Duke Capital (DUKE) H2 2025 earnings summary

Executive summary

• FY25 delivered record recurring cash revenue and robust dividend coverage, despite no portfolio exits and challenging macroeconomic conditions, reflecting disciplined execution and a cautious deployment strategy focused on supporting existing partners.

• Increased equity stakes in six partners, leveraging new IFRS 10 standards to exceed 30% ownership, and raised £23.5 million in an oversubscribed equity offering.

• Dividend per share maintained at 2.8p, fully covered by free cash flow, with a 9.7% yield.

• The business model blends private credit and private equity, targeting profitable lower mid-market companies, prioritizing capital preservation, current yield, and upside from exits.

• Portfolio expanded with nine new companies and further investments post-period.

Financial highlights

• Recurring cash revenue reached £25.8 million, up 6% year-over-year, underpinning dividend payments, while total cash revenue, free cash flow, and adjusted earnings declined due to the absence of exits.

• Operating expenses rose to £3.1 million, with OpEx as a percentage of recurring revenue decreasing to 11%, targeted to fall below 10% in coming years.

• The hybrid credit portfolio was written down by £8 million (just over 3% of cost), while the equity portfolio valuation remained steady.

• Average hybrid credit investment size increased from £13.5 million to £16 million, reflecting a 'stay in for longer' approach.

• Operating profit was £10.3 million, with total comprehensive income of £2.0 million, down from £11.6 million in FY24.

Outlook and guidance

• Management is cautiously optimistic, expecting exits in the coming years and continued dividend coverage from recurring revenue.

• Lower interest rates are expected to benefit free cash flow, with a 100bps decrease adding £900,000 to the bottom line.

• The company aims to further increase equity stakes and pursue third-party capital to enhance NAV per share.

• Dividend yield remains a core pillar, with a self-sustaining model focused on recycling capital and building NAV per share.