TIDMGROW
RNS Number : 2666P
Draper Esprit PLC
25 May 2018
Draper Esprit plc
("Draper Esprit" or "the Company")
FINAL RESULTS FOR THE YEARED 31 MARCH 2018
Draper Esprit (AIM: GROW, ESM: GRW), a leading venture capital
firm investing in high-growth digital technology businesses, today
announces its final results for the year ended 31 March 2018.
Financial highlights
-- Gross Primary Portfolio value has grown by 116% to GBP243.5
million (2017: 72%, GBP112.7 million)
-- Profit after tax increased to GBP65.3 million, a 97% increase (2017: GBP33.2 million)
-- Invested GBP71.5 million by plc and a further GBP24.8m by EIS/ VCT and managed funds
-- Capital raised by the Company of GBP100.0 million in June
2017 and a further GBP55.0 million across EIS and VCT funds
-- Net Assets, including goodwill, increased by 107% to GBP311.3
million (2017: GBP150.7 million)
-- NAV per share of 431 pence (2017: 370 pence)
-- NAV per share, excluding goodwill, of 402 pence (2017: 319 pence)
-- Value of the Core Holdings* has increased by 119%
Operational highlights
-- Invested GBP71.5 million by plc and a further GBP24.8 million
by EIS/VCT and managed funds in 9 new and 11 existing portfolio
companies, across four key subsectors of enterprise, digital health
and wellness, hardware and consumer technology.
-- Announced target of investing GBP75.0 million in top European
seed funds across five-year period
-- Commitments of GBP17.0 million in 7 new fund of funds
vehicles, including 3 post year-end investments.
-- Acquired Seedcamp Fund I and Fund II, for GBP17.9 million
resulting in a stake in Transferwise.
-- Further disposals announced, including Clavis Insight and
have now exited 10 of the original 24 portfolio companies,
realising over GBP57.0 million in cash (including amounts held in
escrow)
Post period end highlights
-- Invested GBP10.0 million (US$14.0m) in Aircall, a leading
provider of cloud-based call centre software
-- Investing up to GBP11.5 million (US$16.5m) in Revolut, the leading fintech business.
-- Announced the sale of portfolio company, Tails.com, to Nestlé Purina Petcare.
Simon Cook, CEO Draper Esprit commented:
"Draper Esprit is pleased to report strong performance and
growth across the portfolio. Since the IPO in 2016, we have grown
our team, invested in 20 high growth companies, realised over
GBP57.0 million in cash, raised GBP100.0 million on the public
market in June 2017 as well as a further GBP55.0 million across our
EIS and VCT funds.
"Over the past 12 months we continued to invest in European
high-growth companies by selecting, building and growing the very
best technology businesses. In particular, we invested GBP96.3
million in 9 new and 11 existing portfolio companies (GBP71.5
million from the plc as well as GBP24.8 million co-invested from
EIS/ VCT and managed funds). We have also exited 3 companies,
realising cash of GBP15.9 million to the benefit of plc
shareholders.
We have executed against our strategy, as set out at the time of
the IPO. Our long-term capital, flexible approach and global
networks, enable us to partner with the best entrepreneurs in
Europe. We also continue to deliver the growth and scale in our
portfolio that will drive sustainable returns for our shareholders.
We look forward to the next financial year with confidence and
optimism."
*The top 10 companies in the portfolio combine to represent
approximately 70% of the portfolio fair value.
Availability of Annual Report and Notice of AGM
The Annual Report and Accounts for the financial year ended 31
March 2018 and notice of the Annual General Meeting ("AGM") of
Draper Esprit will be will be available today on Draper Esprit's
website at http://draperesprit.com/.
ENQUIRIES
Draper Esprit plc
Simon Cook (Chief Executive
Officer)
Ben Wilkinson (Chief Financial
Officer) +44 (0)20 7931 8800
Numis Securities
Nominated Adviser & Joint Broker
Alex Ham
Richard Thomas
Jamie Loughborough +44 (0)20 7260 1000
Goodbody Stockbrokers
ESM Adviser & Joint Broker
Don Harrington
Linda Hickey +353 1 667 0420/+44 20 3841
Charlotte Craigie 6202
MHP Communications (PR)
James White
Vera Prokhorenko
Pete Lambie +44 (0)20 3128 8570
NOTES TO EDITORS
Draper Esprit is one of the most active venture capital firms in
Europe, helping to build and invest in disruptive, high growth
technology companies. We believe the best entrepreneurs in Europe
are capable of building the global businesses of the future, by
partnering with the global Draper Venture Network with VC funds in
22 countries. We fuel their growth with long- term capital, access
to international networks and decades of experience building
businesses. Draper Esprit's portfolio includes global technology
leaders such as Trustpilot, Ledger, Perkbox, Revolut, and
Graphcore. Recent successful exits include Grapeshot, Clavis
Insight, Tails.com, and Movidius. Visit www.draperesprit.com
CHAIRMAN'S STATEMENT
The last twelve months have been a transformational period for
our business. In what has been our first full trading year as an
AIM company we have built on the momentum we generated following
our successful IPO in 2016 and have made significant progress,
growing all aspects of the business.
Through our provision of long-term patient capital to innovative
technology companies across Europe, we have continued to
demonstrate that the public venture capital (VC) model is working
effectively. For companies looking to scale up, growth capital is
still relatively scarce in Europe and we believe much needed - to
finance companies on the journey from start up to scale up,
enabling them to pursue global rather than national ambitions. Our
capital, expertise, international networks and strategic advice
make us ideal partners for businesses at this stage in their life
cycle.
We meet thousands of fast growing companies a year. We use our
experience to invest in those companies where we can use our
expertise to help them achieve their ambitions. In addition, by
taking a board seat, we can apply our expertise beyond the original
investment decision, to supporting our investments to fulfil their
potential for growth and market leadership.
Over the twelve months to the end of March 2018, we have
continued to deploy our increased pool of capital, secured through
the GBP100m placing of new shares completed in June 2017. This fund
raising demonstrates the benefit of our public listing and the
flexibility it gives our balance sheet. It has enabled us to
undertake a wide variety of transactions, which we might not
otherwise have been able to contemplate, including the Seedcamp
acquisition (and the resulting stake acquired in TransferWise). In
addition, it has enabled us to develop a fund of funds strategy and
the building of an exciting ecosystem of investment
opportunities.
In summary, this has resulted in the addition of further
impressive new companies to our portfolio across a broad spectrum
of technology subsectors, ranging from blockchain and cyber
security to gene synthesis and peer-to-peer banking.
We remain passionate advocates for the role that these
technology companies and others we invest in can play in improving
how we as a society work together, learn from one another,
communicate with each other
and live longer, healthier and more productive lives.
We are continually focused on, and have again delivered,
significant returns to our shareholders through the continued
growth of our Net Asset Value, targeting a portfolio return of 20%
per annum, which is underpinned by an average of over 40% revenue
growth across our Core Portfolio Companies.
The European technology market is experiencing an unprecedented
period of growth and, 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 continue to
maintain our position as a leading player.
Karen Slatford
Non-Executive Chair
CHIEF EXECUTIVE'S STATEMENT
Overview
I am pleased to report a year of particularly strong growth
across our portfolio, combined with a number of successful
reinvestments into new and high-growth portfolio companies. The
Company also completed several realisations at attractive
valuations.
As we outlined at the time of our IPO, by providing early-stage
and growth-stage technology businesses with capital, networks and
management support, we are uniquely well placed to offer investors
access to private high-growth technology companies that they
wouldn't otherwise be able to source or invest in.
Our experience of investing over the past 20 years, combined
with our unique and flexible approach to deploying long-term
capital means that we have continued to execute against our
strategy over the past twelve months, delivering the growth and
scale in our portfolio that will drive sustainable growth for our
shareholders.
Operating review
Although the wider technology sector has made headlines for the
wrong reasons in recent months, we remain passionate advocates for
the role technology can play across the various subsectors in which
we invest. At the same time, while Europe's venture capital
industry has long been considered a poor relation to its US
counterpart, there are growing signs that Europe is building a
sustainable and vibrant VC industry of its own; indeed, KPMG
recently valued the European VC industry at US$19.1 billion
representing more than 25% growth on the previous year.
Despite this, Europe still lags behind the US, particularly when
it comes to the provision of growth capital, but this gap is slowly
closing and, by selecting, building and growing the very best
technology businesses from around Europe, we are confident that we
can play a prominent role in reducing this disparity.
Over the course of financial year 2018, we made significant
strides in this regard, investing GBP71.5 million in 9 new and 11
existing portfolio companies as well as GBP24.8 million co-invested
from EIS/ VCT and managed funds. In addition, we exited three
companies, realising cash of GBP15.9 million (including amounts
held in escrows).
As a result, we have exceeded our core strategic aim of
targeting a portfolio return of 20% per annum.
Successful exits
During the year, the Company has announced three disposals.
In December 2017, we announced the sale of Clavis Insight, the
leading eCommerce insights company, to Ascential plc a global
business-to-business information company, for an initial cash
consideration of US$119.0 million. Draper Esprit originally
invested GBP8.1 million in Clavis in December 2016 and will receive
total proceeds of GBP15.3 million including amounts held in
escrow.
The exit followed the sales of Moviepilot and Aveillant earlier
in the same month to the Paris-based publishing group Webedia and
multi-national defence business Thales respectively.
Of the original 24 companies in the portfolio at IPO in June
2016, we have now exited 10 companies, realising over GBP57.0
million in cash.
Continued investment in high-growth technology companies
In June 2017, we raised GBP100 million from new and existing
investments to scale our capital deployment.
There are a number of routes by which we invest our capital -
and during the year we significantly expanded this by developing
our new fund of funds strategy and also investing in a secondary
portfolio transaction. These types of investment complement and
fuel our core investment strategy which is to invest at the point
of growth in primary portfolio businesses.
At the time of our fundraising, we outlined our strategy to
invest up to approximately GBP100.0m (US$130.0 million) a year in
technology businesses at series A, B, and C+ rounds across the
Group's funds (the plc balance sheet, EIS, VCT and secondary
funds), with investment from the Company's balance sheet
representing approximately GBP60.0 million per annum.
New investments in primary portfolio businesses
Our hands-on approach in working with our portfolio companies,
via our active role in board management, our global network and the
support we provide to entrepreneurs, continues to be an attractive
proposition for the businesses we seek to partner with.
All of our investments are innovative technology businesses that
are capable of becoming much larger, global businesses. We continue
to focus on the four key subsectors of enterprise, digital health
& wellness, hardware and consumer technology.
Examples included Evonetix, Ieso Digital Health, Ledger,
PremFina, Droplet and Verve. Ledger is a Paris headquartered
cryptocurrency and blockchain security company in which we made a
GBP17.7 million investment in January 2018. The investment will
enable Ledger to significantly scale up its operations as demand
for its products increases. As cryptocurrency participation has
increased, so have the security challenges associated with it.
Against this backdrop, there are substantial opportunities to
develop trust for participants in this area, a key driver behind
Ledger's business model.
Fund of funds strategy
In October 2017, we announced a strategy to target up to GBP75.0
million (US$100.0 million) of investment in the top seed funds
across Europe over a five-year period. We have committed to invest
in seven funds including Seedcamp (www.seedcamp.com), Episode 1
Ventures (www.episode1.com), Join Capital
(www.join.capital) and Icebreaker
(www.icebreaker.vc), widely recognised as some of Europe's
leading seed fund platforms. Draper Esprit was already an investor
in the leading crowdfunding companies, Crowdcube and Seedrs.
By closely aligning Draper Esprit with the seed fund ecosystem,
we believe we can provide growth capital to the best companies and
unlock the strong performance of Europe's highest quality seed
funds to the benefit of the plc shareholders.
Secondary portfolio acquisition
In October 2017, we announced the acquisition of Seedcamp Funds
I and II for GBP17.9 million, through which we acquired stakes in
high profile growing technology companies including TransferWise, a
leading UK based Fintech business as well as a number of promising
companies including Codacy, Edited, Erply, Fishbrain, Codility,
Winnow, Codeship and Try.com.
Follow on investments
As well as new investments, during the year we also invested in
our core portfolio by adding to our existing investments,
delivering on our strategy of building larger stakes in businesses
we passionately believe in (having earmarked 70% of our capital to
be reserved for scaling-up and increasing our stakes in portfolio
companies through later rounds of funding).
During the period, we deployed GBP23.0m in this way through
follow-on investments in the semiconductor specialist Graphcore;
the employee engagement platform, Perkbox; the leading electric
vehicle charging company, Pod Point; and Push Doctor, Europe's
largest digital health provider.
We remain confident in the growth potential of our underlying
portfolio companies with all of our top holdings continuing to make
strong commercial progress, growing sales significantly and
reporting positive news flow, thereby providing strong value
creation for our shareholders.
Continued momentum - outlook and summary
We have entered the new financial year in a strong position, and
our model of offering investors, who otherwise wouldn't have access
to, or the capacity to actively manage, investments in high-growth
private technology businesses, continues to bear fruit.
Post period end, we have invested US$14.0m in Aircall in May, a
leading provider of cloud-based call centre software and have
committed to US$16.5 million in the more recent investment round in
Revolut, the leading fintech business. We have also announced the
sale of our portfolio company, Tails.com, to Nestlé Purina
Petcare.
We remain grateful for the support we have received from our
existing shareholder base and welcome our new investors. Our
ambition remains to deliver at least 20% year on year growth in
portfolio value while building on our ability to hold and grow our
portfolio companies for longer, increasing our investment in later
rounds in order to maximise the opportunity to build large and
successful European technology businesses that are able to become
the global businesses of the future.
Lastly, I would like to place on record my thanks to our
management team, who continue to leverage their experience, vision
and capabilities on behalf of our talented array of portfolio
companies, as well as the management teams of these portfolio
companies who remain the very essence of our business.
We enter the new financial year well positioned to capitalise
further on opportunities in 2018/19 and remain focused on executing
our strategy for the benefit of our shareholders.
Simon Cook
CEO
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. Our Core Portfolio Companies have performed
strongly, driven by revenue growth and from financing rounds and
exits at higher valuations being achieved.
At the year ended 31 March 2018 the fair value of the Company's
Gross Primary Portfolio had increased to GBP243.5 million (2017:
GBP112.7 million from GBP78.7 million since the IPO in June 2016).
Excluding new investments and realisations across our portfolio of
companies, the gross portfolio value has increased 66% (2017: 39%).
During the year, the Group has realised the investment holdings in
Clavis, Aveillant and Moviepilot with GBP15.9 million (2017:
GBP42.0 million) of cash generated (including amounts held in
escrow). The Company has invested GBP71.5m (2017: GBP37.1 million)
in the year, with a further GBP24.8 million (2017: GBP6.0 million)
co-invested from EIS/VCT and managed funds, into the next
generation of high-growth digital technology companies and to
further support our existing portfolio.
The increase in fair value in the period has been driven by
continued strong performance across the portfolio with notable
uplifts in the value of the core portfolio companies, in particular
Graphcore, Lyst, Trustpilot, Perkbox, M-Files, PodPoint and
TransferWise (acquired as part of the Seedcamp Fund I and II
acquisition in the year).
At year end, the portfolio held by the plc consists of
significant minority interests in 31 companies (2017: 29
companies). The fair value of the Gross Primary Portfolio is
underpinned by ten core holdings which account for approximately
70% of the total portfolio value, with the remaining value spread
across 21 investments which have the potential to grow into the
core holdings of the future. Further investments post year end
bring the current portfolio to 33 companies (see note 30).
As we scale the business the fair value of the core portfolio
holdings is increasing. New investments in the year (Ledger and
TransferWise) and realisations (Clavis Insight) have been reflected
such that the core companies now comprise of: Trustpilot,
Graphcore, Lyst, Perkbox, Ledger, TransferWise, Pod Point, Graze,
M-Files, and SportPursuit. These portfolio companies now have an
average turnover in excess of US$77.0 million, growing in aggregate
over 46% annually from 2017. The gross profit margin of the core
holdings average 65% and demonstrate 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. Post year-end investments in Revolut and Aircall are
expected to form part of the core portfolio going forward.
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.
Investments
The target rate of capital deployment from the plc is GBP60.0
million with a further GBP40.0 million from co-investment funds.
During the financial year a total of GBP71.5 million (2017: GBP37.1
million) was deployed by the plc and a further GBP24.8 million
(2017: GBP6.0 million) across the Group in 20 companies (9 new and
11 existing) and 4 FOF. Since the year end, the Group has invested
a further GBP21.5 million post year end (see note 30). 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.
Some of the notable new investments made in financial year ended
31 March 2018 include:
- GBP18 million into Ledger, the Paris headquartered
cryptocurrency and blockchain security company.
- GBP18 million to acquire Seedcamp Fund I and II, 2007 and 2010
vintage funds which include stakes in high profile growing
technology companies including TransferWise (a leading
international Fintech money transfer business), Codacy, Edited,
Erply, Fishbrain, Codility, Winnow, Codeship and Try.com and which
provides strong follow-on potential.
- GBP21.0 million across the Group (GBP12.0 million plc, GBP9.0
million EIS/VCT) into Ieso Digital Health (online mental health
platform), Verve (word-of-mouth sales software), Evonetix (DNA
synthesis platform), Kaptivo (SaaS-based digital collaboration
solutions for enterprise using computer vision), Droplet (software
allowing unmodified applications to run on any device) and PremFina
(insure-tech business providing premium finance).
The Company also made further investments of GBP17.0 million
alongside a further GBP3.1 million from EIS/VCT to increase its
holdings in:
- Trustpilot, the global online review community.
- 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.
Alongside this, the Company has continued to expand its fund of
fund strategy with further commitments to a number of Europe's top
seed funds: Episode 1 (UK), Seedcamp Fund IV (UK), Join Capital
(Germany), Icebreaker (Finland). Commitments have also been made to
three other funds based in London, Cambridge and Ireland.
A further GBP21.5 million has been committed for investment in
new companies post year end as follows:
- A further GBP10.0 million invested by the Company in Aircall.
- Up to GBP11.5 million committed by the Company in Revolut.
Realisations
The Company announced the following significant disposals since
IPO:
- December 2017 - The sale of Clavis Insight, a leading
eCommerce insights company to Ascential Plc. The sale was for an
initial cash consideration of $US119.0 million resulting in cash to
the Company, including escrows of GBP15.3 million. This represented
a cash exit multiple on funds invested of 1.9x.
- September 2016 - the sale of Movidius to Intel Corporation.
Movidius is a leader in high performance, ultra-low power computer
vision technology for connected devices. This sale brings an
estimated total gross cash return to the Company of approximately
GBP27.4 million, including amounts held in escrow. This represented
a cash exit multiple on funds invested by the Company of 7.6x;
- October 2016 - the sale of Qosmos to ENEA. Qosmos is a
supplier of network intelligence software based on Deep Packet
Inspection and commands a dominating share of its market. The sale
was for a total gross cash consideration of approximately EUR52.7
million resulting in cash to the Company, including escrows, of
GBP8.0 million. This represented a cash exit multiple on funds
invested by the Company of 1.9x; and
- November 2016 - the sale of Datahug, a sales forecasting
software company, to Callidus Software Inc for a cash consideration
of approximately US$13.0 million, resulting in a gross cash return
to the Company of approximately GBP3.6 million, including funds
held in escrow. This represented a cash exit multiple on funds
invested by the Company of 1.6x.
- Since September 2016, interim results the Group has disposed
of its remaining holding in Horizon Discovery. The Company realised
a gross cash return on investment of GBP2.9 million which
represented a cash exit multiple of 2.6x. In addition, the Company
also exited its investment in WorldStores which realised a gross
cash loss of GBP4.3 million.
Fair Value Fair Value Interest
of of FD
Investments Investments category
31st March Movement in Draper Esprit 31st March ** at
2017 Investments Realisations*** Fair Value (Ireland) Limited 2018 reporting
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 date
Investments
Trustpilot 18,226 6,700 - 9,407 - 34,333
Graphcore 2,307 1,853 - 19,228 - 23,388 C
Lyst 8,052 - - 10,289 - 18,341 B
Perkbox 1,650 6,616 - 9,229 - 17,495 C
Ledger - 17,703 - - - 17,703 C
M-Files 9,789 - - 4,570 - 14,359 B
SportPursuit 10,070 206 - 3,091 - 13,367 B
Transferwise - 10,501 - 1,688 - 12,189 D
Graze 9,683 - - 365 - 10,048 A
Podpoint 3,350 2,010 - 4,524 - 9,884 B
Remaining Portfolio 47,667 25,933 (15,338) 10,869 953 70,085 C
Total 110,794 71,523 (15,338) 73,260 953 241,193
Co-invest assigned to plc 1,935 - - 385 - 2,320
Gross Portfolio Value 112,729 71,523 (15,338) 73,645 953 243,513
Carry external (5,621) - - (5,858) 302 (11,177)
Portfolio deferred tax (3,413) - - (332) 1,895 (1,849)
Trading carry & co-invest 2,276 - - (853) - 1,423
Net portfolio value 105,971 71,523 (15,338) 66,603 3,151 231,910
* Realisations do not include amounts held in escrow. Total cash
realisations including amounts held in escrow was GBP15.9 million
(2017: GBP42.0 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%
Core Portfolio Companies
Graphcore
The Group first backed Graphcore in 2016 and has now invested
GBP4.2 million in total, with the most recent investment in 2017 of
GBP1.9 million, part of a wider US$30.0 million Series B funding
round. Since then, US fund Sequoia Capital, led a further US$50.0
million round in the company.
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.
The business is a spin-out of XMOS, a semiconductor business
based near Bristol, UK, which is backed by other funds managed by
Draper Esprit. Nigel Toon, the CEO and Simon Knowles, the CTO, were
previously founders of Icera, a Draper Esprit management backed
semiconductor business which was sold to NVIDIA for US$360 million
in 2011. The company plans to bring its intelligent processing
system to market I this year, which is anticipated to enable
material performance increases (from 10-100x) for machine learning
computation.
Alongside Draper Esprit, investors include: Sequoia Capital,
Atomico, Amadeus Capital, Robert Bosch Ventures, C4 Ventures, Dell
Technologies Capital, Foundation Capital, Pitango Venture Capital,
the Samsung Catalyst Fund and AI experts such as Demis Hassabis
(DeepMind), as angel investors.
TrustPilot
Draper Esprit Funds first invested in Trustpilot in 2013, with
follow-on investment in 2015 and 2017 bringing the total investment
by the Company to GBP18.1 million, including GBP6.7 million
invested in the financial year.
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 and the
Netherlands, as well as the US. The company's aim is to build the
world's single most trusted review company.
It is rapidly becoming an essential part of customer service for
consumer-facing companies. Consumers visit the Trustpilot website
to leave positive or negative reviews about an online merchant
where they purchased a product. Once a merchant has a paid
subscription to use Trustpilot, they are able to respond directly
and openly with consumers who have left reviews.
Trustpilot has built a strong SaaS revenue model with excellent
growth over the last 3 years. They have successfully expanded from
Europe into the US, with over 42 million reviews and 210,000
reviewed companies in that market.
Alongside Draper Esprit, investors include: Vitruvian Partners,
Index Ventures, Northzone and SEED Capital Denmark.
Perkbox
Perkbox, a digital employee engagement platform, received GBP2.5
million (plc GBP1.7 million) from the Group in 2016. In 2017, the
plc built its stake in the business further by investing GBP6.6
million.
Perkbox enables companies of all sizes to incentivise, motivate
and attract staff with over 200 perks and benefits. Its platform
includes a sophisticated rewards and recognition infrastructure.
Launched in 2015, the company already has over 650,000 paying
members ranging from SMEs to large corporations such as British Gas
and BUPA. The company has now developed a white-labelled platform
called "Perkbox for customers", which helps businesses acquire,
connect, and retain loyal customers. The company has doubled
year-on-year and now has over 165 employees. Forbes magazine
recently ranked Perkbox as one of Britain's fastest growing
companies.
Draper Esprit first invested in Perkbox alongside the crowd on
the Seedrs platform.
Ledger
Ledger, a cryptocurrency and blockchain security company,
received GBP17.7 million from the plc in January 2018.
The company have developed two main hardware products: the
Ledger Nano S and the Ledger Blue, both of which enable users to
store their keys offline. They will also launch a new product: the
Ledger Vault, enabling hedge funds, banks and family offices to
manage their crypto assets, due to high demand. All these products
are underpinned by a unique technology: an Operating System (OS)
specifically designed to run on any secure hardware and to support
any crypto asset.
By building a cold storage solution, the company offers users
the most secure option in the market, enabling crypto owners to
keep full ownership of their digital assets, without the need for
third party intervention. The hardware wallets isolate the private
keys from computers or smartphones, which are easily hackable.
Already profitable, it has sold over a million of cryptocurrency
hardware wallets to customers in 165 countries. The team, now over
80 employees across France and the US, has managed to recruit some
of the best engineering talent from organisations such as Gemalto
and French smart card experts, such as Oberthur Technologies.
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.
SportPusuit
SportPursuit was founded in 2011 as a UK-based sport-specific
ecommerce website where members receive access to sales from brand
partners targeting the technical sportswear and outdoor clothing
and equipment space. The company offers up to 70% discounts on
sports and outdoor brands. SportPursuit has customers in the UK,
Australia, Germany, France and Scandinavia. It aims to be the
world's largest private shopping club for sports enthusiasts.
Currently sales are focused across the following niches:
outdoor, running, skiing & snowboarding, health &
wellbeing, athletics, swimwear, cycling, golf, tennis and
experiences (gyms, clubs). The vision of the team is to utilise the
power of the online channel, the SportPursuit brand and the
community they build up around it to realise a greater value
opportunity.
Alongside Draper Esprit Funds, investors include CIT Growth
Capital and Scottish Equity Partners.
M-Files
M-Files is a software company which provides enterprise
information management (EIM) 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.
The M-Files solution is built on three pillars: it's metadata
based, repository neutral, and intelligent. That means that you can
find data based on what it is, not where it's stored. See
information in context automatically, regardless of its system of
origin. M-Files therefore enables users to access data easily, with
a faster and more intuitive data migration system.
Alongside Draper Esprit, other investors include Partech
Ventures and Tesi.
Graze
Graze is a multichannel manufacturer of health snacks, operating
in the UK and the US. Founded in 2009, it developed a subscription
model based on experiences of founder Graham Bosher at Lovefilm,
the DVD rental business. The company has developed logistics
technology that allows it to deliver cost-effectively across the UK
and the US. It utilises data generated from user reviews to
innovate and develop new products for evolving taste preferences
and growing consumer demand for wholesome on-the-go snack
options.
The company has launched its own retail product with wide
availability in the UK across 11,000 stores including retailers
such as Boots, Tesco, WH Smith and Sainsbury's. This will drive
further UK growth together with new online ecommerce sales through
a subscription-based model. The company launched in the US in 2016
and their products are now available in over 20,000 retail stores
in this market, and further online growth is forecast. Graze
remains profitable with strong gross margins.
Graze's vision is to become the number one health snack brand in
the world.
Alongside Draper Esprit, investors in Graze include The Carlyle
Group and Octopus Investments.
Lyst
Lyst is a global fashion search platform used by 65 million
people every year. Lyst is one of the world's largest e-commerce
websites, offering over 4.2 million fashion products from 12,000 of
the world's leading fashion brands and stores. The company aims to
empower customers to find the fashion that's perfect for them,
whatever their style.
With over a million orders, the company reached profitability
this year and has grown 70% year on year. It now has offices in New
York and London. Draper Esprit invested GBP2.6 million in 2012.
Alongside Draper Esprit, investors include Balderton Capital,
Accel Partners and Susa Ventures.
Pod Point
Pod Point, the electric charge point supplier, received GBP3.4
million in 2017 and a further GBP2.0 million in 2018 from plc. Pod
Point is a well-established, leading player in the UK's electric
vehicle sector, having manufactured and sold over 50,000 charging
points since it was founded in 2009.
The market for electric vehicles is going from strength to
strength, driven by advances in technology, infrastructure
developments and cost efficiencies. In the UK, Pod Point has in
excess of a 40% market share of the home charge market, having sold
over 50,000 charging points. The team is also expanding rapidly and
now comprises over 140 employees. Following recent partnerships
with Barratt Homes, Holiday Extra and Hyundai, Pod Point intends to
have one of its stations installed everywhere people park for an
hour or more by 2020.
Alongside Draper Esprit, investors include Barclay's Capital and
QVentures.
TransferWise
TransferWise is an international money transfer platform - using
real exchange rates and has no hidden fees. Co-founded by Taavet
Hinrikus and Kristo Kaarmann, TransferWise was launched in 2011. It
is now one of Europe's most successful fintech startups and over
two million people use the service to transfer US$1.2 billion each
month.
In April 2018, the company became the first non-bank to join the
Bank of England's payment system, enabling it to process payments
in the UK without going through commercial banks.
Draper Esprit acquired a stake in TransferWise through the
acquisition of Seedcamp Fund I and II as a Secondary portfolio.
Alongside Draper Esprit, other investors include Andreessen
Horowitz, Valar Ventures, Baillie Gifford, Sir Richard Branson and
Max Levchin of PayPal. In 2017, the company announced a further
US$280.0 million in a funding round led by Old Mutual Global
Investors and IVP.
Emerging Portfolio Companies
Evonetix
Draper Esprit co-led a GBP9.0 million funding round in Evonetix,
helping it to scale technology that opens up new possibilities for
synthetic biology. The company is pioneering a new approach to
scalable and high-fidelity gene synthesis and received GBP1.8
million funding from the plc and a further GBP1.8 million from the
Group in January 2018.
The ability to synthesise fragments of DNA without the
limitation of sequences and with no fundamental errors is a
challenge. All existing DNA manufacturing methods can only produce
short sequences because longer sequences have a higher rate of
error. Evonetix was founded in 2016 to address this very problem.
Their platform uses an addressable silicon array to direct the
synthesis of DNA at many sites in parallel, followed by an
error-detection process to enable DNA production at scale.
The US$12.3 million financing was co-led by DCVC (Data
Collective) of Palo Alto, CA and Draper Esprit, and included the
Morningside group, alongside existing investors Providence
Investment Company (Jersey), Cambridge Consultants Ltd (Cambridge,
UK), Rising Tide Fund (San Francisco, CA) and Civilization Ventures
(San Francisco, CA).
Ieso
Draper co-led an GBP18.0 million funding round, the largest
amount raised by a digital behavioural health business in Europe.
Draper Esprit invested GBP7.5 million across the Group (GBP3.8
million from plc) alongside existing investor Touchstone
Innovations. This was part of a round to accelerate growth in
Ieso's home market and commercialise its transformative technology
platform in the US.
Based in Cambridge, UK, Ieso Digital Health's breakthrough
technology, is transforming the way mental health is delivered.
Ieso provides patients with access to secure, one-on-one,
real-time, evidence-based cognitive behavioural therapy (CBT)
programmes, delivered by accredited therapists, at a time that is
convenient for patients. Ieso's intelligent technology platform is
both cost effective and removes many of the significant barriers
preventing treatment, including stigma and accessibility. It also
gives its therapist network guides and insights to enhance their
performance and clinical outcomes.
More than 16,700 patients have been treated to date and Ieso now
leads the way in digital therapy as the number one provider of
online CBT in the UK and has also recently expanded into the USA.
Unlike many other online or digital services, Ieso's method was
validated in a randomised clinical trial published in The Lancet in
2009.
Financial Review
The year ended 31 March 2018 has been an active period for the
Group highlighted by the June 2017 equity raise of GBP100.0 million
(GBP95.3 million net of fees) which has led to an increased
investment target of GBP60.0 million per annum by the plc
(alongside a further GBP40.0 million from EIS and VCT co-investment
funds). Accordingly, further investment activity has been
demonstrated with GBP71.5 million deployed in the financial year
(2017: GBP37.1 million). Portfolio performance, particularly in the
core portfolio (as further described in the Portfolio Review) has
driven strong fair value returns and further exits have returned
additional cash back to the plc. The benefits of the plc model have
been further demonstrated through the secondary acquisition of
Seedcamp Fund I and II and the building of secondary stakes in
existing portfolio companies. The flexibility to invest outside of
primary funding rounds enhances the investment opportunity set the
plc is able to take advantage of.
The Gross Primary Portfolio, the gross value of the Company's
investment holdings before deductions for carry and any deferred
tax, has more than doubled to GBP243.5 million (2017: GBP112.7
million), an increase of GBP130.8 million (2017: GBP34.0 million).
The increase in the value of the Gross Primary Portfolio reflects
investments made during the year of GBP71.5 million, a fair value
increase of GBP74.6 million (2017: GBP43.8 million) and
realisations of GBP15.3 million (2017: GBP35.1 million). The
increase in fair value has been driven by the strong performance
across the portfolio and in particular across the core holdings
(ten portfolio companies with a fair value greater than GBP8.0
million that combine to represent more than 70% of the Gross
Portfolio Value). Notable uplifts in the value of Graphcore,
Trustpilot, Lyst, Perkbox, Pod Point and TransferWise (acquired as
part of the Seedcamp Fund I and II acquisition in the period).
Graphcore (reflecting the uplift in value from the US$50.0 million
Series C investment by Sequoia), Trustpilot (driven by growth in
revenue and continued secondary acquisitions to build the equity
holding), Lyst (revenue growth and turning profitable), Perkbox
(continued strong revenue growth and secondary stake acquisition),
Pod Point (continued revenue growth) and TransferWise (acquired as
part of the Seedcamp Fund I and II acquisition in the period -
raised equity at $1.6 billion led by IVP).
In the financial year the Group has realised successful exits
from the investments in Clavis, Aveillant and Moviepilot generating
GBP15.9 million (2017: GBP42.0 million) of cash proceeds (including
amounts held in escrow). Of the original 24 companies in the
portfolio at IPO in June 2016, Draper Esprit has now exited 10
companies (including Tails.com post period end, see note 30).
The Group's portfolio is valued in accordance with the
International Private Equity and Venture Capital Valuation
Guidelines ("IPEV"). Following the initial investment in a
portfolio company the value of the investment is held at cost in
the Group's books. The mechanism for growth in the portfolio
companies to be translated into increased fair values in the
accounts of the Group is triggered by the portfolio company
achieving either financing rounds at higher valuations (with
external investors as well as the Group) or revenue growth in the
portfolio company being reflected against listed comparable
companies price-sales ratio multiples.
The Gross Primary Portfolio of GBP243.5 million (2017: GBP112.7
million) is subject to deductions for the fair value of the carry
liabilities and deferred tax to generate the net investment value
of GBP231.9 million (2017: GBP106.0 million) which is reflected on
the consolidated statement of financial position as financial
assets held at fair value through the profit or loss. The table
opposite has been generated to reflect the movement in value of the
portfolio during the period.
A deferred tax provision of GBP1.8 million (2017: GBP3.4
million) has been recognised in the year against the gains in the
portfolio to reflect holdings of less than 5% equity interest or
for a period of less than 12 months in the underlying portfolio
companies. Tax was paid in the period of GBP1.9 million against
realisations made where the holding period was less than 12 months
(Movidius, Qosmos, Datahug). Carry balances due to previous and
current employees of the Group are accrued on the basis of the
current fair value at the year-end and deducted against the Gross
Primary Portfolio, the Carried Interest Plan is further described
in the Directors' Remuneration Report (page 40). Trading carry and
co-investment of GBP1.4 million (2017: GBP2.3 million) reflects the
carry accrued to plc on the fair value of the portfolio companies
held within legacy funds that are in run-off and continued to be
managed by the Group. The net position of GBP231.9 million (2017:
GBP106.0 million) is reflected on the balance sheet as financial
assets held at fair value through the profit or loss.
Balance sheet net assets have increased by 107% to GBP311.3
million (2017: 17% to GBP150.7 million) in the period while net
assets excluding goodwill have grown by 123% to GBP290.9 million
(2017: 22% to GBP130.2 million) reflecting the growth in the fair
value of the portfolio and the funds raised in June 2017. The
increase in trade and other receivables to GBP4.8 million (2017:
GBP0.5 million) is reflective of GBP3.5 million of accrued income
relating to an EIS performance fee which is attributable from the
sale of Grapeshot to Oracle. Grapeshot was an investment held in
the EIS funds and generated a gross 20% performance fee on gains
above 1.25x following the recent successful sale to Oracle. Encore
Ventures is 70% owned by plc and the balances are therefore
consolidated gross with a non-controlling interest balance
reflecting the amounts not accruing to the plc. GBP1.0 million of
the accrued income is directly attributable to the plc. This
balance demonstrates the benefit of the co-investment funds in
reducing the plc cost base and the upside potential from successful
exits. The GBP3.5 million accrued income is also reflected as
revenue on the income statement.
Year-end cash balances of GBP56.6 million (2017: GBP24.9
million) reflect the cash proceeds from the equity raise of
GBP100.0 million (net of GBP5.0 million of directly attributable
costs, which are reflected in the share premium account on the
statement of financial position), amounts invested of GBP71.5
million, GBP15.3 million of investments realised and the
administrative costs of the Company.
Goodwill of GBP20.5 million was generated from the acquisition
of Esprit Capital Partners LLP ("ECP") and is held on the balance
sheet as an intangible asset. The goodwill was recognised as the
difference between the consideration and the fair value of the
assets acquired in the accounts of ECP.
Consolidated statement of comprehensive income
Investment income for the year comprises the GBP66.6 million
(2017: GBP35.7 million) of unrealised investment gains (gains are
unrealised as they are held within Draper Esprit (Ireland) Limited,
which is accounted for as an investment company) and fee income of
GBP7.2 million (2017: GBP1.7 million) which is generated from
management fees, performance fees and director fees.
Fee income has increased in the period as investment amounts
increase and EIS and VCT funds have continued to increase the size
of their funds raised. Fee income has increased in the period due
to 1) the GBP3.5 million EIS performance fee, described above, of
which GBP1.0 million is directly attributable to the plc (balance
is reflected in non-controlling interests), 2) GBP3.5 million of
management fees (2017: GBP1.6 million), which have increased in
line with the assets under management of the Group.
Total operating costs of GBP7.1 million (2017: GBP4.0 million in
the nine month period) consists of administrative costs of GBP5.8
million (2017: GBP3.7 million), predominantly relating to
employment costs and other operating expenses, non-cash share-based
payments of GBP0.5 million (2017: GBP0.1 million), which have
increased in the year following the issuance of further options in
November 2017 and the charge taken relating to lapsed options (note
13), direct investment costs of GBP0.4 million and exceptional
items of GBP0.2 million for personnel changes. Administrative costs
are in line with expectations and reflect the growth in the
investment team and level of deal activity.
Post balance sheet events
The Group has made further investments totalling GBP21.5 million
(see note 30) and realised GBP2.5 million cash from the sale of
Tails.com to Nestlé Purina Petcare.
After a successful first full year as a listed entity, the
Company is scaling and taking advantage of the broad range of
opportunities available to it.
Ben Wilkinson
CFO
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2018
Notes Year ended Year ended
31 Mar 31 Mar
2018 2017
GBP'000s GBP'000s
Unrealised gains on investments held at fair value
through the profit and loss 5 66,603 35,744
Fee income 6 7,163 1,673
Total investment income 73,766 37,417
Operating expenses
General administrative expenses 7 (5,785) (3,705)
Depreciation and amortisation (160) (127)
Share based payments (490) (123)
Investment and acquisition costs (424) -
Exceptional items (229) -
Total operating costs (7,088) (3,955)
Operating profit from operations 8 66,678 33,462
Finance (expense)/income 10 (1,418) 221
Operating profit/(loss) before tax 65,260 33,683
Income taxes 11, 21 43 (438)
Profit/(loss) for the year 65,303 33,245
Share of profit/(loss) attributable to non-controlling
interests (3,131) (330)
Profit/(loss) from continuing operations 62,172 32,915
Other comprehensive income/(expense):
Other comprehensive expense - -
Total comprehensive income/(loss) for the year 62,172 32,915
Earnings per share attributable to:
Equity holders of parent (pence) 12 86.8 80.8
Diluted earnings per share (pence) 12 83.3 -
The notes on pages 58 to 80 are an integral part of these
consolidated financial statements.
Consolidated Statement of Financial Position
for the year ended 31 March 2018
Non-current assets Notes Year ended Year ended
31 Mar 31 Mar
2018 2017
GBP'000s GBP'000s
Non-current assets
Intangible assets 14 21,055 21,158
Investments in associates 15 258 258
Financial assets held at fair value through the
profit or loss 16 231,910 105,971
Property, plant and equipment 17 229 152
Total non-current assets 253,452 127,539
Current assets
Trade and other receivables 19 4,840 527
Cash and cash equivalents 56,641 24,892
Total current assets 61,481 25,419
Current liabilities
Trade and other payables 20 (2,948) (1,548)
Total current liabilities (2,948) (1,548)
Non-current liabilities
Deferred tax 21 (651) (716)
Total non-current liabilities (3,600) (716)
Net assets 311,334 150,694
Equity
Share capital 22 716 407
Share premium account 22 188,229 93,248
Merger relief reserve 22 23,920 23,920
Share-based payments reserve 13 613 123
Retained earnings 95,064 32,892
Equity attributable to owners of parent 308,542 150,590
Non-controlling interests 2,792 104
Total equity 311,334 150,694
Net assets per share (pence) 12 431 370
The financial statements were approved by the Board of Directors
and authorised for issue on 24 May 2018.
S. M. Chapman
Chief Operating Officer
The notes on pages 58 to 80 are an integral part of these
consolidated financial statements.
Consolidated Statement of Cash Flows
for the year ended 31 March 2018
Notes Year ended Year ended
31 Mar 31 Mar
2018 2017
GBP'000s GBP'000s
Cash flows from operating activities
Operating profit/(loss) after tax 65,303 33,245
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 (66,603) (35,744)
Depreciation and amortisation 160 155
Share-based payments 490 123
Bad debt provision - 37
Foreign exchange movements 10 1,530 (221)
(Increase)/ decrease in trade and other receivables (4,314) 681
Increase in trade and other payables 1,401 441
Net cash used in operating activities (2,033) (1,283)
Tax paid (107) -
Net cash outflow from operating activities (2,140) (1,283)
Cash flows from investing activities
Purchase of property, plant and equipment (204) (166)
Interest received 112
Cash acquired on purchase of subsidiary - 495
Loans repaid from underlying investment vehicles 16 15,338 17,137
Purchase of initial portfolio 16 - (40,000)
Purchase of investments 16 (74,674) (20,602)
Net cash outflow investing activities (59,428) (43,136)
Cash flows from financing activities
Cash paid to non-controlling interests (443) (246)
Proceeds from issue of share capital 22 100,000 72,060
Equity issuance costs 22 (4,710) (2,724)
Net cash inflow from financing activities 94,847 69,090
Net increase in cash & cash equivalents 33,279 24,671
Cash and cash equivalents at beginning of year 24,892 -
Exchange differences on cash and cash equivalents 10 (1,530) 221
Cash and cash equivalents at end of year 56,641 24,892
The notes on pages 58 to 80 are an integral part of these
consolidated financial statements.
Consolidated Statement of Changes in Equity
for the year ended 31 March 2018
Share Share Merger Share-based Retained Total Attributable Total
capital premium relief payments earnings attributable to equity
GBP'000s GBP'000s reserve reserve GBP'000s to equity non-controlling GBP'000s
GBP'000s GBP'000s holders interests
of the GBP'000s
parent
GBP'000s
Balance at 31
March 2016 50 - - - (3) 47 - 47
Total
comprehensive
Income
for the year
Profit for the
year - - - - 32,915 32,915 330 33,245
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 - - - - 32,895 32,895 104 32,999
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) - - 23,920 - - 23,920 - 23,920
Share based
payment (note
13) - - - 123 - 123 - 123
Balance at 31
March 2017 407 93,248 23,920 123 32,892 150,590 104 150,694
Comprehensive
Income for
the year
Profit for the
year - - - - 62,172 62,172 3,131 65,303
Amounts
withdrawn by
non-controlling
interest - - - - - - (443) (443)
Total
comprehensive
income
for the year - - - - 62,172 62,172 2,688 64,860
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
Merger relief - - - - - - - -
reserve
(note 22)
Share based
payment (note
13) - - - 490 - 490 - 490
Balance at 31
March 2018 716 188,229 23,920 613 95,064 308,542 2,792 311,334
The notes on pages 58 to 80 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 limited company
incorporated and domiciled in England and Wales. On 15 June 2016,
the Company listed on the London Stock Exchange's AIM market and
the Irish Stock Exchange's ESM market (the "IPO").
The Company is the ultimate parent company in which results of
all subsidiaries are consolidated. The consolidated financial
statements ("the Group accounts") for the year ended 31 March 2018
comprise the financial statements of the Company and its
subsidiaries (together, "the Group").
The consolidated financial statements are presented in Pounds
Sterling (GBP) 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(a). Information on other related party relationships of the
Draper Esprit Group is provided in note 28.
In the current year, there were no new and revised standards and
Interpretations that have been adopted which affected the amounts
reported in these consolidated financial statements.
Standards not affecting the reported results or financial
position
At the date of authorisation of these consolidated financial
statements, the following Standards and Interpretations which have
not been applied in these financial statements were in issue but
not yet effective:
-- IFRS 15 Revenue from Contracts with Customers is the only 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 Directors have not yet fully determined the impact
on the Group's consolidated financial statements as a result of
adopting this Standard.
-- IFRS 16 Leases was effective from 1 January 2018. 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 GBP1.9 million with respect to the Company's
registered office (note 23) are recognised on the balance sheet as
a liability for the financial year commencing 1 April 2018.
-- IFRS 9 Financial Instruments: IFRS 9, effective from 1
January 2018, will replace IAS 39 in its entirety. The process has
been divided into three main components, being classification and
measurement; impairment; and hedge accounting. The Group
provisionally assesses the potential effect to be immaterial given
the majority of its financial assets will be held 'at fair value
through profit or loss' ('FVTPL'). The Directors have not yet fully
determined the impact on the Group's consolidated financial
statements as a result of adopting this Standard.
3. Significant accounting policies
Basis of accounting
The Group accounts 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,
endorsed by the European Union ("EU"). 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 accounts. The financial statements are prepared on a
going concern basis as disclosed in the Directors' Report.
a) 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 % ownership
of incorporation
Esprit Capital Partners
LLP Investment Management England 100%
Encore Ventures LLP Investment Management England 71%
Esprit Capital I GP Limited General Partner England 100%
DFJ Esprit II GP Limited General Partner England 100%
Esprit Capital III Founder
GP Limited General Partner England 100%
Esprit Capital III GP
LP General Partner England 100%
Encore I GP Limited General Partner England 100%
Encore I Founder GP Limited General Partner England 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%
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(b) 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 and not as a reverse
acquisition having assessed the substance of the transaction,
including control and changes of 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. 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 where there are indications that the carrying value may
no longer be recoverable.
Investment company
In accordance with the provisions of IFRS 10, Draper Esprit plc
considers itself to be an investment entity and its wholly-owned
subsidiary, Draper Esprit (Ireland) limited to be an investment
company as its sole purpose is hold investments on behalf of the
Group. Consequently, Draper Esprit (Ireland) Limited is not
consolidated in accordance with IFRS10, instead it is recognised as
an investment held at fair value through the 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
------------------------ -------------------- ------------------
Draper Esprit (Ireland) Investment company Ireland
Limited
------------------------ -------------------- ------------------
Esprit Capital III LP Limited partnership England
------------------------ -------------------- ------------------
Esprit Capital IV LP Limited partnership England
------------------------ -------------------- ------------------
Esprit Investments (1) Limited partnership England
LP
------------------------ -------------------- ------------------
Esprit Investments (1) Limited partnership England
(B) LP^
------------------------ -------------------- ------------------
Esprit Investments (2) Limited partnership England
LP^
------------------------ -------------------- ------------------
Esprit Investments (2) Limited partnership England
(B) LP^
^ Esprit Investments (1) (B) LP, Esprit Investments (2) (B) LP
and Esprit Investments (2) LP were newly registered UK limited
partnerships during the year.
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 England
--------------------------- ---------------------------------- ------------------
DFJ Esprit II Founder Co-investment limited partnership England
LP
--------------------------- ---------------------------------- ------------------
DFJ Esprit II Founder Co-investment limited partnership England
2 LP
--------------------------- ---------------------------------- ------------------
Encore I Founder LP Co-investment limited partnership England
--------------------------- ---------------------------------- ------------------
Encore I Founder 2014 Co-investment limited partnership England
LP
--------------------------- ---------------------------------- ------------------
Encore I Founder 2014-A Co-investment limited partnership England
LP
--------------------------- ---------------------------------- ------------------
Esprit Capital III Founder Co-investment limited partnership England
LP
b) 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:
-- 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
either by commitments or invested cost, depending on the stage of
the fund being managed. Revenues are recognised as the related
services that are provided.
-- Arrangement fees
Occasionally Draper Esprit plc may charge a fee as part of
arranging an investment from one of the funds it manages into a
portfolio company. Such fees are charged at a rate determined on a
case-by-case basis and are payable upon completion of the
investment.
-- 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.
-- 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 probable funds will flow to the Group.
c) Deferred income
The Group's management fees are typically billed either
quarterly of 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.
d) 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.
e) 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 of the 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 exceeds 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 assets
Certain 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 which is
typically the duration of the underlying contracts. The following
useful economic lives are applied:
-- customer contracts: eight years.
f) 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 which is the higher of fair value less costs to sell and
value-in-use. To determine value-in-use, management estimates
expected future cashflows 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.
g) 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.
h) 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 'loans and receivables'. 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 IAS 39 Financial Instruments: Recognition and
Measurement 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, DFJ Esprit II
Founder LP, Esprit Capital IV LP and Esprit Investments(I) LP are
appropriately designated as at FVTPL as they meet criteria (b)
above.
Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. After initial recognition, these are measured at amortised
cost using the effective interest method, less provision for
impairment. Discounting is omitted where the effect of discounting
is immaterial. The Group's cash and cash equivalents, trade and
most other receivables fall into this category of financial
instruments.
Individually significant receivables are considered for
impairment when they are past due or when other objective evidence
is received that a specific counterparty will default.
The Groups loans and receivables comprise trade and other
receivables, and cash and cash equivalents in the consolidated
statement of financial position.
i) 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.
j) 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.
k) 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.
l) 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.
m) 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.
n) 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.
o) Dividends
Dividends are recognised when they become legally payable. In
the case of interim dividends to equity shareholders, this is when
declared by directors. In the case of final dividends, this is when
approved by the shareholders at the AGM.
p) 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.
q) 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.
r) Property, Plant and equipment
Fixtures and equipment are stated at cost less accumulated
depreciation and any recognised impairment loss. Depreciation is
recognised so as 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.
s) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits, together with other short-term, highly liquid investments
maturing within 90 days from the date of acquisition that are
readily convertible into known amounts of cash and which are
subject to an insignificant risk of changes in value.
t) 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.
u) Financial instruments
Financial assets and financial liabilities are recognised on 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.
v) 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, so as 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. The exceptional item in the current year of
GBP0.23k (2017: GBPnil) relates to costs associated with a change
in personnel.
w) 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 in
a time basis, with reference to the principal outstanding and at
the effective interest rate applicable.
x) Carried interest
The Company 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 Company 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 Committee.
The Groups interest in carried interest is measured at fair
value through the profit and loss (FVTPL) with reference to the
performance conditions described above.
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. There have been no changes to the accounting estimates and
judgements in the financial year ended 31 March 2018.
a) Valuation of unquoted equity investments at fair value through the profit and loss
The judgements and estimations 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 judgements include whether
to increase or decrease investment valuations or not and require
the use of judgement, estimates and 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 (IPEVCVG). In line with the IPEVCVG, 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.
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,
the most appropriate approach to determine fair value is 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.
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 the basis
remains appropriate each time valuations are reviewed. If the
"price of recent investment" methodology is no longer considered
appropriate, the Group then considers alternative methodologies in
the IPEVCVG 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 note 26 and
note 27 for information on unobservable inputs used and sensitivity
analysis on investments held at fair value through the profit and
loss.
b) Control assessment
The Group has a number of entities within its corporate
structure and consideration 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 (a) for further details.
c) 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. 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. 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 discount rate used
was 10% and the IRR used was 20%. The carrying amount of goodwill
at balance sheet date was GBP20.5m (2017: GBP20.5 million). 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% together with a lower IRR of 10% does not reduce
the carrying value of goodwill to less than its recoverable
amount.
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 directors have 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 number of basic average
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. There was no
dilution impact in the prior year.
Basic earnings per ordinary share Profit Weighted Pence
after average per share
tax no. of
GBP'000s shares
'000
31 March 2018 62,172 71,612 86.8
31 March 2017 32,915 40,748 80.8
Diluted earnings per ordinary share Profit Weighted Pence
after average per share
tax no. of
GBP'000s shares
'000
31 March 2018 62,172 74,636 83.3
31 March 2017 - - -
Net asset value ("NAV") per share is based on the net asset
attributable to shareholders and the number of basic average
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. There was no
dilution impact in the prior year.
Net asset value per ordinary share Net Weighted Pence
assets average per share
GBP'000s no. of
shares
'000
31 March 2018 308,542 71,612 431
31 March 2017 150,590 40,748 370
Diluted net asset value per ordinary share Net Weighted Pence
assets average per share
GBP'000s no. of
shares
'000
31 March 2018 308,542 74,636 413
31 March 2017 - - -
6. Intangible assets
31 March 2018 Goodwill(1) Customer Total
GBP'000s contracts(2) GBP'000s
GBP'000s
Cost
Cost carried forward as at 1 April 2017 20,476 818 21,294
Additions during the year - - -
Cost as at 31 March 2018 20,476 818 21,294
Accumulated amortisation
Amortisation carried forward as at 1 April 2017 - (136) (136)
Charge for the year - (103) (102)
Accumulated amortisation as at 31 March 2018 - (239) (238)
Net book value:
As at 31 March 2018 20,476 579 21,055
As at 31 March 2017 20,476 682 21,158
31 March 2017 Goodwill(1) Customer Total
GBP'000s contracts(2) GBP'000s
GBP'000s
Cost
Cost carried forward as at 1 April 2016
Additions during the year - - -
Acquired through business combinations (note 18) 20,476 818 21,294
Cost as at 31 March 2017 20,476 818 21,294
Accumulated amortisation
Amortisation carried forward as at 1 April 2016 - - -
Charge for the year - (136) (136)
Accumulated amortisation as at 31 March 2017 - (136) (136)
Net book value:
As at 31 March 2017 20,476 682 21,158
1 Goodwill of GBP20.5 million 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 from the realisation of investments for the
next eight years with reference to the most recent financial budget
and forecasts. An eight-year cashflows 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 GBP0.8 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. Investments
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
Groups 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 Year ended
31 Mar 31 Mar
2018 2017
GBP'000s GBP'000s
As at 1 April 105,971 -
Initial portfolio acquired on 15 June 2016(1) - 63,940
Carry and Co-invest acquired on 15 June 2016 - 2,822
Investments made in the year(2) 74,674 20,602
Loans repaid from underlying investment vehicles (15,338) (17,137)
Unrealised gains on the revaluation of investments 66,603 35,744
As at 31 March 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 (GBP40.0 million)
and shares of (GBP23.9 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.
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 group would have been GBP1.2 million
and GBP32.9 million had the entity been acquired at the beginning
of the accounting year, being 1 April 2016. Details of the business
combination are as follows:
GBP'000s
Fair value of equity shares issued 24,000
Total 24,000
Recognised amounts of identifiable net assets:
Property, plant and equipment 5
Intangible assets 818
Investments 2,675
Trade and other receivables 1,165
Cash and cash equivalents 495
Deferred tax liabilities (310)
Trade and other payables (1,324)
Net identifiable assets and liabilities 3,524
Goodwill 20,476
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 of the Esprit Capital
Acquisition Agreement on 15 June 2016 and agreed to immediately
sell 681,156 ordinary shares.
9. Share capital and share premium
Ordinary share capital
31 March 2018 - Allotted and fully paid Number Pence
At the beginning of the year 40,747,576 1
Issue of share capital during the year 30,864,197 1
At the end of the year 71,611,773 1
On 5 June 2017 the Company announced a placing and subscription
for GBP100.0 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 4th August 2017.
31 March 2017 - Allotted and fully paid Number Pence
At the beginning of the year 50,000 100
Redeemed during the year(1) (50,000) 100
Issue of share capital during the year 40,747,576 1
At the end of the year 40,747,576 1
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:
-- 23,829,017 shares (GBP69.3 million) were issued to investors
for cash proceeds net of issuance costs;
-- 8,844,892 shares (GBP23.9 million) were issued for the
acquisition of investment interests held by Draper Esprit Ireland
in Esprit Capital III LP as described in note 16;
-- 8,000,000 shares (GBP24.0 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 Period
31 Mar ended
2018^ 31 Mar
GBP'000s 2017^^
GBP'000s
At the beginning of the year 93,248 -
Premium arising on the issue of ordinary shares 100,000 95,972
Equity issuance costs (5,019) (2,724)
At the end of the year 188,229 93,248
^ The premium on ordinary shares in the period arises from the
issue of 30,864,197 new ordinary shares of 1 pence each on 20 June
2017 and 4 August 2017.
^^ The premium on ordinary shares arises from the issue of
32,747,576 new ordinary shares of 1 pence each on 15 June 2016 and
26 November 2016.
Merger relief reserve
In accordance with the Companies Act 2006, a Merger Relief
Reserve of GBP23.9 million (net of the cost of share capital issued
of GBP80k) 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. The Merger Relief Reserve forms part
of the Groups distributable reserves.
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:
-- Level 1: inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can
access at the measurement date;
-- 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
-- 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. The Group mainly
uses most recent investment price as a proxy for fair value where
available. Where such data is not available or no longer
appropriate a revenue multiple is used. See note 4(a) where
valuation policies are discussed in more detail.
11. Related party transactions
Draper Esprit plc may require that one of its members is
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 GBP9,527 (year ended March
2017: GBP29,825) have been included in the turnover for the year.
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 DFJ
Esprit III(i) LP to the Group. The fair value of the DFJ Esprit
III(i) LP interest assigned, calculated in accordance with the
policies applied with the Group's financial statements, was
GBP656,000. A payment of GBP75,000 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 DFJE III
FP LP for GBPnil consideration. The fair value of the DFJE III FP
LP interest assigned, calculated in accordance with the policies
applied with the Group's financial statements, was GBP444,000. All
amounts have been settled by the year end.
Glossary
In this document, where the context permits, the expressions set
out below shall bear the following meaning:
"Admission" or the Admission of the enlarged share capital to trading
"IPO" 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 Draper Esprit plc, a company incorporated in England
Esprit" or "plc" and Wales with registration number 09799594 and having
its registered office at 20 Garrick Street, London, WC2E
9BT.
"Core Portfolio Top 10 portfolio companies by value.
Companies"
"Directors" or the directors of the Company from time to time, but whose
"Board" names as at the date of this document appear on page
43 of this document.
"Draper Esprit the Esprit Funds and the Encore Funds.
Funds"
"Draper Venture the self-governed network of ten independent growth and
Network" venture funds, of which Esprit Capital is a member.
"EIS" 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 with registration number
OC347590 whose registered office is 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 with registration number OC318087 whose
registered office is 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 with registration
number 572006 and having its registered office at 32
Molesworth Street, Dublin 2, Ireland.
"FCA" the UK Financial Conduct Authority.
"FOF" or "FoF" Fund of Funds.
"Gross Portfolio Gross portfolio value is the value of the portfolio of
Value" or "Gross investee companies held by funds controlled by the Company
Primary Portfolio" before accounting for deferred tax, external carried
interest and amounts co-invested.
"Grant Thornton" Grant Thornton UK LLP, a limited liability partnership
registered in England and Wales with registration number
OC307742 and having its registered office at 30 Finsbury
Square, London EC2A 1AG.
"Group" the Company and its subsidiaries from time to time and,
for the purposes of this document, including Esprit Capital
and its subsidiaries and subsidiary undertakings.
"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.
"IRR" the internal rate of return.
"Net Asset Value" the value, as at any date, of the assets of the Company
after deduction of all liabilities determined in accordance
with the accounting policies adopted by the Company from
time to time.
"Ordinary Shares" ordinary shares of GBP0.01 pence each in the capital
of the Company.
"EIS" enterprise investment scheme.
"International the International Private Equity and Venture Capital
Private Equity Valuation Guidelines, as amended from time to time.
and Venture Capital
Valuation Guidelines"
"VC" venture capital.
"VCT" A VCT (venture capital trust) is a UK closed-ended collective
investment scheme.
London | HQ
20 Garrick Street
London, WC2E 9BT
Tel: +44 (0)20 7931 8800
draperesprit.com
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END
FR AIMBTMBBTTLP
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