Duke Capital Regulatory News (DUKE)

5 March 2018

Duke Royalty Limited

("Duke Royalty", "Duke" or the "Company")

New Royalty Agreement with Birmingham-based Specialist Coatings Manufacturer

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 announce that it has entered into a £9 million royalty financing agreement (the "Financing") with Trimite Global Coatings Limited ("Trimite"), a Birmingham-based specialist coatings manufacturer established in the 1940s.

In addition, the Company is pleased to announce that it has entered into non-binding terms with a fourth Royalty Partner and is also pleased to publish an updated unaudited balance sheet to better reflect its current financial position following its £20 million equity financing completed in December 2017.

Highlights

· Duke has committed £9.0 million to Trimite, its third royalty financing agreement in Europe, providing it with the necessary funds to buy-out a minority shareholder, to fund a small bolt-on acquisition and to provide the additional working capital required to fund its anticipated future organic sales growth

· Initial cash-on-cash yield of over 13 per cent. via monthly payments

· 30 year secured financing - distributions to be adjusted annually to reflect Trimite revenue growth

· 2.5 per cent. equity interest in Trimite granted at no additional consideration

· Trimite is a profitable supplier of industrial coatings to global brands and organisations

· 120 employees across four UK plants and a highly experienced management team

· The Financing meets Duke's strategy to replicate the proven North American royalty model to create long term value for shareholders in the form of predictable, robust dividend streams 

· Non-binding terms signed with a fourth Royalty Partner, a long established and profitable UK-based glass processing business

Neil Johnson, CEO of Duke Royalty, said: 

"We have been working closely with Trimite for some time to execute this Financing. With a solid sales pipeline and a high-quality management team who are also investing their capital in the business, we feel that Trimite represents a textbook deal for Duke.

"In addition, we are pleased with the progress we are experiencing in terms of our future pipeline of deal opportunities and are confident that royalty financing will become increasingly understood as a highly competitive form of growth capital across our preferred sectors."

David Roberts, Chairman and majority shareholder of Trimite, said: 

"Trimite investigated a number of different financing alternatives and decided upon the Duke proposal as a result of the long term, participating nature of the investment, which removes any short term refinancing risk. Trimite looks forward to a long and positive partnership with Duke as we grow our business."

New Royalty Partner - Trimite Global Coatings Limited

www.trimite.com

As detailed on 4 December 2017 at the time of its £20 million equity fundraising, Duke has been working on an investment opportunity to provide royalty financing to a speciality coating manufacturer. This investment, which has been entered into with Trimite, has now completed, utilising the proceeds of the Company's equity financing in December.

Trimite is a 70-year-old UK private company that formulates and manufactures high performance and technologically superior coatings and paints for speciality industrial markets. It has more than 120 employees in four UK plants based in Birmingham, the Midlands and West London.

Trimite is a key supplier of industrial coatings to several global brands and organisations in sectors including defence and aerospace, agricultural and construction equipment, and automotive. Trimite has a history of profitable operations in highly technical applications, has low debt and enjoys robust gross margins relative to the overall paint industry.

Trimite is majority-owned by Chairman David Roberts and led by a highly experienced team of executives who have spent their careers in the UK manufacturing sector and in senior management positions in global coatings suppliers like Akzo Nobel. With this in mind, Trimite is well-positioned to expand its market presence and take advantage of its strong and growing sales pipeline.

About the Financing

Duke has committed £9.0 million, providing it with the necessary funds to buy-out a minority shareholder, to fund a small bolt-on acquisition and to provide the additional working capital required to fund its anticipated future organic sales growth.

The terms of the Financing are in line with Duke's typical investment criteria. The Financing is provided through a secured loan and preference shares and Duke will be entitled to monthly distributions (the "Distribution") beginning in March 2018. On an annual basis, the initial Distribution is expected to total approximately £1.2 million, equating to a cash-on-cash yield of over 13 per cent.

The Distribution will be adjusted annually with the first adjustment occurring in April 2019 based on the percentage change in Trimite's gross revenues for the year to 31 March 2019 compared to the prior financial year. The annual adjustment in the Distribution will be subject to a collar. The Financing is for a period of 30 years, with the Distribution payable to Duke throughout the duration of this term, unless Trimite utilises an early buyback option.

Concurrent to the Financing, Trimite has secured an investment from its Chairman for £2 million at an indicative pre-money valuation of £15 million and Trimite has agreed to issue Duke, for no additional consideration, with an equity interest of 2.5 per cent. of the ordinary shares of the enlarged group.

Update on identified near term investment opportunity

As detailed on 4 December 2017, Duke has been actively progressing a potential fourth investment into a long established and profitable UK glass processing business.

Duke is pleased to report that non-binding terms have now been agreed and are in line with Duke's typical deal structure, which includes senior security, an over 13 per cent. initial cash-on-cash yield, an annual adjustment factor based on revenue performance, and a 30-year term.

While the transaction is subject to due diligence and final documentation, Duke is confident that it will be able to complete the transaction by April 2018 as previously announced.

Duke Royalty portfolio

Further to the completion of the Trimite Financing the Company's portfolio of royalty investments is as follows with over £23 million of capital deployed to date:

Unaudited Company balance sheet as at 31 January 2018

To more accurately reflect the financial position of Duke following the fundraising in December 2017, the Company reports its latest unaudited balance sheet as at 31 January 2018.

**ENDS**

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

About Duke Royalty

Duke Royalty Limited provides alternative capital solutions to a diversified range of profitable and long-established businesses in Europe and abroad. Duke Royalty's experienced team and exclusive partnership provide financing solutions to private companies that are in need of capital but whose owners wish to maintain equity control of their business. Duke Royalty's royalty investments are intended to provide robust, stable, long term returns to its shareholders.

Duke Royalty is listed on the AIM market under the ticker DUKE and is headquartered in Guernsey.

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.