Duke Royalty Limited

12/04/2018 | Press release | Distributed by Public on 12/04/2018 01:08

Interim results and dividend declaration

RNS Number : 3023J

Duke Royalty Limited

04 December 2018

4 December 2018

Duke Royalty Limited ('Duke', 'Duke Royalty' or 'the Company')

Interim Results and Dividend Declaration

Duke Royalty Limited (AIM: DUKE), a provider of alternative capital solutions to a diversified range of profitable and long-established businesses in Europe and abroad, is pleased to report its interim results for the six months ended 30 September 2018.

Highlights:

· Revenue of £2.7 million (H1 2017*: £0.6 million), an increase of 350%

· Inaugural net profit before tax £1.1 million (H1 2017: loss before tax of £0.4 million)

· Positive cash flow from operations of £1.3 million (H1 2017: cash outflow of £0.1 million)

· Two new royalty investments made, £6.5 million investment into Brownhills Investments Limited (BIL) and £10 million into InterHealth Canada Holding Corp (ICHC)

· Completed follow-up investments of £3.0 million into Lynx Equity (U.K.) Limited

· Successfully raised £44 million of new equity in an oversubscribed placing at 44 pence per share to expand and diversify royalty investment portfolio

· Placing was well supported by existing shareholders and also brought new institutional investors onto Duke's share register

· Two quarterly dividends paid, 0.6p on 12 April 2018 and 0.7p on 12 July 2018. Based on the previous quarter payment, Duke continues to be ranked amongst the top AIM companies based on dividend yield.

· Positive adjustment factors achieved from Duke's first two investments, Temarca B.V. and Lynx Equity (U.K.) Limited and encouraging sales growth also being shown by Trimite Global Coatings Limited and Brownhills Investments Limited

· Strong liquidity available for future capital deployments with cash at period end sitting at £30.1 million

*H1 2017 means the six-month period to 30 September 2017

Dividend Declaration

The Company is pleased to report it has approved a quarterly dividend of 0.7 pence (sterling) per share with the ex-dividend date being 27 December 2018, the record date 28 December 2018 and the payment date 12 January 2019.

Neil Johnson, CEO of Duke Royalty, said:'I am delighted to report that, in the period under review, Duke has been able to post significant revenue growth as well as its inaugural net profit. As the Company continues to deploy capital and benefit from the participation in the growth of its partner companies, I expect both revenues and profits to increase in subsequent reporting periods.

'The Company is focused on deploying its capital raised in the summer into new royalty partners who are under exclusivity to Duke whilst we conduct due diligence. I remain confident Duke will be in a position to close more than one transaction should they pass our due diligence process by the end of the financial year. With this in mind, I look forward to the remainder of the financial year with optimism.'

For further information, please contact www.dukeroyalty.com, or contact:

Duke Royalty Limited

Neil Johnson/ Charlie Cannon-Brookes

+44 (0) 1481 741 240

Grant Thornton UK LLP

(Nominated Adviser)

Colin Aaronson/ Samantha

Harrison/ Seamus Fricker

+44 (0) 20 7383 5100

Cenkos Securities plc

(Joint Broker)

Julian Morse/ Michael Johnson

+44 (0) 207 397 8900

Mirabaud Securities Limited

(Joint Broker)

Peter Krens/ Edward Haig-Thomas

+44 (0) 20 3167 7222

Newgate Communications

(PR)

Elisabeth Cowell/ Ian Silvera / Tom Carnegie

+44 (0) 20 3757 6880

[email protected]

CHAIRMAN'S REPORT

FOR THE PERIOD ENDED 30 SEPTEMBER 2018

Dear Shareholder,

Duke Royalty's strategy is to provide investors with exposure to capital growth and income by becoming the preferred and leading provider of royalty finance for corporations in Europe and abroad.

I am delighted to present our financial results for the six months ended 30 September 2018, with the Company achieving its inaugural net profit before tax of £1.1 million and revenues of £2.7 million. Duke is now in a strong position to execute its strategy thanks to the achievements delivered during the period.

These include diversification of Duke's portfolio of royalty partners and underlying companies from five to eight investments across a range of sectors, completion of an oversubscribed placing to raise £44 million delivered at a premium to the previous fundraise, and the receipt of increased royalty payments from two of our partners due to the revenue growth they achieved on the back of our investment. As a result of these achievements, Duke continues to be ranked amongst the top AIM companies based on dividend yield.

We are currently the only UK-quoted diversified Royalty company. This means that we have a first-mover advantage to secure some of the most compelling investment opportunities in these jurisdictions.

Our sector focus currently covers:

· Hospitality and Leisure;

· Industrials;

· Technology and media;

· Healthcare; and

· Power and utilities.

Our operating cost base is carefully managed to ensure that each deal entered into by Duke is immediately accretive. Accordingly, cash operating expenses were kept under tight control during the period, increasing from £0.26 million to £0.56 million period-on-period to reflect the decision by Duke to scale-up its operating team to effectively manage its deal origination, execution and monitoring requirements.

Whilst we expect further modest increases in cash operating expenses as the Company continues to expand, they should significantly lag revenue growth and this positive operational leverage is expected to be seen in the coming periods.

During this interim period, two new royalty investments and one follow-on investment were concluded. £6.5 million was invested into Brownhills Investments Limited (BIL) and £10 million into InterHealth Canada Holding Corp (ICHC), while a follow-up investment totalling £3 million was also made into Lynx Equity (U.K.) Limited. Both Brownhills and InterHealth match Duke's core investment criteria in that they are both well-established and profitable private businesses, with Duke looking forward to being aligned with them in their future growth and success.

Royalty finance, which provides capital and receives returns based on revenue performance of its investee companies over a long term, represents a £50 billion sector in North America. The funding gap in Europe and abroad, due to the banks' unwillingness to lend to SMEs, means that we represent an attractive proposition for private growth businesses that wish to retain control of their businesses without any refinancing risk. In turn, our business model provides investors with exposure to ambitious private companies with excellent track records of delivering growth.

One of the key selling points and differentiating factors about the Duke business model is that Duke is aligned with its investee companies (royalty partners), with its return being directly linked to the underlying performance of its royalty partners. Each of Duke's royalty partners is subject to an annual adjustment, which triggers a reset of the monthly payment amount due to Duke, subject to a collar (a maximum adjustment up or down). The reset is calculated once a year, each year for the life of the royalty agreement, based on the gross revenue growth (or decline) of the royalty partner over the preceding twelve months.

In this regard, I am pleased that Duke recently confirmed positive annual adjustments for its first two Royalty Partners, Lynx UK and Temarca. As announced on 8 May 2018, Temarca and Lynx UK were tracking above the top end of the annual adjustment range, and the Company is pleased to report that both partners are continuing to track above expectations and we are confident of further positive resets in both cases.

With regard to Duke's other partners, the first adjustment date for both Trimite and Brownhills is on 31 March 2019. Based on management accounts received by Duke for the period to the end of September 2018, the year-on-year revenue performance for Trimite and Brownhills is meeting expectations. As such, Duke remains confident of a positive reset event as and when these two partners complete their first adjustment periods.

Financial Review

Investors will note the restatement of the September 2017 interim numbers. This has been necessary as part of the move by Duke to adopt IFRS 9 reporting standards and the requirement to compare this Interim FY19 statement to the previous interim period on a like for like basis. All future reporting periods will be reported according to IFRS 9 and, due to the fact that the March 31 2018 financials were also prepared under IFRS 9, no further restatements will be required in the future.

To fund these investments and also provide the necessary liquidity to fund future royalty investments, Duke was able to successfully raise £44 million in an equity issuance in July 2018 priced at 44p per share. It was very pleasing that the equity issue was well oversubscribed and that it also brought a number of new institutional shareholders onto the Company's share register.

During the interim period, Duke paid out two quarterly dividends with 0.6p per share paid to shareholders on 12 April 2018 and 0.7p per share paid on 12 July 2018. The July payment reflected the second dividend increase in the Company's short operating history. The Company remains committed to maintaining a high and stable dividend and the Company's current focus is now on deploying all of its remaining cash into a series of new royalty investments in the coming months.

Outlook

Heading into 2019, I am confident that the Company's momentum will continue as it seeks to further expand its portfolio. We have a very strong cash position with over £30 million as at 30 September, a pipeline of new investments expected to deliver news flow in 2019, and an excellent management team which boasts more than 75 years' combined royalty finance experience. Currently, the Company is focused on delivering additional deployments into new royalty partners and I am confident the results of our efforts will be seen before the end of the financial year.

We expect knowledge of royalty finance, a multi-billion industry in North America, to grow across Europe and abroad, particularly among private small and medium-sized enterprises, attracting more potential opportunities for Duke among well-established businesses. The management team will continue to educate the corporate community, the advisors to these companies and the investor community in 2019, to further drive new opportunities and potential investors to the Company.

We are mindful of the geo-political headwinds, including Brexit, facing the UK and European business community. But Duke's business model, which includes consistently low operating costs and tight controls over operating expenses, means that the Company is very well-positioned to cope with unfavourable macroeconomic events.

Overall, this has been another period of strong progress by the Company and, as always, I am very grateful for the support of our shareholders. The board looks forward to reporting on the Company's continued progress in future periods.

Nigel Birrell

Chairman

3 December 2018

DIRECTORS

FOR THE PERIOD ENDED 30 SEPTEMBER 2018

Mr Nigel Birrell (Chairman)

Nigel Birrell is a Non-Executive Director and Chairman of the Board. He works with the Executive Directors on deal origination and structuring. He has extensive public company experience and expertise in the gaming, media and financial services sectors. Mr Birrell is the CEO of the Lottoland Group, a Gibraltar regulated gaming group.

Mr Birrell was previously Group Director on the Executive Board at bwin.party digital entertainment plc, the world's leading listed on-line gaming business, where he was responsible for all its mergers and acquisitions, business development and managing its investment portfolio. While at bwin.party Mr Birrell led the acquisitions of Gamebookers, Empire On-line and IOG's casino operations, Cashcade, the World Poker Tour and Orneon. He was instrumental in devising, negotiating and transacting the merger between PartyGaming and Bwin.party, the largest online gaming deal in history. He has also led all its disposals including Ongame's sale to Amaya. Prior to bwin.party, Mr Birrell was a director of the FTSE 250 media group HIT Entertainment. He also worked as an investment banker with Donaldson, Lufkin & Jenrette and Dresdner Kleinwort Benson. Since leaving bwin.party Mr Birrell has served on the Board of LottoLand Limited, a Gibraltar regulated fast growing gaming group as its CEO. He is also a Non-Executive Chairman of Southern Rock Insurance Company Limited, a regulated insurance underwriter.

Mr Birrell holds a LLB from the University of London (Queen Mary College) and qualified as a solicitor of the Senior Courts of England and Wales.

Mr Neil Johnson

Neil Johnson is an Executive Director and Duke Royalty's Chief Executive Officer with responsibility for the overall strategic direction and performance of the Group. Working closely with the other members of the Management team, Board members and the Investment Committee, he leads all deal origination, due diligence and structuring.

Mr Johnson has over 25 years of experience in investment banking, merchant banking, and research analysis in both the Canadian and UK capital markets. In 2012 he co-founded and became Chief Executive Officer of Difference Capital Financial, a Canadian publicly listed merchant bank. For the previous 19 years he worked for Canaccord Genuity, first in Canada and later at Canaccord London rising to the positions of Head of Corporate Finance (Europe), Global Head of Technology, and a member of the Global Executive Committee. Mr Johnson was instrumental in the firm becoming authorised as a nominated adviser for AIM and regulated in the UK and London Stock Exchange Main Market listings; he spearheaded the firm's diversification into the technology industry, and led Canaccord's initiative to attract North American firms to list in London.

During his tenure the Canaccord European operation grew revenues from less than £5 million to over £50 million, completed over 100 transactions and raised in excess of £3 billion for North American companies listed in London.

Mr Johnson is a graduate of the Richard Ivey School of Business at the University of Western Ontario and holds the designation of Chartered Financial Analysis Charterholder.

Mr Charles Cannon Brookes

Charlie Cannon Brookes is an Executive Director of the Company and works alongside the CEO on deal origination, due diligence and structuring. In addition Mr Cannon Brookes is Duke Royalty's liaison with UK institutions / advisors and has oversight of Duke Royalty's corporate governance and UK plc responsibilities.

Mr Cannon Brookes has over 20 years investment experience. He is a Director of FCA authorised and regulated Arlington Group Asset Management Limited (AGAM). Through AGAM, Mr Cannon Brookes has been active in a variety of different investment management mandates and corporate finance transactions. In addition, he has successfully led a number of IPO and RTO transactions on the London markets. Prior to AGAM he worked for Arlington Group plc, an AIM quoted investment company and managed all of its public equity portfolio, as well as Jupiter Asset Management, ABN Amro and Barclays de Zoete Wedd. He has extensive fund management experience and has advised and sat on the board of a number of different funds, trusts and other operating public companies.

Mr Cannon Brookes holds a BA Honours degree in Economics & Politics from the University of Exeter.

Mr Justin Cochrane

Justin Cochrane is currently a Non-Executive Director of the Company. He works with the Executive Directors on deal origination and structuring and is a member of the Investment Committee.

Mr Cochrane is the President and COO of Cobalt 27 Capital Corp. Mr Cochrane was the Executive Vice President of Duke Royalty from 2015 to the period under review as he transitioned into the executive role at Cobalt 27. Mr Cochrane was previously the Executive Vice President of Corporate Development for Sandstorm Gold Ltd. At Sandstorm, Mr Cochrane was responsible for sourcing, negotiating and executing royalty and stream financing transactions across the globe. Mr Cochrane was a key part of Sandstorm's team as it grew into one of the largest royalty and stream financing companies in Canada. Prior to Sandstorm Mr Cochrane was a Vice President at National Bank Financial where he spent some nine years working in the investment banking group. As Vice President, Mr Cochrane managed primary coverage of British Columbia based clients in the diversified, paper & forest products, power & utilities, resources, cleantech and other sectors. Mr Cochrane specialised in providing advice to client on merger and acquisition transactions and equity and debt financing opportunities.

Mr Cochrane holds the designation of Chartered Financial Analyst Charterholder and received a Bachelor of Commerce degree, with honours, from the University of British Columbia, Vancouver, Canada. Mr Cochrane is a government ambassador at the Multiple Sclerosis Society of Canada and also a Director of Cobalt 27 Capital Corp. and Nevada Copper Corp.

Mr Mark Le Tissier

Mark Le Tissier is a Non-Executive Director of the Company. He is responsible for the oversight of the Company's corporate obligations in Guernsey.

Mr Le Tissier is the European Regional Director of Trident Trust with oversight over five offices, as well as the Managing Director of Trident Trust Company (Guernsey) Limited and has worked for Trident for over twenty years. He has extensive board-level experience and has an in-depth knowledge of Guernsey and other jurisdictions' corporate and investment regulations. Mr Le Tissier is a Trust & Estate Practitioner who has also completed the IOD Programme in company direction and is resident in Guernsey.

Mr Matthew Wrigley

Matthew Wrigley is a Non-Executive Director of the Company and works with the Executive Directors on structuring and all legal matters relating to the Company.

Mr Wrigley is a partner at asset management advisory firm, MJ Hudson. In his fifteen years in alternative assets, he has gained experience through a mix of legal and commercial roles, including serving as General Counsel for a fund management company listed on the Australian Securities Exchange with AUD 1.3 billion assets under management, Chief Operating Officer of investment trust listed on the Singapore Securities Exchange with a market capitalisation of SGD 600 million, and with leading global law firm, Baker McKenzie. He also sits on several fund and general partner boards, with strategies spanning private equity, infrastructure and real estate.

Mr Wrigley is a Solicitor of the Supreme Court of Queensland Australia, holds a Bachelor of Laws (LL.B) from the University of Queensland and is resident of Guernsey.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 30 SEPTEMBER 2018

Note

Period to

Year to

Period to

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

(restated)

£

£

£

Income

Net change in fair value on financial assets financial

and financial liabilities at fair value

through profit or loss

6,13,15

2,481,210

1,554,518

467,887

Transaction costs reimbursed

107,500

145,000

-

Net foreign currency gains

-

97,238

100,700

Gain on exercise of warrants

87,989

-

-

Interest receivable

22,345

-

-

Total income

2,699,044

1,796,756

568,587

Expenses

Support services administration fees

14

(110,000)

(806,537)

(451,439)

Directors' fees

14

(144,315)

(132,065)

(54,500)

Investment Committee fees

14

(25,000)

(37,500)

(12,500)

Legal and professional fees

(234,510)

(229,723)

(50,918)

Transaction costs

(436,102)

(488,308)

(141,103)

Royalty participation fees

15

(431,750)

(848,534)

(249,769)

Other operating costs

(91,377)

(112,289)

(34,496)

Net foreign currency losses

(1,820)

-

-

Interest payable

(78,880)

(2)

(1,700)

Other finance costs

(93,180)

-

-

Total expenses

(1,646,934)

(2,654,958)

(996,425)

Gain/(loss) for the financial period

1,052,110

(858,202)

(427,838)

Taxation expense

3

(102,000)

-

-

Total comprehensive income/(loss) for the period

950,110

(858,202)

(427,838)

Basic earnings/(deficit) per share (pence)

4

0.73

(1.38)

(0.94)

Diluted earnings/(deficit) per share (pence)

4

0.73

(1.38)

(0.94)

All income is attributable to the holders of the Ordinary Shares of the Company.

The notes on pages 15 to 31 form an integral part of these Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2018

Note

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

(restated)

£

£

£

Non-current assets

Financial assets at fair value through profit or loss

6

39,174,461

20,782,297

6,339,755

Deferred tax

7

107,000

-

-

39,281,461

20,782,297

6,339,755

Current assets

Financial assets at fair value through profit or loss

6

5,609,414

2,786,501

844,198

Trade and other receivables

8

711,163

6,687,020

15,253

Cash and cash equivalents

30,066,361

3,165,221

7,323,409

36,386,938

12,638,742

8,182,860

Total assets

75,668,399

33,421,039

14,522,615

Equity

Shares issued

9

101,918,170

60,303,293

40,905,094

Shares to be issued

-

-

341,439

Share based payment reserve

10

169,042

129,977

124,412

Warrant reserve

125,000

125,000

-

Retained losses

11

(28,623,621)

(28,314,324)

(27,178,219)

73,588,591

32,243,946

14,192,726

Current liabilities

Trade and other payables

12

678,541

259,693

51,336

Financial liabilities at fair value through profit or loss

13

187,362

140,886

42,968

865,903

400,579

94,304

Non-current liabilities

Financial liabilities at fair value through profit or loss

13

1,213,905

776,514

235,585

Total liabilities

2,079,808

1,177,093

329,889

Total equity and liabilities

75,668,399

33,421,039

14,522,615

The Condensed Consolidated Financial Statements on pages 10 to 31 were approved and authorised for issue by the Board of Directors on 3 December 2018 and were signed on its behalf by:

Mark Le Tissier

Matthew Wrigley

Director

Director

The notes on pages 15 to 31 form an integral part of these Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 30 SEPTEMBER 2018

Period to

Year to

Period to

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

(restated)

Cash flows from operating activities

£

£

£

Receipts from royalty investments

1,791,642

987,192

245,074

Receipts from transaction costs reimbursed

167,500

45,000

-

Payments for royalty participation fees

(81,252)

-

-

Operating expenses paid

(566,563)

(785,714)

(343,474)

Net cash inflow/(outflow) from operating activities

1,311,327

246,478

(98,400)

Cash flows from investing activities

Royalty investments advanced

(13,924,640)

(22,932,356)

(6,932,356)

Transaction costs paid

(222,047)

(277,737)

(141,103)

Pre-royalty investment advanced

(605,419)

-

-

Amounts advanced to agents pending royalty investment

completion

-

(6,467,500)

-

Gain on exercise of warrants

87,989

-

-

Payment to acquire equity investment

-

(250)

-

Interest income received

13,914

-

-

Net cash outflow from investing activities

(14,650,203)

(29,677,843)

(7,073,459)

Cash flows from financing activities

Proceeds from share issue

44,010,000

19,840,275

343,000

Share issue costs

(2,345,123)

(765,613)

(70,000)

Dividends paid

(1,250,630)

(925,468)

(226,887)

Interest paid

(78,880)

-

(1,699)

Other finance costs paid

(85,500)

-

-

Net cash inflow from financing activities

40,249,867

18,149,194

44,414

Net change in cash and cash equivalents

26,910,991

(11,282,171)

(7,127,445)

Cash and cash equivalents at beginning of year

3,165,221

14,350,154

14,350,154

Effect of foreign exchange on cash

(9,851)

97,238

100,700

Cash and cash equivalents at the end of year

30,066,361

3,165,221

7,323,409

The notes on pages 15 to 31 form an integral part of these Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIODS ENDED 30 SEPTEMBER 2017 AND 31 MARCH 2018

Share-based

Shares

Shares to be

payment

Warrant

Retained

Total

Note

issued

issued

reserve

reserve

losses

equity

£

£

£

£

£

£

At 1 April 2017

40,905,094

-

124,412

-

(26,523,494)

14,506,012

Total comprehensive loss for

the period (restated)

-

-

-

-

(427,838)

(427,838)

Transactions with owners

Share based payments

10

-

341,439

-

-

-

341,439

Dividends

5

-

-

-

-

(226,887)

(226,887)

Total transactions with owners

-

341,439

-

-

(226,887)

114,552

At 1 October 2017 (restated)

40,905,094

341,439

124,412

-

(27,178,219)

14,192,726

Total comprehensive loss for

the period

-

-

-

-

(430,364)

(430,364)

Transactions with owners

Shares issued for cash

9

19,507,275

-

-

-

-

19,507,275

Share issuance costs

-

9

(1,188,338)

-

-

-

-

(1,188,338)

Share based payments

9,10

1,079,262

(341,439)

5,565

-

-

743,388

Warrants issued

-

-

-

125,000

-

125,000

Dividends

5

-

-

-

-

(705,741)

(705,741)

Total transactions with owners

19,398,199

(341,439)

5,565

125,000

(705,741)

18,481,584

At 31 March 2018

60,303,293

-

129,977

125,000

(28,314,324)

32,243,946

The notes on pages 15 to 31 form an integral part of these Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 SEPTEMBER 2018

Share-based

Shares

payment

Warrant

Retained

Total

Note

issued

reserve

reserve

losses

equity

£

£

£

£

£

At 1 April 2018

60,303,293

129,977

125,000

(28,314,324)

32,243,946

Total comprehensive income for the year

-

-

-

950,110

950,110

Transactions with owners

Shares issued for cash

9

44,000,000

-

-

-

44,000,000

Share issuance costs

-

9

(2,385,123)

-

-

-

(2,385,123)

Share based payments

10

-

39,065

-

-

39,065

Dividends

5

-

-

-

(1,259,407)

(1,259,407)

Total transactions with owners

41,614,877

39,065

-

(1,259,407)

40,394,535

At 30 September 2018

101,918,170

169,042

125,000

(28,623,621)

73,588,591

The notes on pages 15 to 31 form an integral part of these Condensed Consolidated Financial Statements.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 SEPTEMBER 2018

Duke Royalty Limited ('Duke Royalty' or the 'Company') is a closed-ended investment company with limited liability formed under the Companies (Guernsey) Law, 2008. Its shares are traded on the AIM market of the London Stock Exchange. The Company's registered office is shown on page 32.

The Group comprised Duke Royalty Limited and its wholly owned subsidiary Duke Royalty UK Limited, a company registered in England and Wales.

The Group's investing policy is to invest in a diversified portfolio of royalty finance and related opportunities.

2.

Significant accounting policies

The interim Condensed Consolidated Financial Statements of the Group have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union, and using the going concern basis of preparation. These interim financial statements do not contain all the information and disclosures as presented in the annual financial statements, and should be read in conjunction with the Consolidated Financial Statements of the Group for the year ended 31 March 2018, which have been prepared in accordance with International Financial Reporting Standards ('IFRS'), to the extent that they have been adopted by the European Union, and applicable Guernsey law.

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 2018, except for the adoption of new standards effective from 1 January 2018, and are expected to be applied in the preparation of the financial statements for the year ended 31 March 2018.

The Financial Statements have been prepared on a historical cost basis, except for the following:

§ Royalty investments - measured at fair value through profit or loss

§ Equity investments - measured at fair value through profit or loss

§ Royalty participation liabilities - measured at fair value through profit or loss

2.2

New and amended standards adopted by the Group

The Group has adopted IFRS 15 'Revenue from Contracts with Customers' for the first time in these interim financial statements. There are no areas within this standard which have a material impact on the Group.

2.3

Restatement of interim comparatives

In preparing the interim Consolidated Financial Statements of the Group for the period ended 30 September 2017, the Group elected to early adopt IFRS 9 'Financial instruments'. Following a full review of the implementation of IFRS 9 as part of the preparation of the Consolidated Financial Statements for the year ended 31 March 2018, the Group made certain amendments which have resulted in the restatement of the comparative figures for the period ended 30 September 2017 in these Condensed Consolidated Financial Statements. As part of this restatement, transaction costs and royalty participation fees previously included in the carrying value of the investments were expensed in the Condensed Consolidated Statement of Comprehensive Income. This has resulted in the previously reported loss before tax of £78,139 increasing to £427,838.

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 year

Period to

Year to

Period to

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

(restated)

£

£

£

Profit/(loss) on ordinary activities before tax

950,110

(858,202)

(427,838)

Corporation tax at country rates

331,458

(61,409)

(61,049)

Tax losses not recognised

-

61,409

61,049

Utilisation of tax losses brought forward

(122,458)

-

-

Deferred tax asset recognised

(107,000)

102,000

-

-

4.

Earnings/(deficit) per share

Period to

Year to

Period to

30

31

30

September

March

September

2018

2018

2017

Basic earnings/(deficit) per Ordinary Share

(unaudited)

(audited)

(unaudited)

(restated)

£

£

£

Profit/(loss) for the period

950,110

(858,202)

(427,838)

Weighted average number of Ordinary Shares

in issue

130,210,792

62,234,062

45,377,459

Basic earnings/(deficit) per share (pence)

0.73

(1.38)

(0.94)

Period to

Year to

Period to

September

March

September

2018

2018

2017

Diluted earnings/(deficit) per Ordinary Share

(unaudited)

(audited)

(unaudited)

(restated)

£

£

£

Profit/(loss) for the period

950,110

(858,202)

(427,838)

Weighted average number of Ordinary Shares,

diluted for warrants in issue

130,309,049

62,234,062

45,377,459

Diluted earnings/(deficit) per share (pence)

0.73

(1.38)

(0.94)

The basic earnings per share is based on the Group profit for the period and on the weighted average number of Ordinary Shares in issue for the period. The share options, Long Term Incentive Plan awards and warrants in issue were not dilutive in the year ended 31 March 2018 and the period ended 30 September 2017, but the warrants in issue have become dilutive in the current period. For more details on the share options see note 10.

The Company implemented a quarterly dividend policy during the year ended 31 March 2018. The following interim dividends have been recorded and paid since the inception of this policy:

Dividend per

Dividends

share

payable

pence/share

£

Record date

Payment date

30 June 2017

27 July 2017

0.5

226,887

Dividends payable for the period ended 30 September 2017

226,887

Record date

Payment date

29 September 2017

19 October 2017

0.5

226,887

29 December 2017

12 January 2018

0.5

478,854

Dividends payable for the period ended 31 March 2018

705,741

Record date

Payment date

3 April 2018

12 April 2018

0.6

581,265

29 June 2018

12 July 2018

0.7

678,142

Dividends payable for the period ended 30 September 2018

1,259,407

On 20 September 2018 the Company approved a further quarterly dividend of 0.7 pence per share, totalling £1,385,317, which was paid on 12 October 2018.

6.

Financial assets at fair value through profit or loss

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

(restated)

£

£

£

Non-current

-

Royalty investments

39,174,211

20,782,047

6,339,755

Equity investments

250

250

-

39,174,461

20,782,297

6,339,755

Current

Royalty investments

5,609,414

2,786,501

844,198

44,783,875

23,568,798

7,183,953

Net changes in fair value on financial assets at fair value through profit or loss:

Period to

Year to

Period to

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

(restated)

£

£

£

On royalty investments

2,614,579

1,623,384

496,671

On equity investments

-

-

-

Total net gains

2,614,579

1,623,384

496,671

Net changes in fair value on financial assets at fair value through profit or loss:

Period to

Year to

Period to

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

(restated)

£

£

£

Realised

1,791,642

987,192

245,074

Change in unrealised

822,937

636,192

251,597

Total net gains

2,614,579

1,623,384

496,671

Realised changes in fair value relate to cash amounts received under the Group's royalty financing agreements.

Royalty investments

Temarca B.V.

In April 2017 the Group completed its first royalty financing agreement with Temarca B.V. ('Temarca'). Under the terms of the agreement the Group advanced €8 million (£6.9 million) to Temarca for a term of 25 years in exchange for annualised royalty distributions of approximately €1 million (£0.9 million). The distributions are adjusted annually based on the percentage change in Temarca's gross revenues compared to the prior year, subject to a floor and cap. The financing is secured by way of fixed and floating charges over certain assets and the Group has provided Temarca with a buyback option. This buyback option can be exercised at Temarca's discretion at any time during the term of the agreement.

In August 2018 the Group contributed a further €1 million (£0.9 million) of financing to Temarca. This increased the annualised royalty distributions receivable from Temarca to approximately €1.1 million (£1.0 million) per annum.

Lynx Equity (U.K.) Limited

In October 2017 the Group entered into a royalty financing agreement with Lynx Equity (U.K.) Limited ('Lynx'). Under the terms of the agreement the Group advanced £7 million to Lynx in perpetuity in exchange for annualised royalty distributions of approximately £0.8 million. The distributions are adjusted annually based on the percentage change in the aggregated gross revenues of Lynx's investee companies compared to the prior year, subject to a floor and cap. The financing is secured over all present and after-acquired property and assets of Lynx and shares of the subsidiaries of Lynx. Lynx's parent company has also provided a corporate guarantee to pledge all cash flows from Lynx to the Group. The Group has provided Lynx with a buyback option after the expiry of a period of five years from the date of the original investment. This buyback option is exercisable at Lynx's discretion.

In April and September 2018 the Group contributed a further £2 million and £1 million respectively of royalty financing to Lynx. This increased the annualised royalty distributions receivable from Lynx to approximately £1.2 million per annum.

Trimite Global Coatings Limited

In March 2018 the Group entered into a royalty financing agreement with Trimite Global Coatings Limited ('Trimite'). Under the terms of the agreement the Group advanced £9 million to Trimite for a term of 30 years in exchange for annualised distributions of approximately £1.1 million. The distributions are adjusted annually based on the percentage change in Trimite's gross revenues compared to the prior year, subject to a floor and cap. The financing is secured by way of fixed and floating charges over certain assets and the Group has provided Trimite with a buyback option. This buyback option can be exercised at Trimite's discretion at any time during the term of the agreement.

Brownhills Investments Limited

In April 2018 the Group entered into a royalty financing agreement with Brownhills Investments Limited ('Brownhills'). Under the terms of the agreement the Group advanced £6.5 million to Brownhills for a term of 30 years in exchange for annualised distributions of approximately £0.9 million. The distributions are adjusted annually based on the percentage change in Brownhill's gross revenues compared to the prior year, subject to a floor and cap. The investment is secured via fixed and floating charges. The Group has provided Brownhills with a buyback option.

InterHealth Canada Holding Corp

In August 2018 the Group entered into a royalty financing agreement with InterHealth Canada Holding Corp ('ICHC'). Under the terms of the agreement the Group advanced £10 million to ICHC for a term of 30 years in exchange for annualised distributions of approximately £1.35 million. The distributions are adjusted annually based on the percentage change in ICHC's gross revenues compared to the prior year, subject to a floor and cap. The investment is secured via fixed and floating charges. The Group has provided ICHC with a buyback option.

Equity investments

At completion of the Group's royalty financing agreement with Trimite (see above) the Group acquired a 2.5% interest in the Trimite group for £250.

The Group still holds two unlisted investments in mining entities from its previous investment objectives. The Board do not consider there to be any future cash flows from these investments and they are fully written down to nil value.

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

£

£

£

Deferred tax asset

107,000

-

-

The deferred tax asset arises due to a temporary timing differences on the treatment of transaction costs in the UK subsidiary. This deferred tax asset is expected to reverse over a 30 year period. The utilisation of this asset is dependent on sufficient future taxable profits being generated by the UK subsidiary.

8.

Trade and other receivables

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

£

£

£

Transaction costs reimbursed receivable

40,000

100,000

-

Prepayments and accrued income

57,713

109,520

15,253

Unpaid share capital

-

10,000

-

Pre-royalty investment advances

613,450

-

-

Amounts advanced to agents pending royalty

investment completion

-

6,467,500

-

711,163

6,687,020

15,253

No. shares

£

Authorised

Unlimited number of shares of no par value

-

-

Allotted, called up and fully paid

At 1 April 2017 and at 30 September 2017

45,377,459

40,905,094

Shares issued for cash during the period

48,768,187

19,507,275

Shares issued in settlement of share issuance costs

1,231,813

492,725

Share issuance costs

-

(1,188,338)

Shares issued in connection with support services agreement

1,500,000

586,537

At 31 March 2018

96,877,459

60,303,293

Shares issued for cash during the period

100,000,000

44,000,000

Share issuance costs

-

(2,385,123)

Shares issued to Employee Benefit Trust during the period

1,025,000

-

At 30 September 2018

197,902,459

101,918,170

In August 2018 the Company issued 100 million new Ordinary Shares at 44p per share, of which all were fully paid up at 30 September 2018.

During the period, the Company issued 1,025,000 shares for consideration of £nil into an Employee Benefit Trust, under the terms of its Long Term Incentive Plan (LTIP). See note 10 for further details.

The following table shows the movements in the share-based payment reserve during the period:

Share

LTIP

options

awards

Total

£

£

£

At 1 April 2017

124,412

-

124,412

LTIP awards granted in the year

-

-

-

At 30 September 2017

124,412

-

124,412

LTIP awards granted

-

5,565

5,565

At 31 March 2018

124,412

5,565

129,977

LTIP awards granted

-

39,065

39,065

At 30 September 2018

124,412

44,630

169,042

The Group operates a share option scheme ('the Scheme').

The Scheme was established to incentivise Directors, staff and certain key advisers and consultants to deliver long-term value creation for shareholders.

Under the Scheme, the Board of the Company will award, at its sole discretion, options to subscribe for Ordinary Shares of the Company on terms and at exercise prices and with vesting and exercise periods to be determined at the time. However, the Board of the Company has agreed not to grant options such that the total number of unexercised options represents more than 4 per cent of the Company's Ordinary Shares in issue from time to time. Options vest immediately and lapse 5 years from the date of grant.

At the period end 760,000 (March 2018 and September 2017 - 760,000) options were outstanding and exercisable at a weighted average exercise price of 75 pence (March 2018 and September 2017 - 75 pence). The weighted average remaining contractual life of the options outstanding at the period end was 1.93 years (March 2018 - 2.43 years; September 2017 - 2.93 years).

On 7 November 2017 the Remuneration Committee adopted the Duke Royalty Limited Long Term Incentive Plan ('LTIP') which the Board approved the framework of and described in the Admission Document of the Company dated 20 March 2017.

Under the rules of the LTIP the Remuneration Committee may grant Performance Share Awards ('PSAs') which vest after a period of three years and are subject to various performance conditions. The LTIP awards will be subject to a performance condition based 50 per cent on total shareholder return ('TSR') and 50 per cent on total cash available for distribution ('TCAD per share'). TSR can be defined as the returns generated by shareholders based on the combined value of the dividends paid out by the Company and the share price performance over the period in question. Upon vesting the awards are issued fully paid.

On 6 March 2018 1,025,000 PSAs were issued to Directors with a fair value of £234,390. An expense of £39,065 for the period (March 2018 - £5,565; September 2017 - £nil) has been recognised in these Condensed Consolidated Financial Statements in 'Directors' fees'. Disclosure of the valuation assumptions used to value the PSAs has not been made on the basis that the related IFRS 2 charge in the year under review is immaterial.

At the period end 1,025,000 (March 2018 - 1,025,000; September 2017 - nil) LTIP awards were outstanding. The weighted average remaining vesting period of the LTIP awards outstanding at the period end was 2.43 years (March 2018 - 2.93; September 2017 - nil).

11.

Distributable reserves

Under Guernsey law, the Company can pay dividends provided it satisfies the solvency test prescribed by the Companies (Guernsey) Law, 2008. The solvency test considers whether the Company is able to pay its debts when they fall due, and whether the value of the Company's assets is greater than its liabilities. The Company satisfied the solvency test in respect of the dividends declared in the period.

12.

Trade and other payables

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

£

£

£

Trade payables

76,424

178,761

-

Corporation tax

209,000

-

-

Accruals and deferred income

393,117

80,932

51,336

678,541

259,693

51,336

13.

Financial liabilities at fair value through profit or loss

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

(restated)

£

£

£

Royalty participation liability

Current

187,362

140,886

42,968

Non-current

1,213,905

776,514

235,585

1,401,267

917,400

278,553

Net changes in fair value on financial liabilities at fair value through profit or loss:

Period to

Year to

Period to

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

(restated)

£

£

£

Realised

-

-

-

Change in unrealised

133,369

68,866

28,784

133,369

68,866

28,784

The following fees were payable to the Directors during the period:

Period to

Year to

Period to

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

£

£

£

Neil Johnson

56,555

52,715

25,000

Charles Cannon Brookes

39,590

36,900

17,500

Nigel Birrell

12,000

12,000

6,000

James Ryan

-

6,000

6,000

Justin Cochrane

24,170

18,450

-

Matthew Wrigley

12,000

6,000

-

Mark Le Tissier

-

-

-

144,315

132,065

54,500

During the year to 31 March 2018, the Directors voluntarily reduced their fees in order for the Company to implement and sustain its quarterly dividend policy. During the 6 months ended 30 September 2018 this reduction ceased.

The above noted fees include the following expenses relating to awards granted under the Group's Long Term Incentive Plan (see note 10):

Period to

Year to

Period to

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

£

£

£

Neil Johnson

19,055

2,715

-

Charles Cannon Brookes

13,340

1,900

-

Justin Cochrane

6,670

950

-

39,065

5,565

-

Mark Le Tissier, a Director of Trident Trust Company (Guernsey) Limited has waived his entitlement to a fee in relation to being a Director of the Company.

Fees relating to Matthew Wrigley are paid to MJ Hudson, a law firm in which he is a partner.

At the period end £6,000 remained outstanding to Nigel Birrell and £6,000 remained outstanding to Matthew Wrigley (March 2018 and September 2017 - no fees remained outstanding). These were paid subsequent to the period end.

Investment Committee fees

The Group's Investment Committee assist in analysing and recommending potential royalty transactions and its members are considered to be key management along with the Directors. The following fees were payable to the members of the Investment Committee during the period:

Period to

Year to

Period to

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

£

£

£

Andrew Carragher

-

-

20,000

Jim Webster

25,000

37,500

40,000

25,000

37,500

60,000

Jim Webster is also the Group's Chief Investment Officer and has an operational role in the Group beyond the Investment Committee, which is reflected in the level of his fee.

Andrew Carragher has waived his entitlement to a fee during the period in relation to being a member of the Group's Investment Committee, and Jim Webster agreed to voluntarily reduce his fee, in conjunction with the voluntary reductions of the Directors, in order for the Company to implement and sustain its quarterly dividend policy. During the 6 months ended 30 September 2018, the reduction of Jim Webster's fee ceased.

During the fiscal year, the representatives of Oliver Wyman were not paid by the Group for their service as per the terms of the collaboration agreement.

£12,500 remained outstanding to Jim Webster at the period end (March 2018 and September 2017 - £nil). This was paid subsequent to the period end.

Other related party transactions

The following amounts were paid to related parties during the period in respect of support services fees:

Period to

Year to

Period to

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

£

£

£

Payable to Abingdon Capital Corporation

Annual service fee

98,000

196,000

280,000

Share award

-

415,818

-

98,000

611,818

280,000

Payable to Arlington Group Asset Management

Limited

Annual service fee

12,000

24,000

95,000

Share award

-

170,719

-

12,000

194,719

95,000

110,000

806,537

375,000

Support Service Agreements with Abingdon Capital Corporation ('Abingdon'), a company of which Neil Johnson is a Director, and Arlington Group Asset Management Limited ('Arlington'), a company of which Charles Cannon Brookes is a Director, were signed on 16 June 2015. The services to be provided by both Abingdon and Arlington include global deal origination, vertical partner relationships and on-going investment management, including preparation of investment reports, performance data and compliance with the Company's investing policy.

The Support Services Agreements also entitled Abingdon and Arlington to be allotted up to 1,500,000 Ordinary shares in the Company, in recognition of the execution of the royalty strategy, principally the completion of royalty investments by the Group. These conditions were met during the year ended 31 March 2018 and the shares were issued on 22 December 2017. This entitlement has now been satisfied in full and no further shares will be issued pursuant to the Support Services Agreements. The shares were valued at £586,537 based on the 20-day volume weighted average share prices preceding the dates on which Abingdon and Arlington became entitled to them in accordance with the terms of the agreement.

During the year to 31 March 2018, both Abingdon and Arlington agreed to voluntary reductions in their annual service fees in order for the Company to implement and sustain its quarterly dividend policy. These reductions were still in place throughout the current period.

Share options and LTIP awards

The Group's related parties have the following interests, either directly or beneficially, in share options issued under the Group's share option scheme and Long Term Incentive Plan:

Share options

Period to

Year to

Period to

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

No.

No.

No.

Neil Johnson

85,000

85,000

-

Charles Cannon Brookes1

85,000

85,000

-

Nigel Birrell

85,000

85,000

-

James Ryan

85,000

85,000

-

Justin Cochrane

70,000

70,000

-

LTIP awards

Period to

Year to

Period to

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

(restated)

No.

No.

No.

Neil Johnson

500,000

500,000

-

Charles Cannon Brookes1

350,000

350,000

-

Justin Cochrane

175,000

175,000

-

1 Includes share options issued to Arlington

The following dividends were paid to related parties:

Period to

Year to

Period to

30

31

30

September

March

September

2018

2018

2017

(unaudited)

(audited)

(unaudited)

£

£

£

Neil Johnson1

41,693

33,636

-

Charles Cannon Brookes2

65,000

58,000

-

Nigel Birrell

8,450

8,500

-

Justin Cochrane

9,620

10,600

-

1 Includes dividends paid to Abinvest Corporation, a wholly owned subsidiary of Abingdon

2 Includes dividends paid to Arlington

15.

Fair value measurements

Fair value hierarchy

IFRS 13 requires disclosure of fair value measurements by level of the following fair value hierarchy:

Level 1:Inputs are quoted prices (unadjusted) in active markets for identical assets and liabilities that the entity can readily observe.

Level 2:Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly.

Level 3:Inputs that are not based on observable market date (unobservable inputs).

The Group has classified its financial instruments into the three levels prescribed as follows:

30

31

30

September

March

September

2018

2018

2017

Level 3

Level 3

Level 3

(unaudited)

(audited)

(unaudited)

(restated)

£

£

£

Financial assets

Financial assets at fair value through profit or loss

- Royalty investments

44,783,625

23,568,548

7,183,953

- Equity investments

250

250

-

44,783,875

23,568,798

7,183,953

Financial liabilities

Financial liabilities at fair value through profit or loss

- Royalty participation instruments

1,401,267

917,400

278,553

Total financial liabilities

1,401,267

917,400

278,553

The following table presents the changes in level 3 items for the 6 month periods ended 30 September 2018, 31 March 2018 and 30 September 2017:

Financial

Financial

assets

liabilities

Total

£

£

£

At 1 April 2017

-

-

-

Additions (restated)

6,932,356

(249,769)

6,682,587

Royalty income received

(245,074)

-

(245,074)

Net change in fair value (restated)

496,671

(28,784)

467,887

At 30 September 2017 (restated)

7,183,953

(278,553)

6,905,400

Additions

16,000,250

(598,765)

15,401,485

Royalty income received

(742,118)

-

(742,118)

Net change in fair value

1,126,713

(40,082)

1,086,631

At 31 March 2018

23,568,798

(917,400)

22,651,398

Additions

20,392,140

(431,750)

19,960,390

Royalty income received

(1,791,642)

-

(1,791,642)

Net change in fair value

2,614,579

(52,117)

2,562,462

At 30 September 2018

44,783,875

(1,401,267)

43,382,608

Valuation techniques used to determine fair values

The fair value of the Group's financial instruments is determined using discounted cash flow analysis and all of the resulting fair value estimates are included in level 3.

Valuation processes

The main level 3 inputs used by the Group are derived and evaluated as follows:

Annual adjustment factors for royalty investments and royalty participation liabilities

These factors are estimated based upon the underlying past and projected performance of the royalty investee companies together with general market conditions.

Discount rates for financial assets and liabilities

These are initially estimated based upon the projected internal rate of return of the royalty investment and subsequently adjusted to reflect changes in credit risk determined by the Group's Investment Committee.

Changes in level 3 fair values are analysed at the end of each reporting period and reasons for the fair value movements are documented.

Valuation inputs and relationships to fair value

The following summary outlines the quantitative information about the significant unobservable inputs used in level 3 fair value measurements:

Royalty investments

The unobservable inputs are the annual adjustment factor and the discount rate. The range of annual adjustment factors used is -1.0% to 6.0% and the range of risk-adjusted discount rates is 13.6% to 20.0%.

An increase in the annual adjustment factor (subject to the collars set under the terms of the royalty financing agreements) of 25 basis points would increase the fair value by £711,068.

A reduction in the discount rate of 25 basis points would increase the fair value by £714,542.

A decrease in the annual adjustment factor (subject to the collars set under the terms of the royalty financing agreements) of 25 basis points would decrease the fair value by £640,943.

An increase in the discount rate of 25 basis points would decrease the fair value by £643,524.

Equity investments

Sensitivity analysis has not been performed on the Group's equity investments on the basis that they are not material to the Condensed Consolidated Financial Statements.

Royalty participation instruments

The unobservable inputs are the annual adjustment factor and the discount rate used in the fair value calculation of the royalty investments. The range of annual adjustment factors used is -1.0% to 6.0% and the range of risk-adjusted discount rates is 13.6% to 20.0%.

An increase in the annual adjustment factor (subject to the collars set under the terms of the royalty financing agreements) of 25 basis points would increase the fair value of the liability by £31,639.

A reduction in the discount rate of 25 basis points would increase the fair value of the liability by £31,496.

A decrease in the annual adjustment factor (subject to the collars set under the terms of the royalty financing agreements) of 25 basis points would decrease the fair value of the liability by £12,257.

An increase in the discount rate of 25 basis points would decrease the fair value of the liability by £12,089.

16.

Events after the financial reporting date

Dividends

On 12 October 2018 the Company paid a quarterly dividend of 0.7 pence per share.

Performance Share Awards ('PSA') under the Company's Long Term Incentive Plan ('LTIP') Awards

On 31 October 2018 the Group's Remuneration Committee approved the issuance of 1,665,000 PSA's. The PSA's vest after a period of three years and are subject to various performance conditions outlined in the Company's admission document and set by the Remuneration Committee, all

in accordance with the LTIP rules.

Grant of options

On 31 October 2018 the Group's Remuneration Committee approved the grant of 200,000 options over Ordinary Shares (the 'Options') under the Company's option plan. The Options expire five years from the date of issuance and have an exercise price of GBP 0.50.

Issuance of ordinary shares

On 31 October 2018 the Company's Remuneration Committee approved the issuance of 305,000 new ordinary shares of no par value.

Issuance of warrants

The Board also approved the grant of 2,375,000 Warrants to Partners Value Investments LP ('PVI') in consideration for the provision of services provided by PVI to the Company under the terms of the Strategic Advisory Agreement (as announced on 8 November 2017).

COMPANY INFORMATION

Directors

Nigel Birrell (Chairman)

Justin Cochrane

Neil Johnson

Mark Le Tissier

Charles Cannon Brookes

Matthew Wrigley

Secretary and administrator

Trident Trust Company (Guernsey) Limited

Trafalgar Court

4th Floor, West Wing, St Peter Port

Guernsey, GY1 3RL

Registered in Guernsey, number

54697

Website address

www.dukeroyalty.com

Registered office

Trafalgar Court

4th Floor, West Wing, St Peter Port

Guernsey, GY1 2JA

Independent auditor

BDO Limited

Place du Pre

Rue de Pre

St Peter Port

Guernsey, GY1 3LL

Nominated advisor

Grant Thornton UK LLP

30 Finsbury Square

London, EC2A 1AG

Brokers

Mirabaud Securities Limited

Cenkos Securities plc

5th Floor, 10 Bressenden Place

6-8 Tokenhouse Yard

London, SW1E 5DH

London, EC2R 7AS

Support service providers

Arlington Group Asset Management Limited

Abingdon Capital Corporation

4 King Street W., Suite 401

47/48 Piccadilly

Toronto, Ontario

London, W1J 0DT

Canada, M5H 1B6

Registrar and CREST agent

Computershare Investor Services (Guernsey) Limited

c/o Queensway House

Hilgrove Street

St Helier

Jersey, JE1 1ES

Advocates to the Company as to

MJ Hudson

Guernsey law

Hadsley House

Lefebvre Street

St Peter Port

Guernsey, GY1 2JP

Investment Committee

Neil Johnson

John Romeo

Justin Cochrane

Andrew Carragher

Jim Webster

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