“Edison’s accessible and high-quality research gives us the opportunity to communicate an independent perspective of Tyman to a wide variety of potential stakeholders.”
Currency in GBP
Last close As at 02/06/2023
GBP3.00
▲ 9.00 (3.09%)
Market capitalisation
GBP459m
Research: Financials
Draper Esprit reported a very strong FY21, with a 51% increase in gross portfolio value (GPV) to £984m and a 57% rise in NAV to £1.03bn, together with realisations and exits at a record £206m. As at 31 March 2021, plc cash stood at £160.7m. Immediately following the results, management announced a placing and retail offer raising £111m at 800p per share, a 5% discount to the closing price on 11 June 2021 of 839p per share and an 8% premium to the latest NAV of 743p per share, as at 31 March 2021. The cash raised will be used to increase Draper Esprit’s rate of investment to over £150m pa. Following the raise, net of £48m of post year-end investment, we estimate that Draper Esprit has net cash of over £215m.
Draper Esprit |
FY21 results, £111m placing and retail offer |
FY21 results |
Listed venture capital |
22 June 2021 |
Share price performance
Business description
Next events
Analysts
Draper Esprit is a research client of Edison Investment Research Limited |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Draper Esprit reported a very strong FY21, with a 51% increase in gross portfolio value (GPV) to £984m and a 57% rise in NAV to £1.03bn, together with realisations and exits at a record £206m. As at 31 March 2021, plc cash stood at £160.7m. Immediately following the results, management announced a placing and retail offer raising £111m at 800p per share, a 5% discount to the closing price on 11 June 2021 of 839p per share and an 8% premium to the latest NAV of 743p per share, as at 31 March 2021. The cash raised will be used to increase Draper Esprit’s rate of investment to over £150m pa. Following the raise, net of £48m of post year-end investment, we estimate that Draper Esprit has net cash of over £215m.
Period |
Plc cash* |
Gross portfolio value (£m) |
NAV |
NAV/share |
P/NAV |
03/19 |
50.4 |
594.0 |
618.6 |
524 |
1.67 |
03/20 |
34.1 |
702.9 |
659.6 |
555 |
1.58 |
09/20** |
62.1 |
702.4 |
714.7 |
600 |
1.46 |
03/21 |
160.7*** |
983.8 |
1,033.1 |
743 |
1.18 |
Note: *Includes restricted cash but not funds held on behalf of EIS/VCT investors. **H121 interim results. ***Post period-end, the company raised £111m (gross) and invested £48m.
FY21 results: Strong growth, strong returns
In its FY21 results, Draper Esprit confirmed an NAV/share as at 31 March 2021 of 743p, a 24% uplift on its H121 NAV/share of 600p and a 34% increase over 12 months (FY20: 555p). As at 31 March 2021, Draper Esprit held plc cash of £160.7m (including £2.3m restricted cash) (31 March 2020: £34.1m), with positive net realisation (realisations of £206m, less investments of £128m), enabling the group to repay its £45m revolving credit facility (RCF). Net operating costs (net of fee income) remained below management’s target of 1% of NAV.
Placing and retail offer raised £111m (gross)
In total, on 14 June 2021, Draper Esprit placed 13.9m new ordinary shares (c 10% of the existing share capital) at a price of 800p per share, raising gross proceeds of £111.2m. The placing included a retail tranche of 0.6m shares, offered through Draper Esprit’s portfolio company PrimaryBid. The company intends to use the proceeds to commit more capital to investment (over £150m annually), leading more rounds and participating in larger rounds. The placing was oversubscribed. Draper Esprit also confirmed that it intends to move its listing to the premium segment of the Main Market in the next few months and, at today’s valuation, should qualify for inclusion in the FTSE 250 index.
Valuation: A premium VC, offering scale and liquidity
With a 34% rise in NAV in FY21 and a five-year NAV/share CAGR FY16–21 of 18.7%, Draper Esprit has demonstrated why it warrants a premium as a rapidly scaling leader in the technology VC sector. Draper Esprit trades at 1.18x FY21 NAV, and having raised a fresh tranche of capital, is ready to continue to scale its business ahead of a potential listing on the Main Market. Given the group’s strong 51% GPV growth in FY21, management is prudently guiding towards slower 15% GPV growth in FY22 as management targets 20% growth through the economic cycle.
FY21 results: Strong growth drives strong returns
FY21 was characterised by an accelerated transition to digital, as a result of the COVID-19 pandemic, supported by technology companies as enablers of remote working and the digital economy more broadly. These trends benefited the sorts of companies in which Draper Esprit invests: companies with recurring revenue streams, remote networking facilitators, cloud native applications, providers of security infrastructure, automation and e-commerce companies.
This led to strong value growth in the portfolio with GPV rising by 51% y-o-y to £984m (31 March 2020: £703m), with a net fair value uplift of £276m. Net assets increased by 57% to £1,033m (31 March 2020: £660m), with net asset value (NAV) per share of 743p as at 31 March 2021, a 34% y-o-y uplift (FY20: 555p). Net portfolio value fell to 88% of GPV in FY21 from 93% in FY20, reflecting a greater contribution from fund investments, with a higher carry than the 15% carry standard on the group’s direct investments, underlining the success of Draper Esprit’s fund of funds strategy.
Income principally comprised £276.3m of investment gains (FY20: £40.8m), together with fee income from management fees and directors’ fees of £12.5m (FY20: £11.3m). FY21 G&A costs rose to £13.8m (FY20: £9.8m) as the Draper Esprit team grew and its infrastructure was scaled, but net operating costs (FY21: £1.3m)) (net of fee income) remained comfortably below 1% of NAV (a management target), with the rise in both net income and NAV over the year.
As at 31 March 2021, Draper Esprit held plc cash of £160.7m (including £2.3m restricted cash) (31 March 2020: £34.1m), with positive net realisation (realisations of £206m, less investments of £128m) enabling the group to repay its £45m revolving credit facility (RCF). Cash proceeds included realisations of Peak Games, TransferWise and Decibel, as well as partial realisations of Trustpilot and a pre-IPO secondary sale of Draper Esprit’s holding in UiPath.
Post year-end, Draper Esprit invested a further £48m (to 11 June 2021), including investments in Manna, FintechOS, Cervest, Ledger and Lyst. Together with the net proceeds from the placing and retail offer (£111m gross), we estimate a net cash increase of c £60m as at 11 June 2021, implying total plc cash of c £215m. The RCF was also extended to £65m and remains undrawn.
Portfolio update
|
Exhibit 1: A balance between initial and follow-on investment |
|
|
Source: Draper Esprit |
Draper Esprit’s core portfolio has increased from 16 companies to 17 companies, representing 68% of GPV. New companies that have joined the core portfolio include Lyst, Endomag and Freetrade, with ICEYE falling below the threshold for inclusion.
|
Exhibit 2: 17 members of the core portfolio |
Exhibit 3: The core portfolio is 68% of GPV |
|
|
|
Source: Draper Esprit |
Source: Draper Esprit |
|
Exhibit 2: 17 members of the core portfolio |
|
|
Source: Draper Esprit |
|
Exhibit 3: The core portfolio is 68% of GPV |
|
|
Source: Draper Esprit |
GPV as at 31 March 2021 reached £984m (31 March 2020: £703m), with cash proceeds of £206m from realisations (including escrows) during the period. Draper Esprit committed £128m of investment, with a gross change in fair value of £359m, despite strong currency headwinds leading to a £51m foreign exchange loss. Draper Esprit targets 20% gross portfolio returns through the economic cycle (FY21: 51%) as well as 10–15% realisations through the cycle (FY21: 29%).
Exhibit 4: Investment portfolio summary
£m |
Fair value of investments |
Investments |
Realisations |
FX movement |
Change in fair value |
Total change in fair value |
Fair value of investments |
Proportion of GPV |
Cumulative share of GPV |
|
31 Mar 2020 |
FY21 |
FY21 |
FY21 |
FY21 |
FY21 |
31 Mar 2021 |
% |
% |
||
1 |
Graphcore |
86.8 |
10.3 |
– |
(7.5) |
19.2 |
11.7 |
108.8 |
11.1% |
11% |
2 |
UiPath |
28.0 |
– |
(5.3) |
(6.8) |
84.4 |
77.6 |
100.3 |
10.2% |
21% |
3 |
Trustpilot |
65.3 |
– |
(75.0) |
– |
95.2 |
95.2 |
85.5 |
8.7% |
30% |
4 |
Aiven |
12.8 |
– |
– |
(3.1) |
35.8 |
32.7 |
45.5 |
4.6% |
35% |
5 |
Ledger |
17.7 |
– |
– |
(2.9) |
27.0 |
24.1 |
41.8 |
4.2% |
39% |
6 |
Lyst |
10.8 |
– |
– |
(2.4) |
26.7 |
24.3 |
35.1 |
3.6% |
42% |
7 |
Aircall |
24.3 |
– |
– |
(1.6) |
10.1 |
8.5 |
32.8 |
3.3% |
46% |
8 |
RavenPack |
30.9 |
– |
– |
(2.1) |
1.1 |
(1.0) |
29.9 |
3.0% |
49% |
9 |
M-files |
20.0 |
1.5 |
– |
(1.6) |
9.8 |
8.2 |
29.7 |
3.0% |
52% |
10 |
Cazoo |
– |
10.3 |
– |
– |
15.4 |
15.4 |
25.7 |
2.6% |
54% |
11 |
Smava |
16.7 |
– |
– |
(1.6) |
8.7 |
7.1 |
23.8 |
2.4% |
57% |
12 |
Revolut |
21.7 |
– |
– |
(1.5) |
0.2 |
(1.3) |
20.4 |
2.1% |
59% |
13 |
Freetrade |
– |
4.0 |
– |
– |
16.0 |
16.0 |
20.0 |
2.0% |
61% |
14 |
Perkbox |
19.9 |
– |
– |
– |
(1.3) |
(1.3) |
18.6 |
1.9% |
63% |
15 |
SportPursuit |
11.1 |
– |
– |
– |
7.4 |
7.4 |
18.5 |
1.9% |
65% |
16 |
Thought Machine |
17.4 |
– |
– |
– |
1.0 |
1.0 |
18.4 |
1.9% |
67% |
17 |
Endomag |
6.9 |
7.0 |
– |
– |
1.8 |
1.8 |
15.7 |
1.6% |
68% |
Core portfolio |
390.3 |
33.1 |
(80.3) |
(31.1) |
358.5 |
327.4 |
670.5 |
68.2% |
68% |
|
Remaining portfolio |
310.8 |
94.9 |
(125.4) |
(20.1) |
50.5 |
30.4 |
310.7 |
31.6% |
100% |
|
Total |
701.1 |
128.0 |
(205.7) |
(51.2) |
409.0 |
357.8 |
981.2 |
99.7% |
||
Co-investment |
1.8 |
– |
(0.6) |
– |
1.4 |
1.4 |
2.6 |
0.3% |
||
Gross portfolio value |
702.9 |
128.0 |
(206.3) |
(51.2) |
410.4 |
359.2 |
983.8 |
100.0% |
Source: Draper Esprit
Fund of funds: A successful strategy for the group
Draper Esprit committed capital to a further 15 funds in FY21, bringing its overall commitments to 35 seed funds as at 31 March 2021. This network provides access to seed stage companies, as well as supporting specialist deal flow across Europe. New FY21 portfolio companies Cazoo and Hopin originated through this network.
New fund commitments included regional funds such as Icebreaker II (Nordics) and Draper B1 (Spanish start-ups), as well as thematic investors, including Atelier (passion economy) and Quatonation (quantum computing). Draper Esprit also invested in the latest funds of existing fund managers including Seaya Ventures III, Icebreaker II, Stride II, Seedcamp V and Amaranthine fund II. The seed fund of funds programme now includes several impact or sustainable funds.
Engagement with ESG and sustainability
FY21 was a formative year for Draper Esprit in framing its environmental, social, and governance (ESG) policy, but the group aims to continue to use its platform in venture capital to encourage and promote its environmental, social and governance values.
|
Exhibit 5: Draper Esprit’s ESG achievements in FY21 |
|
|
Source: Draper Esprit |
For FY22, the group has finalised four ESG key performance indicators (KPIs), which will be combined to form a single headline business KPI linked to all staff and executive remuneration.
The group’s four ESG KPIs for FY22 are:
1.
Environment – establish a roadmap to make Task Force on Climate-related Financial Disclosures (TCFD) disclosures in the FY22 cycle.
2.
Social – create and implement a group-wide Diversity and Inclusion Policy and a Board Diversity and Inclusion Policy.
3.
Governance – strategically engage with 10–15 portfolio management teams on their governance arrangements.
4.
All-encompassing – provide a training programme for the investment team in applying ESG policy to Draper Esprit’s investment process.
Further details can be found in on pages 60–70 of Draper Esprit’s FY21 annual report and accounts.
Outlook: Positive technology trends underpin FY22
After its record year in FY21, Draper Esprit continues to target 20% fair value growth through the cycle, but given the 51% growth achieved in FY21, management is prudently targeting a lower return of 15% in FY22. Draper Esprit remains confident in the outlook, intending to increase its investment cadence to over £150m annually from FY21 (potentially rising to as high as £200m of investment in FY22 following the latest placing). By moving to the premium segment of the Main Market, Draper Esprit hopes to join the FTSE 250, attracting index funds and enabling the group to tap a wider and deeper pool of capital to support future growth.
Draper Esprit intends to continue to scale its model and strengthen its team, investing in infrastructure and processes to enhance deal flow and grow its third-party funds business. Specifically, Draper Esprit intends to:
■
Stay invested for longer and participate in larger funding rounds as European technology companies mirror US investment trends.
■
Establish a growth stage (Series B+) co-investment fund, using third-party funds to leverage its balance sheet .
■
With a stronger balance sheet, potentially supported by a potential co-investment fund, Draper Esprit wants to lead more rounds.
■
Invest in Earlybird Fund VII, targeting Series A investments in Germany and Europe.
■
Continue to invest in its Fund of Funds programme, securing deal flow at the seed stage.
Valuation: Potential for NAV uplift in FY21
As an investment company, Draper Esprit’s financial performance centres around its balance sheet, the growth in fair value of its investment portfolio (FY21: 51%), the resultant growth in net assets (FY21: 57%) and NAV per share (FY21: 34%), and the cash resources available (c £215m) to allow the group to continue to fund its portfolio companies to maturity and exit.
After a very strong FY21 resulting in a five-year NAV/share CAGR FY16–21 of 18.7%, Draper Esprit has demonstrated why it warrants a premium as a rapidly scaling leader in the technology VC sector. Draper Esprit trades at 1.18x FY21 NAV, and having raised a fresh tranche of capital, is ready to continue to scale its business ahead of a listing on the Main Market and the potential launch of a co-investment growth fund in FY22. Catalysts for a re-rating include further scaling of the business, the listing on the Main Market, growth in third-party fee income and successful exits and IPOs.
Exhibit 6: Financial summary
£'000 |
FY17 |
FY18 |
FY19 |
FY20 |
FY21 |
||
31-March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||
Change in unrealised gains on investments |
35,744 |
66,603 |
114,715 |
40,755 |
276,307 |
||
Fee income |
1,673 |
7,163 |
6,101 |
11,255 |
12,507 |
||
Revenue |
|
|
37,417 |
73,766 |
120,816 |
52,010 |
288,814 |
Cost of Sales |
- |
- |
- |
- |
- |
||
Gross Profit |
37,417 |
73,766 |
120,816 |
52,010 |
288,814 |
||
Operating costs |
(3,832) |
(5,945) |
(7,937) |
(10,330) |
(14,494) |
||
Investment and acquisition costs |
- |
(424) |
(207) |
(239) |
(262) |
||
Normalised operating profit |
|
|
33,585 |
67,397 |
112,672 |
41,441 |
274,058 |
Amortisation of acquired intangibles |
- |
- |
- |
- |
- |
||
Exceptionals |
- |
(229) |
(34) |
- |
94 |
||
Share-based payments |
(4,551) |
(4,896) |
(3,089) |
(990) |
(1,548) |
||
Reported operating profit |
29,034 |
62,272 |
109,549 |
40,451 |
272,604 |
||
Net Interest |
- |
112 |
120 |
(1,302) |
(1,809) |
||
One-off items (incl FX) |
221 |
(1,530) |
1,481 |
1,234 |
(3,348) |
||
Profit Before Tax (norm) |
|
|
33,806 |
65,979 |
114,273 |
41,373 |
268,901 |
Profit Before Tax (reported) |
|
|
29,255 |
60,854 |
111,150 |
40,383 |
267,447 |
Reported tax |
(438) |
43 |
11 |
(17) |
(26) |
||
Profit After Tax (norm) |
34,309 |
65,931 |
114,262 |
41,390 |
268,901 |
||
Profit After Tax (reported) |
28,817 |
60,897 |
111,161 |
40,366 |
267,421 |
||
Minority interests |
(330) |
(3,131) |
(582) |
(659) |
- |
||
Discontinued operations |
- |
- |
- |
- |
- |
||
Net income (normalised) |
33,979 |
62,800 |
113,680 |
40,731 |
268,901 |
||
Net income (reported) |
28,487 |
57,766 |
110,579 |
39,707 |
267,421 |
||
Basic average number of shares outstanding (m) |
32 |
65 |
96 |
118 |
129 |
||
EPS - basic normalised (p) |
|
|
105.4 |
96.6 |
118.4 |
34.5 |
208.7 |
EPS - diluted normalised (p) |
|
|
103.8 |
95.9 |
113.6 |
33.7 |
207.3 |
EPS - basic reported (p) |
|
|
88.4 |
88.9 |
115.1 |
33.6 |
207.5 |
Dividend (p) |
- |
- |
- |
- |
- |
||
Revenue growth (%) |
97.1 |
63.8 |
(57.0) |
455.3 |
|||
Gross Margin (%) |
100.0 |
100.0 |
100.0 |
100.0 |
100.0 |
||
Normalised Operating Margin |
89.8 |
91.4 |
93.3 |
79.7 |
94.9 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
116,716 |
242,629 |
572,658 |
669,379 |
879,392 |
Intangible Assets |
10,335 |
10,232 |
10,130 |
10,028 |
10,936 |
||
Tangible Assets |
152 |
229 |
209 |
1,760 |
1,368 |
||
Investments |
105,971 |
231,910 |
562,061 |
657,333 |
867,088 |
||
Investments in Associates |
258 |
258 |
258 |
258 |
- |
||
Current Assets |
|
|
25,419 |
61,481 |
51,498 |
41,857 |
164,377 |
Stocks |
- |
- |
- |
- |
- |
||
Debtors |
527 |
4,840 |
1,140 |
7,719 |
3,700 |
||
Cash & equivalents |
24,892 |
56,641 |
50,358 |
32,255 |
158,417 |
||
Restricted cash |
- |
- |
- |
1,883 |
2,260 |
||
Current Liabilities |
|
|
(1,548) |
(2,948) |
(4,959) |
(5,396) |
(9,990) |
Creditors |
(1,548) |
(2,948) |
(4,959) |
(5,038) |
(9,645) |
||
Tax and social security |
- |
- |
- |
- |
- |
||
Lease liabilities |
- |
- |
- |
(358) |
(345) |
||
Short term borrowings |
- |
- |
- |
- |
- |
||
Other (incl deferred consideration) |
- |
- |
- |
- |
- |
||
Long Term Liabilities |
|
|
(716) |
(651) |
(631) |
(46,222) |
(638) |
Long term borrowings |
- |
- |
- |
(44,636) |
393 |
||
Lease liabilities |
- |
- |
- |
(975) |
(669) |
||
Other long term liabilities |
(716) |
(651) |
(631) |
(611) |
(362) |
||
Net Assets |
|
|
139,871 |
300,511 |
618,566 |
659,618 |
1,033,141 |
Minority interests |
104 |
2,792 |
234 |
- |
- |
||
Shareholders' equity |
|
|
139,767 |
297,719 |
618,332 |
659,618 |
1,033,141 |
CASH FLOW |
|||||||
Op Cash Flow before WC and tax |
33,712 |
67,557 |
112,835 |
41,961 |
274,708 |
||
Revaluation of investments held at fair value through P&L |
(35,744) |
(66,603) |
(114,715) |
(40,755) |
(276,307) |
||
Working capital |
(42,306) |
(62,249) |
(212,927) |
(61,750) |
74,684 |
||
Exceptional & other |
(438) |
(74) |
97 |
(17) |
68 |
||
Tax |
28 |
(107) |
(32) |
(3) |
(2) |
||
Net operating cash flow |
|
|
(44,748) |
(61,476) |
(214,742) |
(60,564) |
73,151 |
Capex |
(166) |
(155) |
(58) |
(368) |
(143) |
||
Acquisitions/disposals |
- |
- |
- |
- |
(650) |
||
Equity financing |
69,665 |
95,086 |
207,496 |
292 |
104,285 |
||
Dividends |
- |
- |
- |
- |
- |
||
Other |
- |
(49) |
- |
- |
- |
||
Net Cash Flow |
24,751 |
33,406 |
(7,304) |
(60,640) |
176,643 |
||
Opening net debt/(cash) |
|
|
0 |
(24,892) |
(56,641) |
(50,358) |
12,381 |
FX |
221 |
(1,530) |
1,481 |
1,234 |
(3,348) |
||
Other non-cash movements |
(80) |
(127) |
(460) |
(3,333) |
(2,104) |
||
Closing net debt/(cash) |
|
|
(24,892) |
(56,641) |
(50,358) |
12,381 |
(158,810) |
Closing net debt/(cash) (inc restricted cash) |
|
(24,892) |
(56,641) |
(50,358) |
10,498 |
(160,470) |
|
Source: Company accounts, Edison Investment Research
|
|
Research: Investment Companies
The COVID-19 pandemic has been tough on Brazil but OCN has weathered it well with a respectable 5.1% ROE in 2020 and maintained its 70c (4.3%) dividend. Business volumes fell in Wilson Sons (WSON), its Brazilian maritime services company, but prices firmed up and allowed WSON to post a 4.3% ROE. OCN’s international investment portfolio (OWIL) had a good year in 2020 with favourable if choppy markets. Business is now picking up in WSON’s key container terminals and tugboat business and a recovery seems underway. We forecast OCN’s PBT to rise by 44% in FY21 and by 20% in FY22 as business recovers to normal. OCN is currently trading on a 35% discount to look-through value despite having risen 27% since 1 April. Its stake in listed WSON alone is worth 99% of its market cap.
Get access to the very latest content matched to your personal investment style.
