Interim Results for the six months ended 30 Sep 24

NOTES TO THE FINANCIAL STATEMENTS

1.       General Information

Duke Capital Limited ("Duke Capital" 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.

Throughout the period, the "Group" comprised Duke Capital Limited and its wholly owned subsidiaries; Duke Royalty UK Limited, Duke Capital US Holdings, Inc and Duke Capital Employee Benefit Trust.

The Group's investing policy is to invest in a diversified portfolio of hybrid credit 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 UK adopted international accounting standards, and applicable Guernsey law, and reflect the following policies, which have been adopted and applied consistently.

On 31 December 2020, IFRS as adopted by the European Union at that date was brought into the UK law and became UK-adopted international accounting standards, with future changes being subject to endorsement by the UK Endorsement Board. The Group transitioned to UK-adopted international accounting standards in its consolidated financial statements on 1 April 2021. There was no impact or changes in accounting from the transition.

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting, as adopted for use in the UK.

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 2024.

No new or revised standards or interpretations that have become effective during the period ended 30 September 2024 have had a material effect on the financial statements of the Group.

The Directors consider that the Group has adequate financial resources to enable it to continue operations for a period of no less than 12 months from the date of approval of the financial statements. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

2.2     Going concern

In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council. After making enquiries and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the near future.

The cash flow needs of the Group have been assessed taking account the need for further funding for any of the existing hybrid credit partners and the ongoing working capital needs of the business against the current cash and liquidity of the Group.

2.3     Material accounting policies

In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.

The principal accounting policies applied in the presentation of the condensed consolidated interim financial statements of Duke Capital, including the critical accounting judgements made by the Directors and the key sources of estimation, are consistent with those followed in the preparation of the Group's Annual Report and consolidated financial statements for the year ended 31 March 2024 and have been consistently applied throughout the period ended 30 September 2024.

3.       Finance Costs

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.

Factors affecting income tax expense for the period

5.       Earnings per share

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, excluding treasury shares (see Note 14). 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.

All share options, warrants and Long-Term Incentive Plan awards in issue are not dilutive at the year-end as the exercise prices were above the average share price for the period. However, these could become dilutive in future periods.

Adjusted earnings per share

Adjusted earnings represent 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 due diligence fees, together with the tax effects thereon. Given the sensitivity of the inputs used to determine the fair value of its investments, the Group believes that adjusted earnings are a better reflection of its ongoing financial performance.

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.

6.       Hybrid credit investments

Hybrid credit investments are financial assets held at FVTPL that relate to the provision of hybrid credit capital to a diversified portfolio of companies.

Hybrid credit investments are comprised of:

Hybrid credit investment income on the face of the consolidated statement of comprehensive income comprises:

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

The Group's hybrid credit investment assets comprise hybrid credit financing agreements with 14 (30 September 2023: 15, 31 March 2024: 14) capital partners. Under the terms of these agreements the Group advances funds in exchange for annualised hybrid credit 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 of the investees' assets. The investees are provided with buyback options, exercisable at certain stages of the agreements.

7.       Term credit investments

Term credit investments are financial assets held at amortised cost except for the £2.2 million loan issued at 0% interest. The impact of discounting is immaterial to the Consolidated Financial Statements. The below table shows both the loans at amortised cost and fair value.

The Group's loan investments comprise secured loans advanced to two entities (30 September 2023: two, 31 March 2024: two) in connection with the Group's hybrid credit investments.

The loans comprise fixed rate loans of £5,382,000 (30 September 2023: £4,872,000, 31 March 2024: £5,382,000) which bear interest at rates of between 0% and 5% (30 September 2023: 0% and 15%, 31 March 2024: 0% and 5%).

The loans mature as follows:

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