Duke Royalty upbeat ahead of annual adjustments

Alternative capital provider Duke Royalty updated the market on the financial results shown by its initial two royalty partners on Tuesday, ahead of upcoming adjustments for two of its royalty distributions, to be determined for the upcoming year within the next two months.

The AIM-traded firm said Temarca was anticipating an 8% increase in annual revenue in the 2017 financial year,, subject to completion of its audit.

Its annual adjustment date would be 1 July, based on audited numbers from the 2017 financial year over 2016.

Temarca's three river cruise vessels had fully sold their capacity for the 2018 sailing season, Duke reported.

At Lynx Equity, the company delivered a 7% year-over-year revenue growth for the eight-month year-to-date period.

Its annual adjustment date would be 1 August, based on full-year numbers to 31 July over the same period last year.

Duke's royalty payments are derived from Lynx UK's three separate operating businesses in the UK and Denmark, each with a “long history” of profitable operations, the Duke board explained.

The board said the adjustment dates triggered an annual reset of the payment amount due to Duke, subject to a collar.

The reset would be calculated based on the revenue growth or decline of its royalty partners over the preceding 12 months.

Duke said the adjustments were calculated once per year, each year for the life of the royalty agreement.

“We are encouraged to see our initial royalty partners are performing in line with our expectations of solid revenue growth, which would have the benefit of higher annual royalty distributions to Duke at the adjustment date,” said Duke CEO Neil Johnson.

“Given the significant operational leverage at Duke, both higher royalty payments and increased capital deployments are intended to produce a higher dividend pay-out to Duke's shareholders.”

Johnson said that in 2019, Duke would see initial adjustments from both Trimite Global Coatings and Brownhills Glass, both having an annual adjustment date of 1 April.

“Duke is confident in the outlook of the companies' short-term performance and looks forward to updating the market later in the year.”