Interim Results

RNS Number : 4992U
Duke Royalty Limited
03 December 2021
 

 

3 December 2021

Duke Royalty Limited

 

("Duke Royalty", "Duke" or the "Company")

 

Interim Results for the six months ended 30 September 2021

 

Duke Royalty Limited (AIM: DUKE), a provider of alternative capital solutions to a diversified range of profitable and long-established businesses in Europe and abroad, is pleased to announce its interim results for the six-month ended 30 September 2021.

 

Financial Highlights

· Cash revenue of £7.8 million, up 78% from the prior period (Interim 2021: £4.4 million)

· Net cash inflow from operations of £5.2 million, a 46% increase (Interim 2021: £3.6 million)

· Net profit generated of £6.2 million, a 50% increase (Interim 2021: £4.1 million)

· Free cash flow of £4.6 million, up 58% from Interim 2021 (£2.9 million)

· Adjusted earnings of 1.39 pence per share, a 60% increase (Interim 2021: 0.87 pence per share)

· Cash dividends of 1.10 pence per share paid to shareholders

 

Operational Highlights

 

· Raised £35 million of new equity capital in April 2021

· Deployed over £23 million of capital into three new royalty partners

· Realised exits from two investments

· Over £55 million of available liquidity for future deployments

· Current deal pipeline is at historic levels in deal value and number

 

Neil Johnson, CEO of Duke Royalty, said:

 

"This has been a very successful half year, characterised by substantial cashflow growth and accelerating investment deployment. Cash revenue is up 78% from the prior period to £7.8 million, and we have delivered a 58% increase in free cashflow to £4.6 million. This positive performance has been driven mainly by our team's rapid execution of new royalty agreements which has seen us invest over £23 million into three new royalty partners during the period.

 

"This strong trading performance makes me confident that Duke will exceed the market's expectations for the 12 months ended 31 March 2022. Since the resumption of its cash dividend, Duke has increased its dividend payment from 0.50 pence per share to 0.55 pence per share, with the prospect of higher dividend payments for shareholders in the future. This growth will be supported by entering into new royalty agreements and I am pleased to report that our pipeline is the strongest in our history. We expect to announce a range of new deployments in the coming weeks and months."

 

Investor Webinar

Neil Johnson, CEO, and Hugo Evans, Finance Director, will deliver a live presentation via the Investor Meet Company platform on 13 December 2021 at 15:30 GMT.

 

The online presentation is open to all existing and potential shareholders.

 

Questions can be submitted pre-event via your IMC dashboard or at any time during the live presentation via the "Ask a Question" function. Although the Company may not be in a position to answer every question it receives, it will address the most prominent within the confines of information already disclosed to the market. Responses to the Q&A from the live presentation will be published at the earliest opportunity on the Investor Meet Company platform.

 

Investor feedback can also be submitted directly to management post-event to ensure the Company can understand the views of all elements of its shareholder base.

 

Investors can sign up to Investor Meet Company for free and add to meet Duke Royalty via:

https://www.investormeetcompany.com/duke-royalty-limited/register-investor

 

Investors who have already registered and added to meet the Company will be automatically invited.

 

This announcement contains inside information.

 

 

For further information, please contact www.dukeroyalty.com , or contact:


 

Duke Royalty Limited

Neil Johnson / Charlie Cannon Brookes / Hugo Evans

 

+44 (0) 1481 741 240

Cenkos Securities plc 

(Nominated Adviser and Joint Broker)

 

Stephen Keys / Callum Davidson / Julian Morse / Michael Johnson

 

+44 (0) 207 397 8900

Canaccord Genuity

(Joint Broker)

 

Adam James / Georgina McCooke

+44 (0) 207 523 8000

SEC Newgate Communications (PR)

Elisabeth Cowell /

Richard Bicknell / Megan Kovach

  +44 (0) 203 757 6880

dukeroyalty@secnewgate.co.uk

 

 

CHAIRMAN'S REPORT

 

 

Dear Shareholder,

 

I am pleased to report the results for the Group for the six-month period ended 30 September 2021 ("Interim 2022"), which were characterised by substantial cashflow growth and accelerating investment deployment.

 

Interim 2022 was a period of positive development for Duke during which the executive team's focus reverted to business development, growth and deal execution following the initial shock of the pandemic felt during the prior half year period. After a sustained period where the Company was required to focus much of its attention on internal monitoring and working closely with its Royalty Partners to ensure that they traded safely through the many challenges of Covid-19, it has been encouraging to witness a significant bounce back in the operating performance of many of those Partners.

 

Furthermore, after such a period of global financial stress, the Company's unique, long dated and aligned product offering has meant that Duke is increasingly being seen as a preferred capital partner for many profitable, well managed private businesses who do not wish to become encumbered by the high refinancing risk associated with short-dated debt. To highlight this point, I am pleased to be able to report that Duke's current deal pipeline is as robust as it has ever been in the Company's history and I am confident that the Company will being able to announce a number of new deployments in due course.

 

 

Operational Review

 

Interim 2022 started with an over-subscribed £35 million equity placing which closed in late April, providing Duke with the necessary liquidity to allow it to accelerate its speed of deployment. It was very pleasing to note that several large, new institutions were added to the Duke share register as part of the fundraising. As with previous equity fundraisings, Duke ensured there was a retail element to the capital raising process with £32 million being raised from institutional investors and £3 million coming from existing and new retail shareholders through the PrimaryBid platform. Wherever possible, Duke seeks to provide existing and new individual shareholders the chance to participate on the same terms as the institutions and we very much appreciate the strong support we continue to receive from our large retail investor base.

 

Duke made three material new investments during the period under review, the first of which was a €10 million investment into Fairmed Healthcare AG ("Fairmed"), closed at the end of June. Formed in 2012 and based in Zug, Switzerland, Fairmed provides high quality generic prescription medicines, over-the-counter pharmaceuticals, dermocosmetics and dietary supplements in various EU countries. The second investment, made in July, was a £7.7 million investment into InTec Business Solutions Limited ("InTec"). InTec is a UK company specialising in the design, implementation, and support of a wide range of cloud services and business applications and is undertaking a buy and build strategy of synergistic companies within the I.T. Managed Services sector in the UK and Ireland. In September, Duke subsequently upsized its investment in Intec by £2.2 million, which allowed InTec to complete its eighth acquisition, providing additional product, profitability and diversification to the business. Also in July, Duke agreed to a total funding commitment of up to CA$20 million (approximately £11.6 million) with Creō-Tech Industrial Group Inc. ("Creō-Tech"). Creō-Tech is a Canadian holding company that has been set up to acquire businesses that provide engineering, procurement and construction ("EPC") services in commercial and industrial settings. Of the CA$20 million total commitment, Duke invested CA$8.3 million as part of the initial drawdown to facilitate the acquisitions of Silhouette and Axial, two longstanding and profitable businesses with predictable revenue streams.

 

Two successful divestments were also made during the period. The first was Duke's exit of its investment in royalty partner Almondclose Limited, trading as Berkley Recruitment (Group) Limited ("Berkley"), a Cork-based resourcing and recruitment business. Duke received net cash of €1.3 million at closing, delivering an IRR on the Berkley investment of 16.0%. Due to its sub £5 million investment size, Berkley represented a subscale investment for Duke which was inherited via its acquisition of Capital Step back in February 2019. Duke has retained exposure to the Irish resourcing and recruitment sector via its other larger royalty partner, BIL, which is conducting a buy and build strategy within the sector. The second exit came from royalty partner BHPC Limited ("BHP"), an Irish insurance brokerage specialising in the not-for-profit insurance space, and at closing Duke received back net cash of £6.9 million, delivering an IRR of 29.4%, Duke's highest realised IRR to date. BHP represented Duke's fifth exit to date further validating our funding model.

 

 

Financial Review

 

The financial results for Interim 2022 reflect the resilience of Duke's business model and its ability to withstand the global economic disruption caused by the Covid-19 pandemic. I am delighted to report that the Company's cash revenue, being cash distributions from royalty partners and cash gains from the sale of equity investments, grew to £7.8 million during the period under review, a 78% increase over the £4.4 million generated in Interim 2021. Net cash inflow from operations, the key indicator of the Group's underlying operating performance, totalled £5.2 million, a 46% increase over the £3.6 million generated in Interim 2021. Total cash available for distribution (free cashflow), which represents the Group's operating cashflows less its interest on debt financing and is a measure of Duke's ability to cover its dividend, grew by 58% to £4.6 million, generating 1.36 pence per share, up from £2.9 million and 1.22 pence per share in Interim 2021. 

 

Total income, which includes non-cash fair value movements on the Company's investment portfolio, grew to £9.8 million, a 38% increase over Interim 2021. This produced total earnings after tax of £6.2 million and earnings per share of 1.84 pence against £4.1 million in Interim 2021 and earnings per share of 1.73 pence. Adjusted earnings, which strips out the fair value movements and represents a truer reflection of Duke's operating performance, rose to £4.7 million from £2.1 million, a 125% increase.

 

The Company strengthened its balance sheet during the period under review, raising £35 million of new equity capital at the end of April. Of this, over £23 million was deployed into three new royalty partners, only marginally less than the aggregate deployments for the entire financial year 2021. The full cashflow benefits of these deployments will be seen over the second half of the financial year.

 

 

Dividend

 

In April 2021, the Company increased its dividend from 0.50 pence per share to 0.55 pence per share, the first increase since the resumption of the cash dividend in Q3 of financial year 2021. This was followed with a further dividend of 0.55 pence per share paid in July 2021. Post-period end, a dividend of 0.55 pence per share was paid to shareholders in October 2021.

 

 

Outlook

 

One of the few benefits of the Covid-19 experience was the strong working relationship that has been created between Duke and its Royalty Partners. Together, we faced problems and implemented solutions and this has created a strong platform from which Duke can now embark on the next chapter of its growth, one in which I expect to see the Company grow its asset base and diversify its portfolio further.

 

Current trading for the three months ended 31 December 2021 is strong and I am pleased to share the Board's confidence of exceeding the market's expectations for 12 months ended 31 March 2022.

 

Notably, we have a robust pipeline of new investment opportunities, all of which have demonstrated resilience in the height of the pandemic. Given the nature of the Company's low and largely fixed cost base, additional deployments are expected to lead to increases in the Company's operating cash flow per share which in turn should lead to the prospect of higher dividend payments for Duke's shareholders in the future. It remains the Company's key objective to create a large, diversified portfolio of compounding long term income streams with the majority of this income being paid to shareholders in the form of quarterly dividends.

 

As always, I am appreciative of the ongoing support of our shareholders and am pleased to report the Chairman's statement for Interim 2022. Our existing partners have traded resiliently and we have minimised our exposure to the travel and leisure sectors. Therefore, the Group is well placed to continue to grow and I look forward to being able to report on the Group's ongoing progress and development in future periods.

 

Nigel Birrell

Chairman

 

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIOD ENDED 30 SEPTEMBER 2021

 

 

 

Period to

 

Year to

 

Period to

 

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

 

(unaudited)

 

(audited)

 

(unaudited)

 

 

£000

 

£000

 

£000

Cash flows from operating activities

 

 

 

 

 

 

Receipts from royalty investments

 

 6,419

 

 9,931

 

 3,654

Receipts of interest from loan investments

 

 450

 

 667

 

 381

Receipts from equity instruments

 

 652

 

 345

 

 345

Other operating income

 

 266

 

 93

 

 6

Operating expenses paid

 

(946)

 

(2,154)

 

(893)

Payments for royalty participation fees

 

(57)

 

(81)

 

(52)

Tax (paid) / received

 

(1,569)

 

 135

 

 135

Net cash inflow from operating activities

 

5,215

 

8,936

 

3,576

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Royalty investments advanced

 

(23,209)

 

(22,708)

 

(5,326)

Royalty investments received

 

 2,938

 

 14,354

 

900

Loan investments advanced

 

 - 

 

(1,145)

 

 (132)

Loan investments received

 

 3,370

 

 2,370

 

1,100

Equity investments advanced

 

(530)

 

(653)

 

(350)

Investment costs paid

 

(496)

 

(634)

 

(61)

Net cash outflow from investing activities

 

(17,927)

 

(8,416)

 

(3,869)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from share issue

 

 35,000

 

 - 

 

 - 

Share issue costs

 

(1,938)

 

(1)

 

Dividends paid

 

(3,269)

 

(3,013)

 

(1,778)

Proceeds from loans

 

 - 

 

 15,200

 

 4,000

Loans repaid

 

(7,500)

 

(13,926)

 

 - 

Interest paid

 

(611)

 

(1,409)

 

(663)

Other finance costs paid

 

 - 

 

(95)

 

(157)

Net cash inflow / (outflow) from financing activities

 

21,682

 

(3,244)

 

1,402

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

8,970

 

(2,724)

 

1,109

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period/year

 

1,766

 

4,481

 

4,481

Effect of foreign exchange on cash

 

9

 

9

 

14

 

 

 

 

 

 

 

Cash and cash equivalents at the end of period/year

 

10,745

 

1,766

 

5,604

 

 

CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE PERIOD ENDED 30 SEPTEMBER 2021

 

 

 

Period to

 

Year to

 

Period to

 

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

Note

(unaudited)

 

(audited)

 

(unaudited)

 

 

£000

 

£000

 

£000

Income

 

 

 

 

 

 

Royalty investment net income

6

 7,584

 

 19,344

 

 7,509

Loan investment net income

7

 410

 

 636

 

 339

Equity investment net income

8

 1,497

 

 1,569

 

(769)

Other operating income

 

 266

 

 93

 

 6

Total income

 

 9,757

 

 21,642

 

 7,085

 

 

 

 

 

 

 

Investment Expenses

 

 

 

 

 

 

Transaction costs

 

(525)

 

(447)

 

 11

Due diligence costs

 

 11

 

(103)

 

 40

 

 

(514)

 

(550)

 

 51

Operating Expenses

 

 

 

 

 

 

Administration and personnel

 

(1,191)

 

(1,675)

 

(953)

Legal and professional

 

(183)

 

(367)

 

(178)

Other operating expenses

 

(65)

 

(99)

 

(41)

Share-based payments

 

(472)

 

(806)

 

(303)

 

 

(1,911)

 

(2,947)

 

(1,475)

 

 

 

 

 

 

 

Operating profit

 

 7,332

 

 18,145

 

 5,661

 

 

 

 

 

 

 

Net foreign currency gains

 

 108

 

(542)

 

 15

Finance costs

 

(693)

 

(1,539)

 

(815)

 

 

 

 

 

 

 

Profit for the period before tax

 

 6,747

 

 16,064

 

 4,861

 

 

 

 

 

 

 

Taxation expense

4

(540)

 

(2,111)

 

(734)

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 6,207

 

 13,953

 

 4,127

 

 

 

 

 

 

 

Basic earnings per share (pence)

 

1.84

 

5.75

 

1.73

Diluted earnings per share (pence)

 

1.84

 

5.75

 

1.73

 

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2021

 

 

Note

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

 

(unaudited)

 

(audited)

 

(unaudited)

 

 

£000

 

£000

 

£000

Non-current assets

 

 

 

 

 

 

Goodwill

13

 203

 

 203

 

 203

Royalty finance investments

6

 93,232

 

 71,107

 

 53,299

Loan investments

7

 1,000

 

 4,370

 

 3,357

Equity investments

8

 4,810

 

 3,495

 

 172

Trade and other receivables

10

 2,236

 

 5,618

 

 -

Deferred tax asset

18

 157

 

 158

 

 204

 

 

 101,638

 

 84,951

 

 57,235

Current assets

 

 

 

 

 

 

Royalty finance investments

6

 13,607

 

 14,194

 

 30,186

Loan investments

7

 580

 

 580

 

 5,192

Equity investments

8

 60

 

 -

 

 -

Trade and other receivables

10

 7,780

 

 4,422

 

 67

Cash and cash equivalents

 

 10,745

 

 1,766

 

 5,604

Current tax asset

 

 -

 

 -

 

 169

 

 

 32,772

 

 20,962

 

 41,218

 

 

 

 

 

 

 

Total Assets

 

 134,410

 

 105,913

 

 98,453

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Royalty debt liabilities

9

 144

 

 114

 

 131

Trade and other payables

11

 868

 

 267

 

 484

Borrowings

12

 172

 

 161

 

 117

Current tax liability

 

 132

 

 1,163

 

 -

 

 

 1,316

 

 1,705

 

 732

Non-current liabilities

 

 

 

 

 

 

Royalty debt liabilities

9

 932

 

 917

 

 1,063

Trade and other payables

11

 204

 

 402

 

 400

Borrowings

12

 9,659

 

 17,103

 

 19,566

 

 

 10,795

 

 18,422

 

 21,029

 

 

 

 

 

 

 

Net Assets

 

 122,299

 

 85,786

 

 76,692

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Shares issued

14

 153,973

 

 120,870

 

 119,663

Share based payment reserve

15

 2,020

 

 1,548

 

 1,045

Warrant reserve

15

 265

 

 265

 

 265

Retained losses

16

(33,959)

 

(36,897)

 

(44,281)

 

 

 

 

 

 

 

Total Equity

 

 122,299

 

 85,786

 

 76,692

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 30 SEPTEMBER 2021

 

 

 

 

 

Share-based

 

 

 

 

 

 

 

 

Shares

 

payment

 

Warrant

 

Retained

 

Total

 

Note

issued

 

reserve

 

reserve

 

losses

 

equity

 

 

£000

 

£000

 

£000

 

£000

 

£000

 

 

 

 

 

 

 

 

 

 

 

At 1 April 2020

 

118,479

 

742

 

265

 

(45,446)

 

74,040

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

-

 

-

 

-

 

4,127

 

4,127

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners

 

 

 

 

 

 

 

 

 

 

Shares issued as dividends

 

1,184

 

-

 

-

 

-

 

1,184

Share based payments

 

-

 

303

 

-

 

-

 

303

Dividends

 

-

 

-

 

-

 

(2,962)

 

(2,962)

Total transactions with owners

 

1,184

 

303

 

-

 

(2,962)

 

(1,475)

 

 

 

 

 

 

 

 

 

 

 

At 30 September 2020

 

119,663

 

1,045

 

265

 

(44,281)

 

76,692

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

-

 

-

 

-

 

9,826

 

9,826

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners

 

 

 

 

 

 

 

 

 

 

Shares issued as dividends

 

 1,207

 

 - 

 

 - 

 

 - 

 

 1,207

Share based payments

 

 - 

 

 503

 

 - 

 

 - 

 

 503

Dividends

 

 - 

 

 - 

 

 - 

 

(2,442)

 

(2,442)

Total transactions with owners

 

 1,207

 

 503

 

 - 

 

(2,442)

 

(732)

 

 

 

 

 

 

 

 

 

 

 

At 31 March 2021

 

 120,870

 

 1,548

 

 265

 

(36,897)

 

 85,786

 

 

 

 

 

 

 

Share-based

 

 

 

 

 

 

 

 

Shares

 

payment

 

Warrant

 

Retained

 

Total

 

Note

issued

 

reserve

 

reserve

 

losses

 

equity

 

 

£000

 

£000

 

£000

 

£000

 

£000

 

 

 

 

 

 

 

 

 

 

 

At 1 April 2021

 

 120,870

 

 1,548

 

 265

 

(36,897)

 

 85,786

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 - 

 

 - 

 

 - 

 

 6,207

 

6,207

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners

 

 

 

 

 

 

 

 

 

 

Shares issued for cash

 

 35,000

 

 - 

 

 - 

 

 - 

 

 35,000

Share issuance costs

 

(1,937)

 

 - 

 

 - 

 

 - 

 

(1,937)

Share based payments

 

 40

 

 472

 

 - 

 

 - 

 

 512

Dividends

 

 - 

 

 - 

 

 - 

 

(3,269)

 

(3,269)

Total transactions with owners

 

 33,103

 

 472

 

 -

 

(3,269)

 

 30,306

 

 

 

 

 

 

 

 

 

 

 

At 30 September 2021

 

 153,973

 

 2,020

 

 265

 

(33,959)

 

 122,299

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 SEPTEMBER 2021

 

 

1.  General Information

 

Duke Royalty Limited ("Duke Royalty" or the "Company") is a company limited by shares, incorporated in Guernsey under the Companies (Guernsey) Law, 2008. Its shares are traded on the AIM market of the London Stock Exchange. The Company's registered office is shown on page 28.

 

Throughout the period, the "Group" comprised Duke Royalty Limited and its wholly owned subsidiaries; Duke Royalty UK Limited, Capital Step Holdings Limited, Capital Step Investments Limited, Capital Step Funding Limited, Capital Step Funding 2 Limited and Duke Royalty Employee Benefit Trust.

 

The Group's investing policy is to invest in a diversified portfolio of royalty finance and related opportunities.

 

2.  Significant accounting policies

 

2.1  Basis of preparation

 

The interim Condensed Consolidated Financial Statements of the Group have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting", as adopted by the European Union, and using the going concern basis of preparation. These interim financial statements do not contain all the information and disclosures as presented in the annual financial statements and should be read in conjunction with the Consolidated Financial Statements of the Group for the year ended 31 March 2021, which have been prepared in accordance with International Financial Reporting Standards ("IFRS"), to the extent that they have been adopted by the European Union, and applicable Guernsey law.

 

The accounting policies adopted in the preparation of the interim Condensed Consolidated Financial Statements are consistent with those followed in the preparation of the Consolidated Financial Statements of the Group for the year ended 31 March 2021.

· Royalty investments - measured at fair value through profit or loss

· Equity investments - measured at fair value through profit or loss

· Royalty participation liabilities - measured at fair value through profit or loss

 

2.2  New and amended standards adopted by the Group

 

2.3  Going concern

 

3.  Finance Costs

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Interest payable on borrowings

(409)

 

(1,293)

 

(689)

Non-utilisation fees

(213)

 

(106)

 

(56)

Deferred finance costs released to P&L

(71)

 

(140)

 

(70)

 

(693)

 

(1,539)

 

(815)

 

 

4.  Income tax

 

The Company has been granted exemption from Guernsey taxation. The Company's subsidiary in the UK is subject to taxation in accordance with relevant tax legislation.

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

Current tax

 

 

 

 

 

Income tax expense

539

 

1,594

 

263

 

 

 

 

 

 

Deferred tax

 

 

 

 

 

Decrease in deferred tax assets

2

 

674

 

483

Decrease in deferred tax liabilities

(1)

 

(157)

 

(12)

 

1

 

517

 

471

 

 

 

 

 

 

Income tax expense

540

 

2,111

 

734

 

 

Factors affecting income tax expense for the period

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Profit on ordinary activities before tax

6,747

 

16,064

 

4,861

 

 

 

 

 

 

Tax using the Groups effective tax rate of 8.00% (2021: 13.14%, period to 30 September 2020: 15.10%)

540

 

2,111

 

734

Income tax expense

540

 

2,111

 

734

 

 

5.  Earnings per share

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Total comprehensive income (£000)

6,207

 

13,953

 

4,127

Weighted average number of Ordinary Shares in issue, excluding treasury shares (000s)

337,310

 

242,836

 

238,797

Basic earnings per share (pence)

1.84

 

5.75

 

1.73

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Total comprehensive income (£000)

6,207

 

13,953

 

4,127

Weighted average number of Ordinary Shares, diluted for warrants in issue (000s)

337,310

 

242,836

 

238,797

Diluted earnings per share (pence)

1.84

 

5.75

 

1.73

 

Basic earnings per share is calculated by dividing total comprehensive income for the period by the weighted average number of shares in issue throughout the period. Diluted earnings per share represents the basic earnings per share adjusted for the effect of dilutive potential shares issuable on exercise of share options under the Company's share-based payment schemes, weighted for the relevant period.

 

Adjusted earnings per share

 

Adjusted earnings represents the Group's underlying performance from core activities. Adjusted earnings is the total comprehensive income adjusted for unrealised and non-core fair value movements, non-cash items and transaction-related costs, including royalty participation fees, together with the tax effects thereon.

 

Valuation and other non-cash movements such as those outlined are not considered by management in assessing the level of profit and cash generation of the Group. Additionally, IFRS 9 requires transaction-related costs to be expensed immediately whilst the income benefit is over the life of the asset. As such, an adjusted earnings measure is used which reflects the underlying contribution from the Group's core activities during the year.

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Total comprehensive income for the period

 6,207

 

13,953

 

4,127

 

 

 

 

 

 

Unrealised fair value movements

(2,663)

 

(9,871)

 

(2,658)

Share-based payments

 472

 

806

 

 303

Transactions costs / (receipts) net of costs reimbursed

 525

 

550

 

(51)

Tax effect of the adjustments above at Group effective rate

 134

 

1,119

 

 353

Adjusted earnings

4,675

 

6,557

 

2,074

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Adjusted earnings (£000)

4,675

 

6,557

 

2,074

Weighted average number of Ordinary Shares, excluding treasury shares (000s)

337,310

 

242,836

 

238,797

Adjusted earnings per share (pence)

1.39

 

2.70

 

0.87

 

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Diluted adjusted earnings (£000)

4,675

 

6,557

 

2,074

Weighted average number of Ordinary Shares, diluted for warrants in issue (000s)

337,310

 

242,836

 

238,797

Diluted adjusted earnings per share (pence)

1.39

 

2.70

 

0.87

 

 

6.  Royalty investments

 

Royalty finance investments are financial assets held at fair value through profit and loss ("FVTPL") that relate to the provision of royalty capital to a diversified portfolio of companies.

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Brought forward

85,301

 

75,559

 

 75,559

Additions

23,209

 

22,708

 

 5,326

Refinanced assets

(2,938)

 

(21,434)

 

(900)

Gain on financial assets at FVTPL

1,267

 

8,468

 

 3,500

 

106,839

 

85,301

 

 83,485

 

Royalty finance investments are comprised of:

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Non-Current

93,232

 

71,107

 

53,299

Current

13,607

 

14,194

 

 30,186

 

106,839

 

85,301

 

 83,485

 

 

Royalty investment net income on the face of the consolidated statement of comprehensive income comprises:

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Royalty interest

5,705

 

9,179

 

4,082

Royalty premiums

714

 

1,862

 

-

Gain on royalty assets at FVTPL

1,267

 

8,468

 

3,500

Loss on royalty liabilities at FVTPL

(102)

 

(165)

 

 (73)

 

7,584

 

19,344

 

 7,509

 

All financial assets held at FVTPL are mandatorily measured as such.

 

The Group's royalty investment assets comprise royalty financing agreements with 11 (30 September 2020: 11, 31 March 2021: 10) investees. Under the terms of these agreements the Group advances funds in exchange for annualised royalty distributions. The distributions are adjusted based on the change in the investees' revenues, subject to a floor and a cap. The financing is secured by way of fixed and floating charges over certain investees' assets. The investees are provided with buyback options, exercisable at certain stages of the agreements.

 

 

7.  Loan investments

 

Loan investments are financial assets held at amortised cost.

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Brought forward

4,950

 

9,517

 

9,517

Additions

-

 

1,145

 

 132

Refinanced loans

(3,370)

 

(5,649)

 

(1,100)

Net foreign currency movement

-

 

(63)

 

 -

 

1,580

 

4,950

 

8,549

 

The Group's loan investments comprise secured loans advanced to two entities (30 September 2020: six, 31 March 2021: three) in connection with the Group's royalty investments.

 

The loans comprise fixed rate loans of £1,580,000 (30 September 2020: £6,192,000, 31 March 2021: £1,580,000) which bear interest at rates of between 5% and 15% and nil variable rate loans (30 September 2020: £2,357,000, 31 March 2021: £3,370,000).

 

The loans mature as follows:

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

In less than one year

580

 

580

 

5,192

In one to two years

-

 

-

 

 -

In two to five years

1,000

 

4,370

 

3,357

 

1,580

 

4,950

 

8,549

 

The total loan investment net income during the period was £410,000 (30 September 2020: £339,000, 31 March 2021: £636,000). Loan investment net income on the face of the consolidated statement of comprehensive income comprises:

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Loan interest

242

 

603

 

306

Loan premiums

168

 

33

 

33

 

410

 

636

 

339

 

ECL Analysis

 

The measurement of ECLs is primarily based on the product of the instrument's probability of default ("PD"), loss given default ("LGD"), and exposure at default ("EAD"). The Group analyses a range of factors to determine the credit risk of each investment. These include, but are not limited to:

 

· liquidity and cash flows of the underlying businesses

· security strength

· covenant cover

· balance sheet strength

 

If there is a material change in these factors, the weighting of either the PD, LGD or EAD increases, thereby increasing the ECL impairment.

 

The disclosure below presents the gross and net carrying value of the Group' loan investments by stage:

 

 

Gross carrying amount

 

Allowance for ECLs

 

Net

Carrying amount

As at 30 September 2021

£000

 

£000

 

£000

 

 

 

 

 

 

Stage 1

1,580

 

-

 

1,580

Stage 2

-

 

-

 

-

Stage 3

-

 

-

 

-

 

1,580

 

-

 

1,580

 

 

 

Gross carrying amount

 

Allowance for ECLs

 

Net

Carrying amount

As at 31 March 2021

£000

 

£000

 

£000

 

 

 

 

 

 

Stage 1

4,950

 

-

 

4,950

Stage 2

-

 

-

 

-

Stage 3

-

 

-

 

-

 

4,950

 

-

 

4,950

 

 

Gross carrying amount

 

Allowance for ECLs

 

Net

Carrying amount

As at 30 September 2020

£000

 

£000

 

£000

 

 

 

 

 

 

Stage 1

5,269

 

-

 

5,269

Stage 2

 -

 

-

 

 -

Stage 3

3,280

 

-

 

3,280

 

8,549

 

-

 

8,549

 

Under the ECL model introduced by IFRS 9, impairment provisions are driven by changes in credit risk of instruments, with a provision for lifetime expected credit losses recognised where the risk of default of an instrument has increased significantly since initial recognition.

 

At 30 September 2020, the Group determined the risk profile of one loan investment was deemed to be impaired and was classified as Stage 3. This investment was subsequently sold prior to the year ended 31 March 2021.

 

The credit risk profile of the remaining investments has not increased materially and they remain Stage 1 assets. No ECLs have been charged on these assets as they are not deemed material.

 

The following table analyses Group's provision for ECL's by stage for the period ended 30 September 2021:

 

 

Stage 1

 

Stage 2

 

Stage 3

 

Total

 

£000

 

£000

 

£000

 

£000

 

 

 

 

 

 

 

 

At 1 April 2020 and 30 September 2020

-

 

-

 

2,947

 

2,947

Impairment charged in period

-

 

-

 

-

 

-

Refinanced Loans

-

 

-

 

(2,947)

 

(2,947)

Carrying value at 31 March 2021 and 30 September 2021

-

 

-

 

-

 

-

 

 

8.  Equity investments

 

Equity investments are financial assets held at FVTPL.

 

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Brought forward

 3,495

 

507

 

507

Additions

 530

 

1,764

 

779

Disposals

(652)

 

(345)

 

(345)

Gain / (loss) on equity assets at FVTPL

 1,497

 

1,569

 

(769)

 

 4,870

 

3,495

 

172

 

The Group's equity investments comprise unlisted shares and warrants in eight of its royalty investment companies (30 September 2020: six, 31 March 2021: eight).

 

The Group also still holds two (30 September 2020: two, 31 March 2021: two) unlisted investments in mining entities from its previous investment objectives. The Board does not consider there to be any future cash flows from the remaining investments and they are fully written down to nil value.

 

Equity investment net income on the face of the consolidated statement of comprehensive income comprises:

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Gain / (loss) on equity investments at FVTPL

1,497

 

1,569

 

(778)

Realised gain on sale of equity investments

-

 

-

 

9

 

1,497

 

1,569

 

(769)

 

 

9.  Royalty debt liabilities

 

Royalty debt liabilities are financial liabilities held at FVTPL.

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Brought forward

 1,031

 

1,173

 

 1,173

Repayments

-

 

(226)

 

-

Payments made

(57)

 

(81)

 

(52)

Loss on financial assets at FVTPL

102

 

165

 

73

 

 1,076

 

1,031

 

 1,194

 

Royalty debt liabilities are comprised of:

 

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Current

144

 

114

 

131

Non-current

932

 

917

 

1,063

 

1,076

 

1,031

 

1,194

 

 

10.  Trade and other receivables

 

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

Current

 

 

 

 

 

Prepayments and accrued income

43

 

167

 

64

Other receivables

7,737

 

4,255

 

3

 

7,780

 

4,422

 

67

Non-current

 

 

 

 

 

Other receivables

2,236

 

5,618

 

-

 

10,016

 

10,040

 

67

 

11.  Trade and other payables

 

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

Current

 

 

 

 

 

Trade payables

10

 

2

 

2

Transaction costs

125

 

82

 

94

Accruals and deferred income

733

 

183

 

388

 

868

 

267

 

484

Non-current

 

 

 

 

 

Transaction costs

204

 

402

 

480

 

 

 

 

 

 

 

1,072

 

669

 

884

 

 

12.  Borrowings

 

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

Secured loan

 

 

 

 

 

Current - accrued interest

172

 

161

 

117

Non-current

9,659

 

17,103

 

19,566

 

9,831

 

17,264

 

19,683

 

The secured revolving loan facility has an interest rate of 7.25% over UK LIBOR per annum. The principal amount is repayable on 11 March 2026. The loan is secured by means of a fixed and floating charge over the assets of the Group.

 

As at 30 September 2021, £25,000,000 was undrawn on the facility (30 September 2020: £10,000,000, 31 March 2020: £17,500,000).

 

At 30 September 2021, £355,000 (30 September 2020: £434,000, 31 March 2021: £396,000) of unamortised fees remained outstanding.

 

The table below set out an analysis of net debt and the movements in net debt for the period ended 30 September 2021, the prior period and the year ended 31 March 2021.

 

 

Interest Payable

 

Borrowings

 

£000

 

£000

 

 

 

 

At 1 April 2021

161

 

17,103

Cash movements

 

 

 

Loan advanced

-

 

-

Loan repaid

-

 

(7,500)

Deferred finance costs paid

-

 

-

Interest paid

(611)

 

-

Non-cash movements

 

 

 

Deferred finance costs released to P&L

-

 

56

Interest charged

622

 

-

As at 30 September 2021

172

 

9,659

 

 

 

Interest Payable

 

Borrowings

 

£000

 

£000

 

 

 

 

At 1 April 2020

172

 

15,517

Cash movements

 

 

 

Loan advanced

-

 

4,000

Loan repaid

-

 

-

Deferred finance costs paid

-

 

-

Interest paid

(799)

 

-

Non-cash movements

 

 

 

Deferred finance costs released to P&L

-

 

49

Interest charged

744

 

-

As at 30 September 2020

117

 

19,566

 

 

 

 

Cash movements

 

 

 

Loan advanced

-

 

 11,200

Loan repaid

-

 

(13,926)

Deferred finance costs paid

-

 

(23)

Interest paid

(611)

 

 - 

Non-cash movements

 

 

 

Deferred finance costs released to P&L

-

 

60

Transfer to royalty debt liability

-

 

226

Interest charged

655

 

-

At 31 March 2021

161

 

17,103

 

 

13.  Goodwill

 

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Goodwill arising on business combination

203

 

203

 

203

 

14.  Share capital

 

 

External Shares

No.

 

Treasury Shares

No.

 

Total shares

No.

 

£000

Allotted, called up and fully paid

 

 

 

 

 

 

 

At 31 March 2020

236,937

 

2,690

 

239,627

 

118,479

Shares issued for cash during the period

-

 

-

 

-

 

-

Share issuance costs

-

 

-

 

-

 

-

Scrip dividend paid

4,479

 

-

 

4,479

 

1,184

Shares issued to Employee Benefit Trust during the period

 

-

 

2,525

 

2,525

 

-

At 30 September 2020

 241,416

 

5,215

 

 246,631

 

 119,663

Shares issued to Employee Benefit Trust during the period

-

 

6,153

 

6,153

 

-

Scrip dividend paid

5,123

 

-

 

5,123

 

1,207

PSA shares vested during the year

513

 

(513)

 

-

 

-

At 31 March 2021

247,052

 

10,855

 

257,907

 

120,870

 

 

 

 

 

 

 

 

Shares issued for cash during the period

100,000

 

-

 

100,000

 

35,000

Share issuance costs

-

 

-

 

-

 

(1,937)

Shares issued to directors and key advisers as remuneration

105

 

-

 

105

 

40

At 31 September 2021

347,157

 

10,855

 

358,012

 

153,973

 

 

There is a single class of shares. There are no restrictions on the distribution of dividends and the repayment of capital with respect to externally held shares. The shares held by the Duke Royalty Employee Benefit Trust are treated as treasury shares. The rights to dividends and voting rights have been waived in respect of these shares.

 

 

15.  Equity-settled share-based payments

 

Warrant reserve 

 

There were no movements in the warrant reserve during the period:

 

 

Warrants

 

No. (000)

 

£000

 

 

 

 

At 1 April 2020, 30 September 2020, 31 March 2021, and 30 September 2021

4,375

 

265

 

At 30 September 2021, 4,375,000 (30 September 2020: 4,375,000, 31 March 2020: 4,375,000) warrants were outstanding and exercisable at a weighted average exercise price of 46 pence (30 September 2020: 46 pence, 31 March 2020: 46 pence). The weighted average remaining contractual life of the warrants outstanding was 1.50 years (30 September 2020: 2.50 years, 31 March 2021: 2.00 years).

 

Share-based payment reserve 

 

The following table shows the movements in the share-based payment reserve during the period:

 

 

 

Share options

 

LTIP

 

Total

 

£000

 

£000

 

£000

 

 

 

 

 

 

At 1 April 2020

136

 

606

 

742

LTIP awards

-

 

303

 

303

At 30 September 2020

136

 

909

 

1,045

 

 

 

 

 

 

LTIP awards

-

 

503

 

503

At 31 March 2021

136

 

1,412

 

1,548

 

 

 

 

 

 

LTIP awards

-

 

472

 

472

At 30 September 2021

136

 

1,884

 

2,020

 

Share option scheme 

 

No share options were granted during the period to 30 September 2021.

 

At 30 September 2021, 200,000 options (30 September 2020: 960,000, 31 March 2021: 200,000) were outstanding and exercisable at a weighted average exercise price of 50 pence (30 September 2020: 31 March 2021: 50 pence). The weighted average remaining contractual life of the options outstanding at the period end was 2.00 years (30 September 2020: 1.44 years, 31 March 2021: 2.50 years).

 

Long Term Incentive Plan

 

No performance share awards (PSAs) were granted during the period to 30 September 2021.

 

At 30 September 2021, 11,855,000 (30 September 2020: 2,690,000, 31 March 2021: 11,855,000) PSAs were outstanding. The weighted average remaining vesting period of these awards outstanding was 1.50 years (30 September 2020: 1.44 years, 31 March 2021: 2.04 years).

 

 

16.  Distributable reserves

 

Under Guernsey law, the Company can pay dividends provided it satisfies the solvency test prescribed by the Companies (Guernsey) Law, 2008. The solvency test considers whether the Company is able to pay its debts when they fall due, and whether the value of the Company's assets is greater than its liabilities. The Company satisfied the solvency test in respect of the dividends declared in the period.

 

 

17.  Dividends

 

The following interim dividends have been recorded in the period:

 

 

 

Dividend per

 

Dividends

 

 

share

 

payable

Record date

Payment date

pence/share

 

£000

 

 

 

 

 

27 March 2020

14 April 2020

0.75

 

1,777

26 June 2020

10 July 2020

0.50

 

1,185

Dividends payable for the period ended 30 September 2020

 

2,962

 

 

 

 

 

 

 

Dividend per

 

Dividends

 

 

share

 

payable

Record date

Payment date

pence/share

 

£000

 

 

 

 

 

25 September 2020

12 October 2020

0.50

 

1,206

29 December 2020

12 January 2021

0.50

 

1,236

Dividends paid for the period ended 31 March 2021

 

2,442

 

 

 

 

 

26 March 2021

12 April 2021

0.55

 

1,359

25 June 2021

12 July 2021

0.55

 

1,909

Dividends paid for the period ended 30 September 2021

 

3,268

 

On 24 September 2021 the Company approved a further quarterly cash dividend of 0.55 pence per share, totalling £1,909,000, which was paid on 12 October 2021.

 

18.  Deferred tax

 

 

 

Royalty investment

 

Tax losses

 

Total

 

£000s

 

£000s

 

£000s

 

 

 

 

 

 

1 April 2020

(12)

 

687

 

675

Credited / (charged) to profit & loss

9

 

(480)

 

(471)

At 30 September 2020

(3)

 

207

 

204

 

 

 

 

 

 

Credited / (charged) to profit & loss

161

 

(207)

 

(46)

At 31 March 2021

158

 

-

 

158

 

 

 

 

 

 

Charged to profit & loss

(1)

 

-

 

(1)

At 30 September 2021

157

 

-

 

157

 

 

The deferred tax asset arises due to a temporary timing differences on the treatment of transaction costs in the UK subsidiary. This deferred tax asset is expected to reverse over a 30 year period. The utilisation of this asset is dependent on sufficient future taxable profits being generated by the UK subsidiary.

 

 

19.  Related parties

 

Directors' fees

 

The following fees were payable to the Directors during the period:

 

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Short term remuneration

463

 

582

 

366

Share-based payments

273

 

528

 

326

 

736

 

1,110

 

692

 

Other related party transactions

 

The following amounts were paid to related parties during the period in respect of support services fees:

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Abingdon Capital Corporation

175

 

350

 

175

Arlington Group Asset Management Limited

43

 

85

 

43

 

218

 

435

 

218

 

 

Support Service Agreements with Abingdon Capital Corporation ("Abingdon"), a company of which Neil Johnson is a Director, and Arlington Group Asset Management Limited ("Arlington"), a company of which Charles Cannon Brookes is a Director, were signed on 16 June 2015. The services to be provided by both Abingdon and Arlington include global deal origination, vertical partner relationships and assisting the Board with the selection, execution and monitoring of royalty partners and royalty performance. Abingdon fees also includes fees relating to remuneration of staff residing in North America.

 

Dividends

 

The following dividends were paid to related parties:

 

 

Period to

 

Year to

 

Period to

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Directors 1

124

 

232

 

126

Other related parties

17

 

31

 

10

 

141

 

263

 

136

 

1 Includes dividends paid to Abinvest Corporation, a wholly owned subsidiary of Abingdon Capital Corporation, and to Arlington Group Asset Management

 

 

20.  Fair value measurements

 

Fair value hierarchy

 

IFRS 13 requires disclosure of fair value measurements by level of the following fair value hierarchy:

 

Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets and liabilities that the entity can readily observe.

 

Level 2: Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly.

 

Level 3: Inputs that are not based on observable market date (unobservable inputs).

 

The Group has classified its financial instruments into the three levels prescribed as follows:

 

 

 

30-Sep-21

 

31-Mar-21

 

30-Sep-20

 

(unaudited)

 

(audited)

 

(unaudited)

 

£000

 

£000

 

£000

 

 

 

 

 

 

Financial assets

 

 

 

 

 

Financial assets at FVTPL

 

 

 

 

 

- Royalty finance investments

106,839

 

85,301

 

83,485

- Equity investments

4,870

 

3,495

 

172

 

111,709

 

88,796

 

83,657

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

Financial liabilities at FVTPL

 

 

 

 

 

- Royalty debt liabilities

1,076

 

1,031

 

1,194

 

The following table presents the changes in level 3 items for the periods ended 30 September 2021, 31 March 2021 and 30 September 2020:

 

 

Financial

 

Financial

 

 

 

Assets

 

Liabilities

 

Total

 

£000

 

£000

 

£000

 

 

 

 

 

 

At 31 March 2020

 76,067

 

(1,173)

 

 74,894

Additions

 6,104

 

 -

 

 6,104

Repayments

(1,245)

 

 -

 

(1,245)

Royalty income received

 3,654

 

 -

 

 3,654

RP liability paid

 -

 

 52

 

 52

Net change in FV

(923)

 

(73)

 

(996)

At 30 September 2020

 83,657

 

(1,194)

 

 82,463

Additions

18,368

 

-

 

18,368

Repayments

(20,533)

 

226

 

(20,307)

Royalty income received

(22,999)

 

-

 

(22,999)

RP liability paid

-

 

29

 

29

Net change in FV

30,303

 

(92)

 

30,211

At 31 March 2021

88,796

 

(1,031)

 

87,765

Additions

23,739

 

-

 

23,739

Repayments

(3,590)

 

-

 

(3,590)

Royalty income received

5,705

 

-

 

5,705

RP liability paid

-

 

57

 

57

Net change in FV

(2,941)

 

(102)

 

(3,043)

At 30 September 2021

111,709

 

(1,076)

 

110,633

 

 

Valuation techniques used to determine fair values

 

The fair value of the Group's financial instruments is determined using discounted cash flow analysis and all the resulting fair value estimates are included in level 3.

 

Valuation processes

 

The main level 3 inputs used by the Group are derived and evaluated as follows:

 

Annual adjustment factors for royalty investments and royalty participation liabilities

 

These factors are estimated based upon the underlying past and projected performance of the royalty investee companies together with general market conditions.

 

Discount rates for financial assets and liabilities

 

These are initially estimated based upon the projected internal rate of return of the royalty investment and subsequently adjusted to reflect changes in credit risk determined by the Group's Investment Committee.

 

Changes in level 3 fair values are analysed at the end of each reporting period and reasons for the fair value movements are documented.

 

Valuation inputs and relationships to fair value

 

The following summary outlines the quantitative information about the significant unobservable inputs used in level 3 fair value measurements:

 

Royalty investments

 

The unobservable inputs are the annual adjustment factor and the discount rate. The range of annual adjustment factors used is -6.0% to 6.0% and the range of risk-adjusted discount rates is 14.7% to 17.4%.

 

Equity investments

 

Sensitivity analysis has not been performed on the Group's equity investments on the basis that they are not material to the Condensed Consolidated Financial Statements

 

Royalty participation instruments

 

The unobservable inputs are the annual adjustment factor and the discount rate. The range of annual adjustment factors used is -6.0% to 6.0% and the range of risk-adjusted discount rates is 16.3% to 17.4%.

 

 

21.  Events after the financial reporting date

 

Dividends

 

On 12 October 2021, the Company paid a quarterly dividend of 0.55 pence per share.

 

 

 

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