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 via the Q&A tab situated on the right-hand corner of your screen. Just simply type in your questions and press send. Before we begin, I'd like to submit the following poll, and I'd like to hand you over to Neil Johnson, CEO. Good afternoon, sir.
Hello and w elcome. Thank you very much for attending our fiscal 2026 results presentation. I'm joined by my CFO, Hugo Evans, and my CIO, Charlie Cannon Brookes. Let's get started. We have three parts of the presentation that we'd like to run you through. I trust that there is a number of returning shareholders and existing shareholders. The first part is just to set the scene of Duke Capital. You might have heard this before. There is a few nuances and new information that we've had included for your pleasure. For all our new or prospective shareholders, thank you for attending, and we'll tell you a little bit about Duke Capital. Think of what we call hybrid capital as the best features of private credit and private equity.
For business owners, why they would take Duke Capital's money, it's really to, when we'll get into our use cases, but it's for people who want capital but want to retain control of their businesses, and that's what we're looking for. The features of our product really are a senior secured loan. It's one of the features that we adhere to. Think of our senior secured loan as almost a corporate mortgage, that it's very slow amortized over 30 years, just like your home mortgage. And a couple of other things. I won't go through this presentation or this slide in detail, but we do intensive due diligence on all our companies before we invest. Like private equity, it's not throwing corn on the field. We certainly do a long-term investment, and we call them partners for that reason.
Like private equity, we have board representation on these companies. We have minority stakes in 10 out of our 14 companies. We really partner with them, but we also, very importantly, keep the exit in the owner's control. We don't force owners to refinance us out, and that's another big feature of Duke Capital. Our investment strategy, I'm happy and also apologetic to say this slide has not changed in 10 years. What we do and what we look for has not changed. The world has changed around us, but this has been the beacon in the night for us. We always say, we are not all things to all people. We have looked for these specific criteria, which really driven our success over the years, and that's because we're looking for management buyouts and buy and build, like acquisition capital.
We're not just another lender, refinancing lender, that we compete on the lowest price. What we're looking for is companies that have a history of EBITDA and profits through good times and bad times. Our companies are usually over 30 years old, and we're trying to look for long-term partnerships for owners that don't want to give up control. If they don't want to sell their business, we want them to be in control because, as we'll see, that drives the return for our shareholders of Duke. The business characteristics, we are not leveraging private equity-owned companies. These are family owner-operated companies, and I think that's a magic of what we do. We want a history, as I said, of revenue growth and profitability over market cycles to understand the durability of those earnings.
We want the owners to have lived with the company or even founded the company over those decades. Even though they're a dominant position in the local market, we don't need international sales. These are not large companies, w e'll get onto that where we want to invest, but the sectors, t hink of the sectors as sector agnostic, but we like manufacturing and services businesses, and we're not looking for companies with technological obsolescence. We can get into AI as well a little later in the presentation. We diversify across sectors, but also across countries. The U.K., Ireland, U.S., and Canada are our portfolio countries. Charlie, why don't you take this one? Thanks, Mr. CIO.
Okay. Thanks, Neil. I think when you look at this pie chart, the top half of it being the corporate mortgage and the variable preference shares, those are the two elements that pay our monthly return. Duke is paid monthly by all of our companies. The core product, as Neil, I think, alluded to at the beginning, is a senior secured loan, fixed rate return of 12%. Very, very long duration. That's really the difference of what we do at Duke versus every other form of lending that we come across. Our loans are very, very long, why we call them corporate mortgages. Very, very small amount of principal is repaid over every year of the 30-year term, and that dramatically reduces the refinancing risk of the underlying company. Hence why I think we win a lot of the deals we do.
You can fund our payments out of operating cash flow. There is no major capital repayments, amortizations. That is the core product of the senior loan. Attached to that is a variable preference share, provides a little bit of additional income over the fixed rate loan. Typically, 1.5%-2% in year one. The reason it's variable is because it can go slightly up or slightly down depending on the audited revenue performance of the underlying business. For businesses, we're not looking at very fast growth businesses or declined businesses in the Duke portfolio. These are slow organic growth businesses that we're targeting. Assuming the original investment thesis is correct, that initial year one rate, which is 12% on the fixed loan, and then, say, 1.5% on the variable preference share, that could slightly increase in future years via that preference share mechanism.
Good in inflationary times, certainly helped us when we had high inflation, because inflation normally is rolled through into revenue growth. A nice neat part of the product. The bottom two parts of the pie chart, they're paid on exit. We have 10 of 14 businesses we have minority equity stakes. We have 14 out of 14 exit premiums. Those exit premiums can range anywhere from 15%-30%, and both of those can provide a material upside on exit when Duke exits the positions.
Okay. Moving on. Wanted to just give you a sense of how we see our position in this very large industry called private credit. There's a lot of different ways that people can invest in both equity and debt. Speaking of private credit and how things have evolved there, you can see there's, on the left-hand side, is what we have not done. We've never done this, by the way. We stay away from venture capital. There's a lot of debt that goes into venture debt on top of venture capital or private equity funds that are looking for high revenue growth companies, not worried about profits, t he SaaS technology companies, and they wanted highly scalable business models and a very big part of the market.
Also, a lot of headwinds and a lot of problems in that part of the market right now, very, very large, especially in the United States. We can't compete there. We do not want to compete there, and we've never done a venture debt deal. What we're looking for is in the middle, and this is our point of entry, which we call the lower mid-market. These are entrepreneurs, as we talked about before, but I won't go through this slide for the interest of time. Look down at the bottom. What we're looking for is to invest in EBITDA of GBP 2 million-GBP 6 million. We have a buffer of EBITDA, but they do have actual history of profitable operations in those manufacturing and industrial sectors. Also, the multiple of EBITDA is on the low side.
What we do is we build them up and h elp them grow, to the right-hand side of this page. That's when we can get refinanced out, and that is when the EBITDA goes up. Also, as you can see at the bottom right, the multiple goes up. That will feature in the rest of the presentation as well. On the next slide, we have a couple new quotes from our exited shareholders. I think this goes to the heart of what I said before, which is we want to partner with real owners, r eal people that go to work every day, that have their equity and their net worth and the equity of the business, and their income from the profits they generate, and t hey employ people, and they know exactly their business. That's who we're looking to partner with.
When we do our job, when they do their job, having Duke and Duke shareholders have alignment with these people. We become the senior capital in the capital stack, but w ith the equity sweeteners, what we're doing is we're allowing management to control their own destiny. We're allowing those people to control their own destiny and ultimately, grow their own net worth and their own company's net worth with us. We're really happy to have eight exits that we can show. Finally, bringing it all together. What is the benefits for investors? When you boil this down, what we have done for the last nine years now is focused on these three buckets. Our pillars, our investment pillars are to preserve the capital, and that's the senior secured capital.
We also commit to this dividend, kind of being paid as you wait for the monthly cash flow stream. Every one of our transactions, we get a monthly cash payment from the investment date. We get that cash flow stream, and we send up the dividend. We have a great dividend history that Hugo will get into. The third investment pillar is really what we're building, and we get one time to show it, and that's when we have exits. We'll get into where we are with exits, but we are building both exit premiums that we structure from day one. That is like basically exit fees. When you buy us out, we get a kicker.
We also are accumulating these minority equity stakes to align ourselves with the other owners, the majority owners, and also create an IRR bump when Duke gets exited from that company. That's our benefits for our investors and concludes section one of our presentation. Now , over to Hugo.
Yeah. Thanks, Neil. Really just to set up in terms of the FY 2026 financial information, I would describe it as a solid year, delivering growth across our core cash KPIs as most of you will hopefully already know. We tend to focus specifically on cash, and the majority of my KPIs are cash-based, and we've seen solid growth across the majority of those. We maintained our dividend again for the fourth consecutive year at GBP 0.028. In terms of deployments, a disciplined, targeted follow-on investments into our current portfolio. We invested GBP 21 million into the current portfolio. We've said a lot for the last 18 months that we will go in for more and for longer into the names that we know, and w e've done exactly that. Capital was deployed selectively, and we added an extra five operating subsidiaries across the portfolio.
We can't shy away. It's been a difficult 12- 18 months. The macro environment is tough, and I think we've, as a firm, demonstrated resilience across that tough environment, and the model continues to perform. On the outlook slide, I think it's fair to say that it's sort of balanced. We are looking at, hopefully over the next 12 months, some realizations, but while actively managing our portfolio. My TV's gone off. Apologies.
That's okay. One technical.
Small tech.
Ladies and gentlemen, please do bear with us for one moment as we reconnect the team.
Just bear with us for two seconds. We're just bringing the guys back in.
Can you hear us?
Yes, we can hear you, sir. We're just going to keep the camera off for the time being and just keep you connected to the laptop. Please do go ahead.
Perfect. Thanks, Mark. Apologies for that. Just moving on into the financial highlights. Core KPIs across the top. Cash revenue, non-recurring cash revenue and total cash revenue all showing steady growth. Recurring cash revenue is up 5%, to GBP 27.1 million. Total cash revenue is up to GBP 28.6 million. This is in a backdrop where we haven't had any investment exits this year. We're, as we've said, delivering a steady set of financials, steady growth. We hope over the coming 12-18 months that some realizations will bump that total cash revenue up. Free cash flow of GBP 14.2 million, up 13%, covering the dividend, as I said, of GBP 0.028 for the year. So, a steady, as I said, steady year. Moving on to the operating leverage slide. This really just shows it is a tough operating environment out there.
I'm always very sort of sure to try and look after the P&L and the expenses, and that's shown in the operating leverage where you can see our fixed operating costs as a percentage of our recurring cash revenue. Your fixed operating costs there on the gold bars remain steady at 3.1%, following in FY 2026, against a 5% growth in the recurring cash revenue. That operating leverage has just dropped. Ideally, I'd like to see that fall below 10%, but that will depend on some further recurring revenue growth over the next few years. This slide, we're particularly sort of proud of, and I'm sad that actually this data is only to the 31st of March and not sort of to today's date, because you might actually see the first 100% there in the middle from Inter.
This really shows the amount of revenue that we've received back from the start of each investment. We've had over GBP 125 million of cash revenue return from the current portfolio. As you can see there, InterHealth at 98%, Lynx at 94%. Hopefully, by the next time we're presenting to you, I can happily turn around and say at least two of our investments have already returned back 100% of their capital. Really, that underpins our model of hybrid returns, ongoing monthly distributions, and that sort of underpins that recurring cash revenue that I've already spoken about, and really that drives the dividend coverage. Moving on to the balance sheet, r eally some of the key numbers there to look at, o bviously, we've got GBP 8.3 million of cash sitting on the balance sheet at year-end, so that gives us that GBP 5 million liquidity post the payment of April's dividend.
We are GBP 100 million fully drawn on our Fairfax facility. For those of you, just for your information, that is a facility that runs out in January 2028. That will become very much front of mind towards the end of the year, looking to refinance that facility. On the portfolio side, the hybrid credits is sitting pretty much bang on its cost at the moment. You can see there the cost is GBP 248 million, with a fair value of GBP 249 million, so pretty much at exactly cost. The bottom right graph really shows you the average hybrid credit investment size. As I alluded to earlier, we have deployed GBP 21 million in the last 12 months, but that was into our current portfolio, and that's why you see in the bottom right there, the average size increasing.
That will continue to grow until we start getting some realizations, which we hope will be in the near future. The left-hand bottom graph is the equity investment portfolio. That's just dropped a little bit. That's not surprising. It's a pretty difficult macro backdrop out there. We value our equity investments on a forward-looking EBITDA and then use a sort of comparative market multiple. Obviously, some forecasts and some of our companies are going to be slightly depressed, but it's actually held very firm. I go into a lot of detail with my auditors on that one, so w e're pretty happy with that level. I think really just to summarize overall from the financials, a good, steady, if not spectacular year, showing growth across our core metrics and a covered dividend.
Great. Thank you, Hugo. We'll move on to some of the other themes from our results. A little bit of an outlook as well, and a few things that we've said in our accounts outside of the numbers that we'll touch on, you know, t hird-party capital, AI, that one of you had a question about that. Our portfolio exits as well as what's happening in our focus inside the portfolio. Just touching on the second bullet point there, I think Hugo covered the first one, i s really our third-party capital. I want to couch this in, as I mentioned at the start, the overall 2026 industry of private credit. There's an old adage of Wall Street, "What's worth doing is worth overdoing." I think private credit is now coming back to the effects of overdoing something worth doing.
There are some retail U.S. portfolios that have a redemption feature, and that has coincided with a lot of technology and SaaS-based loans in those portfolios. It's been the number one sector to have private credit loaning against technology companies, which AI is now scaring a lot of people out of, and where everyone is now heading for the hills at the same time. There are dates coming up. It doesn't look like 2026 is a very good time to deploy capital for a lot of institutions in the U.S. because of those headwinds. I'm happy to report, as I mentioned in my CEO report, the headlines and those fact base of the private credit industry that are prominent today, do not read across to Duke. We do not have a redemption feature.
We have a permanent capital base that is a public company, and so everyone has ultimate liquidity through the secondary shares, which is much different than what's happening with the redemption. The other, as I also explained, and I wanted to explain, is that these technology-based loans are not something that is inside our portfolio. Having said that, we certainly are not immune to, on the third-party capital raise, that we're not immune to the headlines that, and if everything else is not in favor, then Duke Capital cannot buck the trend as a small player in a very large pool of capital. I think the current private credit weakness will stretch timelines. Everyone will be looking at their own portfolio before looking at what we would be for them as a new manager or an emerging manager.
It's relationship building, but c ertainly, it's a time that will be elongated before any third-party capital is going to come. Now, having said that, there are a number of different ways that we can grow, and we are looking and in the market with a placement agent. We are in the market having conversations, and those are building relationships. What we'll always do is put our shareholders first and do something that's creative to our shareholders. The other point, before getting onto kind of our portfolio focus and investment pillars is the ubiquitous topic of AI. No, we do not have any space-based investments, u nfortunately, actually with SpaceX going the way it is. We certainly stick to our knitting.
We've evaluated our portfolio on the technological obsolescence and the AI problems, or AI, what should I say, how it could be negatively affected by AI. Quite frankly, if everyone knows our portfolio, and Charlie will go through it, there's not too many negative consequences there. We really are looking forward to use AI internally for portfolio monitoring and with one of our partners, our due diligence partners coming with a proprietary AI tool to help Duke and help the people here do our jobs better and more efficiently, and t hat is looking for new deals, evaluating our existing portfolio, deciding how to do that. There are a long AI will affect everything for sure, but for the time being, our portfolio is insulated in the short term and we're using it to better and be more efficient internally.
With that, I'll turn it over to Charlie to discuss a couple other things on the portfolio. Thank you.
Thanks, Neil. I'm sure many of you have seen this slide before this, and the next slide really just explains what we have in our portfolio today, investment date, fair value, some generic sector descriptions. This is just as a reminder, a largely B2B portfolio. There's not a lot of consumer-facing exposures in this portfolio. These are tend to be low growth, low multiple sectors. We're typically buying into these businesses at between 3x and 6x EBITDA. Doing a lot of MBOs, a lot of buy and builds. We try and spread the sectors around geographically and not get too exposed into any individual sector. As Neil said earlier, low risk of technology obsolescence, low customer concentration risk. Good organic, profitable, long-standing businesses that I think everybody on this call would understand.
Dare I say are boring businesses, but boring that pays a proper cash flow is not boring to me. This is the portfolio. I would say you take a step back, I mean, how is, t his is a results presentation, but everybody obviously wants to know how we're doing in the portfolio. I would say overall, relatively happy. Everything outside the U.K. is doing extremely well. That's the Irish and North American exposures. The U.K. is a slightly more mixed bag. Obviously, had a new prime minister today. The outgoing prime minister told us what a fantastic job he's done. Well, I'm not quite sure I agree with that. What we're dealing with in the U.K. is a few things. We have a couple of care homes businesses in there.
The NHS is pushing very, very hard for what they say is value for money at the moment. Quite rightly, given it's taxpayer dollar . There's quite an effort by the government and the NHS to reduce or at least halt any increase in average weekly fee payments for care homes. That's something we're dealing with. Clearly, the NI increases that came in, you will or would've read about those. Our companies tend to be high employment companies, low minimum kind of working wage, so t hey have been affected, a lot of those by the increase in NI. Another thing I'd say is construction. Construction obviously is a bit of a disaster right now, particularly new builds getting absolutely nowhere near the numbers that were promised by this Labour government. That has impacts in the glass business.
Obviously, we have a glass exposure there in United Glass Group in the U.K. That's certainly feeling the headwinds of the failure of government policy. There's obviously the stamp duty at the top end. There's the lack of new builds at the bottom end. There's still people aren't coming into the office five days a week. That has an office partitioning business within it. There are good things and bad things. The good things, we've got a couple of buyouts we're talking about, one in the U.K., one in America. You saw the solid set of numbers that we just produced, and I think we could add an estimate, Hugo, Q1 of GBP 7 million there.
Correct.
Overall, if you flip the page, t hose are the 14 holdcos. Underneath that, we have 78 underlying companies, and I'm sure we have many avid investors on this portfolio, so on this call. I'm sure you understand that in any portfolio there's the good ones, the indifferents, and the bad ones. We're no different to anybody else. Generally, overall, pretty happy because of the spread and the diversification that we now have, as I said, across sectors and geography. That's our nicely mature portfolio. Next slide. This is one to spend a bit of time on. If you look at the capital invested column, that's the GBP 251.4 million that we have invested in these businesses. The cash return today, a nice healthy GBP 125 million. We've had almost 50% of the money back, and yet the unrealized fair value is GBP 263 million.
All pretty [audio distortion], I mean, it's because of the very long duration of our product. The average duration will be over 25 years still at this point. I think we have contracted revenue from this book of over GBP 1 billion in sterling, coming over a long period of time. We've had nicely mature businesses that, as Hugo said earlier, some of which nearly, very nearly paid us back 100% of our money already and have decades to run. That's what we're trying to provide, is a long-term, long-dated, fairly flat annuity stream with a small amount of growth, which we then put through low OpEx at Duke in the middle and pay out to our shareholders in dividends. We've been pretty successful in that. I know Hugo will probably talk about it a little later. Okay, flip the slide. Thanks, Hugo.
Actually, one of our shareholders asked us to put this in, so we always listen to our shareholders, so we put it in. The question of what happens if things don't go well in the portfolio, what do you do? What we do is we tend to see things a long way out. I mean, this is not, you know, we certainly don't expect to get surprises at Duke. Surprises are bad. Both good and bad surprises, we don't expect them. We tend to run like a boat turning around, get a lot of time to see things before they actually happen. We are a senior secured lender. We often take less cash payments out than we contractually due if a business is underperforming. We would accrue those payments. They would be rolled into the debt position that we're owed. We would then be looking to change management teams where necessary.
We look to equitize those unpaid payments to take operational control of the business through the share register. There are three parts of a company that you need to control in the turnaround. One is the share register, one is the board, one is the checkbook. We would make sure that we were in control of all three of those during the operational transformation phase. We would bring in a new management team. With that new management team brought in, we would then re-incentivize that management team with some of the equity. Duke would then go down to a minority equity from being a majority equity player, only temporarily. Temporary the majority, and then back to our normal, which is the minority equity player incentivizing the management team alongside us. This is a playbook we've done many times.
We do it today, we've done it before, we will do it tomorrow. It's how we deal with it when companies perform. We don't panic. We don't enforce our security on asset-light businesses. That destroys value. We get our hands dirty. The 80/20 rule, guys, which is the 20% of the portfolio which needs some love and attention takes, well, it's not 80%, it takes 95% of my time. Coupon clipping the ones doing well takes none of my time. Really, this is what we get up in the morning doing, is ensuring that we maximize difficult situations to the best of our ability.
Can I just add to that, Charlie, that we do always have these fundamentally profitable businesses. When we take our foot off the gas of taking in cash and then reinstating payments back to Duke, we don't ever relinquish that senior security and our note that whatever it was as the principal at the beginning is still the same at the end or there or thereabout. It's not like we take our debt and then take it all into equity and then we're left with an equity position. It's, we're still in debt, and t hat's a point.
Yep. Thanks, Neil. Neil mentioned the eight buyouts to date. I'm disappointed that we haven't had one since March 2023. It's time for another one or two, so l et's keep our fingers crossed for this financial year. You can see very attractive returns, particularly the ones where we have equity as well as exit premiums. As I said earlier, 10 of the 14 businesses, we have equity, 14 of the 14, we have exit premiums. Hopefully when we get the buyouts, we're going to see some attractive returns. Time for another one.
What were the few?
Yeah. We'll get onto the question- and- answer period. I just wanted to bring it all together. This year, really, is all about income and resilience. Delivering, all our KPIs are increased, but w e have a focus on shareholder value and that capital preservation, and our consistent track record of returns. We're very happy about fiscal 2026. The dividend and nine now consecutive years of quarterly dividends, and long may that continue. There are, as we want to convey, there are no doubting that on the day that we have just had another prime minister resign in the U.K., the political and therefore the economic environment is also uncertain. Therefore, we want to play it safe, and we're cautious and disciplined in our business and our business model. However, the long-term model remains intact. We do have capital recycling that we can take place.
We've said that there's a self-sustaining model that we have, so we're not reliant on more and more equity issuances. That was made clear at the last year's results. We have done that. The equity stakes that we're building, the value that we're building inside the portfolio will come good with exits. The third-party capital is ongoing and active. No one, as they say, is bigger than the market, but c ertainly, our aim, shareholders, we aim to, you know, b ecause Charlie and I are very big shareholders of the company ourselves, you're our first priority. Having another set of potential investors will come in time and we are actively pursuing that. Then, the outlook, it's balanced. We have a portion of the North American portfolio which is doing well.
That's the value of diversification and I think the model of a hybrid between our credit and actively getting active when we need to is our private equity side of the hybrid credit. With that, thank you very much, and we'll open it up for questions.
That's great, guys. Thank you for updating investors today. Could I please remind investors to submit your questions just by using the Q&A tab situated on the right-hand corner of your screen. For your reference, a recording of today's presentation will be available on the Investor Meet Company platform shortly after the meeting has ended. Guys, as you can see, we received a number of questions during today's presentation. If I could just hand back to the team to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end.
Yeah. Thanks, Charlie. A number of questions have been submitted on the dividends. I hope you can appreciate, I obviously can't give out sort of forward-looking information, but what I can say is we have paid nine years' worth of quarterly dividends. We pay out a high percentage of our free cash. It's based on a high percentage of our free cash flow. It's reviewed and approved by our board every quarter and will continue to be so. To date, we've paid out GBP 0.235 of dividends since inception. As I said, we've now kept the dividend steady at GBP 0.007. We recently just announced last week an 18th consecutive quarterly dividend at GBP 0.007.
Okay. We can go on to, the question is, how safe are your investments to macroeconomic changes to business and employment models, impact of AI and instability in the United States? I think I touched on this, but just to reiterate, in the United States, we have a sign manufacturer that builds physical signs outside of shopping malls and stadiums. We have a stainless steel fabricator and process manufacturer, so they build things for food and beverage and Coca-Cola and the life sciences industry, their physical products, and also a glass door manufacturer. We see that AI is not replacing that anytime soon. We do feel that in getting more efficient on the OpEx is everyone's job.
I would challenge all our CEOs to see how they can be better on workflow processes using AI and if they can be more efficient, because we do employ a lot of people. I would say there's very insignificant changes to any of that or impact from AI.
There's one here on the share register. Perhaps Charlie could take that.
Sure.
Has your share register changed much over the last three years?
Well, the answer is yes, a lot. We have gone from being a, I guess a 2/3, 1/3 institutional retail share register to the inverse, which is now sitting at about 66/33 retail over institutional. The retail shareholders have been great buyers of our shares. Because of the challenges faced by institutions on terms of their redemptions, we've been to many institutional meetings, Neil, Hugo and I, over the last three years. We've seen a number of different manager changes as well during that period. I can assure you guys, it's a very depressing place to be sometimes with the institutional market. They're suffering and have suffered terribly with major redemptions. Duke is a share with quite high liquidity trading volumes. Thank you to our ever-expanding and loyal retail shareholder base.
They have picked up probably 200- odd million shares of the market over the last few years. The answer is yes, there has been a dramatic change to what is now a retail heavy and hence why the three of us, Hugo, Neil and myself, are committed to doing what we can to look after the retail audience and provide as much information as we can.
Great.
A couple of questions on the debt facility in terms of is that your only debt facility and what is the rate that you're paying at the moment? We're currently paying SONIA plus 5%. We refinanced that just under three and a half years ago, from when we were paying SONIA plus 7.5% . At the time, it was a fairly decent reduction. Do we expect to pay more when we refinance? I can't really tell you that now. That's going to be in, we refinance in January 2028. I think the macro environment may dictate whether that goes up or down to some degree, as well as size of the portfolio. We would be very hopeful, not to have to pay an increased rate from where we're at now. But as I said, 18-19 months down the line, we will see.
Okay. There's one, the question is, given the limited headroom in terms of capital, is there a risk that you can't fund upcoming calls from the existing portfolio?
Shall I take that one?
Yes.
Everybody can see we're fully drawn GBP 100 million on the line, and there was about GBP 8 million in cash at year-end. That means we're getting increasingly cash constrained. Those are factual statements. The reality is twofold. One, we don't have a hugely hungry portfolio, certainly not in the near term. I don't see major cash requirements coming down at us that we can't fund. Secondly, there are certain investments in the portfolio that have significant assets within the companies. I'm talking like Integrum, for instance, that has a GBP 25 million- odd, there or thereabouts anyway, GBP 25 million freehold property portfolio. We are allowing Integrum to gear up that portfolio, that freehold property portfolio. They currently have a Barclays facility. Remember, we have 50.1% of the equity in Integrum.
Where we have big equity upside, are a lot more sympathetic to allow the companies to continue their growth strategies, without due prudent big checks, i.e., allowing them to lever up their asset bases because o bviously, we are going to participate through the equity in any growth on an unlevered basis. In certain situations, we're allowing our companies to gear a little bit more. In certain situations, we're simply not allowing the companies to do deals, i.e., M&A, takeover transactions. We always have to sign off on any takeover transaction while we're a lender to the business. There have been circumstances where if we don't particularly like the deal or we don't want to do the deal because of a capital constraint position, then we will say no. That will probably lead to two things. A slightly unhappy counterparty, clearly, in almost all circumstances.
Often those counterparties will understand the situation and will wait because they're going to wait for us to get some buyouts in the portfolio, then we'll have cash again, and continue with our journey. In certain other situations, possibly that could even push the counterparty to wanting to exit the position with Duke. Given that we are looking for exits at the moment, that wouldn't be the worst result for us. A long way of answering the question, which is, I don't think there is going to be a situation where we're not able to fulfill a cash call. I think we will manage it on a portfolio or on an investment by investment basis, the way I've explained, and sometimes the answer will be simply no, that we won't fund it and we don't want it.
I've got one question that says, a slightly technical question, but how do you value your hybrid credit investments? I value them effectively on a 30-year discounted cash flow. I'm audited by BDO once a year, and obviously, we revalue at the interims as well. That 30-year discounted cash flow includes some forecast adjustment factors. Neil's talked earlier about Duke model and how we have preference shares and an adjusting rate each year. Discount rate, we used in that is the IRR on day one. January tends to be around 16%, 17% discount rate. We do look at that every year, but more often than not, the discount rate remains fairly steady unless there's a serious increase in the credit risk. You don't generally tend to see huge amounts of fluctuations in and out from an overall portfolio perspective.
Obviously, on a case-by-case basis, if there looks like there is a reduction in earnings or even the other way, an increase, you might see that adjustment factor change over the years. Generally speaking, even in post-COVID, we only took GBP 15 million write-downs across the whole portfolio. It's nice in respect to the fact that it's not a sort of mark-to-market movement where you expect to see the value of the fair value go up 30% in one year and suddenly there's a risk that we're massively overvalued. I think the way that we value these models is prudent, and as I said, you don't tend to see huge amounts of volatility.
Okay. Thank you, Hugo. There's a question which is a good one. It says, the number of investments Duke has made into new companies is very low. Would you say that is lack of demand for the product, e.g., companies not investing or taking risks on as much M&A or Duke being very selective? It's a very good question that really touches on the pipeline, I'd say generally, and new investments. Again, when we talk about the self-sustaining model, that is to ensure that growth comes through NAV growth, and exits within the portfolio and bumps in the IRR, and not through equity issuances.
Since 2022 and the rise of the U.K. interest rates, 14 consecutive meetings that they increased interest rates, really have made the risk-free rate 5%, or it used to be 5% and now it's 3.75%, our dividend yield used to be 5%-6%. Now, our dividend yield is 10%. That has made our NAV per share higher than our share price. We believe that's one of the drivers that will shrink that dividend yield over time is the U.K. risk-free rate. When we're in this position that we are right now, we've said that we're not going to grow through these dilutive equity issuances, and therefore, the new investments will come through the repayment or exits.
That's one of the things we could do with the capital that we get back onto our balance sheet, is we could then, three things: reduce debt, we can put in new deals, or we can build our portfolio and go deeper and longer into our existing portfolio. Those are the three options. You're talking about the second one, which is new transactions. Without exits and the self-sustaining model, we're going to have to wait for that. But we are actually doing a number of things to stimulate the pipeline. We sign about four NDAs a week. We're evaluating a lot of different companies. The part of the question was, is this a lack of demand? It is definitely not a lack of demand that we have seen. We've never had a lack of opportunities that we have. But we are very selective.
The companies are also selective. When a company is for sale, that's usually when we get a call, just like every private credit and capital provider. We'd love to do MBOs when it works, but a lot of those new transactions are people wanting to sell their business, and we're not interested. The numbers that we historically have done is in the low single digits of a percent of every transaction that we see, an NDA that we sign. It's a little bit of both, but we are very selective. There's no lack of demand. What it is, as we've said, a commitment to our shareholders to not dilute the stock through equity issuances for the sake of growth.
I think there's another question here. Are Fairfax your only or main lender? If so, is this a risk? Should you have a few alternative lenders? To answer the question, Fairfax is our only lender. I don't consider having a single lender more risky. In fact, I consider it in some ways to be less risky than having a group of lenders because herding cats, once you've got a number of counterparties to deal with you can get unforeseen problems in that too. Very happy with a single lender. We're very happy with Fairfax. It's a great organization, very well run, GBP 90 billion of assets. As Neil might say, they don't wake up worrying about [audio distortion] and the GBP 100 million loan. They've been extremely good to work with. They're very diligent, very professional. They're very supportive.
I think that some of their investment philosophies are very similar to ours at Duke, funnily enough. They take a long-dated view on things. They're calm, and they like to work in a constructive way. We'll be talking to Fairfax. It's January 2028 is the refi date.
Refi.
We'll be talking to Fairfax between now and then, keen to look to extend it. But clearly, that requires sitting down with Fairfax and discussing it. I'd like to think that between now and the one-year anniversary, which will be January next year, that we will have those discussions and we'll know what we're doing. We'll update the market accordingly.
Okay. Great. There is one, a good question. This touches on expanding on third-party capital, I believe, but just the shareholder base. Ultimately, I think I won't read the whole thing. It basically sets out that sophisticated private investors and family offices actively seeking exposure to something that looks like Duke. Therefore, is Duke or the board considering targeting this investment audience as part of its marketing and investor relations strategy? If so, what has the response been? Is this an area the board believes could help broaden the shareholder base over time? Yes. Very good question. It is in what we think about a lot in terms of the buckets of new capital. There are our AIM shareholders, there are public shareholders and public institutions, and all the shareholders on the phone.
Outside of that, the growth of private credit is through funds and other structures. Those, the different buckets of investors for private credit, including insurance company, which is Fairfax and others. Foundations. In the United States, there are a lot of pension funds and state-run pension funds and endowments for universities. Very, very large shareholders, or capital providers. And family offices. Unlike public institutions, unlike insurance companies or even endowments, the family office criteria are, by definition, very broad. They are not one homogeneous and very easily accessible shareholder base. I think you could probably talk to a lot of CEOs of public companies, they would love to have big chunky family offices as their shareholders because of what you've said, t hey're long-term in nature. We do feel that that would be a very natural place for us to seek capital.
What has the response been? The response is that it is a relationship-building exercise with family offices. They get pitched, as you can imagine, by everyone across the board. They are also very specific, and everyone is a little bit different. It is something that we're targeting. We are targeting family offices in our third-party capital structure, and we would be open to co-investing with family offices, et cetera. Certainly, we're considering it and we're actively managing it. What I would say about family offices, it's very hard to earn their trust, and it's usually a single or a very concentrated investment committee with a broad range of investment criteria. You need to know them very well in order to get them as partners.
Okay. This is quite a technical and nerdy question, apparently. Why is Duke a standard list company versus, s orry, something's just moved there.
Yeah. Versus an investment trust.
Versus an investment trust.
That one.
Would there be an advantage to moving to being an investment trust? We're an AIM company, so we're not a standard list company, is the first thing to say. We are listed on AIM, not standard. We would look potentially at times if there was a reason to do so to cut to the main board. Probably standard would be the obvious route to do that if we decided we were ever going to do that. Probably would entail an investor wanting us to do it or access to capital for doing it. Given we're not fundraising at the moment, I don't see a short-term move up to the main board. We're on AIM. Duke is a Guernsey domicile company. I'm sure most of you investors know that. On a tax basis, the tax overall is relatively efficient throughout the group.
We are comparably efficient as an investment trust without the restrictions of a U.K. investment trust. I don't think there's any upside. We've been able to access all of the shareholders on our register over the last seven years. We've had all the main U.K. institutions who have been willing to buy into Duke in the current structure, in the current form. I think it's run efficiently, as I say, as a Guernsey company, so shareholders don't lose out in that regard. Yeah, I don't see there's any advantage in the short term of changing the structure, doing a main board-listed investment trust.
I don't think we're going to get to all of these questions, but I think there's a way we do that on the.
Yeah.
On the website. Okay. Right. I think with that, our hour is up, and apologies for the slight technical glitch. Just blame it on AI, I think is what we have to do in this day and age. Thank you very much for attending our fiscal 2026 results presentation. For Hugo and Charlie, Neil Johnson, the CEO, thank you very much for your attendance and your trust in Duke. Thank you.
Thank you once again for your presentation this afternoon. Could I please ask investors not to close this session, as you'll now be automatically redirected to provide your feedback, which will help the company better understand your views and expectations. On behalf of the management team of Duke Capital Limited, we would like to thank you for attending today's presentation. Good afternoon to you all.