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Draper Esprit PLC (GROW)

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Thursday 28 May, 2020

Draper Esprit PLC

Full year trading update and notice of results

RNS Number : 1383O
Draper Esprit PLC
28 May 2020
 

Draper Esprit plc

("Draper Esprit", "the Group" or the "Company")

Full year trading update and notice of results

Draper Esprit (LSE: GROW, Euronext Growth: GRW), a leading venture capital firm investing in and developing high growth digital technology businesses, today announces an update on its portfolio and NAV (unaudited) ahead of its final results for the year ended 31 March 2020, which are scheduled for release on 29 June 2020.

Highlights

· Unaudited Gross Portfolio Value is expected to be not less than £695m (30 September 2019 - £683m; 31 March 2019 - £594m). The core portfolio accounts for approximately 70% of this

· NAV per share is expected to be not less than 550p (30 September 2019 - 574p; 31 March 2019 - 524p)

· Investments since September 2019 amount to £48m, bringing the total for the year to £90m. The core portfolio accounts for £26m of investments since September 2019

· Realisations since September 2019 amount to £17m, bringing the total for the year to £40m

· Gross Portfolio Fair Value movement increase of circa £55m over the 12 month period but reflecting a net decline of circa £15m since September 2019:

Ø Strong funding activity in portfolio through the period. Funding rounds closed (some after the COVID-19 pandemic had impacted on the economy) for portfolio companies including Graphcore, Revolut, Aiven, Evonetix, Freetrade, Aircall and others as yet unannounced. This has led to total revaluation gains of circa £65m since September 2019

Ø These gains have been offset by revaluation adjustments approaching £80m across the portfolio due to the impact of COVID-19. The majority of these fair value adjustments have arisen in companies in the earlier stage emerging portfolio and only 5 of the 18 core portfolio companies impacted. An appropriately stringent approach to valuation has been undertaken, as further detailed below

· Available cash resources at year-end of £34m and undrawn debt facilities of £5m, further complemented by £50m from EIS and VCT funds give the Group good liquidity against a backdrop of a well-funded portfolio and a cautious approach to new opportunities in the near term. The Board view the existing financial resources as sufficient to support the portfolio and to appraise selective new investments

· Post year-end a further investment has been made into cloud-based voice platform Aircall, an existing portfolio company, which has raised a $65m Series C funding round at a valuation above the September 2019 fair value. The round was led by DTCP with participation from new investors Swisscom and Adam Street. Existing investors including eFounders, Balderton Capital, and NextWorld also participated in the round. This round brings the company's total funding to date to over $100m

· Draper Esprit announce today that Simon Cook is stepping down from the Board from 1st July. Simon will remain with the Company and focus on generating new deals for the Group. He will continue to manage a portfolio of companies including Trustpilot, Ledger and Freetrade, His new title will be Founding Partner

Impact of COVID-19 on portfolio and valuations

· Prior to the pandemic, the Group was on track to achieve its targeted annual 20% portfolio growth and, despite the current market backdrop, has still delivered strong growth across the business

· A substantial majority of the portfolio is well positioned to benefit from historic trends which have accelerated due to the impact of COVID-19. Companies focused on secure cloud, automation, online financial services and gaming/entertainment, digitalisation are continuing to trade well with minimal disruption. Evidence from public market activities, and funding rounds, indicates strong demand for high quality companies in these areas

· The Group reacted quickly to examine the impacts of COVID-19 on its portfolio companies and has taken steps to assist companies where necessary including:

Ø Appraisal of valuation metrics has been adopted where applicable to reflect the rapid shift in the economic environment

Ø 42% of portfolio valuations are at last round valuations, compared with 65% at 30 September 2019, with 58% of the portfolio now valued with reference to comparable multiples

Ø Lower growth forecasts for 2020 and 2021 have been assumed for companies impacted by COVID-19. The Group consistently applies multiples lower than those prevailing for comparable quoted companies to mitigate stock market volatility  

Ø Year-end audit process is ongoing and therefore there may be some further minor adjustments to this split

· Relative to our pre-COVID-19 expectations which were in line with our 20% portfolio growth target we have made provisions of circa £99m across the portfolio, which is equivalent to a 21% adjustment across 53% (by value post-amendment) of our portfolio. Only around one third of these adjustments related to our 18 core portfolio assets, reflecting the strong performance and positions of these businesses even when viewed through a more stringent valuation lens. The long-term potential of the portfolio remains positive and we expect the value of the portfolio to grow post COVID-19 particularly in light of the accelerated transition to digital

· The Executive Directors in Draper Esprit have elected to defer 20% of their salaries for three months and will use these deferred balances when paid to purchase Draper Esprit shares in the market. In addition, the non-Executive Directors have elected to defer any fee increases over the same period in line with the Executive Directors

· No Draper Esprit staff have been furloughed or made redundant and the Company has not applied for any of the Government funding schemes

Martin Davis, Chief Executive Officer, Draper Esprit, commented:

"Over the medium term, we believe the recovery from the pandemic will sharply accelerate the trends which Draper Esprit's portfolio businesses focus on. Transformations such as secure cloud infrastructure, remote financial services, online gaming and entertainment, and digital health, all stand to benefit from the societal shifts which the crisis has engendered. These dynamic businesses are weathering the current environment well and we are confident they will emerge stronger when economic activity normalises.

"Draper Esprit's position as one of Europe's most active VCs, and our long and deep understanding of the needs of this community, put us in an excellent position to play a leading role in helping innovative businesses of all sizes emerge stronger from this crisis."

 

-ENDs-

Enquiries

Draper Esprit plc

Martin Davis (Chief Executive Officer)

Ben Wilkinson (Chief Financial Officer)

+44 (0)20 7931 8800

Numis Securities

Nominated Adviser & Joint Broker

Simon Willis

Richard Thomas

Jamie Loughborough

+44 (0)20 7260 1000

Goodbody Stockbrokers

Euronext Growth Adviser & Joint Broker

Don Harrington

Charlotte Craigie

Dearbhla Gallagher

+44 (0) 20 3841 6202

Powerscourt

Public relations

James White

Elly Williamson

Jessica Hodgson

Notes to editors

 

+44 (0)20 7250 1446

 

 


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