Duke Capital sees profits fall as it moves to new funding strategy
Duke Capital saw its pre-tax profit fall to £2.15m in the first half of its financial year, down from £3.8m in the first half of 2023, as increased borrowing costs and currency headwinds weighed on its bottom line.
Interest payable on borrowings rose to just under £4.27m in the six months to 30 September 2024, an increase from £2.9m year-on-year, as central bank base rate hikes filtered down into the market.
The London-listed provider of hybrid capital solutions for SME business owners in Europe and North America said that total cash revenue was down four per cent to £13.5m from £14.1m year-on-year.
Net cash flow fell 26 per cent year-on-year to £5.9m from £7.9m, due to fewer investment exits delivered in the current period compared to the comparable period the previous year.
However, the firm reported a four per cent increase in ‘recurring cash revenue’, which it defines as excluding exit premiums and cash gains from the sale of equity investments, to £12.7m.
Read more: Duke Capital Q1 revenue up 5pc to £6.3m
Duke Capital deployed more than £15m of capital into existing capital partners over the six-month period.
In his letter to shareholders, the firm’s chairman Nigel Birrell said Duke Capital was building on the strategic review it undertook in the last financial year, to develop a long-term funding strategy which is not reliant on raising equity via the UK public equity markets.
It is planning to move towards a third-party capital model which it said will eliminate cash drag, deliver accretive fee-based revenue and reduce its dependence on the UK public equity markets, thereby minimising dilution and enabling the firm to execute on strategic growth opportunities more rapidly and at scale.
Read more: TwentyFour Select Monthly Income Fund reports 22.6pc NAV growth
However, Duke Capital completed a £23.5m fundraise via the public markets after the reporting period ended, a decision which Birrell said “was not taken lightly”.
He said the fundraise “reflected the near-term investment opportunities and requirements from inside the company’s existing portfolio specifically in relation to Duke’s buy and build platforms”.
“The proceeds will be used to provide additional capital to our current partners, enabling them to deliver bolt-on M&A to build their EBITDA and increasing our equity participation where possible,” he added.
Looking ahead, Birrell said the firm maintains a positive outlook although it recognises the need for caution on the UK economy.
“Positively, we have witnessed good growth in our Irish and North American partners and have confidence that our diversified portfolio is well positioned to continue its resilience,” he said. “The private credit and direct lending markets continue to go from strength to strength, and we have a clear strategy to meaningfully drive future scale.”
