In our April 2024 initiation, we highlighted that Duke Capital plc (LON:DUKE), by optimising the best of equity and debt, aimed to achieve equity-type returns with debt levels of risk. We highlighted four pillars of returns, namely: i) term credit; ii) participating preference share elements, which support DUKE shareholders’ high (2025E: 9.0%), growing (2027E: 14% above FY’24), and 1.7x covered dividend; iii) early exit fees; and iv) equity stakes. The 2024 results saw three of the four show positive returns; consequently, DUKE delivered record recurring cash revenue (+12% to £24.3m) and total cash revenue (+38% to £30.2m), with £18m free cashflow.
- Dividend yield: A key attraction for Duke Capital FY’24 results: record cashflows is its high yield. Investors will note the 2.8p p/sh. paid in FY’24 was more than covered by free cashflow of 4.3p p/sh, recuring cashflow of 3.5p p/sh and adjusted EPS of 4.85p (up 55%). The company expects 12% or more gross yield on the term credit element of its hybrid capital.
- New deals: Our initiation noted that, inter alia, the company could grow by gaining new clients or increasing facilities to existing ones. In April and May, we saw announced a new client (Integrum Care £14.5m) and follow-on investments with New Path Fire and Security Limited (£3.5m) and BPVA (Ireland) Limited (£4m).
