow, those are the business we're looking for. The one nuance to that is if an absentee owner wants to exit, but the management team that is in place and has been in place for a number of years, we can empower them to now own the business. We have some great case studies about management buyouts or MBOs, as you can see. I'm not going to dwell on the business characteristics, but suffice to say, we're in old economy businesses. Some businesses that are ebb and flow with economic cycles, long history of organic revenue growth, et cetera. You can see some of the sectors there, but we'll do that in the portfolio slide. The core product, again, this has not changed, but I do think that we're messaging it differently. The corporate mortgage at the top left is really that 30-year fixed-rate amortized loan, senior secured loan. We take out banks. Usually the high street bank will have that position, and we know that the bank is very cognizant and averse to risk, and we took over that place. That really is the core of our product and why we can really have the core of our investment pillars as preservation of capital. The other three components really give us the opportunity to act not like a bank manager, but more like partners, economically incentivized partners. It also allows our shareholders to benefit from the growth of businesses that we're all economically incentivized to grow. The variable preference share, that was the royalty component, which does vary with the growth or decline of the business, which is collared, but is that component of the cash revenue that we get as businesses grow. That is inflation hedged, very important, and it has been for the last three years. The bottom two product components are really the exit upside. Every one of our transactions come with, if you want to get out of them before 30 years, you will have to pay us fees. Very good banking strategy, but our exit premiums really are super-sized, and that is because we want to disincentivize the company to take us out, not use us as a bridge loan, not use us as short-term capital. We really want to partner with them. When they know, this is all negotiated up front, when they pick the date that they are going to exit the business, we will ask for all our capital back, plus a premium of, as it says, 15%-30%. It's on a sliding scale, but our average is a 20% of our premiums. Hugo will talk about numbers. The minority stakes are, we seek equity when available. These businesses, as I said, our ability to provide capital higher than most banks allow us to have equity in day one, a slice that we don't have to pay for. We can acquire some equity stakes along the time. This is part of what we're going to talk about today with the increasing equity stakes in a majority of our portfolio. The last slide before we turn to our results is something that we have included in our pitch, and just to set the scene on where we fit in this very, very large, almost $1 trillion of capital private credit industry. There are three big buckets of private credit. First one is venture debt people that want upside from warrants, but they're taking a big risk that have to be backed by venture capital firms, and then they leverage the venture capital balance sheet, basically, not the individual company's balance sheet. That is very competitive, especially in the U.S., and getting more so around the world. On the right-hand side is very long-standing and bigger companies, EBITDA of $10 million+. Those are middle-market companies. That's traditional private equity, or used to be. It's getting higher and higher in the market cap range now. Institutionally owned businesses, they have their own life cycle in them, and you have professional managers at that point. You have many more options for capital. Refinancing risk is diminished because you have the bulk that banks will fall over themselves to try and get. More and more refinanced from one bank to the other, very high street bank, typical banking relationships. There's the business owners in the middle, and these business owners don't want to have institutional ownership. Their net worth and their income are from the business. Those entrepreneurs, we want the ones that have proven that they're capable of generating wealth. Retaining control is very important, as I've said. They're distrustful of banks, and to take the refinancing risk off the table, very important for them. We're looking for the lower middle market. The point of this slide is also to say that Duke's point of entry is to get EBITDA and the EV to EBITDA multiples of 4x-6x, as you can see. We build them up and take them and grow them to a point when this is part of the business owner's idea, is to sell them on to private equity. No one has a 30-year business plan, but everyone wants their control in the next five years of what they're going to do. We allow them to get on with their business and execute their business plan, and they tell us when they want to sell out to private equity or refinance this out and keep control of their businesses. This is what you will see from Duke Capital. Again, what we saw this year was no exits out of our portfolio. We built future value this year. Last year, we had three exits, and the future looks good. We'll talk about, we have to look at it as a multi-year strategy of getting from the middle bit to the right-hand bit and making shareholders money. There's future value, but our life cycle is definitely going to be a number of years of how we invest. Okay. Before we get into the numbers, I just wanted to give you the operational highlights of our first full year of operations as Duke Capital. We have more tools to create shareholder value, and one of the most important things we did, along with changing the name, is changing our IFRS from nine to IFRS 10. Those are the accounting standards that allows us to go beyond 30% of equity value. Once we articulated that to our shareholders, we went about in 2025 to seize on that opportunity, and we've increased stakes in six of our existing partners. We'll do that through the portfolio slide. We also, of course, continue to deploy capital, over GBP 31 million from the beginning, and that includes what we've done since March 31st, our period end. We're continuing the execution. We did have an equity raise in this fiscal year, GBP 23.5 million. It was oversubscribed. We're very appreciative of all our shareholders that backed us, and that is going to go plow back into the portfolio for more of the same. I'll touch on the third-party capital, which we have said, hearing from our shareholders, the self-sustaining model can be enhanced with third-party capital. We're not reliant on those further and further equity raises because our stock price is right now at a discount to our net asset value. To supplement our capital with third-party capital is something that we are embarking on. The first quarter of 2025 was a multi-year low in private credit fundraising, and most of that money goes to household names, multi-billion-dollar transactions. We are still looking for an accretive term sheet. We did get two term sheets from big institutions trying to recapitalize our firm, including they wanted to take out Fairfax at a higher cost of capital. That wasn't accretive to our shareholders, so we turned those down. We're continuing to look for the third-party capital. In the meantime, we have exits, and we have the rest of our financial results to tell you about. Yeah, thanks, Neil. I think let's run through the financial results now. I think it's fair to say that FY 2025 was a solid set of results, if unspectacular. Really, I think it's reinforcing the messaging from when we did the equity raise that Neil's just alluded to back in November, December, when really we articulated that we wanted to stay in for longer into our current partners, support our current partners, because that's where we see trying to move into a more sustainable model and not have to come back to the equity markets. We need to win big when we get these exits. As a result, we followed a much more cautious deployment strategy in FY 2025, really just supporting our current partners, and that's shown in the numbers. We did about GBP 25 million, GBP 24.5 million of deployments into the hybrid credit portfolio in FY 2025, and that's against an average of GBP 46 million over the previous three years, a much more cautious strategy. As well, we only supported businesses within the portfolio. We didn't make a new investment in FY 2025, and that's the first time we've done that since COVID, actually. As you can see, top left there, recurring cash revenue is up and continues to increase, albeit steadily, over the last four years. That's really important for us. That's really what underpins our dividends, I think, really shows the resilience of the current portfolio and the Duke model. However, we are not in control of the exits, really, the next few graphs, which we can't shy away from, which shows decreases in our total revenue. That is driven by the top middle graph there, the non-recurring cash revenue, which was down 86%. Now, that is purely just because we didn't have any full exits this year. We had three last year and none this year. We had a little bit of residual premium from one of the exits last year, Sandhurst Healthcare, which gave us the GBP 0.8 million. Outside of that, there was no other upside from an exit. As a result, you'll see total cash revenue is down, free cash flow is down, adjusted earnings is down, all driven by the fact that we didn't have these exits. That's the nature, and you will see that more and more over the years. We would love it if we could just have one or two exits every year to smooth that out. Unfortunately, I think it'll be probably more like London buses, where we get none and then three come at the same time. Most importantly, free cash flow is still covering dividends, and that is something that we are very committed to in the future. I'll come onto a slide a bit later which shows the recurring nature of our revenue stream, which really can underpin that dividend in perpetuity. The next slide really just sort of shows the operating leverage of ours and by that I mean operating costs, fixed operating costs, the percentage of our recurring cash revenue. We are a listed company, you are shareholders, we're acutely aware of trying to manage our cost base, and you'll see that costs only appreciated very slightly over the year from GBP 3 million-GBP 3.1 million. OpEx as a percentage of revenue is currently at 12%. I said before, we're committed to getting that down to below 10%, and I genuinely believe we'll do that over the next few years. Really you'll see there was a kick in OpEx in FY 2024, when OpEx increased from GBP 2.3 million to GBP 3 million. Really that was driven by increasing the headcount within the business to provide a base for growth in the future. I think we're there. We don't need to go any further. Therefore I think we have the ability to significantly materially increase our recurring cash line without having to dramatically increase our OpEx line. I fully believe over the next few years you will see that percentage coming down below 10%. Sorry, just a minute. Just moving on to balance sheet really. This just provides snapshots of the various elements on the balance sheet, starting with the table on the top left really that's just the valuation of our investment portfolio split between the hybrid credit book, de minimis term loan, and our equity book. Really I think what it really shows is that the hybrid credit portfolio is currently valued pretty much smack on cost. That has come down a little bit this year, in fairness. For those of you that have actually managed to go into our accounts and see the numbers, you'll see the hybrid credit portfolio was written down by about GBP 8 million. Now that's only realistically taking a step, but that is only just over 3% of cost, and really driven by, I think what's a pretty tough macro environment out there. I can go into how we value these, but effectively the discounted cash flows are over 30 years and they're very sensitive to Duke's adjustment factor, which Neil talked about as part of Duke's product, whereby our yield can go up and down. Now, if there's a reduction in that adjustment factor, it has a fairly heavy knock-on effect into the fair values. Really that's what's driven the fair value reduction this year in the hybrid credit portfolio. The table at the bottom left, you can see the equity investment portfolio has remained steady, really the first year for sort of five years that we haven't seen an increase, and I think again, that's very reflective of the tough trading conditions out there. I'm pleased that it's held steady, and we haven't seen significant write-downs. The bottom right table really is just a touch on again reinforcing that messaging of staying in for longer within our current portfolio. You can see the average hybrid credit investment size has increased from thirteen and a half to 16 million, and I would expect that increase to continue over the next couple of years. Really the next two slides, the last two slides are just to sort of really reinforce what Neil was talking about in terms of Duke's product, really we have two sides to this. You've got the core hybrid credit portfolio, and then more of the sort of the private equity where we want to get the upsides from equity upside exits. This slide really shows the recurring cash revenue that we've received from each investment as a percentage of the capital invested, really ranging from... You'll see Links and InterHealth, some of the earlier investments we made, are now up to close to 80%. That's what I'm saying by that is that 80% of our initial capital that we invested in this business has been returned to us through our recurring monthly income. Actually one little stat that I'm quite pleased about, in Links is actually a buy and build and therefore we've invested more capital over the life cycle of the investment. The initial tranche of capital that we made back in April 2017 of EUR 7.5 million has now actually paid itself back completely 100%. That's actually on a 99-year investment life. Actually it's repaid itself within seven years is pretty good going. GBP 1 billion. As Neil says, this is just another little stat here. If we were to do absolutely nothing now for the next 30 years and we just ran the investments through to maturity without any adjustment factors, we have over GBP 1 billion of contractual revenue. Really just going back to the point of having an underpinning on dividends, as you can see, that recurring line will always underpin our quarterly dividends. Lastly really the upside from exits that I want to touch on. Again, we've talked about how do we turn this into a self-sustaining model, and what we really want to do is go bigger, stay in for longer, and when we get those exits, we want them to be materially larger, to be able to reinvest that back into the portfolio. You'll see in the table we've had eight exits to date. The IRRs on the right-hand side you'll see really where we've had equity stakes in those bottom four companies. The IRRs move right up into the sort of the mid to late 20s. Those are from smaller investments. What we really want is to have one of those or two or three of those over the next few years from one of our largest partners, and have the ability to invest that back into the portfolio. We talked about the sort of upside from the exits. Obviously, Neil mentioned the exit premiums that range from sort of 15%-30% on every investment. That currently averages out at about 20% of the current portfolio. In numbers terms, that means GBP 46 million of contractual exit premiums that are not included in the hybrid credit portfolio. Now, the reason for that is when I value these, they're valued on a 30-year discount model. We assume all these investments are held to term, and as a result, none of those premiums are baked into the fair value on the exits. The equity stakes is really the other side where we hope to build significant value. We increased equity stakes in six of our partners during FY 2025, and a further two post-year-end. We hope over the next two or three years, we'll be able to demonstrate to you the value on exits of increasing those equity stakes. Thank you, Hugo. I want to touch on our portfolio and give you a flavor of how we've constructed our portfolio. I think the first thing to say, we have a diversified portfolio. We are invested in the U.S., in the U.K., in Canada, and in Ireland, and through Links, actually in some portfolio in the Netherlands and Denmark. We have a diversified portfolio across geographies. The U.S., you can see some of our U.S. portfolio companies overperforming, especially the one in Texas and the one in Florida. We have the U.K., that has been more challenged, especially with the increase in the Budget last year, had an increase in the National Insurance, not only the rate, but the threshold of when businesses have to pay National Insurance. For our companies that do have employees, and a lot of them, for example, the care homes, low-income employees, was a bigger burden. It's all over the press about the grocery stores and whatnot. That did have an effect, one of those economic headwinds I talked about at the beginning. Funnily enough, on the bright side, our tariffs, that is the buzzword in the United States. Our companies are more national, that they sell nationally, not internationally. Not a lot of problems with us trying to export things into the United States. All these things have indirect consequences. Indirectly, we have Atlas Sign Industries, for example, in Florida. What is the importation for the steel that goes into some signs, and what are the prices? Uncertainty, obviously, it breeds a chilling effect on consumer confidence and business-to-business as well. We see indirect consequences, but quite frankly, from the COVID that we have endured to the supply chain problems that occurred right after COVID, to then the inflation, and the interest rate hikes, we have been living with these. I think it's a resilient point that we'll highlight that these companies have survived decades. The average company in our portfolio is over 30 years old. We pick these companies because of their economic resiliency and their long-standing, profitable, underlying businesses. That continues. We also make sure we're diversified across industries. You can see some manufacturing businesses there, business services that we've talked about before, and if you're a longstanding shareholder, you'll know our Irish recruiting business. You'll know our Trimite, which is our industrial paint company. United Glass Group is glass throughout the U.K. These are diversified industries. Of course, what we try to do is we try to balance the investment. As you can see, some of the fair values there, that we're trying to bulk up our small businesses, the buy and builds. That is another core tenet of Duke is to have acquisition capital to make these companies bigger, i.e. more resilient. Therefore, we have the same risk, but an increasing return as we can grow with these companies and make their equity more valuable. If they're growing, our cash receipts also with the royalty component or that variable preference share increases year-on-year. The portfolio is in good shape as a whole. It's delivered another year. As we've told you, we have increased, I think, and going back to what we've been able to execute this year, is increasing equity stakes. You will see from our results. Companies like Newpath Fire and Security, we've invested more and we have some equity, an increasing equity stake. Tristone Healthcare is specialist care homes for young adults and whatnot, and that we also increased our investment and our equity stake as well as Integrum, our latest investment as well. We're doing more and more like that. Our IFRS 10 allows us more control over these companies and allows us more direct control. One of those that, in every portfolio, there's leaders and laggards, and I'm going to pick on Trimite, but one that you've heard me over the years talk about as we are through a restructuring of that company. That happened by reducing the amount of plants that they were making paint in from four to one over a number of years. The restructuring now is complete. And we have incentivized an enhanced group of managers to come in and create those efficiencies and get the efficiencies of the company to drive new customers as well as a more efficient organization and get those fixed costs down. From four plants to one, the fixed costs are down. We're running efficiently and now it's a question of growth that we're committed to. So, while we have this as a company that we've had in our portfolio for 70 plus years, and we're committed to completing the job to make sure that it has a bright future and can weather more and more economic headwinds. So that's kind of a flavor of some of the portfolio that I'd say. But our portfolio, what we want to say, this is a look at the underlying operating companies. You can really tell the diversification here because of these buy-and-builds. We now have 75 underlying operating companies. They're all not going to be, every company do exactly the same. There'll be leaders and laggards, but we're very comfortable that we have a portfolio that will indefinitely cover the dividend from our free cash flow. One of the things that I want to highlight, too, on this slide, which Hugo mentioned in brief, but we are very aligned in multiple ways with the shareholders. Not only you can see us with over 4% of the ownership, so we're aligned in what's good with the shareholders will be good with us. I've invested personally in every single round of the fundraising along with our shareholders when we do fundraisings. Our performance and our compensation is all performance-based. We have all the incentive in the world to grow, but we're not going to grow for growth's sake and do more financings of a dilutive nature or take bank debt that is not economically sound or accretive to shareholders. We're committed to that over the long term. In terms of our shareholders, we're very appreciative, not only our institutional shareholders, but when those individual shareholders get lumped into hands, Hargreaves Lansdown or interactive investor, we know that you place your faith in us, and we take that job very seriously. We want to deliver for you. Fairfax is not a household name, maybe here in the U.K., but it is a $90 billion insurance company out of Canada. There is definitely a connection with Canada and the U.K. We value their faith in us as well. I just want to conclude again before we take some comments that we demonstrate and want to continue demonstrating to our shareholders that the way we invest will give you attractive risk-adjusted returns. We have senior secured capital as that corporate mortgage is, as I said, which really allows us, and if you remember the exit slide, there was the riverboat and long-term shareholders remember our riverboat cruise company and from that we got out with our capital back to positive exits. That is number one is the capital preservation for us. Hugo talked about that throwing off GBP 1 billion of contractual revenues if every one of our portfolio companies held us to maturity. What we do with that cash flow is promise a dividend to our shareholders. That's discipline for us. We have paid dividends now for 32 consecutive quarters. In total, our dividends paid to shareholders from our AIM admission in 2017 has been over GBP 0.21 per share or GBP 65 million. We reward our shareholders. We get paid to wait. Right now at a nice 9.7% dividend yield, we would say we're undervalued. We're paid to say that, too. No. Here's the other thing that we are building. 2025, we've shown that we're accumulating future value. When one of these exits do materialize, I think you will understand the whole strategy. We've had eight exits. We have exit premiums in every one of our transactions. Equity stakes are something that when we win, we will make sure it wins for shareholders, and of course, if they don't hold to maturity, that GBP 1 billion it doesn't come back. Our investment comes back, but we get these unrealized exit premiums. We're ambivalent basically from getting our cash flow every month to getting bought out and getting our capital back and getting an exit premium. We can invest further. That is the growth strategy as a standalone with a self-sustaining model. I think we've proven to our shareholders over the last eight years that you can depend on us for these things. In conclusion, the best of private credit and private equity is what we want to say as our first full year of Duke Capital. Recurring cash revenue that we're in control of is up. We've covered our dividend and without any exits. That is what we're in control of, and we delivered that. The Duke Capital building that future value is important. Six partners in fiscal 2025, but eight partners since we changed the name of our company and allowed more than 30% shareholding. Eight out of 14, we've increased our equity ownership in. We always try to keep alignment. If it's not the business owners, it is with the managers who go to work every day, and we keep that alignment. It is not a private equity shop, but we use that as one of our tools to ensure we go back to preserving your capital. With the economic stability and decreasing interest rates, we're cautiously optimistic. We know we're going to get some exits. It was like London buses, nothing in the last fiscal year, but this is a self-sustainable model. I know that a painful dilutive equity issuance is not what any of us want. We are building the equity stakes. We're building and recycling capital from exits. We will keep you updated on the third-party capital, which is intended to build our NAV per share over time. Thank you very much, everyone, for your shares, for your investments and having Duke Capital in your portfolio. We're happy to take any questions. Neil, Hugo, thank you very much for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab situated on the top right-hand corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. As you can see, we received a number of questions throughout today's presentation. I'll please hand back to you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Thanks, Lily. I'll start off if that's okay. There are a couple of questions that have been submitted to do with valuations. How do you fair value the hybrid credit in the equity portfolio? Can you give me some more detail on the fair value portfolio losses? What sort of amount of unrealized gains can you see in the book value? Just very broadly, really we value the hybrid credit and the equity investment model obviously very separately. The hybrid credit portfolio, each investment, and this is audited once a year, is valued on a 30-year discounted cash flow, assuming every investment is held to term. Each investment is probably discounted at a range of 16%-17%, fairly aggressive discounting, and therefore any changes to sort of the cash flows in the near years one, two, have a fairly significant impact on fair value. That's why, as I said earlier, you saw a small reduction in the fair value of the hybrid credit portfolio this year because some of those adjustment factors moved from being +6s down to flat or in a couple of cases, negative, and therefore that impacts the immediate cash flows of the businesses and reduces the fair value. Another question sort of mentioned is, are those temporary? Do you expect them to reverse? In simple terms, yes. I would hope that over the next few years as the macro. Strengthens, those losses will be reversed out. The equity portfolio on the other side is valued very similar to sort of your usual private equity model in terms of we use a forward-looking EBITDA and then apply a sort of comparative market sector multiple and discount it on the basis that these are much smaller private companies rather than comparing them against listed peers, which are significantly larger. I would say on average, the general sort of multiple that we would use is somewhere between 4x and 6x. Really, and on that side, there was a small fair value loss again on the equity portfolio. The GBP 14 million of losses that were mentioned, which GBP 8.2 were from the hybrid credit portfolio, the rest of it is from the equity portfolio and really again, is a result of those tough macro conditions. Forward-looking EBITDA forecasts have probably reduced a little bit as well as some of the multiples in the sector just softening, and those are very transient. They change every year, so you will always expect a degree of volatility in that equity portfolio valuation as both the sector multiples and the EBITDA forecasts change. I want to tackle two questions that have been done, one was multiple times. Just how would we deal with a big exit? Yes, that's going to be a return of capital. It's going to be an exit premium, and hopefully it's going to be that equity buyout that we get. We have had those, of course, but they've been on small capital. Fabrikat, for example, was only GBP 6.5 million. If we get a GBP 20 million exit, we would theoretically get GBP 30 million, GBP 40 million, GBP 50 million. The first thing, though, is we believe that we would be reinvesting to take that cash on the balance sheet and then reinvest it into new partners. Instead of getting just a revenue, our hybrid credit on the initial GBP 20 million, we could then redeploy the entire lot back, which would then juice the recurring revenue as well as more exit fees and whatnot. That would be our strategy to reinvest it back in the dividend, sorry, back into new deployments as opposed to a special dividend and a one-off because I don't think that is quite frankly the best use of our capital when you consider what I've just said is what we would do. That is going to increase the NAV more than a one-time special dividend. The other question, while you figure out what you're going to do next, is just a little more color on the third-party capital. I guess, for newcomers, that's probably a very good place to dive a little deeper in. Thank you for the question. The third-party capital is not intended to dilute Duke shareholders, i.e., invest in Duke shares. There are other companies that have done this that create this equity value on the balance sheet and then go to other parties to effectively co-invest with the origination that we provide for limited partners. In a private equity or private credit type scenario, we would be looking for limited partners, and Duke would be the general partner. That means that the money that they invest is in a special purpose vehicle, which Duke can contribute some capital to, and then we have a third-party capital into that special purpose vehicle that then creates a cash flow to Duke. We can get a management fee. This is the theory. This is the intention, that we get a management fee for managing that third-party capital's money. What we do with that money is invest it exactly like we are doing, and have done for eight years. Our track record is what they're investing in. Most importantly, though, what it really does is kind of supercharge the Duke Capital's return because we will be investing in those new transactions as well. In other words, there's no conflict of interest. It's like, well, we're going to do something over here, and we're going to do something else over in the third-party capital. It's all very aligned. We're going to do the same thing. What it means, though, is that if we contribute GBP 0.25 of every GBP 1, then we can multiply the amount of capital that we have at work. That means that those fees and that those upside, those PIKers that we can get inside the SPV go back to the Duke shareholders for a better return on our investment. That is a tried-and-true type. We're not breaking any barriers here in terms of what investment companies do. There are good examples of that. Probably the best would be Intermediate Capital Group. When they started out, they started very much like us and then took on other money to manage. That is the detail that I can share with you now. We're open to different structures, but that would be, as I said, the intention that we have. Yeah, thanks, Neil. A couple of other questions here. You mentioned the positive impact of falling interest rates having your business, but what would the impact be? In simplistic terms, we currently have GBP 90 million drawn on our line with Fairfax, so 100 basis point fall in interest rates would impact us by GBP 900,000, which would go straight to our bottom line. Remember, our product is not linked to SONIA, and therefore that's an immediate uplift to free cash flow. Quite easy to see there. A couple of questions on the equity portfolio in terms of why have you increased your equity stakes and, closer down here we say, how does the larger equity ownership strategy translate into improved returns? We sort of said that we want to go in for longer. We want to build those equity stakes because we feel there's a lot of potential value at the end on an exit with these equity stakes. I will use one of our exits, an example being Fabrikat in March last year. That was, at the time, one of our smallest investments. It was only GBP 6 million. On exit, we got a 20% exit premium of just over GBP 1 million. We also received on day one a GBP 2.4 million check back for our equity ownership, and that was on a GBP 6 million investment. Once you translate a similar return into our larger investments, on a GBP 30 million investment, suddenly you're looking at sort of more like GBP 10 million-GBP 15 million-GBP 20 million hopefully coming back to Duke from those equity stakes. Reinvesting that, you can obviously see how it becomes compounding and the cash flow increases, et cetera. You get that day one kicker of the cash coming back in. Also when we reinvest that, it just serves to increase our cash flows going forward. That's really why we want to, when we win and these equity stakes exit, we want to win big and provide more value back to shareholders. I think we have time for one more question and if we didn't get to any of yours, and if other people think of other things, I think there's a way that IMC will be able to answer everyone's questions. Apologies if we don't do it live. I do have one here about the discount to NAV is clearly a disappointment. I'd agree with that, and what consideration has been given to buying back shares? Our goal is to control what we can control as a management team, and that means dividends, recurring revenue, covered dividends, controlling our costs, which I think is something also that we are hyper-focused on. We keeping our costs steady. There was one year that we increased the investment team that were screaming and shouting from the next room at the beginning of this call. We don't intend to have any more hires and therefore our costs are going to be contained while we work through these equities, the portfolio. What we can't control is our relation to the bank rate, which has affected our dividend yield. We think with a decreasing in interest rates, that is a dividend spread, a yield spread, sorry, that will compress and that naturally will bring our share price back to NAV and possibly over NAV. We were trading at over NAV for a great portion of our eight-year history. The possibility of buying back shares in the market, the discount is not large enough to do that. Never say never, but we want to kind of continue to invest any free cash that we have back into the portfolio instead of buying back shares at the current time. I mean, that is always subject to our continual revision. It is something we could do in our control as buyback shares, but I don't think that accomplishes the goals that we want if we can naturally reinvest and get the returns and IRRs that we've shown that we can do. Okay. Neil, Hugo, thank you for answering those questions you can from investors. Of course, the company can review all questions submitted today and will publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Neil, could I please just ask you for a few closing comments? I'd just say thank you. Thank you very much. We are here. We can take investor questions at any time. We're going to continue to do this. We're committed to giving you the information, financial results and otherwise, and I look forward to the future, and thank you all for attending. Thanks, everyone. Neil, Hugo, thank you for updating investors today. Could I please ask investors not to close this session, as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few moments to complete and I'm sure will be greatly valued by the company. On behalf of the management team of Duke Capital Limited, we'd like to thank you for attending today's presentation and good afternoon to you all.