Draper Esprit plc
("Draper Esprit", "the Group" or the "Company")
FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2020
Draper Esprit (LSE: GROW, Euronext Growth: GRW), a leading venture capital firm investing in and developing high growth digital technology businesses, today announces its final results for the year ended 31 March 2020.
Financial highlights
· Gross Portfolio Value increased by 18% to £703m (31 March 2019: £594m).
· Gross Portfolio Fair Value increase of 10% with a £59m fair value movement in the year (31 March 2019: £140m, 58%).
· NAV per share increased by 6% to 555 pence (31 March 2019: 524 pence).
· Cash realisations of £40m (31 March 2019: £16m), with further exits amounting to approx. £80m announced post year-end.
· Net Assets of £660m (31 March 2019: £619m).
· Profit after tax of £40m (31 March 2019: £111m).
· £90m invested by the Group (31 March 2019: £226m), and a further £38m invested by EIS/VCT (31 March 2019: £35m).
· Operating costs (net of fee income) continue to be less than the targeted 1% of year-end NAV.
· Well funded with £34m available cash resources at year-end and undrawn debt facilities of £5m. Post year-end increase in the debt facility by £10m and anticipated realisations of Peak. This is further complemented by c.£50m from EIS/VCT funds.
Operational highlights
· The value of the core portfolio companies has increased to £471m from £415m as at 31 March 2019.
· Total of US$1.8bn raised by the core portfolio in the year (year ended 31 March 2019: US$1.6bn).
· Invested in 9 new companies (including 4 via Earlybird VI*) and 19 existing portfolio companies (including 4 via Earlybird VI*) during the year.
· Committed to 4 new seed funds, bringing the total seed fund of funds portfolio to 20 with total commitments of £39m. £13m drawn down at year-end, of which £7m was drawn during FY2020.
· Acquired the remaining interest in Encore Ventures LLP, the partnership which manages Draper Esprit's EIS funds.
· Appointment of Martin Davis as Chief Executive Officer in November 2019.
· A focus on scaling our investment capability and building out the infrastructure to support the next stage of our journey.
· Reacted quickly to the COVID-19 pandemic to safeguard employees, our investments and monitor the liquidity of the Company.
Post period-end
· Extended the term of the revolving credit facility with Silicon Valley Bank and Investec by 1 year to 2023 and increased its size by £10m to £60m in line with Draper Esprit's growing portfolio.
· Zynga Inc. announced their agreement to acquire Peak Games for $1.8bn, which will, subject to closing, indicate a fair value holding for Draper Esprit of approximately £80m, representing a fair value uplift of £26m in the year ending 31 March 2020 and a further approx. £12m anticipated post year-end (actual returns are subject to completion conditions, including FX movements, and acquirer share price movement with respect to the stock component).
· Simon Cook will be stepping down from the Board from 1 July 2020. Simon will remain with the Company as founding partner and focus on generating new deals and will continue as a board member for a number of portfolio companies.
· Actively appraising dealflow opportunities and making selective investments in high quality companies in markets that benefit from the accelerated transition to digital such as Cazoo (online car retailer).
· Portfolio companies continue to raise financing rounds (some after the COVID-19 pandemic had impacted the economy), such as Aircall and others as yet unannounced.
*Reporting threshold - companies with a NAV of £1 million or more.
Some of the above measures are Alternative Performance Measures ("APMs") - see note 30 to the consolidated financial statements for further details.
Martin Davis, CEO at Draper Esprit, commented:
"Our strong performance for the period reflects that our portfolio of investments includes some of the most exciting private technology companies in Europe and, while the COVID19 pandemic has clearly impacted companies globally, we firmly believe in the role that technology will play in helping to support the wider recovery.
Our portfolio companies are likely to be at the vanguard of this recovery given the likely acceleration of trends such as cloud infrastructure, online gaming and entertainment, digital healthcare, remote financial services and automation as a result of the changes made by countries, corporations and individuals.
Our position as one of Europe's most active VCs, and our long and deep understanding of the needs of this community, as well as our experience of previous cycles, put us in an excellent position to play a leading role in helping innovative businesses of all sizes emerge stronger from this crisis and play an even more active role in the communities and markets where they operate."
Availability of Annual Report and Notice of AGM
The Annual Report and Accounts for the financial year ended 31 March 2020 and notice of the Annual General Meeting ("AGM") of Draper Esprit will be available today on Draper Esprit's website at http://draperesprit.com/.
-ENDs-
Enquiries
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Draper Esprit plc Martin Davis (Chief Executive Officer) Ben Wilkinson (Chief Financial Officer) |
+44 (0)20 7931 8800 |
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Numis Securities Nominated Adviser & Joint Broker Simon Willis Richard Thomas Jamie Loughborough |
+44 (0)20 7260 1000 |
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Goodbody Stockbrokers Euronext Growth Adviser & Joint Broker Don Harrington Charlotte Craigie Dearbhla Gallagher
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+44 (0) 20 3841 6202 |
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Powerscourt Public relations James White Elly Williamson Jessica Hodgson |
+44 (0)20 7250 1446
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If you would like to access the 0900 results presentation, please contact Powerscourt at draperesprit@powerscourt-group.com for dial in details.
Chair's introduction
Following another strong year of financial and operational performance, I am delighted with the progress that Draper Esprit has made to invest and support Europe's highest growth technology businesses especially as we face the impact of the COVID-19 crisis.
Now more than ever, technology plays an integral role in all our lives and has enabled us to adapt to rapidly changing circumstances and challenges.
Draper Esprit has always been focused on investing in the technology of the future and this will be even more critical to help kickstart the global economy.
During the year, we have continued to make investments in four key sectors of: (i) consumer technology; (ii) enterprise technology; (iii) digital health & wellness; and (iv) hardware & deeptech. The majority of the portfolio is well positioned to benefit from historic trends, some of which have been accelerated by the impact of COVID-19. Companies focused on secure cloud, automation, online financial services, gaming/entertainment, and digitalisation are continuing to trade well with minimal disruption and there are indications of strong market growth for high quality companies operating in these areas.
In parallel with our continued focussed portfolio approach and our vision to democratise venture capital we have also made some investments in our own business to build the infrastructure that will enable us to broaden our appeal to a wider pool of investors who would not usually have access to private high growth technology companies.
Martin Davis joined us in the latter part of 2019 as Chief Executive Officer. Martin brings with him experience of working in both technology businesses and in senior roles in financial services. Simon Cook remains with the firm and will focus on what he loves best, working with entrepreneurs in our existing portfolio and identifying new exciting investments as Founding Partner of Draper Esprit. Stuart Chapman continues to bring his experience as a critical member of the Board and senior Executive team. As well as these changes to our senior leadership team, we expanded our HR, IT and legal functions and welcomed new members to the Partnership team, including two internal Partner promotions, one new Investment Director hire, and a new Senior Partner appointment post year-end.
We believe the combination of Martin's experience with Simon and Stuart's deep sector commitment and long standing expertise in working with start-up and scale-up businesses, combined with a team of talented investment professionals position us well to compete for and invest in Europe's most exciting technology companies.
To reinforce our commitment to entrepreneurs we also acquired the remaining interest in Encore Ventures LLP in March 2020, the partnership which manages Draper Esprit's EIS funds. During the year we supported our existing portfolio with follow-on capital while also backing new firms, including making investments in an exciting fintech business and a pioneering IoT start up through to a digital analytics firm and a graphene technology company.
The end of this financial year saw an increasingly challenging environment resulting from the COVID-19 pandemic. We took early steps to implement measures to safeguard employees, in our business, and to ensure increased dialogue with our portfolio companies by providing advice and support throughout this difficult time.
Although a small number of our portfolio companies operate in industries which are more directly affected, such as travel, leisure and hospitality, the vast majority of our portfolio remains optimistic and are preparing for a faster transition to digital and stronger growth when the economic environment starts to improve. We remain one of a small number of companies with the resources to provide growth and support to businesses which will benefit from the key trends which are likely to accelerate as part of the post COVID-19 recovery. We are continuing to see a strong pipeline of exciting opportunities and look forward to maintaining our outstanding investment track record.
Once again, I would like to thank the team at Draper Esprit for their enthusiasm and flexibility during this difficult period and for their continued commitment to our portfolio companies. We look forward to the future with confidence with a more experienced operational team, an exciting portfolio of existing companies and a pipeline of ambitious potential investments.
Karen Slatford
Non-Executive Chair
See more at:
Draperesprit.com
CEO's Statement
Overview
Having joined the business in November 2019, I have been deeply impressed with the quality of our team and our investment expertise, the strength of our existing portfolio and the depth of our pipeline.
The Group has had an active year of investing and further building the portfolio. We have remained focused on providing European entrepreneurs with the capital they need to become global leaders while continuing on our mission to democratise venture capital and provide our investors with access to high growth, privately owned technology companies.
At the end of our financial year, the COVID-19 virus led to a global pandemic, the impact of which is clearly profound, both from the perspective of public health and the economic outlook. The necessary restrictions imposed by Governments on businesses and employees in order to contain the spread of the virus significantly curtailed the operations of many businesses across the wider economy, however our portfolio remains overall very well positioned, in particular given the expected acceleration in the transition to digital.
Over the medium to long term, we believe the recovery from the pandemic will sharply accelerate the trends which Draper Esprit's portfolio businesses focus on. Transformations such as secure cloud infrastructure, remote financial services, online gaming and entertainment, and digital health all stand to benefit from the societal shifts which the crisis has engendered. These dynamic businesses are weathering the current environment well and we are confident they will emerge stronger when economic activity normalises.
Prior to the pandemic, the Group was on track to achieve its targeted annual 20% portfolio growth through the cycle and, despite the current market backdrop, has still delivered strong growth across the business. During the year, our Gross Portfolio Value grew from £594.0 million to £702.9 million with a gross fair value movement of £58.5 million (year to 31 March 2019: £140.1 million), a 10% Gross Portfolio fair value increase in the year.
Our focus now is to build on this strong financial performance by continuing to hire the best deal-making talent in the sector and, as our deal team grows, to ensure that the infrastructure is in place to support it. We are committed to building best-in-class processes and capabilities that will enable us to maintain the integrity and agility of our investment process as we support high quality and exciting businesses successfully navigate this challenging time.
Draper Esprit's position as one of Europe's most active VCs, and our long and deep understanding of the needs of this community, put us in an excellent position to play a leading role in helping European technology entrepreneurs build the future.
Operating review
Our structure as a publicly listed company investing alongside co-investment funds differentiates us from our competitors and helps us in our aim of providing European entrepreneurs with the capital they need to become global leaders. Being publicly listed means that we have the flexibility, and access to different sources of capital, to provide teams with the backing they need at the time they need it most.
We also believe that the high standards of governance, oversight, and transparency to which we are held as a result of our listing is fundamental to our success at a time when the companies we invest in are increasingly mindful of who they choose to partner with.
Over the last decade we have witnessed a historic shift in the capital markets from public to private with companies staying private for longer, raising more capital and reaching greater levels of maturity before exit. This has led to a rapid expansion of both new VC funds and the total level of fundraising. We have also witnessed Europe starting to realise its potential as a technology powerhouse. Given the flexibility in our structure and the experience and expertise within our team, Draper Esprit is in an excellent position to benefit from opportunities that these trends provide.
Leveraging our co-investment model provides improved access to the best deals, as well as managing third-party funds. On 10 March 2020, we acquired the remaining interest in Encore Ventures LLP, the partnership which manages Draper Esprit's EIS funds, better aligning our group structure to support the continued scale-up of our business whilst simultaneously increasing our fee revenue. The Group also holds a 30.77% stake in leading VCT manager Elderstreet Holdings Limited, which manages Draper Esprit VCT plc (LSE:EDV), with an option to acquire the remaining interest.
Our disciplined approach to investment remains central to our overarching strategy; while we continue to review thousands of potential portfolio companies, we only invest in those with strong technology and capital-efficient business models, visionary management teams and robust gross margins. As we scale our business, we will maintain this discipline, which is particularly relevant in the current downturn.
We continue to invest at strong rates, investing £89.9 million in new and existing portfolio companies (year to 31 March 2019: £226.4 million), which included our continued investing through our partnership with Earlybird in Germany and seed funds strategy, to give us more breadth and scale.
The £89.9 million included funding to 19 scale-up companies from our existing portfolio as well as to 9 new portfolio companies (including 4 follow-on and 4 new investments via our partnership with Earlybird*). During the year, we generated £39.5 million of cash through exits including amounts held in escrow. The value of our gross portfolio grew by 18%.
Successful exits
During the year, we announced the sale of our full stake in Pod Point, the UK's largest independent provider of electric vehicle charging, to EDF Energy, representing a return of 2.3x, with an IRR of 39% over 3 years.
Having backed Pod Point through a critical stage in the company's development and supported it through its journey, their new partnership with EDF is an exciting development for the business and a prime example of how Draper Esprit is able to help portfolio companies secure important backing from strategic partners.
We also received proceeds from the partial sales of our stakes in Transferwise, UiPath, and Codility, and the sale of our full stake in Finnish DevOps company, Bitbar, alongside proceeds from amounts previously held in escrow relating to past disposals.
Post year-end, Zynga Inc. announced their agreement to acquire Peak for $1.8 billion, which will, subject to closing, indicate a fair value holding for Draper Esprit of approximately £80.0 million via Earlybird IV (actual returns are subject to completion conditions, including FX movements, and acquirer share price movement with respect to the stock component).
Since IPO, as at year-end we have exited 22 companies, realising over £105.0 million in cash, with further proceeds expected subject to closing, as referenced above, from the sale of Peak of approximately £80.0 million post year-end. An advantage of our model is that we have the ability to build a portfolio with assets of varying maturity, for example through secondary deals, providing us with a strong cycle of realisations across the breadth of the portfolio.
Investments
Our unique structure enables us to offer funding options to entrepreneurs at all stages of their growth. We have the flexibility to back companies through the lifecycle, from seed via our seed funds strategy to scale-up, through to IPO or acquisition.
New portfolio company investments
We partnered with a range of high growth, ambitious technology start-ups during the period through our investments in new portfolio companies: Thought Machine, Sweepr, Decibel, Freetrade, and Paragraf. We have also invested in new portfolio companies via our partnership with Earlybird, including GetSafe, Instamotion, Aiven, and Isar Aerospace.
Seed fund strategy
Our seed fund strategy continues to give us access to the best early stage deals across the markets where we operate, while also ensuring that early stage opportunities across Europe are well funded with capital.
Building a community of seed funds gives us access to high quality deal flow and allows us to work alongside a network of funds from across Europe to fuel the next generation of visionaries, the best of whom we help when they need later stage funding to grow.
In the year, we have committed a further £5.3 million to 4 new funds, FRST Ventures, Change Ventures, 7 Percent Ventures, and LDV Capital.
To 31 March 2020, the Group has made a total commitment of £39.1 million to 20 funds, with £13.3 million invested at the year-end, of which £7.2 million occurred during the financial year. The remaining commitments will be drawn down over approximately a 5-year period.
Follow on investments
During the year, we continued to support our portfolio companies by participating in later funding rounds, as well as by providing hands-on support to help them scale in their respective markets. Our portfolio companies continued to capitalise on their position as global companies able to compete on the international stage in their respective markets. The core alone raised US$1.8 billion capital in the year.
Sustainability
Building on our existing business culture, committed to positive change and sustainability, we continued to enhance our Environmental, Social and Governance ("ESG") practices during this financial year, both in our own business and within our investment process. The Board is committed to the importance of ESG, including through our investment practices as signatory to the UN Principles of Responsible Investment. During the year we have established an ESG committee, which is mandated to implement a 12-month roadmap to progress our ESG journey, with actions including the adoption of an evolved responsible investment policy, enhancements to our investment checklists, a portfolio benchmarking exercise, and the development of monitoring tools for internal and external deployment. More details of our notable achievements during the year and plans for the future can be found in the Annual Report.
Summary
The priority over the coming weeks and months is for us, as an industry, to support businesses in this difficult period and to identify those with strong business models, who will continue to succeed and indeed in some cases play an important role in the recovery of the world from this crisis.
We will continue to focus on being active board members and building stakes over the long term through primary and secondary investments to generate strong cash realisations on exit with a long-term aim to be self-financing. We will continue to evolve our model, recognising the opportunity of bringing in third party investors and reducing the net cost base of our operations with fee income, as is demonstrated through our acquisition of the remaining interest in Encore Ventures LLP during the year, as well as the option to acquire the remaining interest in Elderstreet Holdings Limited.
At the start of the new financial year, we further enhanced our investment and platform team and we will continue to build the infrastructure to support the long-term growth of the business, whilst maintaining the integrity of our investment process.
We remain passionate about democratising entrepreneurship and creating jobs across the UK and Europe and, whilst we are mindful of the continued impact on the global economy following the COVID-19 pandemic, ongoing uncertainty caused by Brexit, and the broader political climate, we believe our dual listing in London and Dublin, as well as strong cash reserves and access to a broad suite of funding sources including our existing revolving debt facility (extended and increased post year-end), will enable us to continue to access the best deals across the UK and Europe.
We continue to see a strong pipeline of deal flow and will continue to leverage our networks, including from our seed funds strategy, to source the best companies through the stages. Recent portfolio funding rounds, for example cloud-based voice platform, Aircall's, Series C post year-end, demonstrates the strength of the portfolio and highlights the focus on sectors which will benefit from an accelerated transition to digital.
Outlook
We have entered the new financial year with a well-positioned portfolio and in a strong position to capitalise on our growing reputation as one of Europe's leading venture capital businesses. At the same time, we must be cognisant of the wider market uncertainty and increased pressures on the global economy, which have the potential to impact our portfolio companies and, by extension, our own business.
Our growth target for the coming financial year is 15%, with an expectation of returning to 20% through the cycle whilst recognising the volatile environment in which we are currently operating.
Our mission to empower Europe to invent the future remains central to our ongoing strategy and this, alongside our progress in building the infrastructure required to scale the Group, means that we are well placed to drive long-term, sustainable returns for all of our stakeholders.
Martin Davis
CEO
*Reporting threshold - companies with a NAV of £1 million or more.
COVID-19
The ongoing spread of the COVID-19 virus continues to be, first and foremost, a public health crisis, but the impact on the economy and businesses is clearly also very significant. We took early steps and have continued to put in place measures to safeguard our employees, manage our business and support our portfolio companies.
Keeping our team safe
We quickly put in place robust measures to protect staff via travel and face to face meeting restrictions, flexible working plans and remote working, alongside regular virtual communication within teams and across all staff. Given the nature of the business and our role in the technology sector, we were well placed to mitigate the impact of social distancing on our team's day to day operations. Our broader team includes the management of the portfolio companies who also acted swiftly to protect their people.
Supporting our portfolio companies
We have maintained high levels of dialogue with our portfolio companies throughout the crisis, many of them receiving operational support and advice. Our team has worked to guide our portfolio companies and assist them to access various elements of the Government's financial assistance packages as these have developed. Our investments are guided by a strong syndicate of investors and we remain well financed with cash resources to provide support where necessary.
Strong balance sheet
The Group has implemented bi-weekly Audit, Risk and Valuations Committee meetings with an enhanced focus on liquidity, both of our business and of the portfolio companies, including an ongoing assessment of their funding requirements. The Group reports net assets of £659.6 million, with available cash resources at year-end of £34.1 million (including restricted cash) and £5.0 million of undrawn debt, complemented by £50.9 million from EIS/VCT. This was enhanced post year-end as we extended the term and increased the size of our revolving credit facility by £10.0 million in June 2020. In addition, post year-end Zynga Inc. announced their agreement to acquire Peak Games for $1.8 billion, which will, subject to closing, indicate a fair value holding for us of approximately £80.0 million (actual returns are subject to completion conditions, including FX movements, and acquirer share price movement with respect to the stock component).
Valuations
An appraisal of valuation metrics has been adopted to reflect the rapid shift in the economic environment, and lower growth forecasts for 2020 and 2021 have been assumed for companies whose business sector or model have been directly impacted by COVID-19. The Group consistently applies multiples lower than those prevailing for comparable quoted companies to mitigate stock market volatility. The long-term potential of the portfolio remains positive and we expect the value of the portfolio to grow post COVID-19 particularly in light of the accelerated transition to digital, however we are mindful of the uncertainties surrounding the pace of the anticipated recovery of the broader economies.
Portfolio Review
Overview
As we build the infrastructure required to scale our operations, we continue to back new and existing portfolio companies whilst maintaining the integrity of our investment and valuations process.
At the end of the financial year, we were all faced with an evolving environment as a result of the COVID-19 pandemic. We have reviewed the current impact and modelled the potential future impact of COVID-19 on our portfolio. While we anticipate a period of trading slowdown, we also remain very positive about the long term areas of growth in the markets that our companies address such as artificial intelligence, cloud computing for remote working and digital health. Many of our portfolio companies generate recurring revenues and the geographic diversity of our portfolio, combined with the broad cross section of areas in which they operate, means that we are not overly exposed to any individual market or sector.
Portfolio
Our portfolio is balanced across four sectors; (i) consumer technology; (ii) enterprise technology; (iii) digital health & wellness; and (iv) hardware & deeptech.
We have continued our focus on finding the most exciting new technology companies and have invested in 9 new companies during the year (including 4 via Earlybird).Thanks to our evergreen strategy, we have been able to increase our stakes in our existing portfolio companies and have invested in 19 existing portfolio companies during the year (including 4 via Earlybird). Realisations in the year have increased from £16.0 million in the year ending 31 March 2019 to £39.5 million from partial and full disposals, including amounts which were held in escrow.
There are 16 core portfolio companies accounting for c.70% of the Gross Portfolio Value. They comprise Graphcore, Trustpilot, Peak Games (acquisition agreement announced post year-end), Transferwise, Smava, Perkbox, M-files, Ledger, Ravenpack, UiPath, Revolut (included in FY2020 interims), Aircall, Thought Machine (new entrant), ICEYE (new entrant), FinalCad, and Aiven (new entrant). Pollen, SportPursuit, N26 and Lyst are constituents of the emerging portfolio. Pod Point was part of the core in the year ending 31 March 2019 and was fully realised in the year ending 31 March 2020.
Investments
During the year ending 31 March 2020, £89.9 million (31 March 2019: £226.4 million) was deployed from the plc, with a further £38.1 million (31 March 2019: £35.1 million) deployed from EIS/VCT.
New investments
In the year, the Group invested in new companies, including:
· £16.5 million into Thought Machine, the cloud native core banking technology firm, leading a Series B funding round of US$83.0 million to drive global growth and banking transformation mission, with a further £7.4 million from EIS/VCT;
· £10.1 million in Decibel, a London-based software company focused on digital experience analytics to improve user interface on company websites, leading its US$17.0 million Series B round;
· £4.0 million into stock investing app, Freetrade, with £3.0 million from EIS and VCT funds, as part of its Series A round;
· £2.7 million from plc leading an €8.0 million Series A funding round in Sweepr, the Dublin-based customer experience platform for smart devices in the connected home;
· £0.9 million from plc and a further £1.7 million from EIS/VCT into Cambridge-based graphene electronics technology company, Paragraf, as part of a £16.2 million round; and
· A range of new investments via our strategic partnership with Earlybird Digital West*, including:
· £4.4 million into Helsinki-based software company Aiven, which combines the best open source technologies with cloud infrastructure, and raised US$40.0 million in Series B funding round led by IVP;
· £2.5 million in Getsafe, a Heidelberg-based company which uses AI to manage insurance via smartphones;
· £1.9 million into Instamotion, an online transaction platform for used cars; and
· £1.1 million into space tech company, Isar Aerospace.
Follow-on investments
As part of our strategy to provide companies with continued support throughout their lifecycle, the plc participated in a number of follow-on investments, including:
· £3.8 million into ICEYE, the Finnish microsatellite manufacturer;
· £2.5 million bridging loan into Pollen, formerly known as Verve, an invite-only marketplace that enables people to bring their friends to the best experiences and share rewards;
· £2.2 million into Realeyes, the machine learning platform which measures emotions through facial recognition;
· £2.1 million into Roomex, the corporate travel software company;
· £2.0 million into IESO Digital Health, the mental health app;
· £1.4 million into the online medical consultation service, PushDoctor;
· £1.0 million into a Series C round for the menstrual cycle tracker app, Clue;
· £1.0 million in the intelligent information management solution provider, M-Files;
· A range of follow-on investments via our strategic partnership with Earlybird Digital West*, including:
· £6.3 million in Berlin-headquartered digital banking company N26 as part of a US$170.0 million round;
· £1.7 million into eHealth Medidate, the vertically integrated digital services platform for selective medical treatments;
· £1.2 million into Movinga, a fixed-priced personal moving services platform; and
· £1.1 million in Allthings Technologies, a digital tenant management platform.
Seed funds
Our seed fund investment strategy gives us access to the best deals across Europe to fuel the next generation of investors and visionaries. We are then well positioned to support the best of them when they need later stage funding to grow.
During the year, we have made commitments to an additional 4 seed funds meaning that to date 20 seed fund deals have closed across various sectors and locations in Europe. This amounts to commitments of £39.1 million with £13.3 million invested at the year-end, of which £7.2 million occurred during the financial year. Through this strategy, as at 31 March 2020, we have invested indirectly in over 300 companies via these seed funds. New seed funds committed to this year, include:
- FRST Ventures - A France-based venture fund with a €1.5 million plc commitment;
- Change Ventures - Latvia-based seed stage fund investing in the Baltic states with €1.5 million commitment;
- 7 Percent Ventures - London-based tech start-up VC with £2.0 million commitment; and
- LDV Capital - A US-based deep tech early stage venture fund investing in Europe with US$0.75 million commitment.
Realisations
During the year, the plc realised £39.5 million from partial and full disposals of investments, including receipts of escrow amounts. Key partial and full realisations during the year include:
- £12.1 million, as well as £0.3 million amounts held in escrow, from the full disposal of Pod Point to EDF Energy for a transaction value ahead of September 2019 held fair value and representing 2.3x, with an IRR of 39% over three years;
- £15.3 million gross proceeds were received for the part realisation of Transferwise (£15.0 million net proceeds); and
- £4.6 million from the partial disposal of our stake in UiPath.
Post period-end, Zynga Inc. announced their agreement to acquire Peak Games for $1.8 billion, which will, subject to closing, indicate a fair value holding for Draper Esprit of approximately £80.0 million via Earlybird IV (actual returns are subject to completion conditions, including FX movements, and acquirer share price movement with respect to the stock component).
Some of the above measures are Alternative Performance Measures ("APMs") - see note 30 to the consolidated financial statements for further details.
*Reporting threshold - companies with a NAV of £1 million or more.
Core Portfolio Company Updates
Aircall
Cloud-based call centre system, Aircall, has launched a new partner program to help agents and resellers sell their phone solution to their server message block customers. The new channel partnerships will enable further growth as it helps companies reach new audiences. Aircall also launched its App Marketplace featuring +60 integrations with best-in-class technology partners, creating a truly connected ecosystem for voice.
In the post Covid-19 climate, demonstrating the value of the product to provide its customers with integrations, flexibility, productivity tools, Aircall has raised US$65 million in Series C. Funding was led by DTCP with participation from new investors Swisscom and Adam Street, existing investors including eFounders, Draper Esprit, Balderton Capial and NextWorld participated in the round. This most recent funding round brings the company's total funding to date to over US$100 million. Aircall is headquartered in Paris and New York. It has more than 300 employees and has acquired 5000+ clients in over 1500+ companies. The company also hired Sandrine Meunier as Chief People Officer. Aircall founders, Pierre-Baptiste Bechu and Xavier Durand, were named on Forbes 30 under 30 in tech 2019.
The global pandemic has caused a rise companies working from home. Aircall's cloud-based software connects remote teams and enables them to stay productive and provide a work life balance. With features like 'Live feed' managers are able to monitor productivity, seeing which employees are on shift, on calls, and a full view of the connected workstream. The Live feed integration also eases the process of remote onboarding of new staff, being able to track their onboarding status and add them to the system remotely. Aircall unifies information by providing a singular inbox allowing for ease in information sharing with tracking tags and comments. Aircall has also created online resources for managers and staff to help with productivity, remote working and working from home.
Total Draper Esprit plc investment: £9.9 million
Investment valuation as at 31 March 2020: £24.3 million
Aiven
The data infrastructure management platform, Aiven, allows developers to focus on application building while the platform manages open-source databases and messaging systems for business clients on all major cloud platforms. The company possesses 8 open-source products, 6 Clouds, and covers 87 regions with headquarters in Boston, Berlin, Sydney, and Helsinki.
Aiven achieved SOC 2 compliance and became the first cloud service to provide hosted PostgreSQL, in October 2019. In December 2019, the company announced it had tripled its revenue run rate and added former Amazon Head of Business Development Olaf Schmitz to the company's Board.
In February 2020 Aiven raised US$40 million in its Series B fund raise led by Silicon-Valley-based IVP. Existing investors Earlybird VC and Lifeline Ventures, as well as family offices of Risto Siilasmaa, chairman of Nokia, and Olivier Pomel, founder of Datadog, were also involved in the round.
Post period end the company announced two executive hires, VP of marketing and VP of sales EMEA to fuel Aiven's global expansion.
Aiven's operational capability is secured by a globally distributed team that is able to work remotely in order to provide support for its service, which is a self-hosting, fully automated platform that requires little human support. Remote work is a normal part of everyday life at Aiven, so COVID-19 has had minimal impact for the company.
Total Draper Esprit plc investment: £5.0 million
Investment valuation as at 31 March 2020: £12.8 million
Finalcad
Finalcad is a construction management application that allows architects, field workers and contractors to run synchronised project builds and risk management solutions that provide progress reports, defect management, quality controls and analytics. The company launched Finalcad Live, "Slack" for construction, enabling real-time defect-tracking connected to the daily site log on to the platform. Several strategic hires were made across the business including; Franck Le Tendre, former Industry Director EMEA at Dropbox, as CEO.
Since 2012, Finalcad has delivered more than 20,000 projects in 35 countries and has raised over US$55 million in funding from Draper Esprit, Cathay Innovation, Salesforce Ventures, Serena, Aster, and CapHorn. In September 2019, the company was selected to be part of the Next 40, a collection of France's most promising start-ups, an initiative run by Cédric O, France's Secretary of State for the Digital Sector.
By digitizing processes, allowing companies to capture relevant data and share it in a paperless process, and creating permanent digital records of health, safety, and environment information Finalcad is helping companies adjust to COVID-19 workplace restrictions and to keep employees safe.
Total Draper Esprit plc investment: £12.4 million
Investment valuation as at 31 March 2020: £12.4 million
Graphcore
Graphcore, the machine intelligence semi-conductor company, has developed IPUs (Intelligent Processing Units) which enable unprecedented levels of compute. In May 2019, the company announced that Dell was one of the first customers to build an IPU-based Dell platform combined with Graphcore's Poplar software stack.
The company also announced its collaboration with Microsoft Azure in mid-November 2019. Microsoft is the first major public cloud vendor to offer Graphcore IPUs to support next generation machine learning. The partnership development is a testament of the maturity of Graphcore's patented IPU technology.
In February 2020, Graphcore raised a US$150 million Series D extension round for research and development including investments from new investors; Baillie Gifford, Mayfair Equity Partners and M&G Investments as well as participation from previous investors Merian Chrysalis, Ahren Innovation Capital, Amadeus Capital Partners and Sofina. Other existing shareholders include BMW, Microsoft, Atomico and Demis Hassabis of DeepMind.
In April 2020, Graphcore launched its new Poplar Analysis Tool, part of Graphcore's PopVision family of analysis tools that help users gain a deeper understanding of how their applications are preforming and utilising the IPU.
Graphcore has +200 employees with plans to hire additional staff, Iin light of Coivid-19 the company has opted to conduct their hiring online in order to keep up with their goal of 500 employees. Graphcore has offices in Bristol, London, Cambridge, Palo alto, Oslos, Bejing, Hsinchu, Seoul, New York, Seattle and Austin. . In a demonstration conducted by Microsoft machine learning scientist, Sujeeth Bharadwaj, a Graphcore IPU was used to recognize Covid-19 in chest x-rays. Bharadwaj's demonstration showed that the Graphcore chip could speed up the process to 30 minutes as opposed to the 5 hours a conventual chip might take, foreshadowing the future success and breakthroughs Graphcore's chip could accomplish.
Total Draper Esprit plc investment: £13.7 million
Investment valuation as at 31 March 2020: £86.8 million
ICEYE
ICEYE empowers others to make better decisions in Governmental and commercial settings by providing access to timely and reliable satellite imagery.
The company's radar satellite imaging service, with coverage of selected areas every few hours, both day and night, helps clients resolve challenges across a variety of sectors such as maritime, disaster management, insurance, finance, security and intelligence. Founded in 2014, ICEYE is the first organisation in the world to successfully launch synthetic-aperture radar (SAR) satellites with a launch mass under 100 kg. ICEYE currently has three satellites in orbit with plans to launch several new units over the next few years.
The company hired Dr. Mark Matossian, an aerospace industry expert, as CEO of ICEYE US, Inc indicating plans to expand to the US market. Dr. Matossian most recently served for more than a decade in program management at Google, including manufacturing and launching the Terra Bella imaging constellation.
In the midst of COVID-19 ICEYE SAR satellite constellation is monitoring the world under lockdown, tracking significant pattern-of-life changes like the significant impacts being had on theme parks and cruise ships.
Total Draper Esprit plc investment: £7.5 million
Investment valuation as at 31 March 2020: £13.9 million
Ledger
Ledger, the cryptocurrency and blockchain hardware security wallet successfully launched the Nano X product and Ledger live companion software. The Nano X received CSPN (First Level Security Certificate) certification issued by the National Agency for Information Systems Security (ANSSI). The Ledger Vault continues to be sold across Europe, Asia, and the US as an enterprise solution.
The company continues to pursue partnerships like the one with Engie, the French multinational electric utility business, to augment the ways in which its technology can support IOT applications. The company is also working with Veolia subsidiary, Birdz, a pioneer in remote water consumption metering, to ensure authenticity of the drinkable water collection data as well as Bitstamp, the world's longest-standing and largest European cryptocurrency exchange (by trade volume) and Shapeshift, the cryptocurrency trading platform.
The company now has 200 global employees working in its Paris, New York, Hong Kong, and Vierzon bases and 1 million users in over 165 countries with1.5 million units sold.
Total Draper Esprit plc investment: £17.7 million
Investment valuation as at 31 March 2020: £17.7 million
M-Files
M-Files is an intelligent information management platform, that organises customers' content with the ability to connect to existing network folders and systems to enhance them with the help of AI to categorise and protect information. In the period, the company announced that its platform is now linked to Microsoft Office 365, Microsoft Teams, and Salesforce Customer 360, and has also publicised attainment of SOC 2 compliance.
M-files grew subscription based annual recurring revenue by over 100% in 2019. In addition to hiring a new CMO, the company has won a number of awards, including the European Investment Bank's 2019 Innovation Award and Best Overall Document Management software of 2020 by Business.com.
The information management platform allows businesses to enable secure access to documents and information while minimizing risk as well as connects existing business systems and data archives without the need for immediate data migration. M-Files offering has helped businesses as they shift to remote working to digitise, organise, and work more effectively during the COVID-19 pandemic.
Total Draper Esprit plc investment: £5.0 million
Investment valuation as at 31 March 2020: £20.0 million
Peak
Peak, the mobile games developer, continues to grow at pace, surpassing US$1 billion in player spend led by its 2015 release Toy Blast.
Over 275 million users world-wide have installed at least one of the company's products. Its most popular games, Toon Blast and Toy Blast, have more than 12 million average mobile DAUs (Daily Active Users).
The UK is the publisher's second largest market at 4.2% of player spend, followed by Japan at 4%. The company's titles are most popular in the United States accounting for c.68% of revenue.
Post year end it was announced that Peak entered into a sale agreement with Zynga Inc for $1.8 billion, comprised of approx. $900 million cash and $900 million of Zynga common stock. Upon completion the acquisition would represent a fair value holding for Draper Esprit in Peak of approx. £80 million (actual returns are subject to completion conditions, including FX movements, and acquirer share price movement with respect to the stock component), which is approx. an anticipated further £12 million increase on the fair value holding of Peak at 31 March 2020. The acquisition is subject to customary closing conditions and is expected to close in the third quarter of 2020.
Total Draper Esprit plc investment: £25.4 million
Investment valuation as at 31 March 2020: £67.8 million
Perkbox
Perkbox is an employee wellbeing platform that provides a unique employee experience, enriching the personal and working life of employees. It offers a suite of products including a platform with access to best-in-class Perks, Perkbox Recognition, Perkbox Insights and Perkbox Medical. It serves organisations of all sizes from SMEs to large companies in the UK such as Nando's, OpenTable, Rentalcars, and Purplebricks.
In March 2019 the company raised £13.5 million in a round led by Draper Esprit, alongside several previous angel investors. Since then the company has signed up a series of new partners including Krispy Kreme, Café Nero, Wasabi, Café Rouge, Bella Italia, ASDA, Dune, Philips, Sainsbury's and H&M. The company continues its global expansion with 113 perks live on its Australian platform and their France team being awarded the "Innovation Award" at the SalonCE Fair.
Perkbox offers resources that have become particularly useful in light of COVID-19, the platform offers online GPs on-demand, online employee recognition, real-time feedback, and perks like online shopping discounts, free online fitness classes and 24/7 online learning.
The company has made several key new hires to support its future growth plans including Marissa White as Revenue Operations Director and Ed Ellis as Organisational Readiness Director. Perkbox ranked 25th in 2019 as one of FT's 'Europe's Fastest Growing Businesses'.
Total Draper Esprit plc investment: £14.0 million
Investment valuation as at 31 March 2020: £19.9 million
Ravenpack
RavenPack is a leading big data analytics provider for financial services. The company's products allow clients to enhance returns, reduce risk and increase efficiency by systematically incorporating the effects of public information in their models or workflows. RavenPack's clients include some of the most successful hedge funds, banks, and asset managers in the world.
The 'Ravenpack Connections' tool has been introduced as the company's latest innovation to reveal business relationships and interconnections among thousands of entities including organisations, lead businesspeople and political figures affecting capital markets. The tool allows researchers to discover interesting themes, actionable ideas, and develop unique investment strategies.
In October 2019 the business raised a Series B Round of US$10 million from the technology advisory and investment firm GP Bullhound. Ravenpack intends to use these fund to expand into Asia, and diversify their product offering in order to better target corporate customers.
In response to the COVID-19 pandemic, Ravenpack created a free coronavirus news monitor. The monitor is a live and interactive website built to track the latest news and trending topics surrounding the pandemic. The tracker provides real-time media analytics, COVID-19 case tracking, and a live news feed. Ravenpack released the tracker in response to client requests for data-driven insights to support their decision making during the current uncertain market conditions.
Total Draper Esprit plc investment: £7.5 million
Investment valuation as at 31 March 2020: £30.9 million
Revolut
Revolut, a global challenger bank and currently Europe's joint-top most valuable fintech bank supports 140 currencies, with no international transaction fees, boasts 10+ million customers and oversees 350m+ transactions.
In February 2020, Revolut raised a US$500 million Series D round led by TCV valuing the company at a post-money valuation of US$5.5 billion The company plans to use the funding to build new products and grow into new markets, enhance its existing products for existing users, launch new lending services for both retail and corporate customers and to enhance its operational infrastructure to support its continued growth.
The company currently has over 2,000 employees and its service is operational in the UK, Europe, Singapore and Australia with plans to launch in the US and Japan in upcoming months. In 2019, Revolut rolled out a product called Revolut Junior in the UK for under 17s to help teach financial literacy and teach children about money management from a young age. Revolut also announced integrations with Paymo, a productivity and time management app, Adzooma, an online marketing optimizing AI platform, and Invoiceexpress, an online invoicing software solution.
Former Standard Life Aberdeen co-Chief Executive, Martin Gilbert, joined as executive chairman post year end and Revolut appointed Pierre Decote as the new group chief risk officer in 2019.
Total Draper Esprit plc investment: £7.4 million
Investment valuation as at 31 March 2020: £21.7 million
Smava
Launched in 2007, Smava, the online lending platform provides easy access to the best conditions for consumer loans from more than 25 banks. The company is the largest specialised loan market place in Germany, providing access to over €3 billion a year in loans. Smava was also the first German company to offer negative interest rates. In 2019 Smava announced plans to IPO, after achieving a consistent growth Compound Annual Growth Rate (CAGR) of 90% from 2012. In May 2020, it was announced that Smava raised €57 million in debt and equity financing.
Smava's early 2020 partnership with S-Kreditpartner GmbH part of Landesbank Berlin AG has facilitated consumers to consumers obtaining cheap loans with Smava.
Total Draper Esprit plc investment: £14.5 million
Investment valuation as at 31 March 2020: £16.7 million
Thought Machine
Leading UK fintech company, Thought Machine, offers cloud native core banking infrastructure to both incumbent and challenger banks. The company's technology provides an alternative more flexible cloud-based solution. Thought Machine offers a single software solution that banks can configure to provide any product, user experience, operating model or data analysis capability. Vault, the company's core offering provides a next generation core banking platform that enables banks, both established and challenger, to compete in a cloud-based era.
The Fintech 50-ranked company was founded in 2014 by former Google engineer, Paul Taylor. Thought Machine has employed over 300 employees in London with plans to continue to scale to 500 employees.
Thought Machine launched its Google Cloud Partnership in November 2019. The company also recently announced a new project, Vault Rare, intended to harness Vault's full core capability to allow the customers of Thought Machine's client banks to edit, adjust and even visually style banking products themselves. Lloyds bank, Atom bank, SEB and Standard Chartered are all customers.
Total Draper Esprit plc investment: £16.5 million
Investment valuation as at 31 March 2020: £17.4 million
TransferWise
The money transfer service, TransferWise, is used by over 7 million people and allows individuals and businesses to send money internationally without hidden fees. It sends on average of over £4 billion a month. TransferWise continues to pursue its mission of money without borders with its platform launching in Singapore, Poland, and the Ukraine with new currency lines being introduced in several countries in Africa and South America. The company appointed two non-Executive Directors to the board, the CFO of Adyen, Ingo Uytdehaage, and David Wells, former CFO of Netflix.
TransferWise continuously works towards immediate money transfers and direct debits, currently launched in the UK and EU, with plans to roll out with more currencies. TransferWise also announced integrations with Xero, to help accountants with bookkeeping for business payments, GoCardless, to bring low-cost currency conversion to recurring payments, and Alipay, allowing users to send Chinese Yuan instantly.
Total Draper Esprit plc investment: £5.9 million
Investment valuation as at 31 March 2020: £15.0 million
Trustpilot
Online global review site, Trustpilot, raised its Series E round of US$55.0 million in March 2019. The company's website has tracked over 77 million reviews, with over 344,000 web domains reviewed since it launched in 2007, is ranked in the top 1% of websites (Alexa ranking). Trustpilot has also made several significant hires adding a new Chief Marketing Officer, Chief Human Resources Officer, and Chief Legal & Policy Officer to its team, promoting strategic members of its leadership team and adding to its Board of Directors. Trustpilot has over 800 employees in its 8 office locations in Copenhagen, London, Edinburgh, New York, Denver, Berlin, Melbourne, and Vilnius.
In its latest drive towards trust and transparency, Trustpilot launched 'transparency reviews' which provides detailed information on how every company invites, receives and responds to reviews across over 345,000 domains globally.
Total Draper Esprit plc investment: £29.7 million
Investment valuation as at 31 March 2020: £65.3 million
UiPath
April 2019, Uipath, a Robotic process automation (RPA) software company, raised its Series D investment round of US$568 million at a post-money valuation of US$7 billion making Uipath the highest-valued AI enterprise software companies in the world. The round was led by Coatue Management with participation from Earlybird VC Dragoneer, Wellington, Sands Capital, Accel, funds and accounts managed by T. Rowe Price Associates, CapitalG, and Sequoia.
During the period between 2017 and 2019, the software company has increased its annual recurring revenue (ARR) from US$8 million to US$360 million, exceeded 6,000 customers and increased its operating revenue by 37,463% making it one of the fastest growing companies in the world. During the year, UiPath has been ranked in Deloitte's 2019 Technology Fast 500 number two spot and post-period-end, was recognised as the fastest growing technology company in the Americas and overall number two in FT America's Fastest Growing Companies 2020 list.
UiPath boasts 50% of the top 50 Fortune Global 500 as customers, including American Fidelity, BankUnited, Duracell, Google, Ricoh, Shinsei Bank, Uber, Virgin Media and World Fuel Services. The RPA enterprise software provider has been working with healthcare providers during the COVID-19 outbreak, automating processes to free up frontline health care staff providing immediate benefits to patients and giving long term ability to reduce appointment booking administration time.
Total Draper Esprit plc investment: £11.0 million
Investment valuation as at 31 March 2020: £28.0 million
Financial Review
Summary
The year ending 31 March 2020 has been another active year during which we have been building the infrastructure required to scale the Group. During the year, we invested £89.9 million from the plc, alongside a further £38.1 million from EIS/VCT. We secured a £50.0 million debt facility (with an extension and increase to £60.0 million post year-end), adding further investable capital, and completed the acquisition of the remaining interest in Encore Ventures LLP, to better align the Group structure to support continued growth. The progress in the year has built on the strategy of scaling our operations while providing investors with access to the best private technology companies in Europe.
The end of this financial year saw a rapidly evolving environment resulting from the COVID-19 pandemic. We were quick to take necessary measures to safeguard our employees, our investments and monitor the liquidity of the Group. We took early steps to prudently manage our business and remain well financed.
Prior to the pandemic, the Group was on track to achieve its targeted 20% portfolio growth through the cycle and despite the current market backdrop, has still delivered strong growth across the business. In light of the volatility that we have seen in the markets in relation to asset valuations and the shifting picture in the real economy, we have re-appraised the valuation measures for each of the portfolio companies during our year-end process. With the stark business interruption created by a lockdown across the global economies being somewhat softened by rapid Government intervention, the picture of the recovery is still unclear. What has been a clear trend over these past few months is the accelerated transition to digital and the infrastructure required for remote working, automated processes and e-commerce - with the concomitant trends for online payments and digital banking.
We have been very pleased with the robustness of the portfolio during this period and with the flexibility demonstrated by the portfolio company management teams to rapidly adapt their strategies and models. We have taken an appropriately prudent approach to the valuation process to reflect reduced expectations of revenue growth in the coming year but have also seen valuation increases supported by third party funding rounds. The pace of change is accelerating and our portfolio is well positioned to lead and benefit from the transitioning economies.
Portfolio Valuation
The Gross Portfolio Value of £702.9 million has grown by £108.9 million from prior year (31 March 2019: £594.0 million). Growth is a result of £89.9 million (2019: £226.4 million) invested during the year and £58.5 million (2019: £140.1 million) of fair value growth, net of realisations of £39.5 million (2019: £16.0 million). The Gross Portfolio is subject to deductions for the fair value of the carry liabilities and deferred tax to generate the net investment value of £657.3 million (2019: £562.1 million), which is reflected in the consolidated statement of financial position as a financial asset held at fair value through the profit or loss. The Gross Portfolio Value Table below has been generated to reflect the gross and net movement in value of the portfolio during the period.
The net fair value gain on investments of £40.8 million is reflected in the consolidated statement of comprehensive income. A deferred tax provision of £5.3 million is accrued against the gains in the portfolio to reflect those portfolio companies where the Company owns less than 5% of the equity holding. This amount is netted off against the investments in the consolidated statement of financial position. Carry balances of £40.6 million are accrued to management teams, including previous and current employees of the Group based on the current fair value at the period-end and deducted from the Gross Portfolio Value.
For valuations as at 31 March 2020, lower growth forecasts for 2020 and 2021 have been assumed for companies impacted by COVID-19. The Group consistently applied multiples lower than those prevailing for comparable quoted companies to mitigate stock market volatility. Companies within our core portfolio holdings which have valuations based on revenue-multiples have an average multiple of 3.2x.
Our pre-COVID-19 expectations were in line with our 20% growth target through the cycle and, despite the impact of the pandemic, we have achieved a Gross Fair Value increase in the year of £58.5 million, which represents Gross Portfolio fair value growth of 10% (2019: £140.1 million, 58%).
Post period end it was announced that Peak Games had entered into a sale agreement with Zynga Inc, subject to closing, for $1.8 billion, comprised of approx. $900 million cash and $900 million of Zynga common stock. Upon completion the acquisition would represent a fair value holding for Draper Esprit in Peak of approx. £80 million (actual returns are subject to completion conditions, including FX movements, and acquirer share price movement in respect of the stock component), representing a fair value uplift of £26 million in the year ending 31 March 2020 and a further approx.£12 million anticipated increase post year-end. The acquisition is subject to customary closing condition and is expected to close in the third quarter of 2020.
Consolidated statement of financial position
On 10 March 2020, the Group acquired the legal and beneficial interest it did not already own in Encore Ventures LLP, the partnership which manages Draper Esprit's EIS funds. Following the acquisition and as at 31 March 2020, the Group owns 100% of the interest in Encore Ventures LLP. Going forward, the acquisition will eliminate the non-controlling interest line in the Group's financial statements. During the current financial year, profit attributable to non-controlling interest to 10 March 2020 amounted to £0.7 million. This transaction results in a change in ownership interest accounted for under IFRS 10 as an equity transaction.
Net assets have increased £41.0 million to £659.6 million at 31 March 2020 (31 March 2019: £618.6 million).
The increase in net assets reflects positive performance of investments, as well as increases in trade and other receivables (see below).
A loan liability is recognised in respect of the amount drawn down at year-end of £45.0 million (undrawn £5.0 million at 31 March 2020). In June 2019, the Company entered into a new revolving credit facility agreement with Silicon Valley Bank and Investec raising £50.0 million of debt capital. Post year-end the facility has been increased by £10.0 million to £60.0 million reflecting the growth in the balance sheet, which is supported by an independent valuations process. The facility reduces the overall cost of capital of the Company and provides financial flexibility to fund the future growth plans of the Group's portfolio companies. As a revolving credit facility, draw downs and pay downs are driven by portfolio investments and realisations. (see note 21 for further details).
From 1 April 2019, the Group applied IFRS 16 Leases using the modified retrospective approach. See further details in significant accounting policies - note 4. The impact on the consolidated statement of financial position has been the recognition of right-to-use assets of £1.3 million at 31 March 2020 (recognised under property, plant and equipment) as well as the introduction of corresponding lease liabilities of £1.3 million. In the consolidated statement of comprehensive income, during the year, depreciation charges of £0.3m were recognised in respect of the right-of-use assets and interest of £0.09 million was recognised in respect of the lease liabilities. These balances reflect the lease of offices at 20 Garrick Street, London.
The largest items in trade and other receivables at year-end relate to accrued income in respect of management fees for the period between 1 January 2020 and 31 March 2020 of £2.2 million and a loan from the Company of £3.7 million to Esprit Capital I Fund No.1 & No.2 LP (see note 31) as well as associated accrued interest of £0.2 million. Further amounts include overhead recharges, timing differences on investment proceeds, prepayments and other receivables.
Year-end cash balance reflects the opening cash balance of £50.4 million at 31 March 2019, the subsequent drawdown on the debt facility of £45.0 million (net of repayments), investments of £89.9 million, realisations of £39.5 million, £8.5 million of net loans to group and related companies, net proceeds for the issue of shares during the year, and the operating costs of the business. At year-end, the Group has available cash resources of £34.1 million (including £1.9 million of restricted cash - see note 21) at the plc, £50.9 million within our EIS/VCT funds and £5.0 million undrawn under our revolving credit facility (with a further £10.0 made available post year-end).
Consolidated Statement of Comprehensive Income
Investment income for the year comprises £40.8 million of unrealised investment gains (31 March 2019: £114.7 million) and fee income of £11.3 million (31 March 2019: £6.1 million), which is generated from management fees and director fees. General & administration costs of £9.8 million in the period reflect the changes to our team as we build the infrastructure to grow (including associated recruitment fees), as well as increases in marketing costs and professional fees. Net operating costs (net of fee income) as a % of NAV are substantially less than 1% and targeted to remain below this level.
Post-balance sheet events
- Extended the term and increased the size of the revolving credit facility, provided by Silicon Valley Bank and Investec, by £10.0 million to £60.0 million
- Zynga Inc. announced their agreement to acquire Peak Games for $1.8 billion, which will, subject to closing, indicate a fair value holding for Draper Esprit of approximately £80.0 million via Earlybird IV (actual returns are subject to completion conditions, including FX movements, and acquirer share price movement with respect to the stock component).
The financial year to 31 March 2020 has seen further growth in the Group and we continue to scale the platform to deliver further growth for our shareholders.
Ben Wilkinson
CFO
Some of the measures are Alternative Performance Measures ("APMs"). Please see note 30 to the consolidated financial statements for further details.
|
|
|
Fair Value of investments 31-Mar-19 |
Investments |
Realisations |
Draper Esprit (Ireland) Limited |
Movements in Fair Value |
Fair Value of investments 31-Mar-20 |
Interest FD category* at reporting date |
|
|
Investments |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
1 |
Graphcore |
78.6 |
- |
- |
- |
8.2 |
86.8 |
B |
|
2 |
Peak Games |
41.7 |
- |
- |
- |
26.1 |
67.8 |
B |
|
3 |
Trustpilot |
62.0 |
- |
- |
- |
3.3 |
65.3 |
C |
|
4 |
Ravenpack |
15.6 |
- |
- |
- |
15.3 |
30.9 |
D |
|
5 |
Ui Path |
33.0 |
- |
(4.6) |
- |
(0.4) |
28.0 |
A |
|
6 |
Aircall |
9.9 |
- |
- |
- |
14.4 |
24.3 |
B |
|
7 |
Revolut |
7.4 |
- |
- |
- |
14.3 |
21.7 |
A |
|
8 |
M-files |
17.2 |
1.0 |
- |
- |
1.8 |
20.0 |
B |
|
9 |
Perkbox |
23.7 |
- |
- |
- |
(3.8) |
19.9 |
C |
|
10 |
Ledger |
17.7 |
- |
- |
- |
0.0 |
17.7 |
B |
|
11 |
Thought Machine |
0.0 |
16.5 |
- |
- |
0.9 |
17.4 |
B |
|
12 |
Smava |
23.5 |
- |
- |
- |
(6.8) |
16.7 |
B |
|
13 |
Transferwise |
27.7 |
- |
(15.0) |
- |
2.3 |
15.0 |
A |
|
14 |
ICEYE |
3.7 |
3.8 |
- |
- |
6.4 |
13.9 |
B |
|
15 |
Aiven |
- |
5.0 |
- |
- |
7.8 |
12.8 |
B |
|
16 |
FinalCad |
12.4 |
- |
- |
- |
0.0 |
12.4 |
C |
|
|
Remaining portfolio |
217.9 |
63.6 |
(19.9) |
- |
(31.1) |
230.5 |
- |
|
|
Total |
592.0 |
89.9 |
(39.5) |
- |
58.7 |
701.1 |
|
|
|
Co-invest assigned to plc |
2.0 |
- |
- |
- |
(0.2) |
1.8 |
|
|
|
Gross Portfolio Value |
594.0 |
89.9 |
(39.5) |
- |
58.5 |
702.9 |
|
|
|
Carry external |
(27.6) |
- |
- |
- |
(13.0) |
(40.6) |
|
|
|
Portfolio Deferred tax |
(5.4) |
- |
- |
- |
0.1 |
(5.3) |
|
|
|
Trading carry & co-invest |
1.1 |
- |
- |
- |
(0.8) |
0.3 |
|
|
|
Draper Esprit (Ireland) Limited |
- |
- |
- |
4.0 |
(4.0) |
0.0 |
|
|
|
Net Portfolio Value |
562.1 |
89.9 |
(39.5) |
4.0 |
40.8 |
657.3 |
|
* Fully diluted interest categorised as follows: Cat A: 0-5%, Cat B: 6-10%, Cat C: 11-15%, Cat D: 16-25%, Cat E: >25%
Financials
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2020
|
|
Note |
Year ended 31 Mar 2020 £'000s |
Year ended 31 Mar 2019 £'000s |
|
Change in unrealised gains on investments held at fair value through the profit and loss |
5 |
40,755 |
114,715 |
|
Fee income |
6 |
11,255 |
6,101 |
|
Total investment income |
|
52,010 |
120,816 |
|
Operating expenses |
|
|
|
|
General administrative expenses |
7 |
(9,810) |
(7,774) |
|
Depreciation and amortisation |
14, 17, 20, 23 |
(520) |
(163) |
|
Share based payments - resulting from company share option scheme |
13 |
(990) |
(1,100) |
|
Share based payments - resulting from acquisition of subsidiary |
|
- |
(1,989) |
|
Investments and acquisition costs |
|
(239) |
(207) |
|
Exceptional items |
|
- |
(34) |
|
Total operating costs |
|
(11,559) |
(11,267) |
|
Profit from operations |
|
40,451 |
109,549 |
|
Finance (expense)/income |
|
|
|
|
Net finance (expense)/income |
10 |
(68) |
1,601 |
|
Operating profit before tax |
|
40,383 |
111,150 |
|
Income taxes |
11, 23 |
(17) |
11 |
|
Profit for the year |
|
40,366 |
111,161 |
|
Other comprehensive income/(expense) |
|
- |
- |
|
Total comprehensive income for the year |
|
40,366 |
111,161 |
|
|
|
|
|
|
Profit attributable to: |
|
|
|
|
Owners of the parent |
|
39,707 |
110,579 |
|
Non-controlling interest^ |
18 |
659 |
582 |
|
|
|
|
|
|
Earnings per share attributable to owners of the Parent: |
|
|
|
|
Basic earnings per weighted average shares (pence) |
12 |
34 |
115 |
|
Diluted earnings per weighted average shares (pence) |
12 |
33 |
110 |
^ On 10 March 2020, the Group acquired the remaining interest in Encore Ventures LLP and as such no profit after 10 March 2020 is attributable to the non-controlling interest - see Note 18 for further details.
The Notes on pages 88 to 116 are an integral part of these consolidated financial statements.
Consolidated Statement of Financial Position
As at 31 March 2020
|
|
Note |
31 Mar 2020 £'000s |
31 Mar 2019 £'000s |
|
Non-current assets |
|
|
|
|
Intangible assets |
14 |
10,028 |
10,130 |
|
Investments in associates |
15 |
258 |
258 |
|
Financial assets held at fair value through the profit or loss |
16 |
657,333 |
562,061 |
|
Property, plant and equipment |
17, 20 |
1,760 |
209 |
|
Total non-current assets |
|
669,379 |
572,658 |
|
Current assets |
|
|
|
|
Trade and other receivables |
19 |
7,719 |
1,140 |
|
Cash and cash equivalents |
|
32,255 |
50,358 |
|
Restricted cash |
21 |
1,883 |
- |
|
Total current assets |
|
41,857 |
51,498 |
|
Current liabilities |
|
|
|
|
Trade and other payables |
22 |
(5,038) |
(4,959) |
|
Lease liabilities |
20 |
(358) |
- |
|
Total current liabilities |
|
(5,396) |
(4,959) |
|
Non-current liabilities |
|
|
|
|
Deferred tax |
23 |
(611) |
(631) |
|
Loans and borrowings |
21 |
(44,636) |
- |
|
Lease liabilities |
20 |
(975) |
- |
|
Total non-current liabilities |
|
(46,222) |
(631) |
|
Net assets |
|
659,618 |
618,566 |
|
Equity |
|
|
|
|
Share capital |
24 |
1,189 |
1,179 |
|
Share premium account |
24 |
400,726 |
395,783 |
|
Merger relief reserve |
25 |
13,097 |
13,097 |
|
Share-based payments reserve - resulting from company share option scheme |
|
2,339 |
1,713 |
|
Share-based payments reserve - resulting from acquisition of subsidiary |
|
10,823 |
10,823 |
|
Retained earnings |
|
231,444 |
195,737 |
|
Equity attributable to owners of parent |
|
659,618 |
618,332 |
|
Non-controlling interests |
18 |
- |
234 |
|
Total equity |
|
659,618 |
618,566 |
|
|
|
|
|
|
Net assets per share (pence) |
12 |
555 |
524 |
The financial statements on pages 84 to 116 were approved by the Board of Directors on 26 June 2020 and signed on its behalf by
B.D. Wilkinson
Chief Financial Officer
The Notes on pages 88 to 116 are an integral part of these consolidated financial statements.
Consolidated Statement of Cash Flows
for the year ended 31 March 2020
|
|
Note |
Year ended 31 Mar 2020 £'000s |
Year ended 31 Mar 2019 £'000s |
|
|
Cash flows from operating activities |
|
|
|
|
|
Profit after tax |
|
40,366 |
111,161 |
|
|
Adjustments to reconcile profit after tax to net cash flows used in operating activities: |
|
|
|
|
|
Revaluation of investments held at fair value through the profit and loss |
5 |
(40,755) |
(114,715) |
|
|
Depreciation and amortisation |
|
520 |
163 |
|
|
Share-based payments - resulting from company share option scheme |
13 |
990 |
1,100 |
|
|
Share-based payments - resulting from acquisition of subsidiary |
|
- |
1,989 |
|
|
Net finance expense/(income) |
10 |
68 |
(1,481) |
|
|
(Increase)/decrease in trade and other receivables and other working capital movements |
|
(2,886) |
189 |
|
|
Increase in trade and other payables |
|
79 |
2,011 |
|
|
Purchase of investments |
16 |
(89,935) |
(226,432) |
|
|
Proceeds from disposals in underlying investment vehicles |
16 |
39,533 |
15,984 |
|
|
Net loans made to underlying investment vehicles and Group companies |
16, 31 |
(8,541) |
(4,679) |
|
|
Net cash used in operating activities |
|
(60,561) |
(214,710) |
|
|
Tax paid |
|
(3) |
(32) |
|
|
Net cash outflow from operating activities |
|
(60,564) |
(214,742) |
|
|
Cash flows from investing activities |
|
|
|
|
|
Purchase of property, plant and equipment |
|
(368) |
(58) |
|
|
Interest received |
|
289 |
120 |
|
|
Net cash (outflow)/inflow from investing activities |
|
(79) |
62 |
|
|
Cash flows from financing activities |
|
|
|
|
|
Cash paid to non-controlling interests |
|
(893) |
(638) |
|
|
Proceeds from loan (net of repayments) |
21 |
45,000 |
- |
|
|
Fees paid on issuance of loan |
21 |
(525) |
- |
|
|
Interest payments |
|
(887) |
- |
|
|
Repayments of leasing liabilities |
20 |
(166) |
- |
|
|
Gross proceeds from issue of share capital |
24 |
993 |
215,035 |
|
|
Equity issuance costs |
24 |
(40) |
(7,481) |
|
|
Cash paid out for share options exercised |
|
(293) |
- |
|
|
Net cash inflow from financing activities |
|
43,189 |
206,916 |
|
|
Net (decrease)/increase in cash & cash equivalents |
|
(17,454) |
(7,764) |
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
50,358 |
56,641 |
|
|
Exchange differences on cash and cash equivalents |
10 |
1,234 |
1,481 |
|
|
Cash and cash equivalents at end of year |
|
32,255 |
50,358 |
|
|
Restricted cash at year end |
|
1,883 |
- |
|
|
Total cash and cash equivalents and restricted cash at year end |
|
34,138 |
50,358 |
|
The Notes on pages 88 to 116 are an integral part of these consolidated financial statements.
Consolidated Statement of Changes in Equity
for the year ended 31 March 2020
|
Year ended 31 March 2020 |
Attributable to equity holders of the parent (£'000s) |
(£'000s) |
(£'000s) |
||||||
|
|
Share capital |
Share premium |
Merger relief reserve |
Share-based payments reserve resulting from: |
Retained earnings |
Total |
Attributable to NCI |
Total equity |
|
|
Company share option scheme |
Acquisition of subsidiary |
||||||||
|
Brought forward at 1 April 2019 |
1,179 |
395,783 |
13,097 |
1,713 |
10,823 |
195,737 |
618,332 |
234 |
618,566 |
|
Comprehensive Income/(expense) for the year |
|
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
- |
39,707 |
39,707 |
659 |
40,366 |
|
Acquired reserves from non-controlling interest |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
Amounts withdrawn by non-controlling interest |
- |
- |
- |
- |
- |
- |
- |
(893) |
(893) |
|
Total comprehensive income/(expense) for the year |
- |
- |
- |
- |
- |
39,707 |
39,707 |
(234) |
39,473 |
|
Contributions by and distributions to the owners: |
|
|
|
|
|
|
|
|
|
|
Adjustment for Encore Ventures acquisition (Note 18) |
- |
- |
- |
- |
- |
(4,000) |
(4,000) |
- |
(4,000) |
|
Issue of share capital (Note 24) |
10 |
- |
- |
- |
- |
- |
10 |
- |
10 |
|
Share premium (Note 24) |
- |
4,943 |
- |
- |
- |
- |
4,943 |
- |
4,943 |
|
Share based payment (Note 13) |
- |
- |
- |
990 |
- |
- |
990 |
- |
990 |
|
Share based payment - exercised during the year (Note 13) |
- |
- |
- |
(364) |
- |
- |
(364) |
- |
(364) |
|
Total contributions by and distributions to the owners |
10 |
4,943 |
- |
626 |
- |
(4,000) |
1,579 |
- |
1,579 |
|
Balance at 31 March 2020 |
1,189 |
400,726 |
13,097 |
2,339 |
10,823 |
231,444 |
659,618 |
- |
659,618 |
|
Year ended 31 March 2019 |
Attributable to equity holders of the parent (£'000s) |
(£'000s) |
(£'000s) |
||||||
|
|
Share capital |
Share premium |
Merger relief reserve |
Share-based payments reserve resulting from: |
Retained earnings |
Total |
Attributable to NCI |
Total equity |
|
|
Company share option scheme |
Acquisition of subsidiary |
||||||||
|
Brought forward at 1 April 2018 |
716 |
188,229 |
13,097 |
613 |
8,834 |
86,230 |
297,719 |
2,792 |
300,511 |
|
Comprehensive Income/(expense) for the year |
|
|
|
|
|
|
|
|
|
|
Adjustments for transitioning to IFRS 15 (Note 2ii) |
- |
- |
- |
- |
- |
(1,072) |
(1,072) |
(2,502) |
(3,574) |
|
Profit for the year |
- |
- |
- |
- |
- |
110,579 |
110,579 |
582 |
111,161 |
|
Amounts withdrawn by non-controlling interest |
- |
- |
- |
- |
- |
- |
- |
(638) |
(638) |
|
Total comprehensive income/(expense) for the year |
- |
- |
- |
- |
- |
109,507 |
109,507 |
(2,558) |
106,949 |
|
Contributions by and distributions to the owners: |
|
|
|
|
|
|
|
|
|
|
Issue of share capital (Note 24) |
463 |
- |
- |
- |
- |
- |
463 |
- |
463 |
|
Share premium (Note 24) |
- |
207,554 |
- |
- |
- |
- |
207,554 |
- |
207,554 |
|
Share based payment (Note 13) |
- |
- |
- |
1,100 |
- |
- |
1,100 |
- |
1,100 |
|
Share based payment resulting from acquisition of Subsidiary |
- |
- |
- |
- |
1,989 |
- |
1,989 |
- |
1,989 |
|
Total contributions by and distributions to the owners |
463 |
207,554 |
- |
1,100 |
1,989 |
- |
211,106 |
- |
211,106 |
|
Balance at 31 March 2019 |
1,179 |
395,783 |
13,097 |
1,713 |
10,823 |
195,737 |
618,332 |
234 |
618,566 |
The Notes on pages 88 to 116 are an integral part of these consolidated financial statements.
Notes to the Consolidated Financial Statements
1. General information
Draper Esprit plc (the "Company") is a public company limited by shares incorporated and domiciled in England and Wales. The Company is listed on the London Stock Exchange's AIM market and Euronext Dublin's Euronext Growth market.
The Company is the ultimate parent company into which the results of all subsidiaries are consolidated. The consolidated financial statements for the years ended 31 March 2020 and 31 March 2019 comprise the financial statements of the Company and its subsidiaries (together, "the Group").
The consolidated financial statements are presented in Pounds Sterling (£), which is the currency of the primary economic environment the Group operates in. All amounts are rounded to the nearest thousand, unless otherwise stated.
2. Adoption of new and revised standards
In the current year, the new Standard below has been adopted, which has affected the amounts reported in these consolidated financial statements:
i. IFRS 16 Leases - From 1 April 2019, the Group has adopted IFRS 16 Leases, which became effective for annual periods beginning on or after 1 January 2019. The Group has applied IFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under IAS 17 and IFRIC 4. The details of accounting policies under IAS 17 and IFRIC 4 are disclosed in the Draper Esprit plc annual report for the year ended 31 March 2019. See further details in significant accounting policies below - note 3.
In the prior year, the following new standards were adopted:
ii. IFRS 15 Revenue from Contracts with Customers was a new standard in the prior year, effective from 1 January 2018. IFRS 15 establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. The core principal of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration, which the entity expects to be entitled in exchange for those goods, or services. The only material impact from the adoption of this standard relates to the recognition of certain performance fees, which under IFRS 15 will no longer be recognised following analysis in line with the Standard's higher threshold for recognition. The underlying status of the fees has not changed. The impact on the consolidated statement of financial position and consolidated statement of changes in equity can be seen in the table below:
|
|
Previously reported £000's |
IFRS 15 reclassification £000's |
PY reported under IFRS 15 £000's |
|
Performance fee revenue (recognised in year ending 31 March 2018) |
3,574 |
(3,574) |
0 |
|
Performance fees attributable to the Group |
1,072 |
(1,072) |
0 |
|
Performance fees attributable to non-controlling interest |
2,502 |
(2,502) |
0 |
|
Accrued Revenue |
3,574 |
(3,574) |
0 |
The Group elected not to restate comparative information from prior periods upon adoption of IFRS 15 and has applied the practical expedient under which contracts that began and were completed prior to 1 April 2018 were not restated. For ongoing contracts, any changes required were taken straight to the condensed consolidated interim statement of changes in equity in the year ending 31 March 2019.
iii. IFRS 9 Financial Instruments (as revised in July 2014) - IFRS 9 introduces new requirements for the 1) classification and measurement of financial assets and financial liabilities, 2) impairment for financial assets and 3) general hedge accounting. There is no material impact on the Group in relation of the implementation of IFRS 9. The Standard has been adopted from 1 April 2018 with no restatement of prior periods required.
o
Classification and measurement
§ On 1 April 2018, the Group classified its financial instruments in the appropriate IFRS 9 categories; there were no changes.
o Impairment of financial assets
§ The Group has one type of financial asset that is subject to IFRS 9's new expected credit loss model:
§ Trade and other receivables (See Note 19)
· On 1 April 2018, there was no material impact on the trade and receivables balance resulting from the expected credit loss model.
o General Hedge Accounting
§ The Group does not use hedge accounting. Therefore, there was no impact on the financial statements from this change to IFRS 9.
No upcoming changes under IFRS are likely to have a material effect on the reported results or financial position. Management will continue to monitor upcoming changes.
3. Significant accounting policies
a) Basis of preparation
The consolidated financial statements have been prepared and approved by the Directors in accordance with all relevant IFRSs as issued by the International Accounting Standards Board ("IASB"), and interpretations issued by the IFRS Interpretations Committee and endorsed by the European Union ("EU") and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial reporting framework that has been applied in the preparation of the Company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). The Company has taken advantage of disclosure exemptions available under FRS 101 as explained further in Note 1 of the Company's financial statements. The financial statements are prepared on a going concern basis as disclosed in the Audit, Risk & Valuations Committee Report (p.66) and the Directors' Report (p.73).
The consolidated financial statements have been prepared under the historical cost convention as modified for the revaluation of financial assets and financial liabilities held at fair value.
A summary of the Group's principal accounting policies, which have been applied consistently across the Group, is set out below.
b) Basis of consolidation
The consolidated financial statements comprise the Company (Draper Esprit plc, 20 Garrick Street, London, England, EC2E 9BT) and the results, cash flows and changes in equity of the following subsidiary undertakings:
|
Name of undertaking |
Nature of business |
Country of incorporation |
% ownership |
|
Esprit Capital Partners LLP^ |
Investment Management |
England |
100% |
|
Draper Esprit (Nominee) Limited^ |
Dormant |
England |
100% |
|
Encore Ventures LLP^ |
Investment Management |
England |
*100% |
|
Esprit Capital I (GP) Limited^ |
General Partner |
England |
100% |
|
Esprit Capital I General Partner^ |
General Partner |
England |
100% |
|
Esprit Capital II GP Limited^^^ |
General Partner |
Cayman |
100% |
|
Esprit Capital III Founder GP Limited^^ |
General Partner |
Scotland |
100% |
|
Esprit Capital III GP LP^^ |
General Partner |
Scotland |
100% |
|
Encore I GP Limited^^^ |
General Partner |
Cayman |
100% |
|
Encore I Founder GP Limited^^^ |
General Partner |
Cayman |
100% |
|
Esprit Capital Management Limited^ |
Admin company - in a Members Voluntary Liquidation |
England |
100% |
|
Esprit Capital Holdings Limited^ |
Dormant |
England |
100% |
|
Esprit Nominees Limited^ |
Dormant |
England |
100% |
|
Esprit Capital I (CIP) Limited^ |
Dormant |
England |
100% |
|
Esprit Capital III MLP LLP^ |
Dormant |
England |
100% |
|
Esprit Capital III GP Limited^ |
Dormant |
England |
100% |
Registered addresses
^20 Garrick Street, London, England, WC2E 9BT
^^50 Lothian Road, Festival Square, Edinburgh, Scotland, EH3 9WJ
^^^ c/o Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands
* This has moved from 71% to 100% during the year - please see note 18 for further details.
Subsidiaries
Subsidiaries are entities controlled by the Group. Control, as defined by IFRS 10, is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries are fully consolidated from the date on which the Group effectively obtains control. They are deconsolidated from the date that control ceases. Control is reassessed whenever circumstances indicate that there may be a change in any of these elements of control. Refer to Note 4(c) for further information. The Group has accounted for the acquisition of the remaining interest in Encore Ventures LLP on 10 March 2020 as a change in ownership interest under IFRS 10 having assessed the substance of the transaction, including control and changes in ownership (see note 18). All transactions and balances between Group subsidiaries are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests.
Associates
Associates are all entities over which the Group has significant influence, but not control or joint control. This is generally the case where the Group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost. Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Group's share of the post-acquisition profits or losses of the investee in profit or loss, and the Group's share of movements in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment. When the Group's share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. The carrying amount of equity-accounted investments is tested for impairment where there are indications that the carrying value may no longer be recoverable. For further details, please see investment in associate Note 15.
Investment company
In accordance with the provisions of IFRS 10, Draper Esprit plc considers itself to be an investment entity as it obtains funds from investors to invest funds for returns from capital appreciation and the performance of substantially all of its investments are held at Fair Value through Profit and Loss. It considers its wholly owned subsidiary, Draper Esprit (Ireland) Limited, as well as the limited partnerships listed below to be investment companies, as their sole purpose is to hold investments on behalf of the Group. Consequently, Draper Esprit (Ireland) Limited and the limited partnerships listed below are not consolidated in accordance with IFRS10; instead they are recognised as investments held at fair value through profit and loss on the consolidated balance sheet. Loans to investment vehicles are treated as net investments at fair value through the profit and loss.
The below is a list of entities that are controlled and not consolidated but held as investments at fair value through the profit and loss on the consolidated balance sheet.
|
Name of undertaking |
Principal activity |
Country of incorporation |
% ownership |
|
Draper Esprit (Ireland) Limited^^ |
Investment company |
Ireland |
100% |
|
Esprit Capital III LP^ |
Limited partnership |
England |
100% |
|
Esprit Capital IV LP^ |
Limited partnership |
England |
100% |
|
Esprit Investments (1) LP^ |
Limited partnership |
England |
100% |
|
Esprit Investments (2) LP^ |
Limited partnership |
England |
100% |
|
Esprit Investments (1)(B) LP^ |
Limited partnership |
England |
100% |
|
Seedcamp Holdings LLP^ |
Limited liability partnership |
England |
100% |
|
Seedcamp Investments LLP^^^ |
Limited liability partnership |
England |
100% |
|
Seedcamp Investments II LLP^^^ |
Limited liability partnership |
England |
100% |
|
Esprit Investments (2)(B) LP^ |
Limited partnership |
England |
100% |
^20 Garrick Street, London, England, WC2E 9BT
^^ 32 Molesworth Street, Dublin 2, Ireland, D02 Y512
^^^ 727-729 High Road, London, England, N12 0BP
Limited partnerships (co-investment)
The following limited partnerships that the Group's General Partners are members of are not considered to be controlled and, therefore, they are not consolidated in these financial statements:
|
Name of undertaking |
Principal activity |
Country of incorporation |
|
Encore I GP LP^ |
General partner |
Cayman |
|
Esprit Capital II Founder LP^ |
Co-investment limited partnership |
Cayman |
|
Esprit Capital II Founder 2 LP^ |
Co-investment limited partnership |
Cayman |
|
Encore I Founder LP^ |
Co-investment limited partnership |
Cayman |
|
Encore I Founder 2014 LP^ |
Co-investment limited partnership |
Cayman |
|
Encore I Founder 2014-A LP^ |
Co-investment limited partnership |
Cayman |
|
Esprit Capital III Founder LP^^ |
Co-investment limited partnership |
Scotland |
^ c/o Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands
^^50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
The Group's management does not consider there to be a material exposure to these entities.
c) Operating segment
The Group's management considers the Group's investment portfolio represents a coherent and diversified portfolio with similar economic characteristics and as a result these individual investments have been aggregated into a single operating segment. In the view of the Directors, there is accordingly one reportable segment under the provisions of IFRS 8.
d) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts, VAT and other sales-related taxes. All revenue from services is generated within the UK and is stated exclusive of value added tax.
Revenue from services comprises:
i. Fund management services
Fund management fees are either earned at a fixed annual rate or are set at a fixed percentage of funds under management, measured by commitments or invested cost, depending on the stage of the fund being managed. Revenues are recognised as the related services are provided.
ii. Portfolio Directors' fees
Portfolio Directors' fees are annual fees charged to an investee company. Directors' fees are only charged on a limited number of the investee companies. Revenues are recognised as services are provided.
iii. Performance fees
Performance fees are earned on a percentage basis on returns over a hurdle rate in the statement of comprehensive income. Amounts are recognised as revenue when it can be reliably measured and is highly probable funds will flow to the Group.
e) Deferred income
The Group's management fees are typically billed quarterly or half-yearly in advance. Where fees have been billed for an advance period, the amounts are credited to deferred income, and then subsequently released through the profit and loss during the period to which the fees relate. Certain performance fees and portfolio directors' fees are also billed in advance and these amounts are credited to deferred income, and then subsequently released through the profit and loss accounting during the period to which the fees relate.
f) Business combinations
The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.
The Group recognises identifiable assets acquired and liabilities assumed in a business combination, regardless of whether they have been previously recognised in the acquiree's financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values. Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of: a) fair value of consideration transferred; b) the recognised amount of any non-controlling interest in the acquiree; and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately.
g) Goodwill and other intangible assets
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceed the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
When the consideration transferred by the Group in a business combination includes an asset or liability resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the "measurement period" (which cannot exceed 1 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, typically the duration of the underlying contracts. The following useful economic lives are applied:
i. Customer contracts: 8 years.
h) Impairment
For the purposes of assessing impairment, assets are grouped at the lowest level for which there are largely independent cash inflows ("cash generating units" or "CGU"). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors goodwill. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised in the consolidated statement of total comprehensive income for the amount by which the assets or cash generating units carrying amount exceeds its recoverable amount that is the higher of fair value less costs to sell and value-in-use. To determine value-in-use, management estimates expected future cash flows over 5 years from each cash-generating unit and determine a suitable discount rate in order to calculate the present value of those cash flows. Discount factors are determined individually for each cash-generating unit and reflect their respective risk profile as assessed by management. Impairment losses for cash generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. Any remaining impairment loss is charged pro-rata to the other assets in the cash-generating unit with the exception of goodwill, and all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment charge is reversed if the cash-generating units recoverable amount exceeds its carrying amount.
i) Foreign currency
Transactions entered into by Group entities in a currency other than the functional currency in which they operate are recorded at the rates prevailing when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates prevailing at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in the profit and loss.
The individual financial statements of the Group's subsidiary undertakings are presented in their functional currency. For the purpose of these consolidated financial statements, the results and financial position of each subsidiary undertaking are expressed in Pounds Sterling, which is the presentation currency for these consolidated financial statements.
The assets and liabilities of the Group's undertakings, whose functional currency is not Pounds Sterling, are translated at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period.
j) Financial assets
All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned and are initially measured at fair value, plus transaction costs, except for those financial assets classified at fair value through profit or loss, which are initially measured at fair value.
Financial assets are classified by the Group into the following specified categories: financial assets 'at fair value through profit or loss' (FVTPL) and 'amortised cost'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Fair value through profit or loss
A financial asset may be designated as at FVTPL upon initial recognition if:
(a) such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
(b) the financial asset forms part of a group of financial assets or financial liabilities, or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Draper Esprit Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
(c) it forms part of a contract containing one or more embedded derivatives, and IFRS 9 Financial Instruments permits the entire combined contract (asset or liability) to be designated as at FVTPL.
The Group considers that the investment interests it holds in Esprit Capital III LP, Esprit Capital III Founder LP, Esprit Capital II Founder LP, Esprit Capital IV LP, Esprit Investments(I) LP, Esprit Investments (1)(B) LP, Esprit Investments (2) LP, and Esprit Investments (2)(B) LP are appropriately designated as at FVTPL as they meet criteria (b) above.
Amortised cost
A financial asset is held at amortised cost under IFRS 9 where it is held for the collection of cash flows representing solely payments of principal and interest. These assets are measured at amortised cost using the effective interest method, less any expected losses.
The Group's financial assets held at amortised cost comprise trade and most other receivables, and cash and cash equivalents in the consolidated statement of financial position.
k) Financial liabilities
The Group's financial liabilities may include borrowings and trade, and other payables.
Trade and other payables
Trade and other payables 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.
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost using the effective interest rate method. All interest-related charges are reported in profit or loss are included within finance costs or finance income.
l) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the outflow of resources embodying the economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
m) Share capital
Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset.
The Group's ordinary shares are classified as equity instruments. Equity instruments are recorded at the proceeds received, net of direct issue costs.
n) Defined contribution schemes
Contributions to defined contribution pension schemes are charged to the consolidated statement of comprehensive income in the year to which they relate.
o) Share-based payments
Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the consolidated statement of comprehensive income over the remaining vesting period. Where equity instruments are granted to persons other than employees, the consolidated statement of comprehensive income is charged with the fair value of goods and services received.
p) Leased assets
Policy applicable from 1 April 2019 (for impact analysis, please see Note 20)
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:
- The contract involves the use of an identified asset - this may be specified, explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;
- The Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
- The Group has the right to direct the use of the asset. The Group has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Group has the right to direct the use of the asset if either: The Group has the right to operate the asset; or
- The Group designed the asset in a way that predetermines how and for what purpose it will be used.
This policy is applied to contracts entered into, or changed, on or after 1 April 2019. The policy is applied taking into account transitional provisions within IFRS 16 for the existing operating lease as at 1 April 2019.
At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.
Lessee
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments.
When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in the profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group presents right-of-use assets that do not meet the definition of investment property in 'property, plant and equipment' and lease liabilities in 'lease liabilities' in the statement of financial position.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets, including IT equipment. The Group would recognise the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
Under IAS 17
For treatment under IAS 17, see the accounting standards notes within the Draper Esprit plc annual report for the year ending 31 March 2019.
q) Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when the dividend is paid. In the case of final dividends, this is when the dividend is approved by the shareholders at the AGM.
r) Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
s) Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities, and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
t) Property, plant and equipment
Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is recognised to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method, on the following basis:
Leasehold improvements - over the term of the lease
Fixtures and equipment - 33% p.a. straight line
Computer equipment - 33% p.a. straight line
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
See 3p above for PPE relating to right-of-use assets resulting from leases.
u) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits at bank and highly liquid investments with a term of no more than 90 days that are readily convertible into known amounts of cash and that are subject to an insignificant risk of changes in value. No cash equivalents are held as at 31 March 2020 (31 March 2019: nil).
v) Segmental reporting
IFRS 8, "Operating Segments", defines operating segments as those activities of an entity about which separate financial information is available and which are evaluated by the Chief Operating Decision Maker to assess performance and determine the allocation of resource. The Chief Operating Decision Maker has been identified by the Board of Directors as the Chief Executive Officer.
w) Financial instruments
Financial assets and financial liabilities are recognised in the consolidated balance sheet when the Group becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
x) Exceptional items
The Group classifies items of income and expenditure as exceptional when the nature of the item or its size is likely to be material, to assist the reader of the financial statements to better understand the results of the operations of the Group. Such items by their nature are not expected to recur and are shown separately on the face of the consolidated statement of comprehensive income.
y) Interest income
Interest income earned on cash and deposits and short-term liquidity investments is recognised when it is probable that the economic benefits will flow to the Group and the amount of income recognised can be measured reliably. Interest income is accrued on a time basis, with reference to the principal outstanding and at the effective interest rate applicable.
z) Carried interest
The Company has established carried interest plans for the Executive Directors (see below), 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. To 31 March 2020 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. From 1 April 2020 the carried interest plan will operate for a five year period in respect of any investments.
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 carried interest plan from 1 April 2020 has an aggregate annualised 8% realised return on investments and follow-on investments made during the relevant period, to bring the plans more in line with market. The Plan Participants' return is subject to a "catch-up" in their favour. Plan Participants' carried interests vest over five years for each carried interest plan and are subject to good and bad leaver provisions. Any unvested carried interest resulting from a Plan Participant becoming a leaver can be reallocated by the Remuneration and Nomination Committee. From 2021/22 onwards, the Executive Directors will not be eligible to participate in new carried interest plans, and instead will participate in the Long-Term Incentive Plan.
The Group's interest in carried interest is measured at fair value through the profit and loss (FVTPL) with reference to the performance conditions described above and is deducted from the valuation of investments measured at FVTPL.
Fair value measurement
Management uses valuation techniques to determine the fair value of financial assets. This involves developing estimates and assumptions consistent with how market participants would price the assets. Management bases its assumptions on observable data as far as possible, but this is not always available, in that case management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date (See Note 4(a)).
4. Critical accounting estimates and judgements
The Directors have made the following judgements and estimates that have had the most significant effect on the carrying amounts of the assets and liabilities in the consolidated financial statement. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Actual results may differ from estimates. The key estimates, (4)(a) and (4)(b), and judgements, (4)(c) and (4)(d), are discussed below. There have been no changes to the accounting estimates and judgements in the financial year ended 31 March 2020.
a) Valuation of unquoted equity investments at fair value through the profit and loss
The Group invests into Limited Companies and Limited Partnerships which are considered to be investment companies that invest in unquoted equity for the benefit of the Group. These investment companies are measured at fair value through the profit or loss based on their NAV at the year end. The Group controls these entities and is responsible for preparing their NAV which is based on the valuation of their unquoted investments. The Group's valuation of investments measured at fair value through profit or loss is therefore dependent upon estimations of the valuation of the underlying portfolio companies.
The Group, through its controlled investment companies also invests in investment companies which primarily focus on German or seed investments. These investments are considered to be 'Fund of Fund investments' for the Group and are recognised at their NAV at the year-end date. These Fund of Fund investments are not controlled by the Group and some do not have coterminous year ends with the Group. To value these investments, management obtain the latest audited financial statements or partner reports of the investments and discuss further movements with the management of the companies. Where the Fund of Funds hold investments that are individually material to the Group, management perform further procedures to determine that the valuation of these investments has been prepared in accordance with the Group's valuation policies for portfolio companies outlined below and these valuations will be adjusted by the Group where necessary based on the Group valuation policy for valuing portfolio companies.
The estimates required to determine the appropriate valuation methodology of unquoted equity investments means there is a risk of material adjustment to the carrying amounts of assets and liabilities. These estimates include whether to increase or decrease investment valuations and require the use of assumptions about the carrying amounts of assets and liabilities that are not readily available or observable.
The fair value of unlisted securities is established with reference to the International Private Equity and Venture Capital Valuation Guidelines as well as the IPEV Board, Special Valuation Guidance issued on 31 March 2020 in response to the COVID-19 crisis ("IPEV Guidelines"). An assessment will be made at each measurement date as to the most appropriate valuation methodology.
The Group invests in early-stage and growth technology companies, through predominantly unlisted securities. Given the nature of these investments, there are often no current or short-term future earnings or positive cash flows. Consequently, although not considered to be the default valuation technique, the appropriate approach to determine fair value may be based on a methodology with reference to observable market data, being the price of the most recent transaction. Fair value estimates that are based on observable market data will be of greater reliability than those based on estimates and assumptions and accordingly where there have been recent investments by third parties, the price of that investment will generally provide a basis of the valuation.
If this methodology is used, its initial use and the length of period for which it remains appropriate to use the price of recent investment depends on the specific circumstances of the investment, and the Group will consider whether this basis remains appropriate each time valuations are reviewed. In addition, the inputs to the valuation model (e.g. revenue, comparable peer group, product roadmap) will be recalibrated to assess the appropriateness of the methodology used in relation to the market performance and technical/product milestones since the round and the company's trading performance relative to the expectations of the round.
The Group considers alternative methodologies in the IPEV Guidelines, being principally price-revenue or price-earnings multiples, depending upon the stage of the asset, requiring management to make assumptions over the timing and nature of future revenues and earnings when calculating fair value. We stress tested management's assumptions regarding revenue using a number of scenarios - base case, downside case, and upside case. We flexed the companies' budget assumptions under the above scenarios as part of our valuations process.
The Group also reviewed cash runway, supply chain risk, sector risk, average length of customer contract, amongst other things.
Where a fair value cannot be estimated reliably, the investment is reported at the carrying value at the previous reporting date unless there is evidence that the investment has since been impaired.
In all cases, valuations are based on the judgement of the Directors after consideration of the above and upon available information believed to be reliable, which may be affected by conditions in the financial markets. Due to the inherent uncertainty of the investment valuations, the estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. Due to this uncertainty, the Group may not be able to sell its investments at the carrying value in these financial statements when it desires to do so or to realise what it perceives to be fair value in the event of a sale. See Notes 28 and 29 for information on unobservable inputs used and sensitivity analysis on investments held at fair value through the profit and loss.
b) Carrying amount of goodwill
Determining whether goodwill is impaired requires an estimation of the recoverable amount of the cash-generating units to which goodwill is allocated. An impairment review is performed on an annual basis unless there is a trigger event during the period. The recoverable amount is based on "value in use" calculations, which requires estimates of future cash flows expected from the cash generation unit (CGU) and a suitable discount rate in order to calculate present value. The key assumptions for the value in use calculations are the discount rate using pre-tax rates that reflect the current market assessments of the time value of money and risks specific to the CGU. The internal rate of return ("IRR") used was based on past performance and experience. The carrying amount of the goodwill as at the statement of financial position date was £9.7 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% does not reduce the carrying value of goodwill to less than its recoverable amount.
The CGU was determined to be the fund managers. This is a critical management judgement, as they are responsible for generating deal flow and working with investee companies creating value and maximising returns for the Group.
c) Control assessment
The Group has a number of entities within its corporate structure and a judgement has been made of which should be consolidated in accordance with IFRS 10, and which should not. The Group consolidates all entities where it has control over the following: power over the investee to significantly direct the activities; exposure, or rights, to variable returns from its involvement with the investee, and the ability to use its power over the investee to affect the amount of the investor's returns. The Company does not consolidate qualifying investment companies it controls in accordance with IFRS 10 and instead recognises them as investments held at fair value through the profit and loss. See Note 3(b) for further details.
d) Business combinations
The Directors have undertaken a detailed assessment of the substance of the transaction through which the Company acquired the underlying investment vehicles and Esprit Capital Partners LLP and its subsidiaries with reference to the requirements of IFRS 10 and IFRS 3. Following that assessment based on the judgement of Directors, it has been determined that this transaction is appropriately accounted for as an acquisition.
The Group acquired the remaining membership interest in Encore Ventures LLP on 10 March 2020. Prior to this, the Group held a membership interest of 71% and had determined based on its control assessment (see (4)(c) above) that the Group had control over Encore Ventures LLP and consolidated this entity in accordance with IFRS 10. As a result, the acquisition of the remaining membership interest has been assessed to be a change in ownership interest and is accounted for as such under IFRS 10. This is not deemed to be a business combination.
5. Change in unrealised gains on investments held at fair value through the profit and loss
|
|
Year ended 31 Mar 2020 £'000s |
Year ended 31 Mar 2019 £'000s |
|
Change in unrealised gains on investments held at fair value through the profit and loss (Note 16) |
40,755 |
114,715 |
6. Fee income
Revenue is derived solely within the UK, from continuing operations for all years. An analysis of the Group's revenue is as follows:
|
|
Year ended 31 Mar 2020 £'000s |
Year ended 31 Mar 2019 £'000s |
|
Management fees |
11,213 |
6,052 |
|
Portfolio directors' fees |
42 |
49 |
|
|
11,255 |
6,101 |
7. General administrative expenses
Administrative expenses comprise:
|
|
Year ended 31 Mar 2020 £'000s |
Year ended 31 Mar 2019 £'000s |
|
General employee and employee related expenses (Note 9) |
6,074 |
4,401 |
|
Operating lease rentals (Note 20) |
- |
246 |
|
Legal and professional |
1,827 |
1,241 |
|
Travel expenses |
349 |
333 |
|
Marketing expenses |
741 |
472 |
|
IT expenses |
85 |
127 |
|
Other administrative costs |
734 |
954 |
|
|
9,810 |
7,774 |
8. Profit from operations
The profit for the year has been arrived at after charging:
|
|
Year ended 31 Mar 2020 £'000s |
Year ended 31 Mar 2019 £'000s |
|
Audit fees for the consolidated financial statements |
146 |
87 |
|
Audit of the accounts of any related undertakings of the Company |
75 |
47 |
|
Audit-related assurance services |
26 |
20 |
|
Other assurance services |
17 |
16 |
|
Total fees payable to the Company's auditors |
264 |
170 |
9. Employee and employee related expenses
Employee benefit expenses (including Directors) comprise:
|
|
Year ended 31 Mar 2020 £'000s |
Year ended 31 Mar 2019 £'000s |
|
Wages and salaries |
4,595 |
3,447 |
|
Defined contribution pension costs |
278 |
354 |
|
Benefits (healthcare and life assurance) |
127 |
74 |
|
Recruitment costs |
473 |
67 |
|
Social security contributions and similar taxes |
601 |
459 |
|
General employee and employee related expenses |
6,074 |
4,401 |
|
Share-based payment expense arising from company share option scheme |
990 |
1,100 |
|
Total employee benefit expenses |
7,064 |
5,501 |
The monthly average number of persons (including Executive and Non-executive Directors) employed by the Group during the year was:
|
|
Year ended 31 Mar 2020 Number |
Year ended 31 Mar 2019 Number |
|
Technology Investment |
14 |
14 |
|
Corporate functions |
19 |
13 |
|
|
33 |
27 |
Corporate functions comprise non-executive directors, finance, marketing, human resources, legal, IT, and administration.
Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, and are considered to be the Directors of the Company listed on pages 58 to 60. This includes Martin Davis who joined as CEO during the year, as announced on 4 November 2019.
|
|
Year ended 31 Mar 2020 £'000s |
Year ended 31 Mar 2019 £'000s |
|
Wages and salaries |
2,019 |
1,317 |
|
Short-term non-monetary benefits |
9 |
10 |
|
Defined contribution pension costs |
163 |
108 |
|
Share-based payment expense |
466 |
631 |
|
Social security contributions and similar taxes |
287 |
133 |
|
|
2,944 |
2,199 |
The details of individual Directors' remuneration and pension benefits, as set out in the tables contained in the Remuneration and Nomination Committee Report on pages 67 to 71, form part of these consolidated financial statements.
10. Net finance (expense)/income
|
|
Year ended 31 Mar 2020 £'000s |
Year ended 31 Mar 2019 £'000s |
|
Interest on leases (Note 20) |
(94) |
- |
|
Interest and expenses on loans and borrowings (Note 21) |
(1,497) |
- |
|
Finance costs |
(1,591) |
- |
|
Net foreign exchange gain |
1,234 |
1,481 |
|
Interest income on cash and cash equivalents |
289 |
120 |
|
Finance income |
1,523 |
1,601 |
|
Net finance (expense)/income |
(68) |
1,601 |
11. Income taxes
The charge to tax, which arises in the Group and the corporate subsidiaries included within these financial statements, is:
|
|
Year ended 31 Mar 2020 £'000s |
Year ended 31 Mar 2019 £'000s |
|
Current tax expense |
|
|
|
Current tax on profits for the year |
2 |
- |
|
Adjustments for under/(over) provision in prior years |
35 |
- |
|
Total current tax |
37 |
- |
|
Deferred tax expense |
|
|
|
Arising on business combinations (Note 23) |
(20) |
(11) |
|
Reversal of amounts previously recognised |
- |
- |
|
Total deferred tax |
17 |
(11) |
The UK standard rate of corporation tax is 19% (for the year ending 31 March 2019: 19%). The current tax charge in the year is £37k (2019: £nil).
The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to profits for the year are as follows:
|
|
Year ended 31 Mar 2020 £'000s |
Year ended 31 Mar 2019 £'000s |
|
Profit/(loss) for the year before tax |
40,383 |
111,150 |
|
Profit/(loss) on ordinary activities of Group companies before tax |
|
|
|
Tax using the Company's domestic tax rate of 19% (2019: 19%) |
7,673 |
21,119 |
|
Expenses not deductible for tax purposes |
- |
- |
|
Unrealised gains on investments |
(7,743) |
(21,796) |
|
Other timing differences |
87 |
666 |
|
Total tax (credit)/charge for the year |
17 |
(11) |
12. Earnings per share and net asset value
The calculation of basic earnings per share is based on the profit attributable to shareholders and the weighted average number of shares. When calculating the diluted earnings per share, the weighted average number of shares in issue is adjusted for the effect of all dilutive share options and awards.
|
Basic earnings per ordinary share |
Profit after tax £'000s |
Weighted average no. of shares '000 |
Pence |
|
For the year ended 31 March 2020 |
39,707 |
118,013 |
34 |
|
For the year ended 31 March 2019 |
110,579 |
96,051 |
115 |
|
Diluted earnings per ordinary share |
Profit after tax £'000s |
Weighted average no. of shares '000 |
Pence |
|
For the year ended 31 March 2020 |
39,707 |
120,961 |
33 |
|
For the year ended 31 March 2019 |
110,579 |
100,055 |
110 |
Net asset value ("NAV") per share is based on the net asset attributable to shareholders and the number of shares as at the balance sheet date. When calculating the diluted earnings per share, the number of shares in issue at balance sheet date is adjusted for the effect of all dilutive share options and awards.
|
Net asset value per ordinary share |
Net assets £'000s |
No. of shares at balance sheet date '000 |
Pence per |
|
31 March 2020 |
659,618 |
118,918 |
555 |
|
31 March 2019 |
618,332 |
117,925 |
524 |
|
Diluted net asset value per ordinary share |
Net assets £'000s |
No. of shares at balance sheet date '000 |
Pence per |
|
31 March 2020 |
659,618 |
121,609 |
542 |
|
31 March 2019 |
618,332 |
123,325 |
501 |
Dividends: There were no Dividends paid out in the year to 31 March 2020 (2019: nil).
13. Share-based payments
|
|
Date of Grant |
Number of CSOP options 1 April 2019 |
Number of Options |
Number of Options (lapsed) in the year |
Number of Options (exercised) in the year |
Number of CSOP options 31 March 2020 |
Number of approved Options |
Vesting period |
Exercise Price (pence) |
Fair value per granted instrument (pence) |
|
Draper Esprit plc 2016 Company Share Option Scheme (CSOP) |
28-Nov-16 |
1,361,033 |
|
|
(195,842) |
1,165,191 |
84,500 |
3 Years |
355 |
64.1 |
|
28-Nov-16 |
152,528 |
|
|
|
152,528 |
- |
3 Years |
355 |
89.3 |
|
|
11-Nov-17 |
180,000 |
|
(20,000) |
|
160,000 |
25,068 |
3 Years |
354 |
89.8 |
|
|
28-Nov-17 |
1,180,364 |
|
(25,000) |
|
1,155,364 |
15,502 |
3 Years |
387 |
70.9 |
|
|
28-Nov-17 |
116,016 |
|
|
|
116,016 |
- |
3 Years |
387 |
97.9 |
|
|
30-Jul-18 |
1,205,000 |
|
(177,500) |
|
1,027,500 |
- |
3 Years |
492 |
152.9 |
|
|
30-Jul-18 |
102,750 |
|
|
|
102,750 |
- |
3 Years |
492 |
186.4 |
|
|
12-Feb-19 |
876,868 |
|
(80,000) |
|
796,868 |
- |
3 Years |
530 |
67.8 |
|
|
12-Feb-19 |
75,000 |
|
|
|
75,000 |
- |
3 Years |
530 |
95.2 |
|
|
26-Nov-19 |
- |
200,000 |
|
|
200,000 |
6,000 |
3 Years |
467 |
71.5 |
On 26 November 2019, 200,000 shares under option were granted to employees of the Group, Directors and Trusts. The exercise price of the issued options was 467p. 302,500 options lapsed which had exercise prices of 354 pence, 387 pence, 492 pence, 530 pence. 195,842 options were exercised during the year.
The Black Scholes Option Pricing Model has been used for valuation purposes. All options are settled in shares and volatility is expected to be in the range of 20-30% based on an analysis of the Company's and peer groups' share price. The risk-free rate used was 0.75% and 0.84% and was taken from zero coupon United Kingdom government bonds on a term consistent with the vesting period.
The share-based payment charge for the year is £990k (year ended 31 March 2019: £1.1 million).
14. Intangible assets
|
31 March 2020 |
Goodwill1 £'000s |
Customer contracts2 £'000s |
Total £'000s |
|
Cost |
|
|
|
|
Cost carried forward as at 1 April 2019 |
9,653 |
818 |
10,471 |
|
Additions during the year |
- |
- |
- |
|
Cost as at 31 March 2020 |
9,653 |
818 |
10,471 |
|
Accumulated amortisation |
|
|
|
|
Amortisation carried forward as at 1 April 2019 |
- |
(341) |
(341) |
|
Charge for the year |
- |
(102) |
(102) |
|
Accumulated amortisation as at 31 March 2020 |
- |
(443) |
(443) |
|
Net book value: |
|
|
|
|
As at 31 March 2020 |
9,653 |
375 |
10,028 |
|
As at 31 March 2019 |
9,653 |
477 |
10,130 |
|
31 March 2019 |
Goodwill1 £'000s |
Customer contracts2 £'000s |
Total £'000s |
|
Cost |
|
|
|
|
Cost carried forward as at 1 April 2018 |
9,653 |
818 |
10,471 |
|
Additions during the year |
- |
- |
- |
|
Cost as at 31 March 2019 |
9,653 |
818 |
10,471 |
|
Accumulated amortisation |
|
|
|
|
Amortisation carried forward as at 1 April 2018 |
- |
(239) |
(239) |
|
Charge for the year |
- |
(102) |
(102) |
|
Accumulated amortisation as at 31 March 2019 |
- |
(341) |
(341) |
|
Net book value: |
|
|
|
|
As at 31 March 2019 |
9,653 |
477 |
10,130 |
|
As at 31 March 2018 |
9,653 |
579 |
10,232 |
1 Goodwill of £9.7 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 to create value and maximising returns for the Group. The Group tests goodwill annually for impairment comparing the recoverable amount using value-in-use calculations and the carrying amount. Value-in-use calculations are based on future expected cash flows generated by the CGU fee income from management fees over the next 5 years with reference to the most recent financial budget and forecasts. A 5-year cash flow period was deemed appropriate for the value in use calculation given the patient capital model adopted by the Group. The key assumptions for the value in use calculations are the discount rate using pre-tax rates that reflect the current market assessments of the time value of money and risks specific to the CGU. The internal rate of return ("IRR") used was based on past performance and experience. The discount rate used was 10% and the IRR used was 20%.
2 An intangible asset of £0.8 million was also recognised in respect of the anticipated profit from the participation in Encore Ventures LLP as a consequence of the acquisition of Esprit Capital Partners LLP.
15. Investments in associates and related undertakings
Investments in associates
On 24 November 2016, Draper Esprit acquired a 30.77% stake in Elderstreet Holdings Limited (registered office: 20 Garrick Street, London, United Kingdom, WC2E 9BT), the holding company of Elderstreet Investments Limited with an option to acquire the balance of the Elderstreet Holdings Limited shares. The initial consideration of £0.26 million has been satisfied by the issue of 73,667 new ordinary shares of 1 pence each in the capital of the Company. The Group's share of profits in the year was not material and there were no indications of impairment at balance sheet date.
Related undertakings
Please see below details of investments held by the Group's investment companies, where the ownership percentage or partnership interest exceeds 20%:
|
Name |
Address |
Type of share holding |
Interest FD category* at reporting date / partnership interest |
|
SportPursuit Limited |
Unit 1.18, Canterbury Court, Kennington Park, 1-3 Brixton Road, London, England, SW9 6DE |
Ordinary shares Preference shares |
E |
|
Bright Computing Holding B.V. |
Kingsfordweg 151, 1043 GR Amsterdam, the Netherlands |
Ordinary shares Preference shares |
E |
|
Ravenpack Holding AG |
Churerstrasse 135, CH-8808 Pfäffikon, Switzerland |
Ordinary shares Preference shares |
D |
|
Earlybird IV |
c/o Earlybird Venture Capital, Maximilianstr. |
Partnership interest |
27% |
|
Earlybird VI |
c/o Earlybird Venture Capital, Maximilianstr. |
Partnership interest |
56.5% |
*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%
Details of the FV of the 16 core companies are detailed as part of the Gross Portfolio Progression table on page 32.
16. Financial assets held at fair value through profit and loss
The Group holds investments through investment vehicles it manages. The investments are predominantly in unlisted securities and are carried at fair value through the profit and loss. The Group's valuation policies are set out in Note 4(a) and Note 28. The table below sets out the movement in the balance sheet value of investments from the start to the end of the year, showing investments made, cash receipts and fair value movements.
|
|
Year ended 31 Mar 2020 £'000s |
Year ended 31 Mar 2019 £'000s |
|
As at 1 April |
562,061 |
231,910 |
|
Investments made in the year1/2 |
89,935 |
226,432 |
|
Investments settled in shares1/2 |
- |
309 |
|
Loans repaid from underlying investment vehicles |
(39,533) |
(15,984) |
|
Loans made to underlying investment vehicles1 |
4,115 |
4,679 |
|
Unrealised gains on the revaluation of investments |
40,755 |
114,715 |
|
As at 31 March |
657,333 |
562,061 |
1 Investments and loans 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.
2 Investments made in the year ended 31 March 2019 include non-cash consideration of £0.3 million. See separate line.
17. Property, plant and equipment
|
31 March 2020 |
Right of use assets £'000s |
Leasehold improvements £'000s |
Computer equipment £'000s |
Total £'000s |
|
Cost |
|
|
|
|
|
Cost carried forward as at 1 April 2019^ |
835 |
327 |
57 |
1,219 |
|
Additions during the year |
779 |
353 |
15 |
1,147 |
|
Cost as at 31 March 2020 |
1,614 |
680 |
72 |
2,366 |
|
Accumulated depreciation |
|
|
|
|
|
Depreciation carried forward as at 1 April 2019 |
- |
(147) |
(28) |
(175) |
|
Charge for the year |
(306) |
(114) |
(11) |
(431) |
|
Accumulated depreciation as at 31 March 2020 |
(306) |
(261) |
(39) |
(606) |
|
Net book value: |
|
|
|
|
|
As at 31 March 2020 |
1,308 |
419 |
33 |
1,760 |
|
As at 31 March 2019 |
- |
180 |
29 |
209 |
|
31 March 2019 |
Right of use assets £'000s |
Leasehold improvements £'000s |
Computer equipment £'000s |
Total £'000s |
|
Cost |
|
|
|
|
|
Cost carried forward as at 1 April 2018 |
- |
285 |
41 |
326 |
|
Additions during the year |
- |
42 |
16 |
58 |
|
Cost as at 31 March 2019 |
- |
327 |
57 |
384 |
|
Accumulated depreciation |
|
|
|
|
|
Depreciation carried forward as at 1 April 2018 |
- |
(80) |
(17) |
(97) |
|
Charge for the year |
- |
(67) |
(11) |
(78) |
|
Accumulated depreciation as at 31 March 2019 |
- |
(147) |
(28) |
(175) |
|
Net book value: |
|
|
|
|
|
As at 31 March 2019 |
- |
180 |
29 |
209 |
|
As at 31 March 2018 |
- |
205 |
24 |
229 |
For depreciation and further information on right-of-use assets, please see the leases note - Note 20.
^ 1 April 2019 figure includes adjustment for IFRS 16 conversion under right of use assets - please see note 20 for further details.
18. Acquisitions of subsidiaries
Encore Ventures LLP
The Group acquired the remaining economic and beneficial membership interest in Encore Ventures LLP on 10 March 2020. Prior to this, the Group held a membership interest of 71%. This resulted in a change in ownership interest which did not result in a loss of control and has been accounted for in accordance with IFRS 10.
Consideration for the remaining interest in Encore Ventures was cash to the amount of £4.0 million. Pursuant to the Acquisition Agreement relating to the sale and purchase of certain membership interests in Encore Ventures LLP as well as the associated Subscription Agreements also dated 10 March 2020, Draper Esprit Plc issued 796,812 1p ordinary shares immediately subscribed to by those partners selling their interest in Encore Ventures LLP. The fair value of the equity shares issued was based on the market value of Draper Esprit plc's traded shares on the 10 March 2020 and amounted to £4.0 million.
As a result of this transaction, the balance of the non-controlling interest reported in the consolidated statement of financial position as at 31 March 2020 is nil (31 March 2019: £0.2 million). The profit attributable to non-controlling interest for the period to 10 March 2020 is £0.7 million and is reflected in the consolidated statement of comprehensive income for the year ended 31 March 2020 (year to 31 March 2019: £0.6 million).
19. Trade and other receivables
|
|
31 Mar 2020 £'000s |
31 Mar 2019 £'000s |
|
Trade receivables^ |
2,669 |
424 |
|
Other receivables and prepayments |
1,358 |
716 |
|
Loans made to related investment vehicles (Note 31) |
3,692 |
- |
|
|
7,719 |
1,140 |
^ £2.2 million of increase relates to accrued management fee.
The ageing of trade receivables at reporting date is as follows:
|
|
31 Mar 2020 £'000s |
31 Mar 2019 £'000s |
|
Not past due |
242 |
268 |
|
Past due 1-30 days |
45 |
5 |
|
Past due 31-60 days |
34 |
9 |
|
More than 60 days |
2,348 |
142 |
|
|
2,669 |
424 |
The maximum exposure to credit risk of the receivables at the reporting date is the fair value of each class of receivable mentioned above. The Group does not hold any collateral as security.
20. Leases
Lessee - Real Estate Leases
The Group leases office buildings in London for use by its staff. The Group also has offices in Cambridge and in Dublin, however these contracts are classified as service contracts and not leases. Information about leases for which the Group is a lessee is presented below. The Group has applied IFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under IAS 17 and IFRIC 4. One office building lease was identified as an operating lease previously and disclosed in the notes to the financial statements in the Draper Esprit plc annual report dated 31 March 2019. A new lease commenced during the current period, relating to the 3rd floor of 20 Garrick Street, WC2E 9BT.
The Group leases IT equipment such as printers for use by staff. The Group has elected to apply the recognition exemption for leases of low value to these leases.
Right-of-use assets
|
|
Property £'000s |
Total £'000s |
|
Balance at 31 March 2019 |
- |
- |
|
Transition to IFRS 16 - recognition of right-of-use asset in respect of existing leases |
835 |
835 |
|
Balance at 1 April 2019 |
835 |
835 |
|
Additions during the period |
779 |
779 |
|
Depreciation charge for the period |
(306) |
(306) |
|
Balance at 31 March 2020 |
1,308 |
1,308 |
Lease liabilities
|
|
Property £'000s |
Total £'000s |
|
Maturity analysis - contractual undiscounted cash flows |
|
|
|
Less than one year |
404 |
404 |
|
One to five years |
1,110 |
1,110 |
|
More than five years |
- |
- |
|
Total undiscounted lease liabilities at 31 March 2020 |
1,514 |
1,514 |
|
|
Property £'000s |
Total £'000s |
|
Lease liabilities included in the consolidated statement of financial position |
|
|
|
Current |
358 |
358 |
|
Non-current |
975 |
975 |
|
Total lease liabilities at 31 March 2020 |
1,333 |
1,333 |
As at 31 March 2019, no lease liabilities were recognised on the consolidated statement of financial position. As noted above, the Group recognised one operating lease under IAS 17. See note 23 to the annual report for Draper Esprit plc as at 31 March 2019 for further details. As at 1 April 2019, in accordance with the transition to IFRS 16, lease liabilities of £0.8 million were recognised in respect of this lease. A further lease commenced during the period relating to the 3rd floor of 20 Garrick Street, London. Lease liabilities in respect of this lease were recognised in accordance with IFRS 16 in the period.
Amounts recognised in the consolidated statement of comprehensive income
|
|
Year ended 31 March 2020 £'000s |
Year ended 31 March 2019 £'000s |
|
Interest on lease liabilities |
94 |
- |
|
Depreciation charge for the period on right-of-use assets |
306 |
- |
|
Expenses relating to short-term leases |
- |
- |
|
Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets |
5 |
- |
Payments of £330k in respect of rental payments paying down the lease liability have been recognised in the consolidated statement of cash flows. A contribution for a rent-free period on the 3rd floor of 20 Garrick Street of £164k has been recognised in the consolidated statement of cash flows for the year ending 31 March 2020. These appear net in the consolidated statement of cash flows for the year ending 31 March 2020.
Under IAS 17, one lease in respect of the 2nd floor of 20 Garrick Street was recognised as an operating lease - please see the notes to the Draper Esprit plc annual report dated 31 March 2019 for further information. This lease was the only lease identified at the beginning of this period. A further lease commenced during the period in respect of the 3rd floor of 20 Garrick Street and can be seen in the additions to right-to-use assets above. Under IAS 17, expenses of £0.2 million were recognised in the consolidated statement of comprehensive income in respect of operating lease rentals in the year ending 31 March 2019.
21. Loans and borrowings
In June 2019 the Company entered into a revolving credit facility agreement with Silicon Valley Bank and Investec (together the "Financiers") of £50.0 million over a 3-year term to provide financial flexibility and to fund the future growth plans of investee companies. The Company incurred costs of £0.5 million with respect to this facility which are presented within loans and borrowings on the statement of financial position and are amortised over the life of the facility (3 years). All interest-related charges are reported in profit or loss are included within finance costs or finance income. The bank loans are secured on agreed assets of the Group within the asset class of investments, updated as agreed with the Financiers from time to time, and are subject to customary financial and non-financial conditions with which the Group must comply.
The new facility agreement introduced financial and non-financial covenants.
a. There must be a minimum of 10 core investments at all times (core investments are not defined in the same way as in this report as it is more broadly defined);
b. The ratio of the NAV of all investments (as defined in the agreement) to original investment cost should not be less than 1.1:1.0 at any time; and
c. The ratio of the NAV (as defined in the agreement) plus amounts in the collateral account to financial indebtedness (as defined in the agreement) should not be less than 10:1 at any time.
In addition, the borrowing base (as defined in the agreement) must exceed the facility amount.
As collateral for interest payments, an amount equal to the aggregate amount of interest costs due for the coming 6 months, all being equal, must be held in an Interest Reserve Account at all times. The balance of this at 31 March 2020 was £1.9 million and is reflected on the consolidated statement of financial position as restricted cash.
The debt facility is repayable on maturity (June 2022) but may become repayable earlier if certain conditions are not met. An increase of the revolving credit facility by £10.0 million to £60.0 million was agreed post year-end. Following this, the debt facility is repayable on maturity in June 2023.
As at 31 March 2020, the Company has drawn down £45.0 million of the £50.0 million facility. The drawn down amount of the £45.0 million is recognised in the consolidated statement of financial position under non-current liabilities net of the arrangement and agent fee balance of £0.4 million.
|
|
31 Mar 2020 £'000s |
31 Mar 2019 £'000s |
|
Bank loan senior facility amount |
50,000 |
- |
|
Interest rate |
BOE base rate + 6.75% / 7.50% floor |
- |
|
Drawn at balance sheet date |
45,000 |
- |
|
Arrangement fees |
(364) |
- |
|
Loan liability balance |
44,636 |
- |
|
Undrawn facilities at balance sheet date |
5,000 |
- |
22. Trade and other payables
|
|
31 Mar 2020 £'000s |
31 Mar 2019 £'000s |
|
Trade payables |
(739) |
(239) |
|
Other taxation and social security |
(280) |
(290) |
|
Other payables |
(164) |
(481) |
|
Accruals and deferred income |
(3,855) |
(3,949) |
|
|
(5,038) |
(4,959) |
All trade and other payables are short-term.
23. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19% (2019: 19%). The movement on the deferred tax account is shown below:
|
|
31 Mar 2020 £'000s |
31 Mar 2019 £'000s |
|
Arising on business combination |
(75) |
(89) |
|
Arising on co-invest and carried interest |
(414) |
(599) |
|
Other timing differences |
(122) |
57 |
|
At 31 March |
(611) |
(631) |
Deferred tax arising on business combination is subject to amortisation within the consolidated statement of comprehensive income.
24. Share capital and share premium
Ordinary share capital
|
31 March 2020 - Allotted and fully paid |
Number |
Pence |
£'000s |
|
At the beginning of the year |
117,925,470 |
1 |
1,179 |
|
Issue of share capital during the year1 |
195,842 |
1 |
2 |
|
Issue of share capital during the year2 |
796,812 |
1 |
8 |
|
At the end of the year |
118,918,124 |
1 |
1,189 |
1 Between 24 December 2019 and 21 February 2020, 195,842 new 1p ordinary shares were issued in
association with share options being exercised.
2 On 10 March 2020, as part of the acquisition agreement relating to the remaining interest in Encore Ventures LLP (see note 18) it was agreed that the Company would issue 796,812 new ordinary shares at 502p.
|
31 March 2019 - Allotted and fully paid |
Number |
Pence |
|
At the beginning of the year |
71,611,773 |
1 |
|
Issue of share capital during the year for cash1/2 |
46,248,877 |
1 |
|
Issue of share capital during the year as consideration for investment purchase3 |
64,820 |
1 |
|
At the end of the year |
117,925,470 |
1 |
1 On 14 June 2018, the Company raised gross proceeds of approximately £115.0 million at an issue price of 420 pence per share by way of the conditional placing of 20,238,095 new ordinary shares and a subscription of 7,142,857 new ordinary shares.
2 On 8 February 2019, the Company raised gross proceeds of approximately £100.0 million at an issue price of 530 pence per share by way of the conditional placing of 18,867,925 new ordinary shares.
3 On 4 July 2018, the Company raised gross proceeds of £0.3 million at an issue price of 478 pence per share by way of the placing of 64,820 new ordinary.
Share premium
|
Allotted and fully paid |
Year ended 31 Mar 2020 £'000s |
Year ended 31 Mar 2019 £'000s |
|
At the beginning of the year |
395,783 |
188,229 |
|
Premium arising on the issue of ordinary shares^ |
4,983 |
215,035 |
|
Equity issuance costs |
(40) |
(7,481) |
|
At the end of the year |
400,726 |
395,783 |
^ The movement on share premium during the year has arisen as a result of 195,842 ordinary shares issued in association with share options being exercised during the year, and the issue of 796,812 shares of ordinary shares at 502 pence in association with the transaction to purchase the additional interest in Encore Ventures LLP (see note 18).
25. Merger relief reserve
In accordance with the Companies Act 2006, a Merger Relief Reserve of £13.1 million (net of the cost of share capital issued of £80k) was created on the issue of 4,392,332 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.
26. Retirement benefits
The Draper Esprit Group makes contributions to personal pension schemes set up to benefit its employees. The Group has no interest in the assets of these schemes and there are no liabilities arising from them beyond the agreed monthly contribution for each employee or member that is included in employment costs in the profit and loss account as appropriate.
27. Financial assets and liabilities
The description of each category of financial asset and financial liability and the related accounting policies are shown below. The carrying amounts of financial assets and financial liabilities in each category are as follows:
|
|
Designated FVTPL £'000s |
Amortised cost £'000s |
Total £'000s |
|
|
31 March 2020 |
|
|
|
|
|
Financial assets |
657,333 |
- |
657,333 |
|
|
Long-term financial assets |
657,333 |
- |
657,333 |
|
|
Trade and other receivables |
- |
4,027 |
4,027 |
|
|
Loans to related investment vehicles |
- |
3,692 |
3,692 |
|
|
Cash and cash equivalents |
- |
32,255 |
32,255 |
|
|
Restricted cash |
- |
1,883 |
1,883 |
|
|
Short-term financial assets |
- |
41,857 |
41,857 |
|
|
Total financial assets |
657,333 |
41,857 |
699,190 |
|
|
Financial liabilities |
|
|
|
|
|
Loans and borrowings |
- |
(44,636) |
(44,636) |
|
|
Lease liabilities |
- |
(975) |
(975) |
|
|
Long-term financial liabilities |
- |
(45,611) |
(45,611) |
|
|
Trade and other payables |
- |
(5,038) |
(5,038) |
|
|
Loans and borrowings |
- |
- |
- |
|
|
Lease liabilities |
- |
(358) |
(358) |
|
|
Short-term financial liabilities |
- |
(5,396) |
(5,396) |
|
|
Total financial liabilities |
- |
(51,007) |
(51,007) |
|
|
|
Designated FVTPL £'000s |
Amortised cost £'000s |
Total £'000s |
|
|
31 March 2019 |
|
|
|
|
|
Financial assets |
562,061 |
- |
562,061 |
|
|
Long-term financial assets |
562,061 |
- |
562,061 |
|
|
Trade and other receivables |
- |
1,140 |
1,140 |
|
|
Cash and cash equivalents |
- |
50,358 |
50,358 |
|
|
Short-term financial assets |
- |
51,498 |
51,498 |
|
|
Total financial assets |
562,061 |
51,498 |
613,559 |
|
|
Financial liabilities |
|
|
|
|
|
Trade and other payables |
- |
(4,959) |
(4,959) |
|
|
Total financial liabilities |
- |
(4,959) |
(4,959) |
|
28. 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 profit or loss according to the following fair value hierarchy:
(a) Level 1: inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
(b) Level 2: inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
(c) Level 3: inputs are unobservable inputs for the asset or liability.
All investments are held at fair value through profit or loss are classified as Level 3 in the fair value hierarchy. There were no transfers between levels 1, 2, and 3 during the period.
Significant unobservable inputs for Level 3 valuations
The fair value of unlisted securities is established with reference to the International Private Equity and Venture Capital Valuation Guidelines ("IPEV Guidelines"). In line with the IPEV Guidelines, the Group may base valuations on earnings or revenues where applicable, market comparables, price of recent investments in the investee companies, or on net asset values. An assessment will be made at each measurement date as to the most appropriate valuation methodology.
See Note 4(a) where valuation policies are discussed in more detail.
Financial instruments, measured at fair value, categorised as Level 3 within the fair value hierarchy can be split into 3 main valuation techniques. Valuation techniques can be categorised as based on last round price (calibrated with reference to market performance and technical/product milestones since the round and the companies trading performance relative to the expectations of the round), revenue-multiple or at NAV of the underlying fund (adjusted where relevant). As at 31 March 2020, financial instruments measured using last round price valuation methodology were £231.7 million (including those at a discount) (as at 31 March 2019: £295.0 million). As at 31 March 2020, financial instruments measured using revenue-multiple valuation methodology were £401.3 million (as at 31 March 2019: £217.8 million). As at 31 March 2020, financial instruments measured at NAV of the underlying fund (adjusted where relevant) were £68.1 million (31 March 2019: £79.2 million).
Each portfolio company will be subject to individual assessment. Where the Group invests in fund of fund investments, the value of the portfolio will be reported by the fund to the Group. The Group will ensure that the valuations comply with the Group policy.
The valuation multiple is the main assumption applied to valuation based on a revenue-multiple methodology. The multiple is derived from comparable listed companies or relevant market transaction multiples. Companies in the same industry and geography, and, where possible, with a similar business model and profile are selected and then adjusted for factors including liquidity risk, growth potential and relative performance. They are also adjusted to represent our longer-term view of performance through the cycle or our existing assumption. The portfolio we have is diversified across sectors and geographies and the companies within our core portfolio holdings which have valuations based on revenue-multiples have an average multiple of 3.2x.
If the multiple used to value each unquoted investment valued on a revenue-multiples basis as at 31 March 2020 were to decrease by 10%, the investment portfolio would decrease by £40.1 million (31 March 2019: £21.8 million). If the multiple increases by 10% then the investment portfolio would increase by £40.1 million (31 March 2019: £21.8 million).
If the multiple used to value each unquoted investment valued on a revenue-multiples basis as at 31 March 2020 were to decrease by 20% the investment portfolio would decrease by £80.3 million (31 March 2019: £43.6 million). If the multiple increases by 20% then the investment portfolio would increase by £80.3 million (31 March 2019: £43.6 million).
29. Financial instruments risk
Financial risk management
Financial risks are usually grouped by risk type: market, liquidity and credit risk. These risks are discussed in turn below.
Market risk - Foreign currency
A significant portion of the Group's investments and cash deposits are denominated in a currency other than Pound Sterling. The principal currency exposure risk is due to changes in the exchange rate between GBP and USD/EUR. Presented below is an analysis of the theoretical impact of 10% volatility in the exchange rate on shareholder equity.
Theoretical impact of a change in the exchange rate of +/-10% between GBP and USD/EUR would be as follows:
|
Foreign currency exposures - Investments |
31 March 2020 £'000s |
31 March 2019 £'000s |
|
Investments |
557,567 |
412,146 |
|
10% decrease in GBP* |
619,519 |
456,632 |
|
10% increase in GBP** |
506,879 |
375,948 |
* £376.5 million (2019: £305.0 million) denominated in USD and £242.9 million (2019: £151.0 million) denominated in EUR.
** £308.1 million (2019: £250.0 million) denominated in USD and £198.8 million (2019: £126.0 million) denominated in EUR.
Certain cash deposits held by the Group are denominated in Euros and US Dollars. The theoretical impact of a change in the exchange rate of +/-10% between GBP and USD/EUR would be as follows:
|
Foreign currency exposures - Cash |
31 March 2020 £'000s |
31 March 2019 £'000s |
|
Cash denominated in EUR |
6,976 |
10,522 |
|
10% decrease in EUR:GBP |
6,278 |
9,470 |
|
10% increase in EUR:GBP |
7,673 |
11,574 |
|
Cash denominated in USD |
3,627 |
9,746 |
|
10% decrease in USD:GBP |
3,264 |
8,771 |
|
10% increase in USD:GBP |
3,990 |
10,721 |
The combined theoretical impact on shareholders' equity of the changes to revenues, investments and cash and cash equivalents of a change in the exchange rate of +/-10% between GBP and USD/EUR would be as follows:
|
Foreign currency exposures - Equity |
31 March 2020 £'000s |
31 March 2019 £'000s |
|
Shareholders' equity |
659,618 |
618,332 |
|
10% decrease in EUR:GBP/USD:GBP |
593,656 |
556,499 |
|
10% increase in EUR:GBP/USD:GBP |
725,580 |
680,166 |
Market risk - Price risk
Market price risk arises from the uncertainty about the future prices of financial instruments held in accordance with the Group's investment objectives. It represents the potential loss that the Group might suffer through holding market positions in the face of market movements, which have been heightened due to COVID-19.
The Group is exposed to equity price risk in respect of equity rights and investments held by the Group and classified on the balance sheet as financial assets at fair value through profit or loss (Note 27). These equity rights are held in unquoted high growth technology companies and are valued by reference to revenue or earnings multiples of quoted comparable companies, last round price, or NAV of underlying fund - as discussed more fully in Note 4(a). These valuations are subject to market movements.
The Group seeks to manage this risk by routinely monitoring the performance of these investments, employing stringent investment appraisal processes.
Theoretical impact of a fluctuation of +/-10% would have the following impact:
|
£'000s |
Revenue-multiple |
NAV of underlying fund |
Last round price |
|
As at 31 March 2020 |
40,131 |
6,810 |
23,169 |
|
As at 31 March 2019 |
21,781 |
7,921 |
29,496 |
We further flexed by 20% given the volatility resulting from the COVID-19 pandemic. Theoretical impact of a fluctuation of +/- 20% would have the following impact:
|
£'000s |
Revenue-multiple |
NAV of underlying fund |
Last round price |
|
As at 31 March 2020 |
80,263 |
13,621 |
46,338 |
|
As at 31 March 2019 |
43,562 |
15,842 |
58,993 |
Liquidity risk
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of 3 months or less held in readily accessible bank accounts. The carrying amount of these assets is approximately equal to their fair value. Responsibility for liquidity risk management rests with the Board of Draper Esprit plc, which has established a framework for the management of the Group's funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and actual cash flows. The utilisation of the loan facility and requirement for utilisation requests is monitored as part of this process.
Lease liabilities fall due over the term of the lease - see Note 20 for further details. The debt facility has a term of 3 years - for further details, see Note 20. All other Group payable balances at balance sheet date and prior periods fall due for payment within 1 year.
As part of our seed fund of funds strategy, we make commitments to funds to be drawn down over the life of the fund. Projected drawdowns are monitored as part of the monitoring process above. For further details see Note 32.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss. The Group is exposed to this risk for various financial instruments; for example, by granting receivables to customers and placing deposits. The Group's trade receivables are amounts due from the investment funds under management, or underlying portfolio companies. The Group's maximum exposure to credit risk is limited to the carrying amount of trade receivables and cash at bank and in hand at 31 March, as summarised below;
|
Classes of financial assets impacted by credit risk, carrying amounts |
31 March 2020 £'000s |
31 March 2019 £'000s |
|
Trade receivables |
2,669 |
424 |
|
Loan to related investment vehicle |
3,692 |
- |
|
Cash at bank and in hand |
32,255 |
50,358 |
|
Restricted cash |
1,883 |
- |
|
|
40,499 |
50,782 |
The Directors consider that all the above financial assets, which are not impaired for each of the reporting dates under review, are of good credit quality. In respect of trade and other receivables, the Group is not exposed to significant risk as the principal customers are the investment funds managed by the Group, and in these the Group has control of the banking as part of its management responsibilities.
Investments in unlisted securities are held within limited partnerships for which the Group acts as manager, and consequently the Group has responsibility itself for collecting and distributing cash associated with these investments. The credit risk of amounts held on deposit is limited by the use of reputable banks with high quality external credit ratings and as such is considered negligible. The majority of cash is held with institution with an A rating at year ended 31 March 2020.
Capital management
The Group's objectives when managing capital are to:
(a) safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and
(b) maintain an optimal capital structure.
The Group is funded through equity and debt at the balance sheet date. Please refer to Note 21 for further information on the revolving credit facility.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to manage cash.
Interest rate risk
The Group's interest rate risk arises from borrowings on the £50.0 million loan facility with Silicon Valley Bank and Investec, which was entered into in June 2019. Prior to the year ending 31 March 2020, the Group did not have any borrowings. The Group's borrowings are denominated in GBP and are carried at amortised cost. Six drawdowns totalling £50.0 million were made on the facility during the year at an interest rate of 7.5% (£5.0 million of which has been repaid). Future drawdowns may be subject to a different interest rate. The facility agreement has an interest rate calculated with reference to the Bank of England base rate (currently 0.10%) with a Margin of 6.75%. The agreement has an interest rate floor of 7.5%. As such, if the base rate increases, the interest charged on future drawdowns will increase.
If the Bank of England base rate had been 1.0% higher during the year to 31 March 2020 the difference to the consolidated statement of comprehensive income would have been an increase in finance costs of £0.1 million. If the Bank of England base rate had been 1.0% higher during the year to 31 March 2020 the difference to the consolidated statement of cash flows would have been an increase in expenditure of £0.1 million.
30. Alternative Performance Measures ("APM")
The Group has included the APMs listed below in this Annual Report as they highlight key value drivers for the Group and, as such, have been deemed by the Group's management to provide useful additional information to readers of the Annual Report. These measures are not defined by IFRS and should be considered in addition to IFRS measures.
Gross Portfolio Value
The Gross Portfolio Value is the gross fair value of the Group's investment holdings before deductions for the fair value of carry liabilities and any deferred tax. The Gross Portfolio Value is subject to deductions for the fair value of carry liabilities and deferred tax to generate the net investment value, which is reflected on the consolidated statement of financial position as financial assets held at fair value through profit or loss. Please see page 43 for a reconciliation to the net investment balance.
31. Related party transactions
The Group may require that one of its members be appointed to the board of a portfolio company in a non-executive role. In certain cases, an administration fee is charged to the portfolio company for the provision of Director services. Fees of £44,000 (2019: £26,957) have been invoiced during the current year. At year-end, there was a balance of £6,000 outstanding (2019: £16,357). Draper Esprit does not exercise control or management through any of these non-executive positions.
During the year, £1,200,000 (2019: £840,000) was invoiced from Draper Esprit plc to Encore Ventures LLP for overheads, at year-end a balance of £100,000 (2019: £70,000) remained outstanding.
During the year £368,332 (2019: £53,737) was invoiced and received from Draper Esprit VCT for overheads.
During the period, the Company loaned £3.7 million to Esprit Capital Fund No 1 & No 2 LP on an arm's length basis. The loan is repayable on demand and interest is charged at 10% per annum. Interest of £187,152 has been accrued on the loan to 31 March 2020.
During the year, the Group purchased the remaining interest in Encore Ventures LLP - see note 18 for further details.
Unconsolidated structured entities
The Group has exposure to a number of unconsolidated structured entities as a result of its venture capital investment activities.
The Group invests funds via a number of limited partnerships. These are controlled by the Group and not consolidated, but they are held as investments at fair value through the profit and loss on the consolidated balance sheet in line with IFRS 10 (See Note 3b for further details). The list of these investment companies and limited partnerships can also be seen in Note 3b. Within these limited partnerships, there are commitments made to fund of funds investments that are disclosed in Note 32 below. The material assets and liabilities within these investment companies are the investments, which are held at FVTPL in the consolidated accounts.
A Strategic Partnership Agreement was entered into in the previous financial year with Earlybird. Total exposure to the Group is £187.3 million of NAV (2019: £144.6 million) and further commitments of £28.5 million (2019: £44.8 million). Following the year-end a further drawdown of £3.3 million was called reducing the undrawn commitment to £25.2 million.
The Group also co-invests or historically co-invested with a number of limited partnerships (See Note 3b for further details). The exposure to these entities is immaterial.
32. Capital commitments
At 31 March 2020, the Group was committed to £39.1 million in relation to investments in fund of funds vehicles (31 March 2019: £33.9 million). As at 31 March 2020, £13.3 million of this has been drawn. In the summer of 2018, the Company entered into a Strategic Partnership Agreement with Earlybird to share deal flow and resources to co-invest in high growth technology companies across Europe. The first stage of this partnership included a 50% commitment in EB VI of £76.0 million to 2022, of which £56.4 million has been deployed to date (31 March 2019: £31.2 million).
33. Ultimate controlling party
The Directors of Draper Esprit plc do not consider there to be a single ultimate controlling party of the Group.
34. Post balance sheet events
- Extended the term of the revolving credit facility with Silicon Valley Bank and Investec [by 1 year to 2023] and increased its size by £10.0 million to £60.0 million.
- Zynga Inc. announced their agreement to acquire Peak Games for $1.8bn, which will, subject to closing, indicate a fair value holding for Draper Esprit of approximately £80.0 million via Earlybird IV (actual returns are subject to completion conditions, including FX movements, and acquirer share price movement with respect to the stock component).
- Simon Cook will be stepping down from the Board from 1 July 2020. Simon will remain with the Company as founding partner and focus on generating new deals and will continue as a board member for a number of portfolio companies.
Glossary
In this document, where the context permits, the terms and expressions set out below shall have the meanings assigned thereto:
|
"Admission" or "IPO" |
|
|
|
"Act" |
the UK Companies Act 2006. |
|
|
"AIM" |
AIM, the market of that name operated by the London Stock Exchange. |
|
|
"Audit, Risk and Valuations Committee" |
the Audit, Risk and Valuations Committee of the Board. |
|
|
"BoE" |
Bank of England |
|
|
"Company" or "Draper Esprit" or "plc" |
Draper Esprit plc, a company incorporated in England and Wales with registration number 09799594 and having its registered office at 20 Garrick Street, London, England, WC2E 9BT. |
|
|
"Core Portfolio Companies" |
the top companies by value that represent approximately 70% of the overall portfolio value. |
|
|
"COVID"/"COVID-19"/"Coronavirus"/"CV19" |
Coronavirus disease, the infectious disease caused by a new strain of coronavirus in 2019/20. |
|
|
"DEF" / "Digital East Fund" |
Digital East Fund 2013 SCA SICAR |
|
|
"Directors" or "Board" |
the Directors of the Company from time to time |
|
|
"Draper Esprit Funds" |
the Esprit Funds and the Encore Funds |
|
|
"Draper Venture Network" |
the self-governed network of 24 independent growth and venture funds, of which Esprit Capital is a member. |
|
|
"EB IV" / "Earlybird Fund IV" |
Earlybird GmbH & Co. Beteiligungs-KG IV |
|
|
"EB VI" / "Earlybird Fund VI" |
Earlybird DWES Fund VI GmbH & Co. KG |
|
|
"EIS" |
the EIS funds managed by Encore Ventures LLP. EIS funds being Enterprise Investment Scheme under the provisions of Part 5 of the Income Tax Act 2007. |
|
|
"Encore Funds" / "Draper Esprit's EIS funds" |
DFJ Esprit Angels' EIS Co-Investment Fund, DFJ Esprit Angels' EIS Co-Investment II, DFJ Esprit EIS III, DFJ Esprit EIS IV, Draper Esprit EIS 5, and Draper Esprit EIS, each an "Encore Fund". |
|
|
"Encore Ventures" |
Encore Ventures LLP, a limited liability partnership incorporated in England and Wales under the registration number OC347590 with its registered office at 20 Garrick Street, London, WC2E 9BT. |
|
|
"Esprit Capital" |
Esprit Capital Partners LLP (previously Draper Esprit LLP), a limited liability partnership incorporated in England and Wales under the registration number OC318087 with its registered office at 20 Garrick Street, London, WC2E 9BT, the holding vehicle of the Group immediately prior to Admission. |
|
|
"Euronext Dublin" |
The trading name of the Irish Stock Exchange Plc. |
|
|
"Euronext Growth" |
the Euronext Growth securities market (formerly the Enterprise Securities Market) operated and regulated by the Irish Stock Exchange plc (trading as "Euronext Dublin"). |
|
|
"FCA" |
the UK Financial Conduct Authority. |
|
|
"FOF" or "FoF" |
Fund of Funds. |
|
|
"Gross Portfolio Value" |
Gross Portfolio Value is the value of the portfolio of investee companies held by funds controlled by the Company before accounting for deferred tax, external carried interest and amounts co-invested. |
|
|
"Group" |
The Company and its subsidiaries from time to time and, for the purposes of this document, including Esprit Capital Partners LLP 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. |
|
"IPO" |
the Company's listing on the London Stock Exchange's AIM market and the Irish Stock Exchange's (trading as Euronext Dublin) Euronext Growth Dublin market on 15 June 2016. |
|
"IRR" |
the internal rate of return. |
|
"NAV" |
the value, as at any date, of the assets of the Company and/or Group after deduction of all liabilities determined in accordance with the accounting policies adopted by the Company and/or Group from time to time. |
|
"Ordinary Shares" |
ordinary shares of £0.01 pence each in the capital of the Company. |
|
"PwC" |
PricewaterhouseCoopers LLP, a limited liability partnership registered in England and Wales under the registration number OC303525 and having its registered office at 1 Embankment Place, London, WC2N 6RH. |
|
"International Private Equity and Venture Capital Valuation Guidelines" |
the International Private Equity and Venture Capital Valuation Guidelines, as amended from time to time. |
|
"VC" |
venture capital. |
|
"VCT" |
The VCT funds managed by Draper Esprit VCT. VCT (venture capital trust) funds being UK closed-ended collective investment schemes. |
London | HQ
20 Garrick Street London, WC2E 9BT
Tel: +44 (0)20 7931 8800
draperesprit.com