Capital Limited (DUKE.L) Earnings Call Transcript & Summary

Good morning, and welcome to the Capital Limited General Meeting. [Operator Instructions] I'd now like to hand you over to Executive Chairman, Jamie Boyton. Good morning, sir.

Good morning. My name is Jamie Boyton, and I'm Executive Chair of Capital Limited, and I'd just like to, on behalf of myself and the Board of Directors, welcome you all to our general meeting. The purpose of this meeting today is to consider, and if thought fit, to approve resolutions that relate to the issue of the second tranche of shares under the placing recently announced by the company. The registrar has confirmed that a shareholders' quorum is present for the meeting to proceed, and therefore, I declare the meeting open. What I'll do just very briefly is talk to a number of the slides that we used in the raising process and the raising presentations. And then I'll hand over to Catherine, our Co-Sec, to go through the resolutions, and there will be a Q&A as well. So just briefly going through the slides as discussed. Just starting with an overview of Capital again for those that may not be familiar with us, an integrated services provider to exploration and mining companies in Africa, the Middle East and North America. We have 3 principal operating divisions. Our drilling business, which runs a fleet of 135 rigs, the largest in Africa and the Middle East. And we do everything from exploration drilling through to delineation, underground grade control and blast hole. Capital Mining, which is our earthmoving business, which is currently active at the Reko Diq site in Pakistan, a niche provider of earthmoving services we've performed now, we're on a fourth contract, all within the Africa/Middle East region. MSALABS. It's an integrated geo-chem laboratory business with 26 laboratories across Africa, Middle East and North America, quite a strong presence in both Canada and the U.S. Capital Investments is obviously our direct investment arm, which has been performing particularly well of late. And finally, our innovation initiative where we trial and bring into our business, into our operations, innovative technologies that actually improve our performance and in some cases, make direct investments in those companies. The operations map, I won't dwell on this too much, 3,000 employees globally. Obviously, we've got corporate presence in London and in Perth and Mauritius and a spread of operations across Africa, Middle East and North America. We're sharing this slide today is just a shareholder overview, which incorporates tranche 2 that we're voting on today. As you can see -- look, I won't read the numbers, but the enlarged share capital taken to about 225 million shares on issue. What I would say is that we had extremely positive and strong support from almost every one of our major shareholders either following their money or, in some cases, increasing their exposure to the company. So it was very pleasing. The capital raising was oversubscribed. We obviously raised USD 40 million at GBP 1.07 and just very pleasing to get such strong support from a very high-quality register that we've got. The rationale behind the raise was quite straightforward. I think everyone would be acutely aware of the very strong commodity prices that we operate in. We made the point that for the service providers, the 2 major commodities are copper and gold and -- for drilling businesses in general, which is still, as we look into next year, 60-odd-percent of our revenue, the principal commodity exposure is gold. And obviously, we're enjoying very robust commodity prices, but we're also seeing unprecedented levels of capital markets activity. A lot of capital raising, some records being set on the ASX for the resources sector. So we're seeing the perfect conditions for an increase in demand and services. And we did a forum with Investor Meet Company a couple of months ago. I think I was in Dubai at the time, and we made reference to the fact that this demand -- we're seeing all the signs of demand increasing. But whilst we've been in a very supportive backdrop for a couple of years now, the demand surge is really only just starting to come through now. And a couple of months later, we've come to market to raise money because of the opportunities that we see in front of us. We also talked quite extensively to these 2 slides. And I think particularly referencing or both of them tell the same thematic. When we first IPO-ed the company, it was 2010. And we did it with an extremely strong demand backdrop at the time, and the company needed some balance sheet, extra balance sheet capacity to capitalize on the opportunities that were in front of us. And again, whilst we've had supportive market conditions for quite a few years now, you can see that the industry spend on exploration and industry spend on CapEx is still well below previous peak cycle levels. And that's despite gold price, again, our principal commodity being at all-time highs. So we certainly anticipate and we're seeing in our tendering pipeline, a significant increase in activity. And again, we moved to capitalize on that for the number of opportunities that are in our pipeline. The other point where we've made quite strongly is that in the previous peak cycle, we saw a significant increase in the lead times for key equipment items. And across drilling rigs in the previous cycle, we were purely a drilling company, and we saw lead times on some of the larger drilling equipment extend out to at its first 18 months. And at the time, a lot of narrative within the industry about the shortage of, for example, tires for trucks. And as we're seeing the demand pick up at the moment, we're starting to see lead times on some of the specialized and generic lab equipment starting to extend, we're starting to see lead times on drill rigs extend, and we're starting to see the equipment market for the HMA, the yellow kit equipment. So again, we took a view that not only are we close to some opportunities, but we also need the flexibility to be able to move on the equipment market. And as such, we initiated the Capital raising. The investment case for the business, I think, remains very robust. I think it's worth pointing out that our third quarter of this year was a record quarter for us. We're expecting very strong earnings momentum into 2026. Obviously, we've had depressed EPS this year and a tale of 2 halves and the second half is going to be significantly stronger than the first half, and we've already reported a record third quarter in terms of revenue. The outlook for next year is very positive, and we think a number of very strong years ahead of us supported by the macro environment. I'll now hand over to Catherine for the resolution.

Thanks, Jamie. Good morning, everyone. The notice of the general meeting was dated and circulated to shareholders on the 24th of November 2025. If there are no objections, I propose taking the notice as read. Turning to the formal business of the meeting. This meeting has been convened to consider 1 ordinary resolution and 2 special resolutions. Resolution 1 is an ordinary resolution and will be passed if more than 50% of the votes are cast in favor. Resolutions 2 and 3 are special resolutions, which require 75% or more of the votes cast for the motion to be carried. It is intended that voting on all resolutions at this meeting will be conducted on a poll rather than a show of hands. A poll reflects the number of voting rights exercisable by each shareholder. And so the Board considers it to be more democratic method of voting. A poll also ensures that the votes of shareholders who have appointed proxies are taken into account in the final voting results. I hereby call a poll in respect of all the resolutions. As it will take some time to complete the poll procedure, the final results of the voting, including the proxy votes on the resolutions, will be announced through our regulatory information service and published on our website as soon as reasonably practical. When you registered your attendance, you will have been given a poll card, which shareholders, proxies and corporate representatives should complete and sign as indicated. Shareholders are presented with 3 options for each resolution: You can vote for the proposed resolution, against the proposed resolution or you may withhold your vote. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. The proxy will vote or abstain from voting as he or she thinks fit in relation to any other matter, which is put before the meeting. I should mention that for those shareholders who have already lodged the proxy form, you do not need to complete a poll card unless you want to change your vote. Please complete your poll card by marking with an X of the appropriate box next to the relevant resolution depending on how you wish to cast your vote. Please then sign the poll card and hand it to me as the Company Secretary at the end of the meeting. Should you require any further assistance, I will be happy to assist you. The resolutions are as follows: Resolution 1. The first resolution, as set out in the notice of the general meeting, is an ordinary resolution for the purposes of bylaw 6.1 of the company's bylaws. In addition to any existing authority granted under bylaw 6.1 to allot and issue the Tranche 2 placing shares as defined in the Notice of General Meeting to generally and unconditionally authorize the directors to allot and issue common shares and to make offers or agreements to allot and issue common shares in the company or grant rights to subscribe for or to convert any security into common shares or any other shares in the company up to a prescribed amount being an aggregate nominal amount of $890 representing approximately 4.53% of the existing issued share capital of the company as of the date of notice. Resolution 2. The second resolution is a special resolution that's subject to the passing of Resolution 1 for the purposes of bylaw 6.3.2 of the company's bylaws in addition to any existing authority granted under bylaw 6.3.2. And in order to do allot and issue the Tranche 2 placing shares on a non-preemptive basis to generally empower the directors to allot and issue equity securities for cash pursuant to the authority conferred by Resolution 1 free from any rights preemption in favor of existing holders of common shares provided that this power shall be limited to the allotment of equity securities up to a preemption free amount being an aggregate nominal amount of $890 representing approximately 4.53% of the existing share capital of the company as of the date of the notice. Resolution 3. The third resolution is a special resolution for the purposes of bylaw 6.3.2 of the company's bylaws in addition to any other authority granted -- under bylaw 6.3.2 to generally empower the directors do allot and issue equity securities for cash pursuant to any existing authority granted under bylaw 6.1 from time to time free from any rights of preemption in favor of existing holders of common shares provided that this power shall be limited to the allotment of equity securities up to a preemption free amount being an aggregate normal amount of $2,000,253 (sic) [ $2,253 ], representing approximately 10% of the issued share capital of the company immediately following the issue of Tranche 2 placing shares. I would now like to propose that the resolutions are set out in the notice of the meeting be put to a poll. I'll close the poll in 1 minute. [Voting]

Everyone done? The poll is now closed. We will make an announcement of all final results of the meeting to the market through our regulatory information service and posted on our website as soon as practicable. Ladies and gentlemen, that concludes the voting and formal business of the meeting. I will now pass you back to Jamie, our Executive Chair.

Very good. Thank you, Catherine. Ryan, I'm going to hand over to you for any Q&A.

Sure. We've had a few questions come in. So the first question is, "did any other directors other than yourself participate in the raise? And why did you not offer a follow-on offer for private orders?"

I am the only director that participated in the raising, although I should note that all -- I think all of our directors and our shareholders, and I'm certainly aware that 2 of our directors, including the Head of our Audit and our Senior Independent Director, both London-based, have purchased shares this year. As for the follow-on offer, I might defer that question to Rick, our CFO, if I could.

I guess [indiscernible]. So during the process, our marketing focused on honoring [ self-preemptions ]. But I think given the size of the raise versus the market cap, we don't think a rights issue is raised and warranted. And I think important to note, as Jamie has already indicated that we had very strong support from our institutional shareholder base. Demand level there is very high, and that allowed us to price pretty tight. And I think that, look, a support share price since is indicative of a well-considered deal structure.

Thanks, Rick and Jamie. One last question, "so do Capital consider selling any of the equity holdings such as we are instead of raising equity? The market doesn't seem to give us much credit for the strategic equity portfolio?"

We did -- obviously, we're always assessing how we allocate the capital within the business. We were very mindful of the -- and this sort of interrelates to the second part of the question, the market, whether the market is going to give us credit or not. But our 5-year -- 5- to 6-year track record, look, the operating business has performed extremely well and generated a return of capital of about 21%. It's a good performance, a very good performance. However, the capital that we've allocated to our direct investment strategies generated a return of just over 60%. So we're looking at this as capital allocators, which we do. We took the view that liquidating one of our core positions. When we see significant upside in that position was not the prudent course of action. So therefore, we made the decision. As to the market not giving us credit for the strategic equity portfolio, I would argue they should. I'd argue our track record has been exceptional. I don't -- and it's been sustained over a number of years. I mean, clearly, we've been helped by the gold price. But beyond the gold price, we've actually been instrumental in creating companies, bringing industry specialists together and discovering across multiple companies, 10 million ounces in 6 years. It's more than a speculative investment fund. This is a real project generator. And the market -- whether the market gives us credit in due time, I would certainly hope they will, given we've found sustainable profit businesses. I hope that answers the question.

Thanks, Jamie. Those are all the questions we have today. So I'll hand back over to you for closing remarks.

Okay. Well, for the closing remarks. Again, thank you for everyone for dialing in. I've got to thank the shareholders that participated. Very pleased to see the endorsement for Tranche 2, and we look forward to a very good 2026 and beyond. And thanks for everyone's time.

That's great. Thank you for updating attending today. On behalf of the management team of Capital Limited, we'd like to thank you for attending today's general meeting, and good morning.