Final Results and Notice of AGM

RNS Number : 6231B

Duke Royalty Limited

24 September 2018

 

24 September 2018

Duke Royalty Limited

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

Final results for the full year ended 31 March 2018,

Posting of Annual Report and Notice of AGM

Duke Royalty, a provider of alternative capital solutions to a diversified range of profitable and long-established businesses in Europe and abroad, announces its final results for the ended 31 March 2018 ("FY18").

Full year highlights:

·   First three royalty partners secured, delivering total income for the year of £1.80 million and generating £0.25 million net cash inflow from operating activities

·    Successfully raised a total of £20 million of equity to fund investments, bringing a suite of new institutional investors onto the share register

·     Dividend yield of 2.1 pence per share, above Duke's stated target of 2 pence per share

·    Strong pipeline of potential new royalty partners developed, testament to the demand for Duke Royalty's alternative finance solution

Post period highlights

·     Two more royalty transactions completed, taking the total number of royalty partners to five

·     Raised an additional £44 million of equity to fund current pipeline of royalty investments

·     Currently in the top 5% highest AIM dividend paying stocks - dividend paid quarterly

Neil Johnson, CEO of Duke Royalty, said:

"I am delighted to report that, in the period under review, Duke has been able to prove the attractiveness of its alternative finance solution both to business owners and to institutional investors, delivering its inaugural income from our royalty investment strategy.

"The Company is now ideally positioned to build on this success and, having successfully raised an additional £44m of equity in August 2018, we have been able to bring the total number of royalty partners in our portfolio up to five. New royalties will be accretive to shareholders due to Duke's high operating leverage and we are delighted to have identified a range of compelling opportunities. With this in mind, I look forward to the year ahead with optimism and excitement."

Notice of AGM

The Company announces that its Annual General Meeting ("AGM") will be held at Trafalgar Court, 4th Floor, West Wing, Admiral Park, St Peter Port, Guernsey GY1 2JA on 1 November 2018 at 11:00 BST.

The full annual report and accounts, including the audit report and the notice of the Company's AGM will be posted to applicable shareholders by 28 September 2018 and will be available on the Company's website at that time.

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

Duke Royalty Limited	Neil Johnson / Charlie Cannon-Brookes	[phone]
Grant Thornton UK LLP  (Nominated Adviser)	Colin Aaronson / Samantha Harrison	[phone]
Cenkos Securities plc  (Joint Broker)	Julian Morse / Michael Johnson	[phone]
Mirabaud Securities Limited (Joint Broker)	Peter Krens / Edward Haig-Thomas	[phone]
Redleaf Communications (PR)	Elisabeth Cowell/ Robin Tozer/ Ian Silvera	[phone]

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 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.

CHAIRMAN'S REPORT

FOR THE YEAR ENDED 31 MARCH 2018

Dear Shareholder,

I am pleased to report the results for the financial year ending 31 March 2018 ("Fiscal 2018") which has been a period of significant progress and development for the Company.

Following the Company's re-admission to AIM in March 2017 and concurrent raising of its first institutional equity capital of £15 million to finance a pipeline of near term royalty financing transactions, we were delighted therefore that the Company was able to quickly announce that, during April 2017, it had closed its inaugural royalty investment of €8 million (£6.9 million) into Temarca, an established European river cruise operator. 

The Temarca investment was followed by two further royalty transactions during Fiscal 2018.  The first of these transactions was a £7 million investment (split into two tranches) into Lynx UK, the European subsidiary of Lynx Equity which is a Toronto-based private firm that seeks to acquire, own and operate mature, old-economy businesses in a diverse range of industries.  The second was a £9 million investment into Trimite, a 70-year-old UK private company that formulates and manufactures high performance and technologically superior coatings and paints for speciality industrial markets.

To be able to fund the third transaction and subsequent investments, Duke closed a successful second equity fundraising of £20 million which was completed in December 2017.  Both of our fundraisings in Fiscal 2018 were well supported by institutional investors, which underpins our confidence in the ability for us to execute our business plan of diversifying the royalty partners at a measured but focused pace. 

I am also pleased to report that during Fiscal 2018, the Company has grown the quality and quantity of the pipeline of transactions the team are evaluating.  Duke Royalty is the first UK quoted non-resource royalty investment company, which means the Company needs to do some education in Europe of the advantages of this alternative finance solution which is well established in North America.  However, one of the most pleasing aspects of Fiscal 2018 has been that we have seen a strong demand for the Duke financing solution in our key target markets.

As referenced in the Company's IPO document, the Company announced that it would target a minimum dividend yield of five percent (or 2 pence per share) for Fiscal 2018.  The actual Fiscal 2018 pay-out was above target at 2.1 pence per share with the initial quarterly dividend of 0.5p per share being increased to 0.6p per share in respect of the final quarter of Fiscal 2018.  A stable and increasing dividend yield is a fundamental principle that Duke will continue to focus on in future years and I am happy to be able to report that post the financial year end the quarterly dividend was increased again to 0.7p per share in respect of the first quarter of Fiscal 2019.

Fiscal 2018 also saw the inaugural income generated from our royalty investment strategy, which is a significant step in the Company's development and we are therefore pleased to report a total income for the year of £1.80 million. Our total comprehensive loss for the year was £0.86 million, however, to understand the overall trading of the Company, we need to point out that our inaugural income coincides with the early adoption of the new IFRS 9 accounting standard for financial instruments.  Due to the nature of the royalty investments, under IFRS 9 they are classified at fair value through profit or loss which requires transaction and similar costs to be expensed immediately.  Accordingly, the Company has had several material items expensed in the financial statements that need to be highlighted. 

Firstly, there were transactional related deal costs of £0.49 million that were expensed.  These related to the execution of the three royalty transactions referred to above. On top of this, there is also a liability associated with the net present value of the long-term Oliver Wyman collaboration fee. This fee was expensed in full during Fiscal 2018 and was valued at £0.85 million, however the payments are directly tied to Duke's actual cash received over the life of its royalty investments.  Finally, there was also a one-off expense associated with the 1.5 million share payment to the Support Service providers which was valued at of £0.59 million.  This payment arose in recognition of the execution of the royalty strategy, principally the completion of royalty investments by the Group, and is now fully satisfied.  If these three items were to be stripped out, then the total operating expenses of the Company would have fallen from £2.65 million to £0.72 million which is line with previous market guidance given by the Company.

As a result of the above impacts on the income statement, I would urge investors to focus their attention on the Consolidated Statement of Cash Flows to obtain a clearer picture of the Company's operating performance.  In Fiscal 2018, this showed a net cash inflow from operating activities of £0.25 million.  Because of the IFRS guidelines in valuing financial instruments as highlighted above, in the more mature Canadian royalty market, many of the independent research analysts focus much more heavily on operating cashflow per share rather than on earnings per share.

Finally, I am glad to be able to inform shareholders that post the financial year end the Company has continued its progress and growth.  The Company has now successfully closed its fourth and fifth royalty investments further diversifying the existing portfolio and also has a strong pipeline of new royalty transactions that are currently under review.  In order to fund this continued growth and portfolio diversification, the Company was able to successfully close a £44 million equity financing in August 2018 which has brought in a number of new institutional shareholders that has further strengthened the Company's share register and has provided the Company with an excellent platform for the future. 

I am grateful for the support of our shareholders and am pleased to report the Chairman's statement for Fiscal 2018.  I look forward to being able to report on the Company's ongoing progress and development in future periods.

Nigel Birrell

Chairman

21 September 2018

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2017

	Note	2018		2017
		£		£
Income
Net change in fair value on financial assets and financial liabilities
at fair value through profit or loss	8,14,16	1,554,518		-
Transaction costs reimbursed	2.7	145,000		-
Net foreign currency gains		97,238		-
Bank interest receivable		-		44
Total income		1,796,756		44
Expenses
Support services administration fees	15	(806,537)		(375,000)
Directors' fees	15	(132,065)		(218,000)
Investment Committee fees	15	(37,500)		(60,000)
Legal and professional fees		(229,723)		(334,195)
Transaction costs	2.8	(488,308)		(95,025)
Royalty participation fees	2.10,16	(848,534)		-
Other operating costs		(112,289)		(320,450)
Bank interest payable		(2)		(1,956)
Total operating expenses		(2,654,958)		(1,404,626)
Loss for the financial year		(858,202)		(1,404,582)
Taxation expense	5	-		-
Total comprehensive loss for the year		(858,202)		(1,404,582)

Basic and diluted deficit per share (pence)	6	(1.38)		(15.83)

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

The notes on pages 25 to 48 form an integral part of these Consolidated Financial Statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2018

	Note	2018		2017
		£		£
Non-current assets
Financial assets at fair value through profit or loss	8	20,782,297		-
Current assets
Financial assets at fair value through profit or loss	8	2,786,501		-
Trade and other receivables	9	6,687,020		381,467
Cash and cash equivalents		3,165,221		14,350,154
		12,638,742		14,731,621
Total assets		33,421,039		14,731,621
Equity
Shares issued	10	60,303,293		40,905,094
Share based payment reserve	11	129,977		124,412
Warrant reserve	10	125,000		-
Retained losses	12	(28,314,324)		(26,523,494)
		32,243,946		14,506,012
Current liabilities
Trade and other payables	13	259,693		225,609
Financial liabilities at fair value through profit or loss	14	140,886		-
		400,579		225,609
Non-current liabilities
Financial liabilities at fair value through profit or loss	14	776,514		-
Total liabilities		1,177,093		225,609
Total equity and liabilities		33,421,039		14,731,621

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2018

		2018		2017
		£		£
Cash flows from operating activities
Receipts from royalty investments		987,192		-
Receipts from transaction costs reimbursed		45,000		-
Proceeds from sale of investments		-		516,535
Interest income received		-		44
Operating expenses paid		(785,714)		(1,255,997)
Net cash inflow/(outflow) from operating activities		246,478		(739,418)
Cash flows from investing activities
Royalty investments advanced		(22,932,356)		-
Transaction costs paid		(277,737)		(31,500)
Amounts advanced to agents pending royalty investment
completion		(6,467,500)		-
Payment to acquire equity investment		(250)		-
Net cash outflow from investing activities		(29,677,843)		(31,500)
Cash flows from financing activities
Proceeds from share issue		19,840,275		14,209,425
Share issue costs		(765,613)		(712,148)
Dividends paid		(925,468)		-
Finance costs paid		-		(1,956)
Net cash inflow from financing activities		18,149,194		13,495,321
Net change in cash and cash equivalents		(11,282,171)		12,724,405
Cash and cash equivalents at beginning of year		14,350,154		1,625,749
Effect of foreign exchange on cash		97,238		-
Cash and cash equivalents at the end of year		3,165,221		14,350,154

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2018

				Share-based
		Shares		payment		Warrant		Retained		Total
	Note	issued		reserve		reserve		losses		equity
		£		£		£		£		£
At 1 April 2016		27,064,815		124,412		72,454		(25,191,366)		2,070,315
Total comprehensive loss for the year		-		-		-		(1,404,582)		(1,404,582)
Transactions with owners
Shares issued for cash	10	14,552,425		-		-		-		14,552,425
Share issuance costs -	10	(1,159,721)		-		-		-		(1,159,721)
Share based payments	11	447,575		-		-		-		447,575
Warrants lapsed	10	-		-		(72,454)		72,454		-
Total transactions with owners		13,840,279		-		(72,454)		(1,332,128)		12,435,697
At 1 April 2017		40,905,094		124,412		-		(26,523,494)		14,506,012
Total comprehensive loss for the year		-		-		-		(858,202)		(858,202)
Transactions with owners
Shares issued for cash	10	19,507,275		-		-		-		19,507,275
Share issuance costs -	10	(1,188,338)		-		-		-		(1,188,338)
Share based payments	10,11	1,079,262		5,565		-		-		1,084,827
Warrants issued	10	-		-		125,000		-		125,000
Dividends	7	-		-		-		(932,628)		(932,628)
Total transactions with owners		19,398,199		5,565		125,000		(932,628)		18,603,296
At 31 March 2018		60,303,293		129,977		125,000		(28,314,324)		32,243,946

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2018

1.	General Information

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 49. 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. The Company's shares are traded on AIM, a market operated by the London Stock Exchange.

2.	Significant accounting policies

2.1

Basis of preparation

The Consolidated Financial Statements of the Group 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, and reflect the following policies, which have been adopted and applied consistently. 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 elected to apply IFRS 9 'Financial instruments' early. IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items.  This standard replaces IAS 39 'Financial instruments: recognition and measurement'. The application of IFRS 9 has resulted in the following changes to the classification of the Group's financial instruments: § Trade and other receivables were classified as 'loans and receivables' under IAS 39 and are now classified as 'financial assets held at amortised cost' § Cash and cash equivalents were classified as 'loans and receivables' under IAS 39 and are now classified as 'financial assets held at amortised cost' The adoption of IFRS 9 has not materially impacted the measurement basis of the opening balance sheet. Further information can be found in note 2.10.
	2.3	New standards and interpretations not yet adopted

At the date of authorisation of these Consolidated Financial Statements, certain standards and interpretations were in issue but not yet effective and have not been applied in these Consolidated Financial Statements.  The Directors do not expect that the adoption of these standards and interpretations will have a material impact on the Financial Statements of the Group in future periods.

2.4

Basis of consolidation

Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. All intra-group transactions, balances, income and expenses are eliminated on consolidation.  Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted across the Group. The "Group" is defined as the Company and its subsidiary Duke Royalty UK Limited.

2.5

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors, as a whole. The key measure of performance used by the Board to assess the Group's performance and to allocate resources is the total return on the Group's net asset value, as calculated under IFRS, and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in these Consolidated Financial Statements. For management purposes, the Group's new investment objective is to focus on one main operating segment, which is to invest in a diversified portfolio of royalty finance and related opportunities. At the end of the period the Group has three investments into this segment and has derived income from them. Due to the Group's nature it has no customers.

2.6

Foreign currency

Functional and presentation currency Items included in the Financial Statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency").  The Consolidated Financial Statements are presented in pounds sterling, which is also the functional currency of the Company and its subsidiary. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.  Foreign currency assets and liabilities are translated into the functional currency using the exchange rate prevailing at the balance sheet date. Foreign exchange gains and losses relating to cash and cash equivalents are presented in the Consolidated Statement of Comprehensive Income within 'net foreign currency gains'. Foreign exchange gains and losses relating to the financial assets and liabilities carried at fair value through profit or loss are presented in the Consolidated Statement of Comprehensive Income within 'net change in fair value on financial assets and financial liabilities at fair value through profit or loss'.

2.7

Transaction costs reimbursed

Income relating to transaction costs reimbursed comprises one off fees charged to investee companies as a reimbursement of certain costs incurred on their behalf. The Group recognises transaction costs reimbursed when the costs have been incurred and right to reimbursement has been established.

2.8

Transaction costs

Transaction costs are costs incurred to acquire financial assets at fair value through profit or loss.  They include fees and commissions paid to agents and advisers.  Transaction costs, when incurred, are recognised immediately in profit or loss as an expense.

2.9

Income tax

The income tax expense or credit for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company's subsidiaries operate and generate taxable income.  Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation.  It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Consolidated Financial Statements.  Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.  Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.  In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

2.10

Financial instruments

Financial assets and financial liabilities are recognised in the Consolidated Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are only offset and the net amount reported in the Consolidated Statement of Financial Position and Consolidated Statement of Comprehensive Income when there is a currently enforceable legal right to offset the recognised amounts and the Group intends to settle on a net basis or realise the asset and liability simultaneously. Financial assets The Group financial assets are classified in the following measurement categories: § those to be measured subsequently at fair value or through profit or loss; and § those to be measured at amortised cost. The classification depends on the entity's business model for managing the financial assets and the contractual terms of the cash flows.

		At initial recognition, the Group measures a financial asset at its fair value, plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset.  Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Financial assets held at amortised cost Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost.  These assets are subsequently measured at amortised cost using the effective interest method. The Group assesses on a forward looking basis the expected credit losses associated with its financial assets held at amortised cost.  The Group has elected to apply the simplified approach permitted by IFRS 9 in respect of trade receivables.  This approach requires expected lifetime losses to be recognised from initial recognition of the receivables. The Group's financial assets held at amortised cost include trade and other receivables and cash and cash equivalents. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments with an original maturity of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Financial assets at fair value through profit or loss Royalty investments are debt instruments classified at fair value through profit or loss under IFRS 9.   The return on these investments is linked to a fluctuating revenue stream and thus, whilst the business model is to collect contractual cash flows, such cash flows are not solely payments of principal and interest.  Such assets are recognised initially at fair value and remeasured at each reporting date.  The change in fair value is recognised in profit or loss and is presented within the 'net change in fair value on financial assets and financial liabilities' in the Consolidated Statement of Comprehensive Income.  The fair value of these financial instruments is determined using discounted cash flow analysis.  Further details of the methods and assumptions used in determining the fair value can be found in note 16.  Derecognition of financial assets A financial asset (in whole or in part) is derecognised either (i) when the Group has transferred substantially all the risks and rewards of ownership; or (ii) when it has neither transferred nor retained substantially all the risks and rewards and when it no longer has control over the assets or a portion of the asset; or (iii) when the contractual right to receive cash flow has expired. Any gain or loss on derecognition is taken to other income/expenses in the Consolidated Statement of Comprehensive Income as appropriate.
		Financial liabilities The classification of financial liabilities at initial recognition depends on the purpose for which the financial liability was issued and its characteristics. All financial liabilities are initially recognised at fair value. Unless otherwise indicated the carrying amounts of the Group's financial liabilities are approximate to their fair values. Financial liabilities measured at amortised cost These consist of trade and other payables.  These liabilities are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method. Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss comprise royalty participation liabilities.  These liabilities arise under a contractual agreement between the Group and a strategic partner for the provision of services in connection with the Group's royalty financing arrangements.  Under this agreement services are provided in exchange for a percentage of gross royalties receivable.  These instruments are classified at fair value through profit or loss on the basis that the liability is linked to the Group's royalty investments. Such liabilities are recognised initially at fair value with the costs being recorded immediately in profit or loss as 'royalty participation fees' and remeasured at each reporting date in order to avoid an accounting mismatch.  The change in fair value is recognised in profit or loss and presented within 'net change in fair value on financial assets and financial liabilities'.  The fair value of these financial instruments is determined using discounted cash flow analysis.  Further details of the methods and assumptions used in determining the fair value can be found in note 16. Derecognition of financial liabilities A financial liability (in whole or in part) is derecognised when the Group has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on derecognition is taken to other income/expenses in the Consolidated Statement of Comprehensive Income. Capital Financial instruments issued by the Group are treated as equity if the holder has only a residual interest in the assets of the Group after the deduction of all liabilities. The Company's Ordinary Shares are classified as equity instruments. The Group considers its capital to comprise its Ordinary Share Capital, share based payment reserve, warrants and retained losses. Equity instruments Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from proceeds.

2.11

Share-based payment

The Group operates an equity settled Share Option Plan for its Directors and key advisers and a Long Term Incentive Plan for its Directors. The fair value of awards granted under the above plans are recognised in profit or loss with a corresponding increase in equity.  The total amount to be expensed is determined by reference to the fair value of the awards granted: § including any market performance conditions (eg. the entity's share price); § excluding the impact of any service and non-market performance vesting conditions (eg. increase in cash available for distribution, remaining a Director for a specified time period); and § including the impact of any non-vesting conditions. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied.  At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions.  It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity. The Group also settles a portion of expenses by way of share-based payments. These expenses are settled based on the fair value of the service received as an expense with the corresponding amount increasing equity. The Group issues warrants in return for services.  These are measured based on the value of the service provided and are recognised as the service is delivered.

3.	Critical accounting judgements and estimates

		The preparation of the Consolidated Financial Statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. 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 revision and future periods, if the revision affects both current and future periods.  The following judgements, estimates and assumptions that may cause a material adjustment to the carrying amount of assets and liabilities are: Fair value of royalty investments Royalty investments are valued using a discounted cash flow analysis.  The discount rate used in these valuations has been estimated to take account of market interest rates and the credit worthiness of the investee.  Revenue growth has been estimated by the Directors and is based on unobservable market inputs.
	Where the royalty investment contains a buy-back clause, the Directors have assessed the likelihood of this occurring.  Where occurrence of the buy-back is deemed likely, this is built into the discounted cash flow at the appropriate point. These assumptions are reviewed annually.  The Directors believe that the applied valuation techniques and assumptions used are appropriate in determining the fair value of the royalty investments.  Due to the relatively short time between entering into the investments and the year end, and having considered all relevant factors, the Directors have used the initial implied yield in the instruments as the year end discount rate. At the year end the Directors did not consider that there had been any changes to the assumptions applied at inception of the investments.  Further details of the methods and assumptions used in determining the fair value can be found in note 16. Fair value of royalty participation liabilities The payments falling due under the Group's contract for royalty participation fees are directly linked to the Group's royalty investments and thus the same assumptions have been applied in arriving at the fair value of these liabilities.  The Directors have considered whether any increase in discount rate is required to represent the Group's credit risk as the payments are made by the Group rather than the investee and have concluded that none is required since payment under the contract is only due once the Group has received the gross amounts from the investee.

4.	Auditor's remuneration

		2018		2017
		£		£
	Audit of the Consolidated Financial Statements	28,500		28,000

5.	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 year

		2018		2017
		£		£
	Loss on ordinary activities before tax	(858,202)		(1,404,582)
	Corporation tax at country rates	(122,458)		-
	Tax losses not recognised	122,458		-
		-		(1,404,582)

Tax losses

		2018		2017
		£		£
	Unused tax losses for which no deferred tax asset has been recognised	644,517		-
	Potential tax benefit at 17%	109,568		-

The unused tax losses were incurred by the Company's subsidiary, Duke Royalty UK Limited.

6.	Deficit per share

		2018		2017
	Basic and diluted deficit per Ordinary Share	£		£
	Loss for the year	(858,202)		(1,404,582)
	Weighted average number of Ordinary Shares in issue	62,234,062		8,874,766
	Deficit per share (pence)	(1.38)		(15.83)

The deficit per share is based on the Group loss for the year and on the weighted average number of Ordinary Shares in issue for the year. The share options, warrants and Long Term Incentive Plan awards in issue are not dilutive at the year end but could become dilutive in future periods. For more details on the share options see note 11. Subsequent to the year end, 100 million new Ordinary Shares were placed (see note 18).

7.

Dividends

The Company implemented a quarterly dividend policy during the year and paid three quarterly dividends of 0.5 pence per share, totalling £932,628 (2017: £nil). On 28 March 2018 a fourth interim dividend of 0.6 pence per share, totalling £1,117,415, was declared and this was paid on 12 April 2018. On 12 July 2018 the Company paid a further quarterly dividend of 0.7 pence per share, totalling £1,385,317. On 20 September 2018 the Company approved a further quarterly dividend of 0.7 pence per share, to be paid on 12 October 2018.

8.	Financial assets at fair value through profit or loss

		2018		2017
		£		£
	Non-current
	Royalty investments	20,782,047		-
	Equity investments	250		-
		20,782,297		-
	Current
	Royalty investments	2,786,501		-
		23,568,798		-

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

		2018		2017
		£		£
	On royalty investments	1,623,384		-
	On equity investments	-		-
	Total net gains	1,623,384		-

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

		2018		2017
		£		£
	Realised	987,192		-
	Change in unrealised	636,192		-
	Total net gains	1,623,384		-

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.

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.  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. 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.

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 three 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 were fully written down to nil value.

9.

Trade and other receivables

		2018		2017
		£		£
	Transaction costs reimbursed receivable	100,000		-
	Prepayments and accrued income	109,520		38,467
	Unpaid share capital	10,000		343,000
	Amounts advanced to agents pending royalty investment
	completion (see note 18)	6,467,500		-
		6,687,020		381,467

10.	Share capital

		No. shares		£
	Authorised
	Unlimited number of shares of no par value	-		-
	Allotted, called up and fully paid
	A 1 April 2016	7,877,459		27,137,269
	Shares issued for cash during the year	36,381,062		14,552,425
	Shares issued in settlement of share issuance costs	1,118,938		447,575
	Share issuance costs	-		(1,159,721)
	Warrants lapsed	-		(72,454)
	At 31 March 2017	45,377,459		40,905,094
	Shares issued for cash during the year	48,768,187		19,507,275
	Shares issued in settlement of share issuance costs	1,231,813		492,725
	Share issuance costs	-		(1,188,339)
	Shares issued in connection with support services agreement	1,500,000		586,537
	At 31 March 2018	96,877,459		60,303,292

On 22 December 2017 the Company issued 50,000,000 new Ordinary Shares at 40p per share, comprising 48,768,187 issued for cash and 1,231,813 issued in settlement of broker and other commission arising on the fundraising of £492,725. A total of £18,811,661 was raised, net of issuance costs.  At the year end £10,000 of the shares issued remained outstanding.  This was settled subsequent to the year end.       On 22 December 2017 the Company also issued 1,500,000 shares with a fair value of £586,537 in respect of its support services agreement (see note 15).        On 23 March 2017 the Company issued 37,500,000 new Ordinary Shares at 40p per share, of which 1,118,938 were issued in settlement of broker and other commission arising on the fundraising.  At 31 March 2017 £343,000 of the shares issued remained outstanding.

11.	Share-based payments

Warrants On 8 November 2017 the Company issued 2,000,000 warrants to Partners Value Investments LP to subscribe for shares at 42 pence per share.  The warrants are exercisable immediately and can be exercised within a period of five years from the date of the agreement.  The fair value of the warrants was determined to be £125,000, being the value of services provided.  This was recognised in profit or loss with £70,000 attributed to 'Transaction costs' and £55,000 to 'Legal and professional fees'. On 29 October 2016, 363,196 warrants with an exercise price of £4.13 lapsed.  The fair value of the warrants of £72,454 was reclassified to reserves during the year ended 31 March 2017.

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

		Share		LTIP
		options		awards		Total
		£		£		£
	At 1 April 2016 and 1 April 2017	124,412		-		124,412
	LTIP awards granted in the year	-		5,565		5,565
	At 31 March 2018	124,412		5,565		129,977

Share option scheme

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 year end 760,000 (2017 - 760,000) options were outstanding and exercisable at a weighted average exercise price of 75 pence (2017 - 75 pence).  The weighted average remaining contractual life of the options outstanding at the year end was 2.43 years (2017 - 3.43 years).

Long Term Incentive Plan

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 £5,565 was recognised in these 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 year end 1,025,000 (2017 - nil) LTIP awards were outstanding.  The weighted average remaining vesting period of the LTIP awards outstanding at the year end was 2.93 years (2017 - nil). Support services agreement During the year the Company issued 1,500,000 shares with a fair value of £586,537 in respect of its support services agreement (see note 15). Other share-based payments The Company also issues shares periodically in settlement of certain share issuance costs (see note 10).

12.	Distributable reserves

Pursuant to the Companies (Guernsey) Law, 2008 (as amended), all reserves (including share capital) can be designated as distributable. However, in accordance with the Admission Document, the Company shall not make any distribution of capital profits or capital reserves except by means of capitalisation issues in the form of fully paid Ordinary Shares or issue securities by way of capitalisation of profits or reserves except fully paid Ordinary Shares issued to the holders of its Ordinary Shares.

13.	Trade and other payables

		2018		2017
		£		£
	Trade payables	178,761		-
	Accruals and deferred income	80,932		225,609
		259,693		225,609

14.	Financial liabilities at fair value through profit or loss

		2018		2017
		£		£
	Royalty participation liability
	Current	140,886		-
	Non-current	776,514		-
		917,400		-

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

		2018		2017
		£		£
	Realised	-		-
	Change in unrealised	68,866		-
	Total net losses	68,866		-

15.	Related parties

Directors' fees

The following fees were paid to the Directors during the year:

		2018		2017
		£		£
	Neil Johnson	52,715		100,000
	Charles Cannon Brookes	36,900		70,000
	Nigel Birrell	12,000		24,000
	James Ryan	6,000		24,000
	Justin Cochrane	18,450		-
	Matthew Wrigley	6,000		-
	Mark Le Tissier	-		-
		132,065		218,000

During the year, the Directors voluntarily reduced their fees in order for the Company to implement and sustain its quarterly dividend policy.  Subsequent to the year end this reduction has ceased. The above noted fees include the following expenses relating to awards granted under the Group's Long Term Incentive Plan (see note 11):

		2018		2017
		£		£
	Neil Johnson	2,715		-
	Charles Cannon Brookes	1,900		-
	Justin Cochrane	950		-
		5,565		-

Mark Le Tissier, a Director of Trident Trust Company (Guernsey) Limited has waived his entitlement to a fee in relation to being 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 year end no fees remained outstanding.  At 31 March 2017 £6,000 remained outstanding to James Ryan.

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 paid to the members of the Investment Committee during the year:

		2018		2017
		£		£
	Andrew Carragher	-		20,000
	Jim Webster	37,500		40,000
		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 year 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.  Subsequent to the year end this reduction has 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. No amounts remained outstanding at the year end (2017 - £nil).

Other related party transactions

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

		2018		2017
		£		£
	Payable to Abingdon Capital Corporation
	Annual service fee	196,000		280,000
	Share award	415,818		-
		611,818		280,000
	Payable to Arlington Group Asset Management Limited
	Annual service fee	24,000		95,000
	Share award	170,719		-
		194,719		95,000
		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 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, 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.  Currently these reductions are still in place.

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				LTIP awards
		2018		2017		2018		2017
		No.		No.		No.		No.
	Neil Johnson	85,000		85,000		500,000		-
	Charles Cannon Brookes1	85,000		85,000		350,000		-
	Nigel Birrell	85,000		85,000		-		-
	James Ryan	85,000		85,000		-		-
	Justin Cochrane	70,000		70,000		175,000		-

1 Includes share options issued to Arlington

The following dividends were paid to related parties:

						2018		2017
						£		£
	Neil Johnson1					33,636		-
	Charles Cannon Brookes2					58,000		-
	Nigel Birrell					8,500		-
	Justin Cochrane					10,600		-

1 Includes dividends paid to Abinvest Corporation, a wholly owned subsidiary of Abingdon 2 Includes dividends paid to Arlington

16.	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:

		2018		2017
		Level 3		Level 3
		£		£
	Financial assets
	Financial assets at fair value through profit or loss
	- Royalty investments	23,568,548		-
	- Equity investments	250		-
	Total financial assets	23,568,798		-
	Financial liabilities
	Financial liabilities at fair value through profit or loss
	- Royalty participation instruments	917,400		-
	Total financial liabilities	917,400		-

The following table presents the changes in level 3 items for the years ended 31 March 2018 and 31 March 2017:

		Financial		Financial
		assets		liabilities		Total
		£		£		£
	At 1 April 2016 and 1 April 2017	-		-		-
	Additions	22,932,606		(848,534)		22,084,072
	Royalty income received	(987,192)		-		(987,192)
	Net change in fair value	1,623,384		(68,866)		1,554,518
	At 31 March 2018	23,568,798		(917,400)		22,651,398

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 0.0% to 6.0% and the range of risk-adjusted discount rates is 15.4% to 17.3%. An increase in the annual adjustment factor (subject to the collars set under the terms of the royalty financing agreements) of 5% would increase the fair value by £160,969. A reduction in the discount rate of 25 basis points would increase the fair value by £366,748. A decrease in the annual adjustment factor (subject to the collars set under the terms of the royalty financing agreements) of 5% would decrease the fair value by £243,127. An increase in the discount rate of 25 basis points would decrease the fair value by £364,692. Equity investments Sensitivity analysis has not been performed on the Group's equity investments on the basis that they are not material to the 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 0.0% to 6.0% and the range of risk-adjusted discount rates is 15.4% to 17.3%. An increase in the annual adjustment factor (subject to the collars set under the terms of the royalty financing agreements) of 5% would increase the fair value of the liability by £6,026. A reduction in the discount rate of 25 basis points would increase the fair value of the liability by £13,755. A decrease in the annual adjustment factor (subject to the collars set under the terms of the royalty financing agreements) of 5% would decrease the fair value of the liability by £9,092. An increase in the discount rate of 25 basis points would decrease the fair value of the liability by £13,679.

17.	Financial risk management

The Group's royalty financing activities expose it to various types of risk that are associated with the investee companies to which it provides royalty finance. The most important types of financial risk to which the Group is exposed are market risk, liquidity risk and credit risk. Market risk includes price risk, foreign currency risk and interest rate risk. The Board of Directors has overall responsibility for risk management and the policies adopted to minimise potential adverse effects on the Group's financial performance. The policies and processes for measuring and mitigating each of the main risks are described below. Market Risk Market risk comprises foreign exchange risk, interest rate risk and other price risk. Foreign exchange risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign currency exchange rates. The functional and presentation currency of the Group is Sterling. The Group is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the Euro.  Foreign exchange risk arises from future commercial transactions in recognised assets and liabilities denominated in a currency that is not the functional currency of the Company and its subsidiary. The Group does not consider the foreign exchange risk to be significant and therefore no steps have been taken to mitigate this risk.

The Group's exposure to foreign currency risk at the end of the reporting period was as follows:

		2018		2017
		Euro		Euro
		£		£
	Royalty investments	7,216,755		-
	Cash and cash equivalents	75,663		-
	Royalty participation liability	(293,002)		-
		6,999,416		-

If Sterling strengthens by 5% against the Euro the net Euro-denominated assets would reduce by £361,720.  Conversely, if it weakens by 5% the assets would increase by £398,634.

During the year the following foreign exchange related amounts were recognised in profit or loss:

		2018		2017
		£		£
	Exchange gain on royalty investment included in net change in fair value			-
	on financial assets and liabilities at fair value through profit or loss	77,837
	Exchange loss on royalty participation liability included in net change in
	fair value on financial assets and liabilities at fair value through profit
	or loss	(8,493)
	Other exchange gains included in other income/expenses	97,238		-
		166,582		-

Interest rate risk Interest rate risk is the risk that the fair value of future cash flows of a financial asset will fluctuate because of changes in market interest rates. The Group's main interest rate risk arises in relation to its royalty investments, which are carried at fair value through profit or loss.  The Group's royalty investments have a fair value at the balance sheet date of £23,568,548 (2017: £nil).  A sensitivity analysis in respect of these assets is presented in note 16. Other price risk Other price risk is the risk that the fair value of future cash flows of a financial asset will fluctuate because of changes in market prices (other than those arising from interest rate risk or foreign exchange risk). The fair value of the Group's royalty investments fluctuates due to changes in the expected annual adjustment factor applied to the royalties payable by each of the investee companies, which factors are based upon the revenue growth of the investee company. A sensitivity analysis in respect of the annual adjustment factors applied to the royalty investments is presented in note 16.

Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Group's assets subject to credit risk are as follows:

		2018		2017
		£		£
	Royalty investments	23,568,548		-
	Deal fees reimbursed receivable	100,000		-
	Funds held in escrow	6,467,500		-
	Cash and cash equivalents	3,165,221		14,350,154
		33,301,269		14,350,154

Royalty investments The royalty investments relate to the Group's three royalty financing agreements.  At the reporting date there are no royalty receipts that are past due. The Group monitors the credit worthiness of the investee companies on an ongoing basis and receives regular financial reports from each investee company.  These reports are reviewed by the Investment Committee. The Group also has security in respect of the royalty investments which can be called upon if the counterparty is in default under the terms of the agreement (see note 8).

Funds held in escrow The Group's funds held in escrow at the reporting date were held in a solicitor's client account pending completion of the Group's investment in Brownhills Investment Limited (see note 18).  This royalty financing agreement was completed in April 2018 and the funds transferred to the investee. Cash and cash equivalents The credit quality of the Group's cash and cash equivalents can be assessed by reference to external credit ratings as follows:

		2018		2017
	Moody's credit rating:	£		£
	Aa3	294,136		-
	Baa2	-		14,350,154
	Baa3	2,871,085		-
		3,165,221		14,350,154

The Group considers that the credit risk relating to cash and cash equivalents is acceptable.

Liquidity risk Liquidity risk is the risk that the Group will encounter in realising assets or otherwise raising funds to meet financial commitments. The Group maintains sufficient cash to pay accounts payable and accrued expenses as they fall due.  The Group's overall liquidity risks are monitored on a quarterly basis by the Board. The table below analyses the Group's royalty investments and financial liabilities into relevant maturity groupings based on their contractual maturities:

							Total
							contrac-
		Less than	6 - 12	Between	Between	Over	tual cash
		6 months	months	1 - 2 years	2 - 5 years	5 years	flows
		£'000	£'000	£'000	£'000	£'000	£'000
	As at 31 March 2018
	Royalty investments	1,473	1,515	3,132	10,044	88,712	104,876
	Royalty participation	(92)	(57)	(117)	(377)	(3,327)	(3,970)
	Trade and other payables	(260)	-	-	-	-	(260)
	Total	1,121	1,458	3,015	9,667	85,385	100,646

	As at 31 March 2017
	Trade and other payables	(226)	-	-	-	-	(226)

Capital management The Board manages the Company's capital with the objective of being able to continue as a going concern while maximising the return to Shareholders through the capital appreciation of its investments. The capital structure of the Company consists of equity as disclosed in the Consolidated Statement of Financial Position.

18.	Events after the financial reporting date

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.

Lynx Equity (U.K.) Limited In April 2018 the Group contributed a further £2 million of royalty financing to Lynx Equity (U.K.) Limited ("Lynx").  This entitled the Group to higher distributions from Lynx from June 2018, of £1.08 million per annual.  The terms of the agreement are outlined in note 8 to the Consolidated Financial Statements. 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. Secured loan In June 2018 the Group was granted a secured loan of £3.5 million by a non-related third party.  This loan has an expiry date of 30 June 2019 and bears interest at 9% per annum until 31 December 2018, rising to 12% per annum for the final six-month period ending 30 June 2019.  The loan required automatic repayment in the event of the closure of an equity issue of more than £3.5 million and accordingly was repaid following the fundraising noted below. Fundraising On 13 July 2018 the Company announced that 100 million new Ordinary Shares had been successfully placed or subscribed for at a price of 44 pence per share.  The net proceeds from this fundraising were approximately £42 million. Dividends On 12 April 2018 the Company paid a quarterly dividend of 0.6 pence per share and on 12 July 2018 the Company paid a further quarterly dividend of 0.7 pence per share. On 20 September 2018 the Company approved a further quarterly dividend of 0.7 pence per share, to be paid on 12 October 2018. Exclusive healthcare collaboration On 14 June 2018 the Company announced that it has mutually agreed with Oliver Wyman to end the exclusive healthcare collaboration.  The work that the two firms have undertaken together while developing the Group's existing royalty portfolio has adhered to the economic framework of the original agreement however, the sector focus has been broader than originally envisaged by either party.  As such, the necessity of the exclusive relationship in potential healthcare investments was deemed to be no longer relevant by either party, given that the Group's future pipeline transactions are mostly outside of this sector. Going forward, the Group intends to continue working with Oliver Wyman on a non-exclusive basis.  It also plans to supplement Oliver Wyman's due diligence efforts with relationships with additional global consulting firms which demonstrate expertise and local knowledge for each investment opportunity.

 

END

 

 

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