Final Results
Draper Esprit plc
("Draper Esprit", "the Group" or the "Company")
FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2019
Draper Esprit (LSE: GROW, Euronext Growth: GRW), a leading venture capital firm investing in and developing high growth digital technology businesses, today announces its final results for the year ended 31 March 2019.
Financial highlights
· Gross Primary Portfolio value has grown by 144% to £594.0 million (2018: 116% increase to £243.5 million) with fair value increase since the start of the year of 58%
· £16.0 million in cash generated via 2 exits, with an additional £15.3 million realised post-period end - have now exited 18 companies since 2016 IPO, realising over £81.6 million in cash
· Profit after tax increased 83% to £111.2 million (2018: £60.9 million)
· Invested £226.4 million by plc including £106.2 million invested into Earlybird fund acquisitions and strategic partnership, and a further £35.1 million by EIS/ VCT
· Capital raised by plc of £215.0 million in the financial year and a further £64.0 million across EIS and VCT funds
· Net Assets, including goodwill, increased by 106% to £618.6 million (2018: £300.5 million)
· NAV per share, of 524.0 pence (2018: 416.0 pence), increased by 26%
· Cash for future investment over £150.0 million including over £50.0 million plc cash, £50.0 million new EIS/VCT cash and new undrawn Revolving Credit Facility ("RCF") of £50.0 million which provides additional financing flexibility
Operational highlights
· Investments in 21 new companies (including 9 new portfolio company investments via Earlybird partnership) and follow on investments in 12 existing portfolio companies*
· Core Portfolio Holdings increased in value by 143% to £415.3 million (2018: £171.1 million)
· Strategic partnership with Earlybird Digital West to share dealflow, investment resources and expertise
· £5.3 million invested in seed funds (further commitments of £24.0 million in 13 new seed funds invested over 5 years) into 150 companies averaging £30,000 seed investment in each, enhancing future dealflow as the best companies will seek further growth capital
Post FY End Highlights
· £15.3 million gross proceeds realised from the partial realisation of Transferwise
· Entered into a credit agreement for a £50.0 million RCF with Silicon Valley Bank and Investec providing additional funding flexibility
*Reporting threshold - companies with a NAV of £1.0 million or more.
Simon Cook, CEO at Draper Esprit, commented:
"The twelve months ended 31 March 2019 were a transformational period for the business which saw us undertake two successful fundraisings for the plc, invest £226.4 million in high growth tech firms across Europe (as well as a further £35.1 million from EIS/VCT), strengthen our dealflow across Europe with our strategic partnership with Earlybird, realise significant cash from exits and, once again, exceed our core strategic aim of delivering a portfolio return of 20% per annum with an annual return of 58% on opening portfolio value.
As a result, we have cemented our standing as one of Europe's largest VCs, delivering growth and scale across our portfolio, as well as in our own business, which will continue to drive long-term, sustainable returns for our shareholders giving them access to high growth private technology companies through a listed company.
We have started the new financial year well and, while we are maintaining our customary discipline with regards to new investments, we continue to see exciting opportunities to work with attractive businesses, providing early and growth-stage technology companies with the capital, international networks, and hands-on support they need in order to achieve their global growth ambitions."
Availability of Annual Report and Notice of AGM
The Annual Report and Accounts for the financial year ended 31 March 2019 and notice of the Annual General Meeting ("AGM") of Draper Esprit will be available today on Draper Esprit's website at http://draperesprit.com/.
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Enquiries
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Draper Esprit plc Simon Cook (Chief Executive Officer) Ben Wilkinson (Chief Financial Officer) |
+44 (0)20 7931 8800 |
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Numis Securities Nominated Adviser & Joint Broker Alex Ham Richard Thomas Jamie Loughborough |
+44 (0)20 7260 1000 |
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Goodbody Stockbrokers Euronext Growth Adviser & Joint Broker Don Harrington Charlotte Craigie Richard Tunney |
+44 (0) 20 3841 6202 |
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Powerscourt Public relations Elly Williamson Oliver Norgate |
+44 (0)20 7250 1446
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Chairman's Introduction
I am pleased to be able to introduce our third annual report as a listed company, following our listing on the AIM and Euronext Growth markets in 2016.
Once again, we have exceeded our targeted portfolio return of 20% per annum while investing in the future of our business and helping our portfolio companies push the boundaries of what is possible.
Technology is playing an increasingly significant role in our daily lives. I am immensely proud of the role that Draper Esprit is able to play in helping entrepreneurs who have the vision, passion, and creativity to deliver this future across our four key subsectors; enterprise, digital health & wellness, hardware & deeptech and consumer technology.
During the period, we continued to provide long-term, patient capital to the businesses we work with, in line with the strategy we outlined at our 2016 IPO. This has enabled the technology entrepreneurs in our portfolio to access the capital they need to grow their businesses, while simultaneously giving our investors exposure to exciting early and growth-stage technology companies.
Our own business has evolved significantly over the course of the last year. We have further scaled the business through investment and acquisition and entered a strategic partnership with Earlybird Digital West ("Earlybird"), with whom we share dealflow, investment resources, and expertise to co-invest including in the German speaking market. In parallel, we have grown our own team and extended our market reach through this partnership. We were also able to deliver two successful fundraisings during the period, strengthening our commitment to invest in the very best technology companies across Europe. We are grateful for the ongoing support of our shareholders and welcome new investors to our register.
Our investments in FY19 spanned a number of sectors and geographies, from a Finnish microsatellite company and a Dublin-based travel software business, to a London-headquartered fintech Unicorn and a Cambridge-based surgical guidance company. All have big ambitions and a clear focus with the energy and dynamism needed to deliver on their growth ambitions.
Our success this year was driven by the teams who run our portfolio companies and the excellence of our people. Therefore, on behalf of the Board, I would like to thank all of them for their contribution and commitment to building the very best early and growth-stage technology companies Europe has to offer.
The European venture capital market continues to gather strength and winning firms are beginning to emerge. As one of Europe's largest venture capital firms in terms of capital deployment, we are at the vanguard of this movement. In addition, with the continued support of our team, Board colleagues, shareholders, advisers and our wider network of contacts, I am very confident that Draper Esprit can build on our impressive 2019 performance in the years ahead.
Karen Slatford
Non-Executive Chair
See more at:
draperesprit.com
CEO's Statement
Overview
The year ended 31 March 2019 was a period of significant development for Draper Esprit. We continue to deliver on our strategy of providing early and growth-stage technology companies with the capital, international networks, and hands-on support they need in order to achieve their global growth ambitions. Meanwhile, we have considerably increased the scale and breadth of our own business.
During the year, we undertook two successful fundraisings, signed a strategic partnership with Earlybird Digital West, and invested £226.4 million in new and existing companies including £106.5m through our strategic fund acquisition and strategic partnership with Earlybird, and a further £35.1 million from EIS and VCT, cementing our standing as one of Europe's largest VCs.
Our mission is to empower Europe to invent the future, and the progress we have made towards achieving this aim is reflected in the growth across our portfolio, our strong financial performance for the period, exciting new investments and multiple exits.
We remain passionate about democratising entrepreneurship and the twelve months ended 31 March 2019 have seen us deliver growth and scale in our portfolio, as well as our own business, that will drive long-term, sustainable returns for our shareholders.
Operating review
The strong momentum generated by the Company in 2018 has continued into 2019 with further progress made across all areas of the business.
The pace at which new technologies are disrupting, shaping, and improving the world around us shows no signs of relenting with developments around machine learning, artificial intelligence, mobility, and blockchain opening up exciting new possibilities across our areas of focus in enterprise, digital health, hardware & deeptech, and consumer technology.
At the same time, we continue to invest in high quality companies, which fulfil our strict investment criteria; we met thousands of businesses over the course of the year, but only the very best met these criteria and secured investment from us. Similarly, as the private capital markets continue to evolve, with greater funding opportunities available for companies to stay private for longer, we remain focused on price discipline.
Over the course of the 2019 financial year, we scaled our investments in line with the opportunities presented. The plc invested £89.0 million into new and existing portfolio companies, with a further £25.9 million via the acquisition of DFJ Europe X, increasing our stakes in existing portfolio companies, £5.3 million invested in fund of funds vehicles, and a further £35.8 million invested via Earlybird. We also furthered our relationship with Earlybird, acquiring underlying holdings in Earlybird IV and Earlybird Digital East for £70.4 million.
During the year, we generated cash of £16.0 million through exits including amounts held in escrow (with a further £15.3 million gross post period end). We once again exceeded our core strategic aim of targeting a portfolio return of 20% per annum, with 58% fair value growth in the portfolio across the period.
We achieved this with costs of less than 1% of year end NAV.
Successful exits
During the year, the Company announced two disposals, with one further exit post the period end.
In April 2018, we announced the sale of our portfolio company Tails.com, the direct-to-consumer, tailor-made dog nutrition business to Purina Petcare, a subsidiary of Nestlé SA. The transaction was executed at a valuation supportive of NAV and represented an attractive return for Draper Esprit.
In February 2019, we sold our holding in Graze, the UK's leading healthy snacking brand, as part of its acquisition by Unilever plc, generating an IRR of 19%.
Post period end, we also announced a partial disposal of our share in TransferWise, the international money transfer platform, following its successful $292.0 million share sale which values the business at $3.5 billion.
Having originally acquired a stake in TransferWise as part of the acquisition of Seedcamp Funds I and II, which were acquired for £17.9 million in October 2017, we took the opportunity in April 2019 to sell down part of our stake while retaining an ongoing investment in the business.
Following this partial sale, Draper Esprit will have generated cash realisations of £18.1 million from TransferWise and three other companies from the Seedcamp portfolio, exceeding the original £17.9 million initial investment for the portfolio in October 2017. The remaining stake in Seedcamp I and II are also currently valued at above the £17.9 million original cost.
This transaction can be seen as part of an active secondary market developing as part of the maturing European ecosystem.
In addition, Grapeshot, part of the EIS portfolio, was sold to Oracle in April. Since IPO, we have exited 18 companies, realising over £81.6 million in cash (including £15.3 million for Transferwise post period-end).
Building scale to invest in high-growth technology companies
The European venture capital market is maturing, with companies able to access larger pools of capital in order to achieve their growth ambitions, therefore leading to these firms remaining private for longer.
However, investment into technology on a per capita basis is over 165% higher in the US and 79% higher in China than in Europe. Europe is still under-ventured and, if entrepreneurs from Europe are to compete on an international level, they need to access funds with the ability to back their businesses over the long term.
In order to maintain continued access to the best dealflow across Europe, alongside our ambition to build a platform of scale, we entered into a Strategic Partnership Agreement with Earlybird Digital West ("Earlybird") with a view to sharing dealflow, investment resources, and expertise.
This partnership has already delivered success and, having taken a significant stake in Earlybird's VI fund as part of the original agreement, we further strengthened our partnership in January 2019 when we acquired interests in two of Earlybird's funds, EB IV and DEF, increasing the Group's underlying position within the German-speaking market and our broader position with fast-growing European companies.
With over 100 high growth companies across Europe in our respective portfolios, the Draper Esprit and Earlybird teams perfectly complement one another with our existing offices in London, Dublin, Paris and Cambridge, working closely with Earlybird's offices in Berlin, Munich, Cologne, and Istanbul to create one of the most active venture capital partnerships in Europe.
To fund our continued growth, we successfully raised £115.0 million and £100.0 million in June 2018 and February 2019 respectively, from both new and existing shareholders. These placings broadened our shareholder base and were accompanied by a further £64.0 million raised from across Draper Esprit's EIS and VCT funds.
The proceeds from the placings have been used to fund our primary strategy of direct investing as well as the acquisitions of the Earlybird funds. More broadly, our ambition is to grow NAV organically, through investment and realisations, to over £1.0 billion, utilising selective secondary acquisitions to generate scale and enhance returns.
New investments in portfolio businesses
During the period, we invested in a range of innovative and high growth technology businesses, which, we believe, have the potential to become global leaders in their respective fields. These included the following new core holdings in:
- £25.4 million in Peak Games, the leading mobile games company based in Turkey. The plc acquired the underlying holding in the company via its relationship with Earlybird in February 2019. Peak Games is one of the top 10 mobile games companies in the USA, with over 275 million users.
- £14.5 million in Smava, the consumer loans portal based in Germany, striving to make loans transparent, fair, and affordable. The plc acquired the underlying holding in the company via its relationship with Earlybird in February 2019. The company has raised $135 million to date and has over 300,000 customers who have made transactions of over €3 billion on the platform.
- £13.3 million in UiPath, the comprehensive robotic software solution for IT-based process automation. The plc acquired the underlying holding in the company via its relationship with Earlybird in February 2019 based on a value of UiPath of $3.0 billion. Post period end, UiPath raised a further $568.0 million at a post-money valuation of $7.0 billion.
- £12.4 million in FINALCAD, the leading building, infrastructure and construction mobile software platform, bringing the total funds raised by FINALCAD to $60m to date, with the proceeds being used to extend the product platform into the energy, operations and maintenance sectors, increase headcount globally, and further invest in R&D.
- £9.9 million in Aircall, a leading provider of cloud-based call centre software bringing the total funds raised by Aircall to $40.5 million to date, with the proceeds from the round being used to accelerate the buildout of Aircall's cloud-based phone system.
In addition, £49.3 million has been invested into a further 28 new emerging portfolio companies including 6 via Earlybird VI.* These include Iceye, the Finnish microsatellite company, Revolut, the London-headquartered fintech company, Fluidic Analytics, the Cambridge-based protein detection platform with research, medical and consumer applications, N26, the digital mobile bank, Onefootball, the football app, and Hadean, the London-based deep tech company building a cloud-first operating system.
Seed fund strategy
As we have consistently outlined, our seed fund strategy gives us access to the best early stage deals across the sectors and geographies in which we operate while also ensuring that the early stage market in Europe is well seeded with capital.
During the period, Draper Esprit plc has continued to expand its fund of funds strategy and has invested £5.3 million in top seed funds. This £5.3m investment gives strategic seed stakes of an average of £30,000 in 150 companies, enhancing future dealflow as the best will seek growth capital. We have now invested in 17 seed funds, having committed £34.0 million in total, which will be invested by the funds across a broad range of subsectors within the European technology market over the next five years.
Fund secondaries
Secondary activity has always been central to the entrepreneurs we support given the role it plays in driving value and creating liquidity in the market, allowing founders to scale their businesses for the long term. By investing in primary and secondary deals, we are able to provide entrepreneurs with broader capital solutions to allow them to build their companies while finding high quality opportunities for our shareholders at attractive valuations.
During the period, we invested £70.4 million in Earlybird Fund IV and Digital East, where we gained underlying holdings in companies such as UiPath, Smava, Peak Games, B2X, and Socialbakers.
In addition, we acquired DFJ X for £25.9 million, increasing our stakes in existing core portfolio companies including Trustpilot, M-Files, Sportspursuit and Lyst.
Follow on investments and portfolio update
Our core portfolio companies have performed strongly, driven by revenue growth and from financing rounds at higher valuations. As the European venture capital market matures, the ability for companies to stay private for longer, by raising significant capital in later rounds, is generating global companies that can compete with the very best internationally. Our growing scale and patient capital model mean we can back the companies we invest in for longer.
Graphcore and Trustpilot are two particularly good examples of this model in action, with Draper Esprit working closely with both businesses since our original investment. These firms, and others such as Ravenpack and Perkbox, have been in our portfolio from an early stage. We have continued to support their development via participation in later funding rounds, as well as hands-on support to help them to scale in their respective markets.
Building on our momentum - outlook and summary
We have entered the new financial year in a strong position and have built on this positive momentum with strong progress within the portfolio, including the recent equity raises by Perkbox, UiPath, and the secondary sale of Transferwise.
In May 2019, we have secured a new revolving credit facility, provided by Silicon Valley Bank ("SVB") and Investec, of £50.0 million over a 3 year term which will provide us with greater financing flexibility. We enter the new financial year with over £150.0 million investment capacity, including over £50.0 million in cash, £50.0 million debt, and £50.0 million from our co-investment funds, EIS and VCT, to invest in new, exciting investment opportunities and continue backing the winners in our portfolio.
As we continue to source the best deals via the provision of growth capital to entrepreneurs, we have been able to deliver both consistent returns for investors and increased scale across our business.
Our relationship with Earlybird continues to strengthen our position in the German speaking market, providing us with exciting opportunities to invest in some of Europe's brightest tech start-ups, while the ongoing revenue growth within our portfolio, combined with attractive exits and a healthy pipeline of future investment opportunities, means we are well placed to build on our strong track record of delivery to date.
I would also like to place on record my thanks to the management teams of our portfolio companies who remain central to our whole business model.
We enter the new financial year well positioned to capitalise further on opportunities in 2019/20 and remain focused on executing our strategy driving long-term, sustainable returns for our shareholders.
Simon Cook
CEO
*Reporting threshold - companies with a NAV of £1.0 million or more.
Portfolio Review
Overview
This year has seen an increase in the investment rate, taking advantage of the opportunities in the market that are afforded by our flexible model and strategic co-operation with our partnership with Earlybird. Our core portfolio companies have performed strongly, driven by revenue growth and from financing rounds.
At the year ended 31 March 2019, the fair value of the Group's Gross Portfolio had increased to £594.0 million (2018: £243.5 million).
During the year, the Group has realised its investment holdings in Graze and Tails.com with £16.0 million (2018: £15.9 million) of cash generated including amounts held in escrow. The Group invested £226.4 million in the year (2018: £71.5 million), with a further £35.1 million co-invested from EIS/ VCT funds (2018: £24.8 million), into the next generation of high-growth digital technology companies as well as supporting our existing portfolio companies.
The increase in gross fair value in the period of £140.1 million (58%) is driven by continued strong performance across the portfolio with notable uplifts in the value of the core portfolio companies, in particular Graphcore, UiPath, Peak Games, Trustpilot, Transferwise, and Smava.
At year-end, the portfolio held by the plc including via Earlybird consists of significant minority interests in 54* companies (2018: 31 companies). The fair value of the Gross Portfolio is underpinned by 15 core holdings (2018: 10), which account for approximately 70% (2018: 70%) of the total portfolio value, with the remaining value spread across emerging investee companies, which have the potential to grow into the core holdings of the future. The investments made in the period and over the last number of years have added strength and breadth to the portfolio.
As we scale the business, the fair value of the core portfolio holdings is increasing. New investments in the year and realisations have been reflected such that the core companies now comprise of: Graphcore, Trustpilot, Peak Games, UiPath, Lyst, TransferWise, Smava, Perkbox, Ledger, M-Files, Ravenpack, SportPursuit, Finalcad, Podpoint and Aircall. This is a natural progression of the portfolio as the core companies scale and meet value inflexion points that highlight an acceleration in their growth.
These portfolio companies now have an average turnover in excess of US$142.0 million (2018: $98.0 million), growing in aggregate over 45% annually from 2018. The high average revenues continue to grow in excess of our 30% per annum target and now reflects the scale and maturity of the core companies. The gross profit margin of the core holdings average approximately 65% and demonstrates the ability of the companies to reinvest for future revenue growth and also the opportunity for future profitability at the appropriate time in the company's life cycle.
The fair value growth in the period reflects the strong revenue growth of the portfolio companies, the flexible model of the plc to be able to acquire positions at a discount by providing liquidity to private markets and the upside impact of portfolio companies achieving financing rounds at higher valuations.
* Reporting threshold - companies with a NAV of £1.0 million or more.
Investments
To date, we have targeted investments of £60.0 million per annum from the plc and £40.0 million from co-invest funds into primary investments. In addition, the Group looks to opportunistically acquire portfolios of assets to provide investors with access to the best technology companies in Europe at attractive valuations.
During the financial year a total of £226.4 million (2018: £71.5 million) was deployed by the plc and a further £35.1 million (2018: £24.8 million) from EIS/VCT funds in 21 new companies (plc: 12, Earlybird: 9), 12 existing companies, and 12 seed funds. The Group continues to balance the portfolio by deploying approximately 30% of the Group's investment capital towards smaller rounds in early stage companies with approximately 70% being invested in larger later-stage growth rounds. The intention is to increase the size of the equity interest held in the portfolio companies over time in line with the available capital of the Group.
New investments
In the year, the Company invested £91.7 million in 21 new investments (including £31.5 million in 9 new investments via Earlybird VI), with a further £21.0 million invested from EIS/VCT funds. Some of the notable new investments made in the financial year include:
- £12.4 million into FINALCAD, the leading building, infrastructure and construction mobile software platform.
- £9.9 million into Aircall, the leading provider of cloud-based call centre software.
- £8.0 million (including £4.0 million from EIS/VCT funds) into Fluidic Analytics, the Cambridge based deep tech protein detection platform with research, medical and consumer applications.
- £7.4 million into Revolut, the London headquartered fintech company.
- £7.3 million (including £5.0 million from EIS/VCT funds) into Endomagentics, the Cambridge based cancer diagnostic clinical platform.
- £6.0 million (including £2.0 million from EIS/VCT funds) into Crowdcube, the UK based lending platform.
- £6.0 million (including £3.0 million from EIS/VCT funds) into Roomex, the Dublin headquartered SaaS enabled business travel platform.
- £4.3 million via Earlybird into N26, the Berlin headquartered digital banking company.
- £3.7 million into ICEYE, the Finnish microsatellite manufacturer.
- £31.2 million via Earlybird VI in high profile growing technology companies including Crosslend (a digital marketplace for loans), Shapeshift (the cryptocurrency exchange which offers global trading of a variety of digital assets via web and mobile platforms) together with further follow-on opportunities in the remaining portfolio.
Follow-on investments
To grow our holdings in line with our stated strategy, and to continue to back the growth of our best companies, the Group invested £33.1 million into 12 existing portfolio companies. A further £14.1 million was invested from EIS/VCT funds increasing existing holdings in:
- Graphcore, a machine intelligence semiconductor company.
- Trustpilot, the global online review community.
- Ravenpack, the provider of analytics as a service to financial professionals by transforming unstructured data / content into actionable information in real-time.
- Perkbox, digital employee engagement platform.
- Pod Point, the UK's leading provider of electric car charging solutions for home, workplace and public charging.
- Resolver, the customer support and complaints resolution software business.
- Realeyes, machine learning technology measuring emotions through facial recognition.
Secondary investments
To provide investors with access to the best high growth technology companies in Europe, the Company sources investment opportunities through secondary acquisitions.
In the period, the Company acquired a 27% stake in Earlybird IV and a 5% stake in Earlybird Digital East which added a further £70.4 million of notable investments in the year including:
- £25.4 million in Peak Games (the leading mobile games company based in Turkey) and £14.5 million in Smava (the consumer loans portal based in Germany), which have been added to the Core Portfolio, via Earlybird VI together with further follow-on opportunities in the remaining portfolio.
- £13.3 million in UiPath the comprehensive robotic software solution for IT-based process automation acquired via Earlybird Digital East Fund together with further follow-on opportunities in the remaining portfolio.
The secondary acquisition of DFJ Europe X Fund for £25.9 million in the year increased our percentage holdings in several of our Core Portfolio companies, including Ravenpack, Trustpilot, M-Files, and Lyst.
Seed funds
In addition to the above, the Company has continued to expand its seed fund strategy investing £5.3 million in the year together with further commitments to a number of Europe's top seed funds: Byfounders (Denmark), Hardware Club (France), 5 Seasons (France), Episode1(UK), Seedcamp Fund IV (UK), Join Capital (Germany), Icebreaker (Finland). During the year, commitments have been made to 13 new seed funds across Europe.
Post-year end the following investments were made:
- A further £2.5 million invested by the Company in Verve.
- A further £2.2 million invested by the Company in Realeyes.
- A further £0.5 million invested by the Company in Push Doctor.
- A further £0.4 million invested by the Company in Kaptivo.
Realisation
During the year, the Company realised £16.0 million from the disposal of Graze and Tails.com, including amounts held in escrows. Post period end £15.3 million gross proceeds were received for the part realisation of Transferwise bringing the total cash returned since IPO to £81.6 million to the balance sheet.
Core Portfolio Companies
Aircall
Draper Esprit invested £9.9 million in 2018.
Aircall makes phone support easy to manage. It offers instant phone numbers in over 40 countries for over 3000 business customers and provides a collaborative phone app for teams using connective CRM or customer support tools.
In 2018, the company raised a series B round, led by Draper Esprit totalling US$29.0 million. Opening new offices in New York and Paris, Aircall has hired a team of over 150 people and released integrations with ecommerce giant Shopify as well as CRM systems MS Dynamics and Copper.
In May, Aircall announced a partnership with Intercom. Aircall Now, an application that instantly transitions text chat with customers into a phone conversation within Intercom Messenger, streamlines the sales, marketing, and customer workflow. This partnership sees Aircall Now available to Intercom's 25,000+ customers, giving the company ample firepower to scale globally.
Alongside Draper Esprit, other investors include Balderton Capital, NextWorld Capital, eFounders and Newfund.
FINALCAD
Draper Esprit invested £12.4 million in 2018.
FINALCAD improves construction companies' operational efficiency through a mobile digital platform. Site engineers, Foremen, Architects and Consultants can collaborate using FINALCAD's app, enabling collaboration across a wide variety of workflows both on site and at the office. The app is not just a communication tool, but also enables users to work on drawings, BIM models, tasks, controls, safety procedures and progress monitoring. FINALCAD then provide insights and best practices at a company level.
During the period, the company launched FINALCAD Live, an app allowing users to write a digital site diary with images, a location, and description, creating a news feed for short duration construction projects. The app transforms the way in which site managers oversee costs, collaboration, and processes.
The company also made key hires in its sales teams, bringing in Olivier Remy, Head of Sales for Northern Europe and Jaime Urquiza, Head of Sales for Southern Europe and Latam. Additionally, it signed Groupe Fayat, France, the no.1 independent construction group in France and worldwide leader in road equipment.
Investors alongside Draper Esprit are CapHorn Invest, Aster, Serena Capital, Salesforce Ventures, and Cathay innovation.
Graphcore
Draper Esprit first backed Graphcore in 2016 and has invested £13.7 million to date with the most recent investment of £9 million in December 2018, part of a wider US$200.0 million plus Series D funding round. This latest round valued Graphcore at $1.7 billion, making it one of a handful of British technology unicorns.
Graphcore is a machine intelligence semiconductor company, changing the way that developers can build AI and machine learning applications through its cutting-edge processing capabilities. Its technology will be indispensable for advancements in artificial intelligence and machine learning across diverse industries - from autonomous vehicles to personalised healthcare, intelligent mobile devices and collaborative robots. The appetite for an easier and more powerful way to develop such applications is growing rapidly.
During the year, the company began product rollout. In May, it shipped its C2 IPU (Intelligence Processing Unit) cards to early access customers. In December, it announced the Rackscale IPU-Pod™ reference design, which takes full advantage of the IPU's scale-up and scale out features, harnessing its capability of massive machine intelligence training tasks or the support of huge deployments with 1000s of users.
The team are also scaling significantly, with around 500 new hires expected across the business by end of Q1 2019. Notable hires include Scott Hover-Smoot as SVP and General Counsel bringing considerable experience of the semiconductor industry and Jason Lu as VP of China Sales in October 2018, building out the Graphcore team in China.
Investors alongside Draper Esprit are Sequoia Capital, Atomico, Microsoft, and BMW iVentures.
Ledger
Draper Esprit invested £17.7 million from the plc in January 2018.
During the period, Ledger, the hardware security wallet for cryptocurrencies and blockchain applications, launched three new products: the Ledger Nano X, a Bluetooth hardware wallet that received an innovation award at the CES, the Ledger Vault, a security solution for financial institutions and Ledger Live, the standalone companion computer app for Ledger devices.
Ledger has opened new offices in New York and Hong Kong, deploying sales teams to the ground for the Ledger Vault. The Ledger Plex, a 3500m² production facility in Vierzon (France), has broken ground and will be delivered in September 2019.
To date the company has clients in over 165 countries and has sold over 150 million wallets globally. In May, the team also announced a joint-venture named Komainu with global investment bank, Nomura, and pioneer investment house, Global Advisors. Komainu is being established to bring together the traditional and disruptive worlds of asset custody, paving the way for secure and compliant institutional investment in digital assets.
Other investors include Draper Network funds, Draper Associates (US), Draper Dragon (China) and Boost VC (US), as well as FirstMark Capital, Cathay Capital and Korelya Capital.
Lyst
Draper Esprit has invested a total of £5.3 million in the company.
Lyst is a global fashion search platform used by over 72 million shoppers from 120 countries. It is one of the world's largest e-commerce websites, bringing together 5 million products from 12,000 of the world's leading fashion brands and retailers. Lyst keeps customers at the centre of its offering, providing a one stop solution to find fashion that's perfectly right for them.
In 2018, the French multinational luxury goods conglomerate LVMH, led a funding round of US$60.0 million in the company. This new funding will be used to drive global expansion. During the period, revenues grew by 23%, it opened offices in The Netherlands, Russia, and Japan, now operates in over 11 markets, and had a big brand refresh.
Investors include LVMH, Balderton Capital, Accel Partners, and Susa Ventures.
M-Files
Draper Esprit has invested a total of £4.0 million to date.
M-Files is a software company which provides enterprise content management (ECM) solutions to eliminate information silos and to provide access to content from core business systems and devices. By using software based on the meta-data contained within the document, it is not constrained by where the document is stored or resides.
During the period, the company launched M-Files Online, a fully cloud-enabled subscription-only offering, and began selling to new customers exclusively via recurring subscription licenses while growing annual recurring revenue (ARR) by more than 30% year on year. M-Files also raised €27.0 million from the European Investment Bank (EIB), fuelling technology development and international expansion.
With this recent investment, the company has aggressively scaled its team, totalling 500 employees globally and now has 9,000 worldwide customers, including Thyssenkrupp, Mazars, Apex Oil Company and Kinsmen Group.
M-Files was honoured with the prestigious Internationalisation Award by the President of the Republic of Finland for its global success, innovative intelligent information management solutions and positive impact on the Finnish economy.
Investors include Partech Ventures, Tesi, and the European Investment Bank.
Peak Games
As part of our strategic partnership with Earlybird, the plc acquired a 27 per cent. interest in Earlybird GmbH & Co. Beteiligungs-KG IV ("EB IV") for £55.0 million, adding Peak Games to the core portfolio.
Peak Games is a leading name in the gaming industry. Founded in 2010 and based in Turkey, Peak Games produces highly-rated mobile games which includes the top-10 grossing Toy Blast and the launch of Toon Blast in July 2018. Peak Games is one of the top 10 mobile games companies in the USA, with over 275 million users globally having installed at least one product.
In July 2018, to support the debut of puzzle game, Toon Blast, the company launched the first celebrity performance marketing campaign with actor, Ryan Reynolds. This saw the creation of 30 unique videos, promoted across online channels to varying demographics, allowing the company to measure the effectiveness of each video in precise detail. Toon Blast has now achieved over 80 million downloads.
Investors include Earlybird VC, Hummingbird Ventures, and Endeavor Catalyst.
Perkbox
Draper Esprit has invested a total of £14.0 million to date.
Perkbox is a platform that provides a unique employee experience, enriching the personal and working life of employees. It offers a suite of products including a platform with access to best in class Perks, Perkbox Recognition and Perkbox Insights. It serves organisations of all sizes from SMEs to large companies in the UK such as OpenTable, Rentalcars, and Purplebricks.
In February 2019, the company opened an office in Sydney, Australia, sending existing team members from its London HQ to ensure the company starts off with an experienced talent pool. The company has already signed up several providers including coworking workspace, Emerge Sydney; food and beverage startup, Hey You; suit maker, Institchu and SME loans company, Valiant Finance. It is estimating to onboard another 2,000 companies by the end of the year.
Perkbox also expanded their team with several key hires including ex Yahoo! Veteran, Paul Schulz as CTO and Edenred CEO, Jacques Stern as a Non-exec director. It has grown the size of its tech team from 32 to 65 employees in order to accelerate product development cycles.
Draper Esprit first invested in Perkbox in 2016 alongside the crowd on the Seedrs platform.
Pod Point
Draper Esprit has invested a total of £5.4 million to date.
The electric charge point supplier, which has now partnered with 13 car manufacturers including household names Audi, Volkswagen, and Volvo raised £13.0 million of funding from Legal and General in March 2019, taking a 13 per cent. stake in the company.
PodPoint is one of the UK's largest electric vehicle charging point operators, boasting more than 1,500 charging stations across the UK. The company has charged over 44 million miles of electric motoring and shipped in excess of 40,000 charging points.
During the year, the company signed a partnership with Tesco to roll out POD Points across their 400 stores, installed the UK's largest workplace charging array with Skanska and began installing across the Lloyds Bank estate.
Investors include Legal and General, Barclay's Capital, QVentures.
RavenPack
Draper Esprit has invested a total of £7.5 million to date.
During the year, the company closed deals with several large financial institutions and research houses, including Citi Bank, CloudQuant, and Wolfe Research. Meanwhile, they launched a new portfolio sentiment ranking tool, enabling users to search from 50,000 companies, addressing specific risks across 19,000 sources including news, social media, regulatory filings, and transcripts. Hundreds of thematic factors can be considered for their stock rankings to monitor for headline risk, identify sentiment leaders and laggards, or flag companies that are no longer aligned with their strategy.
Investors can also apply a selection of screening criteria and better manage reputational risks by identifying controversial companies in their portfolio. For example, users can filter out companies experiencing negative environmental, social, or governance (ESG) events, or rank higher those with positive earnings and product sentiment. Combined with RavenPack's sentiment scoring and analytics, the company can now empower their clients with a better understanding of events and how markets might react to them.
During the year, the plc made a follow-on investment of £4.3 million, enabling the company to expand internationally and scale its team. By end of Q2 2019 the company will have over 100 employees
Smava
As part of our strategic partnership with Earlybird, the plc acquired a 27 per cent. interest in Earlybird Fund IV for £55.0 million, adding Smava to the core portfolio.
Launched in 2007, Smava is consumer loans portal based in Germany, striving to make personal loans transparent, fair, and affordable. Based on digital processes, Smava provides a market overview of 70 loan offers from 25 banks, ranging in value from €1,000 to €120,000. Borrowers can then choose a deal that suits them best.
In August 2018, the company announced a partnership with eBay's car portal in Germany, mobile.de, so users can access financing facilities when purchasing vehicles.
The company has raised $135.0 million to date and has over 300,000 customers who have transacted over €3 billion through its platform over the lifetime of the start-up.
Investors include Earlybird VC, Vitruvian, Phenomen Ventures, and Neuhaus Partners.
Sportspursuit
Draper Esprit has invested a total of £5.6 million to date.
Founded in 2011, SportPursuit is as a UK-based sport-specific ecommerce website where members receive access to sales from brand partners within the technical sportswear and outdoor clothing and equipment space. It aims to be the world's largest private shopping club for sports enthusiasts, helping them to find the best clothing for them at the best rates.
During the period the company partnered with Eurosport, the Discovery-owned sports broadcaster, to launch a white-label platform for sports fans to purchase clothing, footwear, equipment and accessories. The Eurosports shop is now live in France, Germany and the UK via dedicated local-language microsites, with plans to extend this to Belgium, Monaco, Austria and Switzerland. In efforts to build a stronger brand presence in Germany and bolstering its move towards Europe, the company launched TV advertising campaigns raising brand awareness in new markets.
SportPursuit made several moves to improve its carbon footprint. It became the first online retailer to use sustainable packaging made entirely from sugar cane, achieving a carbon negative impact and planted 10,000 new trees in Uganda alongside the "Size of Wales" charity organisation.
Investors include CIT Growth Capital and Scottish Equity Partners, Secret Escapes co-founder Alex Saint and Zoopla founder Alex Chesterman.
Transferwise
Draper Esprit has invested a total of £10.5 million to date.
TransferWise is an international money transfer platform - using real exchange rates with no hidden fees. Co-founded by Taavet Hinrikus and Kristo Kaarmann, TransferWise was launched in 2010 with the vision of making international money transfers cheap, fair, and simple.
During the period, TransferWise became the first fintech company to hold a settlement account, allowing the company direct access to Bank of England's Real Time Gross Settlement. Through the settlement account, TransferWise became the first tech company to be a direct member of the Faster Payment Scheme.
In June 2018, they announced a partnership with UK neobank Monzo, and France's second largest bank, BCPE, making exchange rates low-cost and transparent. Additional partnerships include accountancy software company Xero, Dutch digital banking company Bunq, and food delivery service Wolt.
TransferWise continues to demonstrate strong growth. In September 2018, the company released their FY18 annual report, showing 75% revenue growth to £117.0 million and £6.2 million net profit after tax.
The company now serves 5 million customers worldwide, processing £4.0 billion every month.
Post period end, the company announced a $292.0 million share sale in which (through a partial sale of its stake) Draper Esprit generated cash of £15.3 million.
Trustpilot
Draper Esprit has invested a total of £29.7 million to date.
Founded in 2007, Trustpilot is a global, multi-language review community. Trustpilot has customers in 65 countries including Denmark, Sweden, the UK, France, Italy, Germany, The Netherlands and the US. The company has more than 58 million reviews of over 265,000 companies from 150+ countries and is one of the top 1% most visited websites worldwide.
With offices in Copenhagen, London, New York, Denver, Berlin, Melbourne and Vilnius, Trustpilot's 700 employees represent more than 40 different nationalities. In June 2018, the company also launched a successful brand refresh, alongside plans for changes and upgrades to its platform after a year of research and collaboration with consumers.
Trustpilot will now offer companies new features for customer engagement and has launched its "Find Reviewer" tool, which enables companies and reviewers to engage with each other more freely and directly. The company has also now secured partnerships with leading ecommerce platforms, Magento (based in the US) and PrestaShop (based in Paris) alongside leading digital knowledge platform, Yext (based in the US). The partnerships will enable Trustpilot to expand its business further while improving user experience by providing them with more opportunity to gain insights. In March 2019, the company successfully raised $55.0 million in a Series E equity round led by Sunley House Capital Management. This funding will enable Trustpilot to strengthen its market leading position through investment in marketing, platform development and team expansion.
Investors include Sunley House Capital management, Vitruvian Partners, Index Ventures, Northzone, SEED Capital Denmark.
UiPath
As part of our strategic partnership with Earlybird, the plc acquired a 5 per cent. interest in the Digital East Fund 2013 SCA SICAR for £16.0 million, adding UiPath to the portfolio. When Draper Esprit invested, UiPath was valued at $3.0 billion. Post period end, the company announced in April a $568.0 million investment round at a post-money valuation of $7.0 billion.
UiPath provides a comprehensive robotic software solution for IT-based process automation. Built on a comprehensive, fully integrated platform with centralised instrumentality, UiPath is designed for the highest standards of enterprise management, security, scalability and auditability.
In February 2019, the company released the UiPath Computer Vision which enables human-like recognition of user interfaces, enabling robots to "see" the screen and visually identify individual elements of software platforms such as Citrix, VMware, VNC, and Windows Remote Desktop. This development is a huge leap in the path to empowering robots AI skills to solve complex problems in the most effective way.
In April 2019, Bruno Ferreira joined the company as VP of UK & Ireland. Bringing with him 20+ years of experience in the technology sector, Ferreira will help the firm to continue its exponential growth. In the same month, UiPath announced a partnership with RPAbox, a specialist UiPath implementation partner helping organisations scale RPA capabilities in their business units by providing a fast, reliable and efficient delivery model. This partnership will assist clients and partners with projects and increase the reach of UiPath globally.
Investors include Accel, Coatue, Capital IG, Credo, Earlybird VC, IVP, KPCB, Madrona, Meritech, Seedcamp, Sequoia.
Financial Review
The year ended 31 March 2019 has been another active year for the Group with significant investment activity and two equity raises in the period. The progress in the year has built on the strategy of scaling our operations while providing investors with access to the best private technology companies in Europe.
New equity capital of £100.0 million was raised in June 2018 to further scale the balance sheet and broaden the shareholder base. In February 2019, a further raise of £115.0 million was undertaken to secure the secondary acquisition of 27% in Earlybird IV and 5% in Earlybird Digital East. With a strong balance sheet, the Group has been able to increase investments in high growth technology companies, take advantage of secondary opportunities to create value and increase the breadth of operations.
The Gross Portfolio Value, the gross value of the Group's investment holdings before deductions for carry and any deferred tax, has more than doubled to £594.0 million (2018: £243.5 million) as a consequence of the £226.4 million of investment (2018: £71.5 million) and fair value growth of £140.1 million (2018: £73.6 million) net of realisations of £16.0 million (2018: £15.9 million).
The Gross Portfolio Value is subject to deductions for the fair value of the carry liabilities and deferred tax to generate the net investment value of £562.1 million (2018: £231.9 million) which is reflected on the consolidated statement of financial position as financial assets held at fair value through the profit or loss. The below table has been generated to reflect gross and net movement in value of the portfolio during the period.
The net fair value gain on investments of £114.7 million (31 March 2018: £66.6 million) is reflected in the consolidated statement of comprehensive income. A deferred tax provision of £5.4 million (2018: £1.8 million) is accrued against the gains in the portfolio where future tax liabilities are anticipated to be due. This amount is netted against the investments in the consolidated statement of comprehensive income. Carry balances of £27.7 million (2018: £11.2 million) are accrued to management teams, including previous and current employees of the Group based on the current fair value at the year-end and deducted from the Gross Portfolio.
Net assets have increased by 106% to £618.6 million (£300.5 million at 31 March 2018) and net assets excluding goodwill have grown by 109% to £608.9 million (£290.8 million at 31 March 2018). The increase in the balance sheet assets reflects the positive portfolio performance, particularly in the core portfolio, including the new secondary acquisitions, and the equity raises undertaken in the year of £215.0 million (£207.6 million net of fees) from both existing and new institutional investors.
Fair value growth of the gross portfolio of £140.1 million (2018: £73.6 million) reflects fair value gains in the portfolio of £157.5 million and fair value reductions of £17.4 million including £16.2 million of positive currency movements.
In the Summer of 2018, the Group entered into a Strategic Partnership Agreement with Earlybird to share dealflow and resources to co-invest in high growth technology companies across Europe. The first stage of this partnership included a 50% commitment of £76.0 million to 2022 to Earlybird Fund VI, of which £31.5 million has been deployed to date. As approximately 20% of the European Venture Capital dealflow occurs in Germany, this commitment reflected the amount the Company would have otherwise invested in that market directly. As part of this first stage, the Company acquired a minority stake in the Earlybird Fund VI management company for a total consideration of £0.6 million. The consideration was satisfied by cash and the issuance of 64,820 new ordinary shares of one pence each in the capital of the Company to the Earlybird Digital West partners.
The subsequent phase of the partnership trajectory was enacted in February of 2019 with the acquisition of stakes in Earlybird IV and Earlybird Digital East. These acquisitions strengthened the relationship and provided significant value creation opportunity for the Group.
In addition to the shares outlined above, the fund raises led to an increase in the issued share capital with the issuance of 27,380,952 and 18,867,925 new shares on 14 June 2018 and 8 February 2019 respectively to trading on AIM and Euronext Growth.
During the year, a change in the underlying accounting treatment of the Company's acquisition of Esprit Capital Partners (ECP) in June 2016 has led to a reduction in the goodwill carried on the balance sheet of £10.8 million. This is not indicative of an impairment to the goodwill or the inherent value of Esprit Capital Partners LLP but a change in presentation. The reduction in the goodwill is matched by a reduction in the merger reserve on the balance sheet of £10.8 million and the income statement reflects an equivalent charge over the current and restated reporting periods. The prior period balance sheet and income statement comparatives have been restated to reflect how the reduced goodwill would have impacted the accounts in those periods. There are no ongoing charges related to this accounting change.
Year-end cash balances of £50.4 million reflect the cash balance of £56.6 million at 31 March 2018, the subsequent equity raise of £207.6 million net of fees, investments in the period of £226.4 million net of proceeds from disposals in the portfolio and the operating costs of the business.
Consolidated statement of comprehensive income
Investment income for the year comprises the £114.7 million (2018: £66.6 million) of unrealised investment gains (gains are unrealised as they have not been disposed of at period end and are held within Draper Esprit (Ireland) Limited, which is accounted for as an investment company) and fee income of £6.1 million which is generated from management fees and director fees. At the year-end 31 March 2018, performance fees were recognised of £3.5 million, of which £1.0 million was attributable to the plc with the remainder reflected in non-controlling interests. Under the new IFRS 15 accounting standard, there has been a change in the test for recognition and this revenue has not been recognised in the current period; it is anticipated that these balances will now be recognised at the point of cash realisation. General administrative costs of £7.8 million (2018: £5.8 million), predominantly relate to employment, professional and office expenses, while investment and acquisition costs of £0.2 million (2018: £0.4 million) relate directly to portfolio investment costs. The cost base of the Group in the year is less than 1% of year end NAV on a net basis (costs less income).
Post balance sheet events
The Group has made further investments and realised £15.3 million gross proceeds from the partial sale of TransferWise.
Post year-end the Company entered into a £50.0 million Revolving Credit Facility with Silicon Valley Bank and Investec. The facility is for a 3 year term and carries an interest rate at the Bank of England base rate + 6.75% (min 7.5%). The facility provides additional funding flexibility to fund the future growth plans of portfolio companies.
After a further successful year of transformational growth, the Group has a strong balance sheet with the cash resources to harvest the opportunities presented by its deep networks across Europe.
Ben Wilkinson
CFO
Gross Portfolio Value Table
|
Investments |
Fair Value of Investments 31st March £'000 |
Investments £'000 |
Realisations* £'000 |
Draper Esprit (Ireland) Limited £'000 |
Movement Value £'000 |
Fair Value of Investments 31st March £'000 |
Interest |
|
Graphcore |
23,381 |
9,491 |
- |
- |
45,740 |
78,612 |
B |
|
Trustpilot |
34,333 |
11,623 |
- |
- |
16,016 |
61,972 |
C |
|
Peak |
- |
25,374 |
- |
- |
16,312 |
41,686 |
B |
|
UiPath |
- |
13,250 |
- |
- |
19,704 |
32,954 |
A |
|
Lyst |
18,341 |
2,633 |
- |
- |
6,788 |
27,762 |
C |
|
TransferWise |
12,189 |
- |
- |
- |
15,530 |
27,719 |
A |
|
Smava |
- |
14,549 |
- |
- |
9,138 |
23,687 |
B |
|
Perkbox |
17,495 |
5,740 |
- |
- |
455 |
23,690 |
C |
|
Ledger |
17,703 |
- |
- |
- |
- |
17,703 |
B |
|
M-Files |
14,359 |
1,506 |
- |
- |
1,308 |
17,173 |
B |
|
Ravenpack |
5,478 |
4,207 |
- |
- |
5,930 |
15,615 |
D |
|
SportPursuit |
13,366 |
1,959 |
- |
- |
(1,990) |
13,335 |
E |
|
FinalCad |
- |
12,444 |
- |
- |
- |
12,444 |
C |
|
Podpoint |
9,884 |
- |
- |
- |
1,175 |
11,059 |
C |
|
Aircall |
- |
9,916 |
- |
- |
- |
9,916 |
B |
|
Remaining Portfolio |
74,663 |
113,740 |
(15,984) |
- |
4,258 |
176,677 |
- |
|
Total |
241,192 |
226,432 |
(15,984) |
- |
140,364 |
592,004 |
|
|
Co-invest assigned to plc |
2,320 |
- |
- |
- |
(308) |
2,012 |
|
|
Gross Portfolio Value |
243,512 |
226,432 |
(15,984) |
- |
140,056 |
594,016 |
|
|
Carry external |
(11,177) |
- |
- |
- |
(16,534) |
(27,711) |
|
|
Portfolio deferred tax |
(1,848) |
- |
- |
- |
(3,504) |
(5,352) |
|
|
Trading carry & co-invest |
1,423 |
- |
- |
- |
(315) |
1,108 |
|
|
Draper Esprit (Ireland) Limited |
- |
- |
- |
4,988 |
(4,988) |
- |
|
|
Net portfolio value |
231,910 |
226,432 |
(15,984) |
4,988 |
114,715 |
562,061 |
|
* Realisations do not include amounts held in escrow. Total cash realisations including amounts held in escrow were £16.0 million (2017: £15.9 million)
** Fully diluted interest categorised as follows: Cat A: 0-5%, Cat B: 6-10%, Cat C: 11-15%, Cat D: 16-25%, Cat E: >25%
Financials
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2019
|
|
Note |
Year ended 31 Mar 2019 £'000s |
Year ended 31 Mar 2018 £'000s Restated* |
Year ended 31 Mar 2017 £'000s Restated* |
|
Unrealised gains on investments held at fair value through the profit and loss |
5 |
114,715 |
66,603 |
35,744 |
|
Fee income |
6 |
6,101 |
7,163 |
1,673 |
|
Total investment income |
|
120,816 |
73,766 |
37,417 |
|
Operating expenses |
|
|
|
|
|
General administrative expenses |
7 |
(7,774) |
(5,785) |
(3,705) |
|
Depreciation and amortisation |
14, 17, 21 |
(163) |
(160) |
(127) |
|
Share based payments - resulting from company share option scheme |
9 |
(1,100) |
(490) |
(123) |
|
Share based payments - resulting from acquisition of subsidiary |
18 |
(1,989) |
(4,406) |
(4,428) |
|
Investments and acquisition costs |
|
(207) |
(424) |
- |
|
Exceptional items |
|
(34) |
(229) |
- |
|
Total operating costs |
|
(11,267) |
(11,494) |
(8,383) |
|
Profit from operations |
|
109,549 |
62,272 |
29,034 |
|
Net foreign exchange gain/(loss) |
10 |
1,481 |
(1,530) |
221 |
|
Finance income on cash and cash equivalents |
|
120 |
112 |
- |
|
Operating profit before tax |
|
111,150 |
60,854 |
29,255 |
|
Income taxes |
11, 21 |
11 |
43 |
(438) |
|
Profit for the year |
|
111,161 |
60,897 |
28,817 |
|
Other comprehensive income/(expense) |
|
- |
- |
- |
|
Total comprehensive income for the year |
|
111,161 |
60,897 |
28,817 |
|
|
|
|
|
|
|
Profit attributable to: |
|
|
|
|
|
Owners of the parent |
|
110,579 |
57,766 |
28,487 |
|
Non-controlling interest |
|
582 |
3,131 |
330 |
|
|
|
|
|
|
|
Earnings per share attributable to owners of the Parent: |
|
|
|
|
|
Basic earnings per weighted average shares (pence) |
12 |
115 |
89 |
88 |
|
Diluted earnings per weighted average shares (pence) |
12 |
110 |
88 |
87 |
*Certain amounts shown here do not correspond to the Annual Report for the year ended 31 March 2018 and 31 March 2017 and reflect adjustments made, refer to Note 3(a) and Note 18.
The Notes on pages 72 to 99 are an integral part of these consolidated financial statements.
Consolidated Statement of Financial Position
For the year ended 31 March 2019
|
Non-current assets |
Note |
31 Mar 2019 £'000s |
31 Mar 2018 £'000s Restated* |
31 Mar 2017 £'000s Restated* |
|
Non-current assets |
|
|
|
|
|
Intangible assets |
14 |
10,130 |
10,232 |
10,335 |
|
Investments in associates |
15 |
258 |
258 |
258 |
|
Financial assets held at fair value through the profit or loss |
16 |
562,061 |
231,910 |
105,971 |
|
Property, plant and equipment |
17 |
209 |
229 |
152 |
|
Total non-current assets |
|
572,658 |
242,629 |
116,716 |
|
Current assets |
|
|
|
|
|
Trade and other receivables |
19 |
1,140 |
4,840 |
527 |
|
Cash and cash equivalents |
|
50,358 |
56,641 |
24,892 |
|
Total current assets |
|
51,498 |
61,481 |
25,419 |
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
20 |
(4,959) |
(2,948) |
(1,548) |
|
Total current liabilities |
|
(4,959) |
(2,948) |
(1,548) |
|
Non-current liabilities |
|
|
|
|
|
Deferred tax |
21 |
(631) |
(651) |
(716) |
|
Total non-current liabilities |
|
(631) |
(651) |
(716) |
|
Net assets |
|
618,566 |
300,511 |
139,871 |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
Share capital |
22 |
1,179 |
716 |
407 |
|
Share premium account |
22 |
395,783 |
188,229 |
93,248 |
|
Merger relief reserve |
22 |
13,097 |
13,097 |
13,097 |
|
Share-based payments reserve - resulting from company share option scheme |
|
1,713 |
613 |
123 |
|
Share-based payments reserve - resulting from acquisition of subsidiary |
|
10,823 |
8,834 |
4,428 |
|
Retained earnings |
|
195,737 |
86,230 |
28,464 |
|
Equity attributable to owners of parent |
|
618,332 |
297,719 |
139,767 |
|
|
|
|
|
|
|
Non-controlling interests |
|
234 |
2,792 |
104 |
|
Total equity |
|
618,566 |
300,511 |
139,871 |
|
|
|
|
|
|
|
Net assets per share (pence) |
12 |
524 |
416 |
343 |
*Certain amounts shown here do not correspond to the Annual Report for the years ended 31 March 2018 and 31 March 2017 and reflect adjustments made, refer to Note 3(a) and Note 18.
The financial statements on pages 68 to 99 were approved by the Board of Directors on 4 June 2019 and signed on its behalf by
S. M. Chapman
Chief Operating Officer
The Notes on pages 72 to 99 are an integral part of these consolidated financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 March 2019
|
|
Note |
Year ended 31 Mar 2019 £'000s |
Year ended 31 Mar 2018 £'000s Restated* |
Year ended 31 Mar 2017 £'000s Restated* |
|
Cash flows from operating activities |
|
|
|
|
|
Operating profit after tax |
|
111,161 |
60,897 |
28,817 |
|
Adjustments to reconcile operating profit to net cash flows used in operating activities: |
|
|
|
|
|
Revaluation of investments held at fair value through the profit and loss |
5 |
(114,715) |
(66,603) |
(35,744) |
|
Depreciation and amortisation |
|
163 |
160 |
155 |
|
Share-based payments - resulting from company share option scheme |
|
1,100 |
490 |
123 |
|
Share-based payments - resulting from acquisition of subsidiary |
|
1,989 |
4,406 |
4,428 |
|
Bad debt provision |
|
- |
- |
37 |
|
Exchange differences on cash and cash equivalents |
10 |
(1,481) |
1,530 |
(221) |
|
Decrease/(increase) in trade and other receivables |
|
189 |
(4,314) |
681 |
|
Increase in trade and other payables |
|
2,011 |
1,401 |
441 |
|
Purchase of investments |
16 |
(226,432) |
(74,674) |
(20,602) |
|
Proceeds from disposals in underlying investment vehicles |
16 |
15,984 |
15,338 |
17,137 |
|
Net loans made to/returned from underlying investment vehicles |
16 |
(4,679) |
- |
- |
|
Purchase of initial portfolio |
|
- |
- |
(40,000) |
|
Net cash (used in)/generated from operating activities |
|
(214,710) |
(61,369) |
(44,478) |
|
Tax paid |
|
(32) |
(107) |
- |
|
Net cash (outflow)/inflow from operating activities |
|
(214,742) |
(61,476) |
(44,748) |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
Purchase of property, plant and equipment |
|
(58) |
(204) |
(166) |
|
Interest received |
|
120 |
112 |
- |
|
Cash acquired on purchase of subsidiary |
|
- |
- |
495 |
|
Net cash inflow/(outflow) from investing activities |
|
62 |
(92) |
329 |
|
Cash flows from financing activities |
|
|
|
|
|
Cash paid to non-controlling interests |
|
(638) |
(443) |
(246) |
|
Proceeds from issue of share capital |
22 |
215,035 |
100,000 |
72,060 |
|
Equity issuance costs |
22 |
(7,481) |
(4,710) |
(2,724) |
|
Net cash inflow from financing activities |
|
206,916 |
94,847 |
69,090 |
|
Net (decrease)/increase in cash & cash equivalents |
|
(7,764) |
33,279 |
24,671 |
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
56,641 |
24,892 |
- |
|
Exchange differences on cash and cash equivalents |
10 |
1,481 |
(1,530) |
221 |
|
Cash and cash equivalents at end of year |
|
50,358 |
56,641 |
24,892 |
*Certain amounts shown here do not correspond to the Annual Report for the year ended 31 March 2018 and 31 March 2017 and reflect adjustments made, refer to Note 3(a) and Note 18.
The Notes on pages 72 to 99 are an integral part of these consolidated financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 March 2019
|
|
Attributable to equity holders of the parent (£'000s) |
(£'000s) |
(£'000s) |
||||||
|
|
Share capital |
Share premium |
Merger relief reserve^ |
Share-based payments reserve resulting from: |
Retained earnings |
Total |
Attributable to non- controlling interests |
Total equity |
|
|
Company share option scheme |
Acquisition of subsidiary |
||||||||
|
Balance at 1 April 2016 |
50 |
- |
- |
- |
- |
(3) |
47 |
- |
47 |
|
Total comprehensive Income for the year |
|
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
- |
28,487 |
28,487 |
330 |
28,817 |
|
Acquired reserves due to non-controlling interest |
- |
- |
- |
- |
- |
(20) |
(20) |
20 |
- |
|
Amounts withdrawn by non-controlling interest |
- |
- |
- |
- |
- |
- |
- |
(246) |
(246) |
|
Total comprehensive income/(loss) for the year |
- |
- |
- |
- |
- |
28,467 |
28,467 |
104 |
28,571 |
|
Contributions by and distributions to the owners: |
|
|
|
|
|
|
|
|
|
|
Issue of share capital (Note 22) |
357 |
- |
- |
- |
- |
- |
357 |
- |
357 |
|
Share premium (Note 22) |
- |
93,248 |
- |
- |
- |
- |
93,248 |
- |
93,248 |
|
Merger relief reserve (Note 22) |
- |
- |
13,097 |
- |
- |
- |
13,097 |
- |
13,097 |
|
Share based payments - resulting from company share option scheme (Note 13) |
- |
- |
- |
123 |
- |
- |
123 |
- |
123 |
|
Share based payments - resulting from acquisition of subsidiary (Note 18) |
- |
- |
- |
- |
4,428 |
|
4,428 |
- |
4,428 |
|
Balance at 31 March 2017 (Restated*) |
407 |
93,248 |
13,097 |
123 |
4,428 |
28,464 |
139,767 |
104 |
139,871 |
|
Comprehensive Income for the year |
|
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
- |
57,766 |
57,766 |
3,131 |
60,897 |
|
Amounts withdrawn by non-controlling interest |
- |
- |
- |
- |
- |
- |
- |
(443) |
(443) |
|
Total comprehensive income for the year |
- |
- |
- |
- |
- |
57,766 |
57,766 |
2,688 |
60,454 |
|
Contributions by and distributions to the owners: |
|
|
|
|
|
|
|
|
|
|
Issue of share capital (Note 22) |
309 |
- |
- |
- |
- |
- |
309 |
- |
309 |
|
Share premium (Note 22) |
- |
94,981 |
- |
- |
- |
- |
94,981 |
- |
94,981 |
|
Share based payments - resulting from company share option scheme (Note 13) |
- |
- |
- |
490 |
- |
- |
490 |
- |
490 |
|
Share based payments - resulting from acquisition of subsidiary (Note 18) |
- |
- |
- |
- |
4,406 |
- |
4,406 |
- |
4,406 |
|
Balance at 31 March 2018 (Restated*) |
716 |
188,229 |
13,097 |
613 |
8,834 |
86,230 |
297,719 |
2,792 |
300,511 |
|
Comprehensive Income for the year |
|
|
|
|
|
|
|
|
|
|
Adjustments for transitioning to IFRS 15 (Note 2i) |
- |
- |
- |
- |
- |
(1,072) |
(1,072) |
(2,502) |
(3,574) |
|
Profit for the year |
- |
- |
- |
- |
- |
110,579 |
110,579 |
582 |
111,161 |
|
Acquired reserves due to non-controlling interest |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
Amounts withdrawn by non-controlling interest |
- |
- |
- |
- |
- |
- |
- |
(638) |
(638) |
|
Total comprehensive income for the year |
- |
- |
- |
- |
- |
109,507 |
109,507 |
(2,558) |
106,949 |
|
Contributions by and distributions to the owners: |
|
|
|
|
|
|
|
|
|
|
Issue of share capital (Note 22) |
463 |
- |
- |
- |
- |
- |
463 |
- |
463 |
|
Share premium (Note 22) |
- |
207,554 |
- |
- |
- |
- |
207,554 |
- |
207,554 |
|
Share based payment (Note 13) |
- |
- |
- |
1,100 |
- |
- |
1,100 |
- |
1,100 |
|
Share Based payment resulting from acquisition of Subsidiary (Note 18) |
- |
- |
- |
- |
1,989 |
- |
1,989 |
- |
1,989 |
|
Balance at 31 March 2019 |
1,179 |
395,783 |
13,097 |
1,713 |
10,823 |
195,737 |
618,332 |
234 |
618,566 |
*Certain amounts shown here do not correspond to the Annual Report for the year ended 31 March 2018 and 31 March 2017 and reflect adjustments made, refer to Note 3(a) and Note 18.
The notes on pages 72 to 99 are an integral part of these consolidated financial statements.
Notes to the Consolidated Financial Statements
1. General information
Draper Esprit plc (the "Company") is a public company limited by shares incorporated and domiciled in England and Wales. The Company is listed on the London Stock Exchange's AIM market and the Irish Stock Exchange's Euronext Dublin market.
The Company is the ultimate parent company into which the results of all subsidiaries are consolidated. The consolidated financial statements for the year ended 31 March 2019, 31 March 2018, and 31 March 2017 comprise the financial statements of the Company and its subsidiaries (together, "the Group").
The consolidated financial statements are presented in Pounds Sterling (£), which is the currency of the primary economic environment the Group operates in. All amounts are rounded to the nearest thousand, unless otherwise stated.
2. Adoption of new and revised standards
Information on the Draper Esprit Group's structure is given in Note 3(b). Information on other related party relationships of the Draper Esprit Group is provided in Note 29.
In the current year, the new and revised Standards and Interpretations below have been adopted which affected the amounts reported in these consolidated financial statements:
i. IFRS 15 Revenue from Contracts with Customers is a new Standard, effective from 1 January 2018. IFRS 15 establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers.
The core principal of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration, which the entity expects to be entitled in exchange for those goods or services.
The only material impact from the adoption of this standard relates to the recognition of performance fees, which under IFRS 15 will no longer be recognised following analysis in line with the Standard's higher threshold for recognition. The underlying status of the fees has not changed.
The impact on the consolidated statement of financial position and consolidated statement of changes in equity can be seen in the table below:
|
|
Previously reported £000's |
IFRS 15 reclassification £000's |
PY reported under IFRS 15 £000's |
|
Performance fee revenue (recognised in year ending 31 March 2018) |
3,574 |
(3,574) |
0 |
|
Performance fees attributable to the Group |
1,072 |
(1,072) |
0 |
|
Performance fees attributable to non-controlling interest |
2,502 |
(2,502) |
0 |
|
Accrued Revenue |
3,574 |
(3,574) |
0 |
The Group has elected not to restate comparative information from prior periods upon adoption of IFRS 15 and has applied the practical expedient under which contracts that began and were completed prior to 1 April 2018 are not restated. For ongoing contracts, any changes required are taken straight to the condensed consolidated interim statement of changes in equity.
ii. In the current year, the Group has applied IFRS 9 Financial Instruments (as revised in July 2014) and the related consequential amendments to other IFRSs. IFRS 9 introduces new requirements for the 1) classification and measurement of financial assets and financial liabilities, 2) impairment for financial assets and 3) general hedge accounting. There is no material impact on the Group in relation of the implementation of IFRS 9. The Standard has been adopted from 1 April 2018 with no restatement of prior periods required.
1) Classification and measurement
On 1 April 2018, the Group has classified its financial instruments in the appropriate IFRS 9 categories; there were no changes.
2) Impairment of financial assets
The Group has one type of financial asset that is subject to IFRS 9's new expected credit loss model:
· Trade and other receivables (See Note 19)
On 1 April 2018, there was no material impact on the trade and receivables balance resulting from the expected credit loss model.
3) General Hedge Accounting
The Group does not use hedge accounting, therefore there is no impact on the financial statements from this change to IFRS 9.
Standards not affecting the reported results or financial position
At the date of authorisation of these consolidated financial statements, the following Standards and Interpretations that have not been applied in these financial statements were in issue but not yet effective:
· IFRS 16 Leases applies to annual reporting periods beginning on or after 1 January 2019. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new Standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low value leases. The accounting for lessors will not significantly change. The Standard will affect primarily the accounting for the Group's operating leases. As at the reporting date, the Group has non-cancellable operating lease commitments,(See Note 23). The Directors have determined that commitments of £1.6 million would be recognised on the balance sheet as a liability with an equivalent asset in fixed assets for the financial year commencing 1 April 2019. There will not be a material impact on the Consolidated Statement of Comprehensive Income. The impact on the Consolidated Statement of Comprehensive Income is expected to be to reclassify operating lease expenses to depreciation and interest expenses.
3. Significant accounting policies
Basis of preparation
To note within the year are the adoption by the Group of IFRS 9 and IFRS 15, which is discussed in further detail above, as well as the restatement discussed in 3(a) below. The consolidated financial statements have been prepared and approved by the Directors in accordance with all relevant IFRSs as issued by the International Accounting Standards Board ("IASB"), and interpretations issued by the IFRS Interpretations Committee and, endorsed by the European Union ("EU") and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial reporting framework that has been applied in the preparation of the Company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). The Company has taken advantage of disclosure exemptions available under FRS 101 as explained further in Note 1 of the Company's financial statements. The financial statements are prepared on a going concern basis as disclosed in the Directors' Report.
The consolidated financial statements have been prepared under the historical cost convention as modified for the revaluation of financial assets and financial liabilities held at fair value.
A summary of the Group's principal accounting policies, which have been applied consistently across the Group is set out below.
a) Prior period restatements
In accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, the comparative periods presented in these financial statements have been restated in line with IFRS 3 Business Combinations to recognise the impact of terms in the Lock-in and Vesting Deed dated 10 June 2016 on the acquisition of Esprit Capital Partners LLP, (See Note 18 for further details).
The impact on net assets in the consolidated statement of financial position as at 31 March 2017 and 31 March 2018 was £10.8 million. The impact on profit for the year ended 31 March 2018 in the consolidated statement of comprehensive income was £4.4 million (31 March 2017: £4.4 million). For further details of the restatements, see the primary statements and Note 18.
b) Basis of consolidation
The consolidated financial statements comprise the Company and the results, cash flows and changes in equity of the following subsidiary undertakings:
|
Name of undertaking |
Nature of business |
Country of incorporation |
% ownership |
|
Esprit Capital Partners LLP^ |
Investment Management |
England |
100% |
|
Draper Esprit (Nominee) Limited^ |
Dormant |
England |
100% |
|
Encore Ventures LLP^ |
Investment Management |
England |
71% |
|
Esprit Capital I GP Limited^ |
General Partner |
England |
100% |
|
Esprit Capital II GP Limited^^^ |
General Partner |
Cayman |
100% |
|
Esprit Capital III Founder GP Limited^^ |
General Partner |
Scotland |
100% |
|
Esprit Capital III GP LP^^ |
General Partner |
Scotland |
100% |
|
Encore I GP Limited^^^ |
General Partner |
Cayman |
100% |
|
Encore I Founder GP Limited^^ |
General Partner |
Scotland |
100% |
|
Esprit Capital Management Limited^ |
Admin company |
England |
100% |
|
Esprit Capital Holdings Limited^ |
Dormant |
England |
100% |
|
Esprit Nominees Limited^ |
Dormant |
England |
100% |
|
Esprit Capital I CIP Limited^ |
Dormant |
England |
100% |
|
Esprit Capital III MLP LLP^ |
Dormant |
England |
100% |
|
Esprit Capital III GP Limited^ |
Dormant |
England |
100% |
Registered addresses
^20 Garrick Street, London, England, WC2E 9BT
^^50 Lothian Road, Festival Square, Edinburgh, Scotland, EH3 9WJ
^^^Appleby Trust (Cayman) Limited, PO Box 1350, Clifton House, 75 Fort Street, Grand Cayman, KY1-1108, Cayman Islands
Subsidiaries
Subsidiaries are entities controlled by the Group. Control, as defined by IFRS 10, is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries are fully consolidated from the date on which the Group effectively obtains control. They are deconsolidated from the date that control ceases. Control is reassessed whenever circumstances indicate that there may be a change in any of these elements of control. Refer to Note 4(c) for further information. The Group has accounted for the acquisition of Esprit Capital Partners LLP on 15 June 2016 as an acquisition in accordance with IFRS 3 Business Combinations, rather than as a reverse acquisition having assessed the substance of the transaction, including control and changes in ownership. All transactions and balances between Group subsidiaries are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests.
Associates
Associates are all entities over which the Group has significant influence, but not control or joint control. This is generally the case where the Group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost. Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Group's share of the post-acquisition profits or losses of the investee in profit or loss, and the Group's share of movements in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment. When the Group's share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. The carrying amount of equity-accounted investments is tested for impairment in case there are indications that the carrying value may no longer be recoverable. For further details, please see investment in associate Note 15.
Investment Company
In accordance with the provisions of IFRS 10, Draper Esprit plc considers itself to be an investment entity and considers its wholly-owned subsidiary, Draper Esprit (Ireland) Limited as well as the limited partnerships listed below to be investment companies, as their sole purpose is to hold investments on behalf of the Group. Consequently, Draper Esprit (Ireland) Limited and the limited partnerships listed below are not consolidated in accordance with IFRS10, instead they are recognised as investments held at fair value through profit and loss on the consolidated balance sheet. Loans to investment vehicles are treated as net investments at fair value through the profit and loss.
The below is a list of entities that are controlled and not consolidated but held as investments at fair value through the profit and loss on the consolidated balance sheet.
|
Name of undertaking |
Principal activity |
Country of incorporation |
% ownership |
|
Draper Esprit (Ireland) Limited^^ |
Investment company |
Ireland |
100% |
|
Esprit Capital III LP^ |
Limited partnership |
England |
100% |
|
Esprit Capital IV LP^ |
Limited partnership |
England |
100% |
|
Esprit Investments (1) LP^ |
Limited partnership |
England |
100% |
|
Esprit Investments (2) LP^ |
Limited partnership |
England |
100% |
|
Esprit Investments (1) (B) LP^ |
Limited partnership |
England |
100% |
|
Esprit Investments (2) (B) LP^ |
Limited partnership |
England |
100% |
^20 Garrick Street, London, England, WC2E 9BT
^^ 32 Molesworth Street, Dublin 2, Ireland, D02 Y512
Limited Partnerships (co-investment)
The following limited partnerships that the Group's General Partners are members of are not considered to be controlled and, therefore, they are not consolidated in these financial statements:
|
Name of undertaking |
Principal activity |
Country of incorporation |
|
Encore I GP LP^ |
General partner |
Cayman |
|
Esprit Capital II Founder LP^ |
Co-investment limited partnership |
Cayman |
|
Esprit Capital II Founder 2 LP^ |
Co-investment limited partnership |
Cayman |
|
Encore I Founder LP^ |
Co-investment limited partnership |
Cayman |
|
Encore I Founder 2014 LP^ |
Co-investment limited partnership |
Cayman |
|
Encore I Founder 2014-A LP^ |
Co-investment limited partnership |
Cayman |
|
Esprit Capital III Founder LP^^ |
Co-investment limited partnership |
Scotland |
^Appleby Trust (Cayman) Limited, PO Box 1350, Clifton House, 75 Fort Street, Grand Cayman, KY1-1108, Cayman Islands
^^50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
The Group's management does not consider there to be a material exposure to these entities.
c) Operating Segment
The Group's management considers the Group's investment portfolio represents a coherent and diversified portfolio with similar economic characteristics and as a result these individual investments have been aggregated into a single operating segment. In the view of the Directors, there is accordingly one reportable segment under the provisions of IFRS 8.
d) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts, VAT and other sales-related taxes. All revenue from services is generated within the UK and is stated exclusive of value added tax.
Revenue from services comprises:
i. Fund management services
Fund management fees are either earned at a fixed annual rate or are set at a fixed percentage of funds under management, measured by commitments or invested cost, depending on the stage of the fund being managed. Revenues are recognised as the related services are provided.
ii. Portfolio Directors' fees
Portfolio Directors' fees are annual fees, charged in arrears, to an investee company and payable to Draper Esprit plc as the fund manager. Draper Esprit plc only charges Directors' fees on a limited number of the investee companies. Revenues are recognised as services are provided.
iii. Performance fees
Performance fees are earned on a percentage basis on returns over a hurdle rate in the statement of comprehensive income. Amounts are recognised as revenue when it can be reliably measured and highly probable funds will flow to the Group.
e) Deferred income
The Group's management fees are typically billed annually, either quarterly or half-yearly in advance. Where fees have been billed for an advance period, the amounts are credited to deferred income, and then subsequently released through the profit and loss accounting the period the fees relate to.
f) Business combinations
The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.
The Group recognises identifiable assets acquired and liabilities assumed in a business combination, regardless of whether they have been previously recognised in the acquiree's financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values. Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of: a) fair value of consideration transferred; b) the recognised amount of any non-controlling interest in the acquiree; and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately.
g) Goodwill and other intangible assets
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceed the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
When the consideration transferred by the Group in a business combination includes an asset or liability resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the "measurement period" (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.
Other intangible assetsCertain previously unrecognised assets acquired in a business combination that qualify for separate recognition are recognised as intangible assets at their fair values e.g. brand names, customer contracts and lists (See Note 14). All finite-lived intangible assets are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives. Residual values and useful lives are reviewed at each reporting date. In addition, they are subject to impairment testing as described below. Customer contracts are amortised on a straight-line basis over their useful economic lives, typically the duration of the underlying contracts. The following useful economic lives are applied:
i. Customer contracts: eight years.
h) Impairment
For the purposes of assessing impairment, assets are grouped at the lowest level for which there are largely independent cash inflows ("cash generating units" or "CGU"). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors goodwill. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised in the consolidated statement of total comprehensive income for the amount by which the assets or cash generating units carrying amount exceeds its recoverable amount that is the higher of fair value less costs to sell and value-in-use. To determine value-in-use, management estimates expected future cashflows over 5 years from each cash-generating unit and determine a suitable discount rate in order to calculate the present value of those cashflows. Discount factors are determined individually for each cash- generating unit and reflect their respective risk profile as assessed by management. Impairment losses for cash generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. Any remaining impairment loss is charged pro-rata to the other assets in the cash-generating unit with the exception of goodwill, and all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment charge is reversed if the cash-generating units recoverable amount exceeds its carrying amount.
i) Foreign currency
Transactions entered into by Group entities in a currency other than the functional currency in which they operate are recorded at the rates prevailing when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates prevailing at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in the profit and loss.
The individual financial statements of the Group's subsidiary undertakings are presented in their functional currency. For the purpose of these consolidated financial statements, the results and financial position of each subsidiary undertaking are expressed in Pounds Sterling, which is the presentation currency for these consolidated financial statements.
The assets and liabilities of the Group's undertakings, whose functional currency is not pounds sterling, are translated at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period.
j) Financial assets
All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned and are initially measured at fair value, plus transaction costs, except for those financial assets classified at fair value through profit or loss, which are initially measured at fair value.
Financial assets are classified by the Group into the following specified categories: financial assets 'at fair value through profit or loss' (FVTPL) and 'amortised cost'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Fair value through profit or loss
A financial asset may be designated as at FVTPL upon initial recognition if:
(a) such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
(b) the financial asset forms part of a group of financial assets or financial liabilities, or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Draper Esprit Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
(c) it forms part of a contract containing one or more embedded derivatives, and IFRS 9 Financial Instruments permits the entire combined contract (asset or liability) to be designated as at FVTPL.
The Group considers that the investment interests it holds in Esprit Capital III LP, Esprit Capital III Founder LP, Esprit Capital II Founder LP, Esprit Capital IV LP, Esprit Investments(I) LP, Esprit Investments (1)(B) LP, Esprit Investments (2) LP, and Esprit Investments (2)(B) LP are appropriately designated as at FVTPL as they meet criteria (b) above.
Amortised cost
A financial asset is held at amortised cost under IFRS 9 where it is held for the collection of cash flows representing solely payments of principal and interest. These assets are measured at amortised cost using the effective interest method, less any expected losses. Financial assets which were part of the category of 'loans and receivables' under IAS 39 Financial Instruments: Recognition and measurement are now categorised within this group.
The Group's financial assets held at amortised cost comprise trade and most other receivables, and cash and cash equivalents in the consolidated statement of financial position.
k) Financial liabilities
The Group's financial liabilities may include borrowings and trade, and other payables.
All financial liabilities are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned and are initially measured at fair value, plus transaction costs.
Financial liabilities are measured subsequently at amortised cost using the effective interest Method. All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within finance costs or finance income.
l) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the outflow of resources embodying the economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
m) Share capital
Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset.
The Group's ordinary shares are classified as equity instruments. Equity instruments are recorded at the proceeds received, net of direct issue costs.
n) Defined contribution schemes
Contributions to defined contribution pension schemes are charged to the consolidated statement of comprehensive income in the year to which they relate.
o) Share-based payments
Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the consolidated statement of comprehensive income over the remaining vesting period. Where equity instruments are granted to persons other than employees, the consolidated statement of comprehensive income is charged with the fair value of goods and services received.
p) Leased assets
Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a "finance lease") the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair value of the leased property and the present value of the minimum payments payable of the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the consolidated statement of comprehensive income over the period of the lease and is calculated so that it represents constant proportion of the lease liability. The capital element reduces the balance owed to the lessor.
Where substantially all of the risks and rewards incidental to the ownership are not transferred to the Group (an "operating lease") the total rentals payable under the lease are charged to the consolidated statement of comprehensive income on a straight-line basis over the lease term. The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis.
q) Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when the dividend is paid. In the case of final dividends, this is when the dividend is approved by the shareholders at the AGM.
r) Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
s) Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities, and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
t) Property, Plant and equipment
Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is recognised to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method, on the following basis:
Leasehold improvements - over the term of the lease
Fixtures and equipment - 33% p.a. straight line
Computer equipment - 33% p.a. straight line
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
u) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits at bank and highly liquid investments with a term of no more than 90 days that are readily convertible into known amounts of cash and that are subject to an insignificant risk of changes in value. No cash equivalents are held as at 31 March 2019 (31 March 2018: nil).
v) Segmental reporting
IFRS 8, "Operating Segments" defines operating segments as those activities of an entity about which separate financial information is available and which are evaluated by the Chief Operating Decision Maker to assess performance and determine the allocation of resource. The Chief Operating Decision Maker has been identified by the Board of Directors as the Chief Executive Officer.
w) Financial instruments
Financial assets and financial liabilities are recognised in the consolidated balance sheet when the Group becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
x) Exceptional items
The Group classifies items of income and expenditure as exceptional when the nature of the item or its size is likely to be material, to assist the reader of the financial statements to better understand the results of the operations of the Group. Such items by their nature are not expected to recur and are shown separately on the face of the consolidated statement of comprehensive income.
y) Interest income
Interest income earned on cash and deposits and short-term liquidity investments is recognised when it is probable that the economic benefits will flow to the Group and the amount of income recognised can be measured reliably. Interest income is accrued on a time basis, with reference to the principal outstanding and at the effective interest rate applicable.
z) Carried interest
The Group has established carried interest plans for the Executive Directors, other members of the investment team and certain other employees (together, the ''Plan Participants'') in respect of any investments and follow-on investments made from Admission. Each carried interest plan operates in respect of investments made during a 24-month period and related follow-on investments made for a further 36-month period.
Subject to certain exceptions, Plan Participants will receive, in aggregate, 15% of the net realised cash profits from the investments and follow-on investments made over the relevant period once the Group has received an aggregate annualised 10% realised return on investments and follow-on investments made during the relevant period. The Plan Participants' return is subject to a ''catch-up'' in their favour. Plan Participants' carried interests vest over five years for each carried interest plan and are subject to good and bad leaver provisions. Any unvested carried interest resulting from a Plan Participant becoming a leaver can be reallocated by the Remuneration and Nomination Committee.
The Group's interest in carried interest is measured at fair value through the profit and loss (FVTPL) with reference to the performance conditions described above, and is deducted from the valuation of investments measured at FVTPL.
Fair value measurement
Management uses valuation techniques to determine the fair value of financial assets. This involves developing estimates and assumptions consistent with how market participants would price the assets. Management bases its assumptions on observable data as far as possible, but this is not always available, in that case management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date (See Note 4(a)).
4. Critical accounting estimates and judgements
The Directors have made the following judgements and estimates that have had the most significant effect on the carrying amounts of the assets and liabilities in the consolidated financial statement. 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 the revision and future periods if the revision affects both current and future periods. Actual results may differ from estimates. The key estimates, (4)(a) and (4)(b), and judgements, (4)(c) and (4)(d), are discussed below. There have been no changes to the accounting estimates and judgements in the financial year ended 31 March 2019.
a) Valuation of unquoted equity investments at fair value through the profit and loss
The Group invests into Limited Companies and Limited Partnerships which are considered to be investment companies that invest in unquoted equity for the benefit of the Group. These investment companies are measured at fair value through the profit or loss based on their NAV at the year end. The Group controls these entities and is responsible for preparing their NAV which is based on the valuation of their unquoted investments. The Group's valuation of investments measured at fair value through profit or loss is therefore dependent upon estimations of the valuation of the underlying portfolio companies.
The Group, through its controlled investment companies also invests in investment companies which primarily focus on German or seed investments. These investments are considered to be 'Fund of Fund investments' for the Group and are recognised at their NAV at the year-end date. These Fund of Fund investments are not controlled by the Group and some do not have coterminous year ends with the Group. To value these investments management obtain the latest audited financial statements of the investments and discuss further movements with the management of the companies. Where the Fund of Funds hold investments that are individually material to the Group, management perform further procedures to determine that the valuation of these investments has been prepared in accordance with the Group's valuation policies for portfolio companies outlined below and these valuations will be adjusted by the Group where necessary based on the Group valuation policy for valuing portfolio companies.
The estimates required to determine the appropriate valuation methodology of unquoted equity investments means there is a risk of material adjustment to the carrying amounts of assets and liabilities. These estimates include whether to increase or decrease investment valuations or not and require the use of assumptions about the carrying amounts of assets and liabilities that are not readily available or observable.
The fair value of unlisted securities is established with reference to the International Private Equity and Venture Capital Valuation Guidelines ("IPEV Guidelines"). In line with the IPEV Guidelines, the Group may base valuations on earnings or revenues where applicable, market comparables, price of recent investments in the investee companies, or on net asset values. An assessment will be made at each measurement date as to the most appropriate valuation methodology.
The Group invests in early-stage and growth technology companies, through predominantly unlisted securities. Given the nature of these investments, there are often no current or short-term future earnings or positive cash flows. Consequently, although not considered to be the default valuation technique, the appropriate approach to determine fair value may be based on a methodology with reference to observable market data, being the price of the most recent transaction. Fair value estimates that are based on observable market data will be of greater reliability than those based on estimates and assumptions and accordingly where there have been recent investments by third parties, the price of that investment will generally provide a basis of the valuation.
If this methodology is used, the length of period for which it remains appropriate to use the price of recent investment depends on the specific circumstances of the investment, and the Group will consider whether this basis remains appropriate each time valuations are reviewed.
If the "price of recent investment" methodology is not considered appropriate, the Group considers alternative methodologies in the IPEV Guidelines, being principally price-revenue or price-earnings multiples, depending upon the stage of the asset, requiring management to make assumptions over the timing and nature of future revenues and earnings when calculating fair value.
Where a fair value cannot be estimated reliably, the investment is reported at the carrying value at the previous reporting date unless there is evidence that the investment has since been impaired.
In all cases, valuations are based on the judgement of the Directors after consideration of the above and upon available information believed to be reliable, which may be affected by conditions in the financial markets. Due to the inherent uncertainty of the investment valuations, the estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. Due to this uncertainty, the Group may not be able to sell its investments at the carrying value in these financial statements when it desires to do so or to realise what it perceives to be fair value in the event of a sale. See Notes 26 and 27 for information on unobservable inputs used and sensitivity analysis on investments held at fair value through the profit and loss.
b) Carrying amount of goodwill
Determining whether goodwill is impaired requires an estimation of the recoverable amount of the cash-generating units to which goodwill is allocated. An impairment review is performed on an annual basis unless there is a trigger event during the period. The recoverable amount is based on "value in use" calculations which requires estimates of future cashflows expected from the cash generation unit (CGU) and a suitable discount rate in order to calculate present value. The key assumptions for the value in use calculations are the discount rate using pre-tax rates that reflect the current market assessments of the time value of money and risks specific to the CGU. The internal rate of return ("IRR") used was based on past performance and experience. The carrying amount of the restated goodwill as at the statement of financial position date was £9.7 million, which was recognised during the year ending 31 March 2017 in according with IFRS 3 Business Combinations. Other than the restatement during the period (See Note 3(a) and note 18 for further details), the Group has conducted a sensitivity analysis on the impairment test of the CGU and the carrying value. A higher discount rate in the range of 15%-20% does not reduce the carrying value of goodwill to less than its recoverable amount.
The CGU was determined to be the fund managers, which is a critical management judgement, as they are responsible for generating deal flow and working with investee companies creating value and maximising returns for the Group.
c) Control assessment
The Group has a number of entities within its corporate structure and a judgement has been made of which should be consolidated in accordance with IFRS 10, and which should not. The Group consolidates all entities where it has control over the following: power over the investee to significantly direct the activities; exposure, or rights, to variable returns from its involvement with the investee, and the ability to use its power over the investee to affect the amount of the investor's returns. The Company does not consolidate qualifying investment companies it controls in accordance with IFRS 10 and instead recognises them as investments held at fair value through the profit and loss. See Note 3(b) for further details.
d) Business combinations
The Directors have undertaken a detailed assessment of the substance of the transaction through which the Company acquired the underlying investment vehicles and Esprit Capital Partners LLP and its subsidiaries with reference to the requirements of IFRS 10 and IFRS 3. Following that assessment based on the judgement of Directors, it has been determined that this transaction is appropriately accounted for as an acquisition.
5. Earnings per share and net asset value
The calculation of basic earnings per share is based on the profit attributable to shareholders and the weighted average number of shares. When calculating the diluted earnings per share, the weighted average number of shares in issue is adjusted for the effect of all dilutive share options and awards.
|
Basic earnings per ordinary share |
Profit after tax £'000s |
Weighted average no. of shares '000 |
Pence |
|
31 March 2019 |
110,579 |
96,051 |
115 |
|
31 March 2018 *Restated (Note 3a & 18) |
57,766 |
65,011 |
89 |
|
31 March 2017 *Restated (Notes 3a & 18) |
28,487 |
32,230 |
88 |
|
Diluted earnings per ordinary share |
Profit after tax £'000s |
Weighted average no. of shares '000 |
Pence |
|
31 March 2019 |
110,579 |
100,506 |
110 |
|
31 March 2018 *Restated (Notes 3a & 18) |
57,766 |
65,512 |
88 |
|
31 March 2017 *Restated (Notes 3a & 18) |
28,487 |
32,740 |
87 |
Net asset value ("NAV") per share is based on the net asset attributable to shareholders and the number of shares as at the balance sheet date. When calculating the diluted earnings per share, the number of shares in issue at balance sheet date is adjusted for the effect of all dilutive share options and awards.
|
Net asset value per ordinary share |
Net assets £'000s |
No. of shares at balance sheet date '000 |
Pence per |
|
31 March 2019 |
618,332 |
117,925 |
524 |
|
31 March 2018 *Restated (Notes 3a & 18) |
297,719 |
71,612 |
416 |
|
31 March 2017 *Restated (Notes 3a & 18) |
139,767 |
40,748 |
343 |
|
Diluted net asset value per ordinary share |
Net assets £'000s |
No. of shares at balance sheet date '000 |
Pence per |
|
31 March 2019 |
618,332 |
123,325 |
501 |
|
31 March 2018 *Restated (Notes 3a & 18) |
297,719 |
74,636 |
399 |
|
31 March 2017 *Restated (Notes 3a & 18) |
139,767 |
42,261 |
331 |
Dividends: There were no Dividends paid out in the year to 31March 2019 (2018: nil)
6. Intangible assets
|
31 March 2019 |
Goodwill1 £'000s |
Customer contracts2 £'000s |
Total £'000s |
|
Cost |
|
|
|
|
Cost carried forward as at 1 April 2018 |
9,653 |
818 |
10,471 |
|
Additions during the year |
- |
- |
- |
|
Cost as at 31 March 2018 |
9,653 |
818 |
10,471 |
|
Accumulated amortisation |
|
|
|
|
Amortisation carried forward as at 1 April 2018 |
- |
(239) |
(239) |
|
Charge for the year |
- |
(102) |
(102) |
|
Accumulated amortisation as at 31 March 2019 |
- |
(341) |
(341) |
|
Net book value: |
|
|
|
|
As at 31 March 2019 |
9,653 |
477 |
10,130 |
|
As at 31 March 2018 |
9,653 |
579 |
10,232 |
|
31 March 2018 *Restated (Notes 4b & 18) |
Goodwill1 £'000s |
Customer contracts2 £'000s |
Total £'000s |
|
Cost |
|
|
|
|
Cost carried forward as at 1 April 2017 |
9,653 |
818 |
10,471 |
|
Additions during the year |
- |
- |
- |
|
Cost as at 31 March 2018 |
9,653 |
818 |
10,471 |
|
Accumulated amortisation |
|
|
|
|
Amortisation carried forward as at 1 April 2017 |
- |
(136) |
(136) |
|
Charge for the year |
- |
(103) |
(103) |
|
Accumulated amortisation as at 31 March 2018 |
- |
(239) |
(239) |
|
Net book value: |
|
|
|
|
As at 31 March 2018 |
9,653 |
579 |
10,232 |
|
As at 31 March 2017 |
9,653 |
682 |
10,335 |
|
31 March 2017 *Restated (Notes 4b & 18) |
Goodwill1 £'000s |
Customer contracts2 £'000s |
Total £'000s |
|
Cost |
|
|
|
|
Cost carried forward as at 15 June 2016 |
|
|
|
|
Additions during the year |
- |
- |
- |
|
Acquired through business combinations (Note 18) |
9,653 |
818 |
10,471 |
|
Cost as at 31 March 2017 |
9,653 |
818 |
10,471 |
|
Accumulated amortisation |
|
|
|
|
Amortisation carried forward as at 15 June 2016 |
- |
- |
- |
|
Charge for the year |
- |
(136) |
(136) |
|
Accumulated amortisation as at 31 March 2017 |
- |
(136) |
(136) |
|
Net book value: |
|
|
|
|
As at 31 March 2017 |
9,653 |
682 |
10,335 |
1 Goodwill of £9.7 million (restated - see Notes 3(a) and 18) arose on the acquisition of all the capital interests in Esprit Capital Partners LLP, a Venture Capital manager based in the UK, on 15 June 2016 and represents the value of the acquired expertise and knowledge of the fund managers. The directors have identified the fund managers as the cash-generating unit ("CGU") being the smallest group of assets that generates cash inflows independent of cash flows from other assets or groups of assets. The fund managers are responsible for generating deal flow and working closely with investee companies creating value and maximising returns for the Group. The Group tests goodwill annually for impairment comparing the recoverable amount using value-in-use calculations and the carrying amount. Value-in-use calculations are based on future expected cash flows generated by the CGU fee income from management fees over the next 5 years from the realisation of investments for the next eight years with reference to the most recent financial budget and forecasts. A five-year cashflow period was deemed appropriate for the value in use calculation given the patient capital model adopted by the Group. The key assumptions for the value in use calculations are the discount rate using pre-tax rates that reflect the current market assessments of the time value of money and risks specific to the CGU. The internal rate of return ("IRR") used was based on past performance and experience. The discount rate used was 10% and the IRR used was 20%.
2 An intangible asset of £0.8 million was also recognised in respect of the anticipated profit from the participation in Encore Ventures LLP as a consequence of the acquisition of Esprit Capital Partners LLP.
7. Financial assets held at fair value through profit and loss
The Group holds investments through investment vehicles it manages. The investments are predominantly in unlisted securities and are carried at fair value through the profit and loss. The Group's valuation policies are set out in Note 4(a) and Note 26. The table below sets out the movement in the balance sheet value of investments from the start to the end of the year, showing investments made, cash receipts and fair value movements.
|
|
Year ended 31 Mar 2019 £'000s |
Year ended 31 Mar 2018 £'000s |
Year ended 31 Mar 2017 £'000s |
|
As at 1 April |
231,910 |
105,971 |
- |
|
Initial portfolio acquired on 15 June 20161 |
- |
- |
63,940 |
|
Carry and Co-invest acquired on 15 June 2016 |
- |
- |
2,822 |
|
Investments made in the year2/3 |
226,432 |
74,674 |
20,602 |
|
Investments settled in shares3 |
309 |
- |
- |
|
Loans repaid from underlying investment vehicles |
(15,984) |
(15,338) |
(17,137) |
|
Loans made to underlying investment vehicles |
4,679 |
- |
- |
|
Unrealised gains on the revaluation of investments |
114,715 |
66,603 |
35,744 |
|
As at 31 March |
562,061 |
231,910 |
105,971 |
1 The initial portfolio was acquired on 15 June 2016 as part of the IPO, which was satisfied by a mixture of cash (£40.0 million) and shares of (£23.9 million) issued by the Company.
2 Investments made in the year are amounts the Company has invested in underlying investment vehicles. This is not the equivalent to the total amount invested in portfolio companies as existing cash balances from the investment vehicles are reinvested.
3 Investments made in the period include non-cash consideration of £0.3 million. See separate line.
8. Acquisition of Esprit Capital Partners LLP
On 15 June 2016, the Company acquired 100% of the member's capital of Esprit Capital Partners LLP, a venture capital manager based in the UK. The business was acquired in order for Draper Esprit plc to become a self-managed investment entity. The revenues and profits of the acquired entity and its subsidiaries would have been £1.2 million and £32.9 million had the entity been acquired at the beginning of the accounting period being 15 June 2016. Details of the business combination are as follows:
|
|
As reported £'000s |
Adjustment |
Restated |
|
Fair value of equity shares issued |
24,000 |
(10,823) |
13,177 |
|
Total |
24,000 |
(10,823) |
13,177 |
|
Recognised amounts of identifiable net assets: |
|
|
|
|
Property, plant and equipment |
5 |
- |
5 |
|
Intangible assets |
818 |
- |
818 |
|
Investments |
2,675 |
- |
2,675 |
|
Trade and other receivables |
1,165 |
- |
1,165 |
|
Cash and cash equivalents |
495 |
- |
495 |
|
Deferred tax liabilities |
(310) |
- |
(310) |
|
Trade and other payables |
(1,324) |
- |
(1,324) |
|
Net identifiable assets and liabilities |
3,524 |
- |
3,524 |
|
Goodwill |
20,476 |
(10,823) |
9,653 |
Consideration transferred
The acquisition was settled by issuing 8,000,000 shares of Draper Esprit plc. The fair value of the equity shares issued was based on the market value of Draper Esprit plc's traded shares on the acquisition date. Certain Directors each received 2,911,311 ordinary shares pursuant to the terms of the Esprit Capital Acquisition Agreement on 15 June 2016 and agreed to immediately each sell 681,156 ordinary shares. In the year, a change in the underlying accounting treatment of the Company's acquisition of Esprit Capital Partners LLP ("ECP") in June 2016 has led to a reduction in the goodwill carried on the balance sheet of £10.8 million. In accordance with IFRS 3, Business Combinations, £10.8 million (3,607,668 shares at £3.00 each) was reclassified to the consolidated statement of changes in equity as a contingent payment to the members of Esprit Capital Partners LLP and charged to the consolidated statement of comprehensive income over 2.5 years in accordance with the Lock-in And Vesting Deed dated 10 June 2016 and subsequent Waiver Agreement. This is not indicative of an impairment to the goodwill or the inherent value of ECP but a change to present approximately half of the original consideration (8 million shares at 300p per share) as a contingent payment.
The reduction in the goodwill is matched by a reduction in the merger reserve on the balance sheet of £10.8 million and the income statement reflects an equivalent charge over the current and restated reporting periods.
The comparative periods' consolidated statements of financial position and consolidated statements of comprehensive income presented in these consolidated financial statements have been restated to reflect this reclassification from the period commencing 1 April 2016 through to 31 March 2018. There are no ongoing charges related to this accounting change.
Please see below a table reflecting the movements during prior periods and during the year ending 31 March 2019 resulting from this restatement:
|
|
|
Balance Sheet |
Equity |
P&L* |
|||
|
Account |
Date |
Dr |
Cr |
Dr |
Cr |
Dr |
Cr |
|
Merger Reserve |
15/06/2016 |
£10,823,004 |
- |
- |
- |
- |
- |
|
Goodwill |
15/06/2016 |
- |
£10,823,004 |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Retained earnings - b/f |
Year ending 31 March 2017 |
- |
- |
£4,427,855 |
- |
- |
- |
|
Share-based payment reserve -arising from acquisition of subsidiary |
Year ending 31 March 2017 |
- |
£4,427,855 |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Retained earnings - b/f |
Year ending 31 March 2018 |
- |
- |
£4,405,506 |
- |
- |
- |
|
Share-based payment reserve -arising from acquisition of subsidiary |
Year ending 31 March 2018 |
- |
£4,405,506 |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Share-based payment charge -arising from acquisition of subsidiary |
Period ending 30 September 2018 |
- |
- |
- |
- |
£1,989,643 |
- |
|
Share-based payment reserve -arising from acquisition of subsidiary |
Period ending 30 September 2018 |
- |
£1,989,643 |
- |
- |
- |
- |
|
|
|
£10,823,004 |
£21,646,008 |
£8,833,361 |
- |
£1,989,643 |
- |
*Consolidated Statement of Comprehensive Income
9. Share capital and share premium
Ordinary share capital
|
31 March 2019 - Allotted and fully paid |
Number |
Pence |
£'000s |
|
At the beginning of the year |
71,611,773 |
1 |
716 |
|
Issue of share capital during the year for cash1 / 2 |
46,248,877 |
1 |
462 |
|
Issue of share capital during the year as consideration for investment purchase3 |
64,820 |
1 |
- |
|
At the end of the year |
117,925,470 |
1 |
1,179 |
1 On 14 June 2018, the Company raised gross proceeds of approximately £115.0 million at an issue price of 420 pence per share by way of the conditional placing of 20,238,095 new ordinary shares and a subscription of 7,142,857 new ordinary shares.
2 On 8 February 2019, the Company raised gross proceeds of approximately £100.0 million at an issue price of 530 pence per share by way of the conditional placing of 18,867,925 new ordinary shares.
3 On the 4 July 2018, the Company raised gross proceeds of £0.3 million at an issue price of 478 pence per share by way of the placing of 64,820 new ordinary shares.
|
31 March 2018 - Allotted and fully paid |
Number |
Pence |
£'000s |
|
At the beginning of the year |
40,747,576 |
1 |
407 |
|
Issue of share capital during the year |
30,864,197 |
1 |
309 |
|
At the end of the year |
71,611,773 |
1 |
716 |
On 5 June 2017 the Company announced a placing and subscription for £100.0 million. 29,012,346 new shares were issued on 20 June 2017 to trading on AIM and ESM with a further 1,851,851 new shares issued for 324 pence each on 4 August 2017.
|
31 March 2017 - Allotted and fully paid |
Number |
Pence |
£'000s |
|
At the beginning of the year |
50,000 |
100 |
50 |
|
Redeemed during the year1 |
(50,000) |
100 |
(50) |
|
Issue of share capital during the year |
40,747,576 |
1 |
407 |
|
At the end of the year |
40,747,576 |
1 |
407 |
1 During the year, 50,000 management shares were redeemed by the Company at par for 100 pence each.
On 15 June 2016, 40,673,909 new ordinary shares of 1 pence each were issued for trading on the AIM and ESM at a price of 300 pence per share as part of an IPO transaction to purchase Esprit Capital III LP and acquire the Esprit Capital Partners LLP Group. The shares were issued as follows:
i. 23,829,017 shares (£69.3 million) were issued to investors for cash proceeds, net of issuance costs;
ii. 8,844,892 shares (£23.9 million) were issued for the acquisition of investment interests held by Draper Esprit Ireland in Esprit Capital III LP as described in Note 16 (net of issuance costs);
iii. 8,000,000 shares (£24.0 million) were issued for the acquisition of Esprit Capital Partners LLP, as described in note 18.
On 26 November 2016, a further 73,667 new ordinary shares of 1 pence each were issued at a price of 350 pence per share to purchase Elderstreet Holdings limited as described in Note 15.
Share premium
|
Allotted and fully paid |
Year ended 31 Mar 2019 £'000s |
Year ended 31 Mar 2018 £'000s |
Year ended 31 Mar 2017 £'000s |
|
At the beginning of the year |
188,229 |
93,248 |
- |
|
Premium arising on the issue of ordinary shares^ |
215,035 |
100,000 |
95,972 |
|
Equity issuance costs |
(7,481) |
(5,019) |
(2,724) |
|
At the end of the year |
395,783 |
188,229 |
93,248 |
^ The premium on ordinary shares in the year arises from the issue of 27,380,952 new ordinary shares of 1 pence each on 14 June 2018, the issue of 64,820 new ordinary shares of 1 pence each on 4 July 2018, and the issue of 18,867,925 of 1 pence each on 8 February 2019.
Merger relief reserve
In accordance with the Companies Act 2006, a Merger Relief Reserve of £13.1 million (restated) (net of the cost of share capital issued of £80k) was created on the issue of 8,000,000 ordinary shares for 300 pence each in Draper Esprit plc as consideration for the acquisition of 100% of the capital interests in Esprit Capital Partners LLP on 15 June 2016..
10. Fair value measurements
This section should be read with reference to Note 4(a) and Note 16. The Group classifies financial instruments measured at fair value through the profit and loss according to the following fair value hierarchy:
(a) Level 1: inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
(b) Level 2: inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
(c) Level 3: inputs are unobservable inputs for the asset or liability.
All investments are held at fair value through the profit and loss are classified as Level 3 in the fair value hierarchy. As a consequence, the values of investments at balance sheet date are considered to be entirely based on Level 3 inputs. There were no transfers between Levels 1, 2 and 3 during the year.
Significant unobservable inputs for Level 3 valuations
The Group's investments are all classified as Level 3 investments. The Group may base valuations on earnings or revenues where applicable, market comparables, price of recent investments in the investee companies, or on net asset values. See Note 4(a) where valuation policies are discussed in more detail.
Financial instruments, measured at fair value, categorised as Level 3 within the fair value hierarchy can be split into two main valuation techniques. Valuation techniques can be categorised as based on last round price or revenue-multiple. As at 31 March 2019, financial instruments measured using last round price valuation methodology £405.9 million (year ended 31 March 2018: £114.7 million). As at 31 March 2019, financial instruments measured using revenue-multiple valuation methodology £186.1 million (year ended 31 March 2018: £117.2 million).
Each portfolio company will be subject to individual assessment. Where the Group invests in funds of funds investments, the value of the portfolio will be reported by the seed fund to the Group. The Group will ensure that the valuations comply with the Group policy.
The valuation multiple is the main assumption applied to valuation based on a revenue-multiple methodology. The multiple is derived from comparable listed companies or relevant market transaction multiples. Companies in the same industry and geography, and, where possible, with a similar business model and profile are selected and then adjusted for factors including liquidity risk, growth potential and relative performance. They are also adjusted to represent our longer-term view of performance through the cycle or our existing assumption. The portfolio we have is diversified across sectors and geographies and the companies within our core portfolio holdings which have valuations based on revenue-multiples have an average multiple of 3x.
If the multiple used to value each unquoted investment valued on a revenue-multiples basis as at 31 March 2019 was to decrease by 10%, the investment portfolio would decrease by £15.2 million (31 March 2018: £10.8 million). If the multiple increases by 10% then the investment portfolio would increase by £15.2 million (31 March 2018: £10.8 million).
11. Related party transactions
Draper Esprit plc may require that one of its members be appointed to the board of an investee company in a non-executive role. In such circumstances Draper Esprit plc charges an administration fee to the investees for the provision of Director services. These fees which amounted to £26,957 (2018: £9,527, 2017: £29,825) have been included in the turnover for the year. At year end, there was a balance of £16,357 outstanding (2018: £8,307). Draper Esprit does not exercise control or management through any of these non-executive positions.
On Admission, Simon Cook and Stuart Chapman assigned a portion of their personal entitlements in the carried interest in Esprit Capital Fund III(i) LP to the Group. The fair value of the Esprit Capital Fund III(i) LP interest assigned, calculated in accordance with the policies applied with the Group's financial statements, was £656,000. A payment of £75,000 each was made in favour of Simon Cook and Stuart Chapman in recognition of the transfer. The members of the LLP also assigned a 61.5% interest in the gains of Esprit Capital III FP LP for £nil consideration. The fair value of the Esprit Capital III FP LP interest assigned, calculated in accordance with the policies applied with the Group's financial statements, was £444,000. All amounts had been settled by the 31 March 2018. The payments made to Directors during the year ending 31 March 2019 only include salaries and other forms of compensation disclosed in Remuneration and Nomination Committee Report starting on page 54.
During the year, £840,000 (2018: £208,800) was received from Encore Ventures LLP for overheads, at year end there was a balance of £70,000 (2018: £17,400) remained outstanding.
During the year £53,737 (2018: £59,287) was received from Draper Esprit VCT for overheads, at year-end a balance of £39,154 (2018: £4,858) remained outstanding.
Unconsolidated structured entities
The Group has exposure to a number of unconsolidated structured entities as a result of its venture capital investment activities.
The Group invests funds via a number of limited partnerships. These are controlled by the Group and not consolidated, but they are held as investments at fair value through the profit and loss on the consolidated balance sheet in line with IFRS 10 (See Note 3b for further details). The list of these investment companies and limited partnerships can also be seen in Note 3b. Within these limited partnerships, there are commitments made to fund of funds investments that are disclosed in Note 30 below. The material assets and liabilities within these investment companies are the investments, which are held at FVTPL in the consolidated accounts.
A Strategic Partnership Agreement was entered into during the financial year with Earlybird. Total exposure to the Group is £144.6 million of NAV and further commitments of £44.8 million.
The Group also co-invests or historically co-invested with a number of limited partnerships (see note 3b for further details). The exposure to these entities is immaterial.
Glossary
In this document, where the context permits, the terms and expressions set out below shall have the meanings assigned thereto:
|
"Admission" or "IPO" |
the Admission of the enlarged share capital to trading on AIM and ESM on 15 June 2016 and such admission becoming effective in accordance with the AIM Rules and the ESM Rules respectively. The IPO included the acquisition of Esprit Capital Partners LLP and Draper Esprit (Ireland) Limited. |
|
"Act" |
the UK Companies Act 2006. |
|
"AIM" |
AIM, the market of that name operated by the London Stock Exchange. |
|
"Audit Committee" |
the Audit Committee of the Board. |
|
"Company" or "Draper Esprit" or "plc" |
Draper Esprit plc, a company incorporated in England and Wales with registration number 09799594 and having its registered office at 20 Garrick Street, London, England, WC2E 9BT. |
|
"Core Portfolio Companies" |
Top 15 portfolio companies by value. |
|
"DEF" / "Digital East Fund" |
Digital East Fund 2013 SCA SICAR |
|
"Directors" or "Board" |
the Directors of the Company, whose names, as at the date of this document appear on page 46 and 47 of this document. |
|
"Draper Esprit Funds" |
the Esprit Funds and the Encore Funds. |
|
"Draper Venture Network" |
the self-governed network of ten independent growth and venture funds, of which Esprit Capital is a member. |
|
"EB IV" / "Earlybird Fund IV" |
Earlybird GmbH & Co. Beteiligungs-KG IV |
|
"EB VI" / "Earlybird Fund VI" |
Earlybird DWES Fund VI GmbH & Co. KG |
|
"EIS" |
The EIS funds managed by Encore Ventures LLP. EIS funds being Enterprise Investment Scheme under the provisions of Part 5 of the Income Tax Act 2007. |
|
"Encore Funds" |
DFJ Esprit Angels' EIS Co-Investment Fund, DFJ Esprit Angels' EIS Co-Investment II, DFJ Esprit EIS III and DFJ Esprit EIS IV and each an "Encore Fund". |
|
"Encore Ventures" |
Encore Ventures LLP, a limited liability partnership incorporated in England and Wales under the registration number OC347590 with its registered office at 20 Garrick Street, London, WC2E 9BT. |
|
"ESM" |
the Enterprise Securities Market operated and regulated by the Irish Stock Exchange. |
|
"Esprit Capital" |
Esprit Capital Partners LLP (previously Draper Esprit LLP), a limited liability partnership incorporated in England and Wales under the registration number OC318087 with its registered office at 20 Garrick Street, London, WC2E 9BT, the holding vehicle of the Group immediately prior to Admission. |
|
"Esprit Ireland" |
Draper Esprit (Ireland) Limited, a wholly owned subsidiary of the Company incorporated in Ireland under the registration number 572006 with its registered office at 32 Molesworth Street, Dublin 2, Ireland. |
|
"FCA" |
the UK Financial Conduct Authority. |
|
"FOF" or "FoF" |
Fund of Funds. |
|
"Gross Portfolio Value" |
Gross portfolio value is the value of the portfolio of investee companies held by funds controlled by the Company before accounting for deferred tax, external carried interest and amounts co-invested. |
|
"HMRC" |
HM Revenue & Customs. |
|
"IFRS" or "IFRSs" |
International Financial Reporting Standards, as adopted for use in the European Union. |
|
"Irish Stock Exchange" |
Irish Stock Exchange Plc. |
|
"IPO" |
The Company's listing on the London Stock Exchange's AIM market and the Irish Stock Exchange's Euronext Dublin market on 15 June 2016. |
|
"IRR" |
the internal rate of return. |
|
"NAV" |
Net asset value. |
|
"Ordinary Shares" |
ordinary shares of £0.01 pence each in the capital of the Company. |
|
"PwC" |
Pricewaterhousecoopers LLP, a limited liability partnership registered in England and Wales under the registration number OC303525 with its registered office at 1 Embankment Place, London, England, WC2N 6RH. |
|
"International Private Equity and Venture Capital Valuation Guidelines" |
the International Private Equity and Venture Capital Valuation Guidelines, as amended from time to time. |
|
"VC" |
venture capital. |
|
"VCT" |
The VCT funds managed by Draper Esprit VCT. VCT (venture capital trust) funds being UK closed-ended collective investment schemes. |
London | HQ
20 Garrick Street London, WC2E 9BT
Tel: +44 (0)20 7931 8800
draperesprit.com
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