Duke Capital: shares fall nearly 20% on bulletin board chatter, while cash revenue holds at £7.0m

Up 4.5% at 22.48p (£115m) - Response re. Share Price: Operational Update

The DUKE share price has seen some drama this week, on above-average volume. It fell nearly 20% yesterday, on no official news:

This is how Duke responds:

• Total cash revenue for the quarter ending September 30th was £7.0m, in line with the previous quarter

• H1 dividends were covered by free cashflow

This bit seems more substantive:

The portfolio reorganisations referred to in FY26 accounts have made substantial progress, with materially loss-making divisions in two Duke investments now exited. As the UK market continues to be challenging, we do expect lower recurring revenue to be generated within our UK portfolio in H2 with the key focus of the investment team currently being on improving the performance of the UK portfolio into next year.

There are also two capital partners (a fancy word for borrowers) who are "in late-stage processes for exits which, if concluded, could have a material positive impact on market expectations for FY27 total cash revenue."

Finally: "The Directors believe that the current share price sits at a material discount to the current NAV."

Graham's view

The only explanation for the fall that I can find is on the well-known bulletin board ADVFN. A poster there yesterday morning said that they had sold their shares, and they highlighted losses at inTEC, an IT managed services company based in Manchester.

inTEC is still listed as a "current" investment on Duke's website, with £31m+ invested.

The latest accounts for inTEC Business Holdings were published about a week ago. They do not include a going concern warning from the auditors. They do show the company making an operating loss in 2025 of £7.8m, on revenues of £21.7m. They were loss-making the prior year, too.

The loss in 2025 included less than £2m of goodwill amortisation, so this is not a situation where the company was loss-making but cash flow was strong - operating cash flow was in fact negative.

Also, the balance sheet was deeply in the red with negative tangible equity of £38m. The main item here is Duke's loan which is shown with a value of £31.5m, charging an interest rate of 13.5%. Duke is also the "ultimate controlling party" - I think it owns 100% of inTEC.

As this is a "buy-and-build" situation, it's not so unusual to see highly negative balance sheet equity (due to high levels of goodwill).

However, it's always important to check that acquisitions are followed by profitability before too long, particularly where there is leverage involved.

We can only hope that inTec has had a much better 2026, and/or that it has been successfully reorganised (it has sold some of its subsidiaries in 2026), and/or that Duke is exiting it completely, without making a loss.

Last year, Mark did some digging into another Duke investment, and concluded by taking our stance on the company down by one notch to neutral.

I have some history here, as a former shareholder. I've not been tempted back in. I've accepted that Duke tends to invest in businesses that are not of the highest-quality, but I've been impressed by its ability (so far) to dodge any serious losses.

It has done this by successfully exiting some troubled investments. It also frequently ploughs money into its existing portfolio.

Duke's total investment portfolio at the end of FY March 2026 had an accounting value of £263m. After taking Duke's own leverage into account, net assets were £175m.

So if Duke's £32m position inTEC was worthless, it would cut Duke's net assets by 18%, to £143m.

The Duke market cap is at a c. 20% discount even to that low figure.

I'm going to leave us on neutral here. I don't see the need to take a negative stance when the share price has already taken such a heavy hit.

The share price is saying to us that there are likely to be multiple problem parts to the Duke portfolio. It might well be right about that. I'm still not tempted to buy back in here, even at a 13% yield.