Earnings Call: H2 2024

Jul 1, 2024

Good afternoon and welcome to the Duke Capital Limited full-year results investor presentation. Throughout today's presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time by the Q&A tab situated in the right-hand corner of your screen. Just 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 the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Neil Johnson, CEO. Good afternoon to you, sir. Good afternoon, everyone, and happy Canada Day, July 1st. We are very pleased. I'm here with our CFO, Hugo Evans. Afternoon To run through our fiscal year-end results presentation. I'll do some overview and then hand off to Hugo for the finance section. We have some other bits, the portfolio and other bits as well, some messages for you. Welcome, everyone. Just as an overview of what Duke Capital is. We are a leading provider of a unique hybrid capital solution. We have been listed since 2017. Those of you who have been with us on our journey before today will know our investment pillars, what we're achieving, and guide us as our philosophy is to have capital preservation as one pillar. We also offer investors an attractive yield through our quarterly dividends and also upside through our exits. I think fiscal 2024 has shown all three of those investment pillars working to the investors' advantage. We currently have 15 capital partners or royalty partners, as we used to say, and invested capital of GBP 214 million. We have had some exits we'll talk about and how that affects our financial results as well as our philosophy. I won't steal Hugo's thunder about our record results, but we're very pleased on the last 12 months. Our annual dividend is right now GBP 0.028 per share in the year. Equity stakes have increased. Significantly, what we'll talk about today is make the case how we believe our hybrid credit product, the equity part of that hybrid, has significant upside. You will hear, and I want to explain now about our refreshed messaging, however, what has stayed the same and what is new and why we did it, and how we intend to continue with both taking equity ownership as well as our product of direct lending to the lower mid-market. Let's get into that. I think stepping back, you can see the rise of private credit, and the direct lending segment of private credit has really blossomed since the credit crisis, the Great Recession of 2008-2009. Direct lending is the darker piece of the pie, and the pie is significantly increasing, but also where we sit in that pie, and we have always talked about our product in the terms of being a corporate royalty. We talked about being a corporate mortgage with revenue linkage. We're going to go back to that. Ultimately, we have been a direct lender to the lower mid-market since our inception, so nothing is changing. Just looking at now private credit becoming more mainstream in investors and also business owners understanding of their options, we're really pleased that we made a tweak to our messaging so we can be better understood by both investors and business owners. This also is something you've heard me say before, if you've been on any of our investor presentations. It's a hybrid between private credit and private equity. What we do is right in the middle of those four columns. We do have the 30-year amortizing senior secured loan. We do have fees upon exit or exit fees. We've told you around our intensive due diligence when we invest, that is very much like private equity. We don't do a lot of deals, but we have McKinsey & Company to help us with the commercial due diligence, and we have our team of experts here completing deals. We do take board seats. We are very much relationship-based. We know a lot about these companies that we have monthly financials from, sit on the boards, et cetera. We're very active. However, we keep the control of the company, the exit, the timing of the exit, and the strategy in the business owner's hands. We don't do what's on the other, the two columns on the side. We're not a floating rate. We're not mezzanine or junior lending. On the other side, on the private equity, we don't have a fund, so we have to realize exits by selling the company. Again, we don't need that, and we don't have to force an exit. We can really choose when we exit, and the business owners can choose when we exit. In terms of where we sit in kind of the ecosystem, I would say, on the left-hand side, we're not a venture debt provider. On the right-hand side, we're not competing against the majority, I would say, of private credit, which is EBITDA above GBP 10 million, and revenue up to GBP 1 billion. That would be the middle market, very competitive. They're usually private equity-owned companies. We're sitting right in the middle. These are steadily revenue growth but not hyper-growth. They've been around for a lot of market cycles. We have owner-operated, i.e., non-sponsored, non-private equity-sponsored businesses. What's important to business owners is that they retain control of their company, and that's why they would choose Duke Capital over selling to another company or choosing short-term debt that they have to get on the refinancing treadmill of debt every couple of years. We're the long-term solution, but yet they receive capital and retain control. This hasn't changed, but I would like to explain our hybrid product in slightly a different way. You've heard us talk about a corporate mortgage that we have that is on the top of the left-hand box. It's a fixed rate loan that amortizes slowly over 30 years. That is one of the most important aspects of Duke's product is that there is no refinancing risk because that elongated amortization timeline allows the company to service its obligations to Duke through the existing cash flow of the company. That never has to be faced with high amortization payments that they cannot repay. That is also kind of buttressed with a variable rate preference share, which you've heard us talk about, the participating loan or for example, the corporate royalty which has the rate that fluctuates once per year and adjusts up or down 6% in currency terms once per year based on the revenue growth or decline of the business. That hasn't changed as well. Basically what we have always given to business owners is this two-part, debt, corporate mortgage and another instrument that is the variable rate. We want to give our investors as we talk about our hybrid capital product, these are its component parts. The other component parts have always had exit fees or redemption premiums, et cetera, that is that bucket, and then the minority equity stakes. We've always had these four components. What we want to talk about today after the finance section is really how those bottom two buckets align our interests with the business owner and make sure that when there is a success of the business and a successful exit or transaction that Duke participates into that success. We just don't want to be bucketed as a cash flow and dividend payer. We also want to participate in the growth of our companies when there is a transaction. That transaction is always. Our philosophy is to be aligned with the business owners and the management, and so that will not change. For our investors, I won't belabor this slide. I think all of you, after the last few years, will know we have a highly predictable revenue stream. Unfortunately, probably too predictable because nothing is a surprise when we come to the finance presentations like this. Boring is the new exciting, as I like to say. Exits have the upside potential. We'll get to that, as I've explained. The lower mid-market, these are companies that you cannot buy on the stock exchange. They're very resilient economically. We look at the cycles that they have been through in the 2008, the 1990s, and most of our companies have been around for 30-50 years. And then the attractive risk return profile, and I think this is very important because there is some risk in what we do, absolutely, but remember our investment pillars of the first one being capital preservation. And when we're happy to go through the balance sheet and the NAF, that we're doing a good job on that. And so now it's all about how to mitigate the risks, but also deliver these returns. And fiscal '24 will show how we do that. And that actually is a good segue. Good segue into the finance. Thank you, Neil. Good afternoon, everyone. I think I'll just dive straight into it, really. We feel a very successful FY 2024 for Duke. As I'll go through, a lot of growth across all of our sort of core metrics. Indeed, majority of them showing sort of record numbers this year. I'm particularly pleased to present these seven numbers to you. I'll start off, obviously, total cash revenue there at the top left of GBP 30.3 million. Actually a record growth for us, both in terms of total number and growth, up from GBP 22 million in FY 2023. It's not only the top line, it's the recurring number as well. It's gone up to GBP 24.3 million, up from GBP 22 again. Feeding down through into the lower down in the cash flow statement, our free cash flow number. Now, this is obviously one of the ones I do always highlight as it's fundamental to our ability to pay out quarterly dividends. Very pleasing to see the free cash flow number there up close to GBP 18 million, up from GBP 12.8 million in the prior year. Buoyed obviously by the investment exits, which we'll come onto in a little bit. Free cash flow per share up to GBP 0.0434 per share. That's up from GBP 0.032 last year. That's particularly significant when you look at the graph next with the dividend per share. We paid out GBP 0.028 of dividends during FY 2024, so well covered from that free cash flow per share. I'll probably take this opportunity actually to answer a number of pre-submitted questions we'd been given, and actually quite a few of them focused on the dividend, asking about, given the fact that free cash flow was GBP 0.043, are we looking to increase that dividend in the short term? I think my answer would be, in the very short term, I think it's probably unlikely. We are still in a very high interest rate environment. SONIA's still up north of 5%. Duke is currently sitting at a 9% yield, very healthy dividend yield. I think if anything, we would like to put more back into the portfolio to try and generate some capital growth rather than increasing the dividend in the short term. Having said that, obviously as SONIA starts to come down, we're all expecting hopefully some good news, if not in August, then maybe September on that front. Once we see a longer-term prospect of continuous interest rate falls, then it's a conversation that myself, Neil, and Charlie will have with the Board. Obviously as quarterly dividend payers, we sit down every quarter and discuss that dividend. As the interest rates come down, that will be a conversation that we will have in the future. Do I see an increase in dividend in the very near future? Probably not. Longer-term, that will be for a discussion as and when rates fall. Lastly, just looking at that bottom-right one. I don't normally talk about the income statement, but I think it is important this year given, and again, there have been a couple of questions talking about the fall in income. What I would highlight this year is that the fair value movements have played a significant part in the income statement. Last year we see sort of GBP 20 million of profit after tax as opposed to sort of closer to GBP 11.5 this year. What I've done on the right-hand side really is to strip out those fair value movements, and you'll actually see the adjusted earnings per share number really is a much better reflection of the core operating performance of this business. That's not to hide from the fair value movements, but these are non-cash movements which fluctuate year-on-year according to sort of the growth forecast of the business. Obviously, it's been a pretty difficult 12-18 months from a macro perspective, and unsurprisingly you would have seen a slight pullback in some of the sort of growth forecasts of the businesses. My fair value models are particularly sensitive to the next 12 months growth rate. The reason you'll see there was a GBP 4.7 million fair value fall on the hybrid credit portfolio, that relates to only sort of 2.5% of the overall value of the portfolio, so fairly minimal. That was against a GBP 9 million increase in FY 2023, and hence why in the income statement you will see that net income has fallen. Moving on. Those of you who have followed us more in the last three or four years will probably have seen this slide before, but just to talk about the operating leverage of the business. In terms of personnel, we're a fairly small business, only 10 of us. We try to keep our fixed operating costs low and stable. That's really reflected now, and you can see that the OpEx as a percentage of our recurring cash revenue falling fairly materially over the last four years from 22% in FY 2020, down to 12% in FY 2024. Hopefully, I'd like to see it by FY 2026. That will be dropping below 10%. For the keener eyes among you will see a small uptick in FY 2024 versus the prior year. Really, that's because we've taken the opportunity in FY 2024 to invest in the business. I think every business reaches an inflection point at some point as you're growing. You do need to invest a little bit more into the business to be able to create a base for the next stage of growth. I think we've done that in FY24. We've hired three new associates to bulk up the investment team to help with the portfolio monitoring and allow our senior principals to focus more on business development. Moving on to the balance sheet. You'll see the top left graph showing the investment portfolio. As you see, the hybrid credit portfolio has increased from two hundred and two million to two hundred and ten. Or sorry, the cost is two hundred and two million against the fair value of two hundred and ten. Fair value has increased circa twenty million from the prior year. And we've net investments of about twenty-five million into the portfolio, forty-two million in, and seventeen coming out from exits. So, decent growth. As I said, there was a small write-down on that book. So, probably not quite as significant as in prior years in terms of the growth. That's reflected in the NAV per share, which has remained pretty stable, GBP 0.403 a share last year versus GBP 0.398 this year. Only a GBP 0.005 decrease, driven, as I said, probably by those fair value decreases in the investments. What I would like to just point out there is on the equity book. The equity book now valued at GBP 15.9 million, against the GBP 5.7 million cost. I think that's where hopefully, further down the line, as we have the ability to take larger equity stakes in businesses, you would hopefully expect to see that equity fair value increase more materially over the next two to five years. Also just touching on the right-hand side. As we grow, you would expect to see it's really showing the evolution of the size of our investments growing as well. Part of that really is, I would say, two different sides to that. There's the buy and build strategy that a number of our investments are buy and build. Naturally you would expect to see the size of those investments growing. Also as we grow as a company, our day one ticket sizes have increased and hopefully you will have seen on the very last day of the financial year, which we announced second day of April, of our largest U.K. investment to date into Integrum Care Group, which was GBP 14.5 million. Finally, just to touch on the sort of the hybrid credit returns. We've currently got GBP 208 million of capital invested. Now, I will point out that's a slightly different number to the GBP 214 million that Neil mentioned on the first page, only because this table doesn't include Fairmed, which is in partial exit at the moment. We've got a partial repayment prior to year-end and expecting the final repayment to that in the next couple of weeks. That's the reason for the difference from this slide to what Neil mentioned a little bit earlier. What you can see is the annuity-like revenue streams that is our fixed corporate mortgage bearing fruit. GBP 208 million of capital invested, and we've already got GBP 73 million of cash revenue returned back from that portfolio. That obviously will probably never go too high because we've got the Integrum and the Glasshouse and New Path, those at the bottom that we've only recently invested, and only showing a small return to date. What you'll see as the portfolio matures closer to the top Links now has returned back 68% of our original capital. Today, you've got InterHealth 66%. I would hopefully expect to see within 2-3 years a couple of those getting closer to 100%. On the right-hand side, two columns showing dividend cash-on-cash returns. That's just to say if everyone was to repay us tomorrow, what that cash-on-cash return would look like. It's really highlighting, we've often talked about the upsides on exit being the exit premiums and the equity. The exit premiums here I can show you. Currently about GBP 45 million of exit premiums which are barely valued in our NAV. That if everyone was to buy back tomorrow, including the premium, that would increase the cash-on-cash return from 1.4x-1.7x. It just shows you the impact of those exit premiums. Overall, one number that I haven't put in here, contractual cash flows, I think we've mentioned this before, but across the portfolio, we currently have over GBP 900 million of contractual cash flows. That is, if every investment held itself to maturity over the next 30 years. Between that time, we'd get over GBP 900 million back of current contractual cash flows. Just to summarize, I think a really good FY 2024 record cash revenue at the top line, record free cash flow. We're paying out a healthy dividend at GBP 0.028. That's a 9% yield, but a very healthily covered dividend. The business, I think, generally very, very happy with all of those metrics and a good financial year 2024. It's always a lot easier to present these numbers when you've had a good year. That's made on the portfolio. Great. Yes, as Hugo said, we've done Integrum. We're not going to belabor all of these. I think the portfolio is in good shape. We're going to talk about growth and things. As Hugo mentioned, what happens in the inflationary environment and economic growth when that slows, our NAV will come down. We've had that. I think the U.K. part of our portfolio is under more stress than the other parts. You can see that from the last few deals. We've done U.S. and Canadian deals. We have part of our portfolio in Ireland. There's a big portion of Links that is now in Denmark. We have diversified away from just a U.K. portfolio. We're bullish on the U.K. long term. It's a very resilient market. And even though London Stock Exchange that has had its contractors or detractors in recent times, I've been around this market since 1999 when I came to the UK. And it certainly is one of the most resilient economies and stock exchanges in the world. And it is a cyclical business that we are in and this feels like a very long cycle to the the wrong side of the economic cycle, as I'll say. But overall, the portfolio has-- These are all longstanding, fundamentally profitable businesses. We know them very well. We sit on all the boards and we have our strategy of focusing on management buyouts as we've done Glasshouse and Integram, just recently, and buy and builds. And buy and builds are, for example, Newpath, environmental security, that we've added to the portfolio, TriStone, in healthcare. Why don't I flip to this slide because we have those 15 companies in the last slide. Actually, what we do is we have 71 underlying operating companies. We actually have the embedded diversification of a much larger and broader portfolio. We like to show this slide, and we're very actually pleased of this slide because this slide was a blank piece of paper when we started in 2017. To come and be able to contract with now 23 different businesses with eight exits, and be able to help companies and further invest in the companies that we do have, and we do sit on the board of, and know very well, to continue to build them, is very pleasing. We are maturing as a portfolio, i.e., some of these companies have been with us since 2017, 2018. We're going to show you in a little bit why Duke Capital has a real great possibility in future exits and our future is really in alignment with these business owners. We have upsides that are embedded in this portfolio that we're very excited about. Yeah. So we talked about obviously the exits and how they can increase our IRRs, et cetera. But what I really want to just show is the core product, and the exits, and how they create the overall IRR of this business. The left-hand graph, just to highlight, is very much illustrative. These numbers can change, but what we hope to see is over the life of these investments, the hybrid credit investment, which combines the fixed loan and the preference share, will generally return an IRR of circa 15%. Normally, a blended deal, we start on day one somewhere between 13 and 14%, and then would expect to see a degree of growth through that adjusting preference share and continuing to 15%. The exit premiums and the equities. Now I've put there 5% for each. Now, of course, this is very much dependent, A, on timings of exits. The earlier the exit, the higher the exit premium percentage is going to be. Again, with the equity very much dependent on the percentage that Duke owns and the timing of that exit. What I would highlight on the equity, obviously now is the repositioning that we went through in February, March now allows us. We changed our accounting policy, and I will not bore you with the technical details. Suffice to say we've moved to IFRS 10 accounting. What that means, it means we're allowed to take more than 30% equity stakes in our underlying investments without having to consolidate into our financials. Now, we weren't in a position to do that prior to the repositioning. Now opportunistically, when it makes sense for us, we can. What that means is hopefully we can then boost that sort of gold 5% box there, 5%, we can boost that up higher to try and get the IRRs even higher. The right-hand side really shows you, puts that into actual exits that we've had. We've had eight exits to date, and you can really see the larger, the higher end of those Welltale, BHP, Fabrikat, all investments where we held equity stakes. Fabrikat, which was one of the most recent exits, we had a 30% equity stake, and that delivered us an IRR of 36%. I will ignore Instor because that was a one-off. Obviously extremely good for us. Was very much a one-off transaction that Neil can give you a little bit more color on. It was only around for three months. That's what I mean by the timing of the exits. They can get boosted significantly by shorter investment horizons. I think overall, those eight exits really show you sort of the breadth of how we invest. The credits-only products, you've got Berkley there at the top in the dark blue, Fairmed and Xtremepush, where you also had the exit premium, pushes those IRRs up closer to 20%. The equity on the top pushes them up to 25% and north of 25%. Just very briefly, obviously, you'll notice the one there that's in the minus. I'm sure if you've heard us talk before over the last three years you'll remember the Riverboat Company that we invested in right at the start and obviously struggled during COVID. Ultimately, when your entire industry shuts down for 12 months, and revenue goes from fairly material to nothing, it's very difficult. Actually that's probably one of the investments that we hopefully get given the most credit for getting out of at such a very small IRR loss. Well, it does prove the model. Even the markup, the Riverboat cruise is capital preservation. We took possession of the Riverboats and sold them on and got essentially our money back. On Instor, this is getting the upside, keeping the exit timing in the hands of the owners. Winning with the winners and aligning ourself with the management. This CEO of Instor actually made a deal with the owner. This was a management buyout, but the equity deal was struck four years before he came to us and asked us to finance. He had a deal that was four years in the making before we got involved, and then when we did, it turned out that he was in a rush to complete that deal, that four-year-old deal, get his hands on all the stock because he had improved the financial position of the company so much in those four years that he could then sell it on a windfall profit. It was a windfall for us, but it was also a windfall for him, and he did a good job by fixing the buy price of Instor right around the pandemic. You can imagine the difference. That was a win-win. That comes to some new slides, and there's two slides, but I think the better slide here is really just to highlight what we talked about right at the start and what Hugo Evans mentioned with our change in our accounting policies, how we can better benefit the investors by taking over 30% of any company. Now, one of the hallmarks of Duke, since our inception, is two things. One is that we have a debt product, that capital preservation as our investment pillar. We lead with a debt product, and we get paid. That pays our dividend. That's not going away. The second hallmark from day one has been alignment with the business owners. We want to win, and we want to continue to be partners. That's what we call them. We kind of forge these long-term partnerships. United Glass Group, everyone who's been a shareholder of Duke has known about this company, and on our new website, please check that out at dukecapital.com. It has actually a case study of Mark Harrison, and you can see inside the walls of the United Glass Birmingham site. Mark and we partnered in 2018, and by 2024, he's been working there for a number of times, wanted to take some chips off the table, de-risk his life because when you're a business owner you get your paycheck from the company as well as your net worth from the company. He's not unlike any other business owner. He was wanting to either sell the business, which before this interest rate cycle started, was showing some private equity interest was being shown, however, never materialized. What we did earlier this year is really actually acquire a large stake of shares from the CEO. That allowed Duke to stay with this investment for longer instead of him choosing to sell the whole thing and then Duke would be refinanced out and whatnot. Essentially we're swapping the equity stakes. He's now minority and we're majority, but the decision making and day-to-day operations are exactly the same. The alignment is still intact. That's the top half of this slide, a little narrative on the decision making there. The bottom half is really understanding and showing in numbers what we want to achieve. Listen, this isn't going to be tomorrow, but this is what we're building. If you harken back on that slide that I said, we're not like venture debt, and we're not trying to compete with middle market. What we actually are doing is trying to get people like Mark to build their companies up from a nice little business of GBP 2 million, GBP 3 million, or GBP 4 million EBITDA and build them up to a GBP 10 million EBITDA, GBP 8 million-GBP 10 million EBITDA on that end of the scale, so that they will be able to have both a multiple expansion as well as, of course, the value of the equity that improves with an expanding EBITDA number. If you can look at the pro forma right in the middle, if we deploy, that's Duke deploying GBP 25 million ultimately into United Glass, we're not there yet. We can illustrate, let's say, five operating companies with an EBITDA of GBP 8 million. You can see the EBITDA multiples from GBP 4 million when you're a small company to GBP 7 million when you're a much bigger company. Therefore, the enterprise value of GBP 56 million equals an equity value of GBP 26 million. That would be our GBP 25 million, sorry, of capital. The extra GBP 5 million there would be like a mortgage and a CID facility that we have in all our companies, the small amount of other debt. The equity value of GBP 26 million really now favors the Duke equity value because of the higher equity stake. On the right-hand side of this page, this is the returns to our shareholders. That manage this company, we're also aligned with our shareholders because we have big equity stakes. This is a win-win for us. If we put in GBP 25 million received over the life of investment, we're just illustrating this. Again, this is not what we're saying is going to happen, but this is over an eight-year period of our company just for illustrative sake. GBP 18.1 million of cash received. We do have an exit premium of GBP 5.8 million, that's a percentage of the GBP 25. The equity value is that ballast, the gold bar at the top that will allow us to get a very healthy IRR of 28% over illustratively this eight-year period living with a company. That pays our dividend, that cash received over life of the investment is really that hybrid credit product that we can get paid, and we get paid while we wait for that exit and that equity value and exit premium to materialize for very healthy IRRs. That really encapsulates our mission here at Duke Capital to be a hybrid debt and equity type product. This in numbers is what we're achieving. Fabrikat, we've put that really in practice this year. I think the difference between a Fabrikat and what we're illustrating here is really the size of the top number. The GBP 25 million versus what Fabrikat was was GBP 6.4 million. If we can triple the size of our companies, we're going to triple the exits and the premiums and the equity values that we can also return to the shareholders. I will have some time for questions. I won't go over this, but we value all shareholders. We have a strong retail following. We do things like this to appeal, make sure that all investors are up to date with what's happening inside our company, and we're happy to do that. Hargreaves Lansdown interact with investors, and these are the people that are increasing their stakes in the company, and AJ Bell. We're very pleased with that. The directors, management, and insiders have a big stake, as well as some very good names. Also, Fairfax Financial is our senior lender. It's a $90 billion Canadian insurance company that has a lot of investments around the world. Yeah. In summary, I'm going to not read the page here. I'm going to kind of answer some of the questions I know are on your mind, and then we'll turn it over. We know that with a great set of results, one of the things that we're all cognizant of is that the stock price is in a very nice narrow band, but sideways instead of up and to the right. I thought that the Cavendish note, that some of you might not have, was actually a very interesting analysis. The tagline was geared to the macro. I'm going to say that the last two years that when our share price has gone sideways, there's been three macro headwinds. One is obviously increasing interest rates, which then allow, if you're getting 5% or 4% at the bank, our dividend yield increases. We've got a nice healthy 8.8% dividend yield, but that used to be six. As interest rates fall, that yield compression will happen, and the math says if we have a 7% dividend yield with our existing dividend, the stock would be GBP 0.40. That is what a 7% dividend yield is. That's one of the headwinds that we have been faced with in the last two years. If you can get 5% in the bank, you're not going to pay 7% for Duke Royalty. As that unwinds, so will the compression. That will boost the stock price. The second is, as we talked about, the economic growth in the U.K., that has an effect on the inflation and economic growth. We're in high inflation, and we're having some economic headwinds. As those abate, that will increase our NAV by improving the growth rates of our companies, and therefore the net asset value also goes up, and that will filter into the results of our companies. Number three, which I think is very important and some of the comments that we've had is the third headwind that we have been faced with is an outflow of funds from the U.K. small-cap fund management sector. Our shareholders have had redemptions for over three years, every single month, which means that they have to sell things, they have to build cash for redemptions. They have to sell stocks. That put pressure on the prices of their investments, including Duke Royalty. With that unwinding of that macro headwind will improve and allow our institutional shareholders to be able to buy stocks instead of having to sell them. We're hoping and anticipating all three of those macros. That's what the Cavendish Analyst, Stephen Barrett, was talking about being geared to the macro. We look forward to that in the near future. Okay. We'll hand it back. Perfect. Thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab, which is situated on the top right-hand corner of your screen. Just while the company take a few moments to read the questions that have been 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 have received a number of questions, both pre-submitted and throughout today's presentation. Neil, Hugo, if I could just hand back to you just to read out the questions and give responses where it is appropriate to do so, and I'll pick up from you both at the end. Yeah. Thank you. I can definitely knock a couple of the pre-submitted questions on the head. I think we've hopefully answered the question on the dividend. I've got one question here. Why did Charlie Cannon-Brookes resign from United Glass, which is given Neil's discussion about the equity values prior to making a large investment through Duke Capital? That's quite an easy one. Charlie resigned a couple of years ago purely to allow another Duke member, one of the investment principals, onto the board. Actually, Charlie went back on the board when we took a majority equity stake. Duke now has two people on the board at UGG. We answered the question on the dividend. I've another question. Can you please explain why profit has fallen by GBP 8 million? I can see the increased finance costs and the balance sheet shows the fall in hybrid credit investment income. Again, hopefully I outlined that was due to the fair value falls on the hybrid credit portfolio against the GBP 9 million increase in the prior year. Hopefully a number of those questions are now answered. Okay. I'm trying to read and answer. Did you want me to go over on the graphs yet? Yeah. Oh, yeah. Listen, I think we're also coupling a number of different things. How do you propose to move the stock price? There was one, how do you intend to grow between GBP 30-GBP 32 share price range? A lot of that I wanted to answer and I have answered in the summary geared to the macro. I said in my CEO statement after fiscal 2024 is that in the last 12 months we've had to focus on what we can control. That's our portfolio, our communications to our shareholders, and ensuring the dividend is covered et cetera, because those are fundamentally the exits and showing the model that works in growing both the hybrid credit as well as the equity side of our businesses. That's what we've been focused on, and that is what we have delivered in this fiscal 2024. What is outside of our control are those three macro things that have all been conspiring against us. Certainly every small-cap stock in the U.K. would feel the same. We're not going to go through every one individually. Pre-submitted Yeah, pre-submitted. got a question here from James S. Could you please provide some details on your cost of funding fixed versus floating duration covenants, et cetera? Thank you. Our debt facility is currently, as Neil said in that shareholders tab, with Fairfax Financial Holdings. We have a GBP 100 million facility, which we took out in January 2023. We're 18 months into that facility. The cost of that is SONIA plus 5%. As interest rates come down, obviously our cost of funding will come down as well. Just to put into perspective, once we're fully drawn at GBP 100 million, a 2% fall in interest rates down from 5.75% down to sort of 3.75% would give an extra GBP 2 million saving in interest for our shareholders. That's why I touched on the fact that as interest rates come down, then there's a potential conversation to have about the dividend as we have more cash. It's either do we pay out more in dividends or do we invest more back into the portfolio? The duration of that, as I said, is five years. That will be up in three and a half years' time. I'm not going to go into the actual details of our covenants, but suffice to say they are light. Certainly, we refinanced that back in January last year, and I went from north of 15 core covenants down to three. It's what you would expect in terms of sort of LTV value, debt service coverage and liquidity. There's one here, the free cash flow per share, what was it without the realization? This is very important. Going back to the dividend, can you get that number, i.e., the recurring free cash flow per share? Yeah. The recurring free cash flow per share was GBP 0.035 per share. Again, an increase on it was sort of flat on the prior year because we obviously saw a significant increase from the buyouts. Again, still against the GBP 0.028, it's that recurring free cash flow number that is the course of sort of covering our quarterly dividend. It was, again, significantly higher than the GBP 0.028 of dividends that we paid out. Therein lies another consideration when we're setting the dividend. We have buyouts, which pushes up our free cash flow, but we're actually monitoring our coverage by our recurring revenue, not by the buyouts, because we don't want to increase our dividend one year because we had buyouts and then have to cut it again the next year because we don't have buyouts. We're going to have a steady look at the cash flow, recurring cash flow, to set our dividend, and that is going up. We're wanting to make sure that those macro factors are going in our favor before we're going to increase that. Steve asks, what capacity do you have to make further investments? At what stage will there need to be a further equity raise? Steve, what we had, obviously as I just discussed, GBP 100 million on our debt facility. We were drawn to GBP 73 million at year-end. That gives us GBP 27 million in liquidity on the debt line, along with GBP 3 million cash at year-end. GBP 30 million liquidity at that point. Future liquidity obviously and the need for equity raise will very much be driven by the exits. Because as you can imagine, currently of the exits we've had, Fabrikat, while a very, very healthy IRR, was one of our smallest investments. If you take Intac, for instance, which we're now invested north of GBP 25 million. If we get an exit on Intac with an exit premium and some equity, potentially you're getting sort of GBP 30 million back in one go. That will obviously take a lot longer to reinvest and redeploy and will push out the need for any further equity raises. It is fairly dependent on the potential of getting exits over the next 12 months-18 months. We did have one kind of adjacent question to the dividend and also the future, which is buying back of shares. Listen, we are an investment company, and so those exit fees and equities we want to go back into the portfolio to increase the Net Asset Value per share, the NAV per share. Listen, although buying back of the shares reduces the share count, so therefore could increase the share price in the short term, again, the interest rates haven't gone down at the Bank of England yet. That's going to re-rate the stock. Buying back the shares, we'd rather put it back into the portfolio where we're getting very nice IRRs in our exits. That's our chosen strategy, no buybacks. I got one other one that I've got off on the top of my head before I'll pass it back to you. The downside of taking increased equity stakes, I like this question because it is very thoughtful. Also the philosophy I think, there is a downside or a risk of losing that alignment with the business owners, i.e., trying to be the business owner and trying to own and manage the company. We're not going to lose that alignment, and I think that is something that we're working hard to do, the Mark Harrison example of ensuring that he's well incentivized to do, but also not too short-term focused by saying, "This is something that I have to de-risk my life over." In other times, we're going to take a majority but ensure that the right people have the minority exit and equity. We need to make sure that we incentivize the right people the right way, who are managing all our businesses. And so that's on a case-by-case basis. But the philosophy, that potential risk of losing that alignment, our philosophy is if you have alignment with the business owners and the management, you can continue to get some outsized performance. I see. Probably possibly the last question I think in the time, but Philip M says, is Duke considered a qualifying business asset for IHT purposes or not in your opinion? In my opinion, no, it's not. We're an investor. Unfortunately, I wish it were, I wish we were, because I think it would help us significantly. As an investment company on AIM, the advice we've been given is no. Ultimately, until you actually take it up with HMRC, we don't know. HMRC will not give you a clear black-and-white yes or no, unfortunately. I can't give you a cast-iron guarantee, but the advice we've been given is no. Perfect. Neil, Hugo, I'd just like to thank you for answering those questions that you can from investors. Of course, the company can review all the questions submitted today, and we'll 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 you both, Neil, could I maybe just ask you for a few closing comments? Well, again, happy Canada Day, and thank you. Thanks to all our shareholders, and hopefully prospective shareholders learned something. We're here and we do value your feedback and input as shareholders and we value having you put your faith in us and our company. Thank you very much for your attendance. Yeah. Thank you, everyone. Perfect. Thank you once again 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, but I'm sure it 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.