Venture Capital
Reinvented.
Draper Esprit plc Annual Report
Year ended 31 March 2019
Registration number 09799594
The future of tech,
made in Europe.
Draper Esprit is one of the most active venture capital firms
in Europe, investing in high growth technology companies
with global ambitions.
We believe the best entrepreneurs in Europe can build the
businesses of the future. We fuel their growth with long-term
capital, access to international networks and decades of
experience building businesses.
We are the European arm of the Draper Network, a global
community of 22 independent funds. We have collectively backed
businesses such as Baidu, Space X, Tesla, Cambridge Silicon Radio,
and Lovefilm.
In 2016, we reinvented the traditional venture capital model by going
public. It allows us to provide entrepreneurs with a more flexible
approach to funding, to back the best teams for longer, and give
investors access to private technology companies.
In this report
Strategic Report
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Performance highlights 2019
Chairman’s Introduction
CEO’s Statement
Case Study — Graphcore
Our pools of capital
Our Portfolio
The investment opportunity
What’s in a share?
Our investment strategy
Supporting companies for growth
Case Study — Trustpilot
Earlybird × Draper Esprit
Seed fund strategy
Emerging Trends
Case Study — Ravenpack
Activity in the year
Portfolio Review
Portfolio Review investments
Core Portfolio companies
Financial Review
Principal risks
Governance
46
48
52
54
57
59
Board of Directors
Chairman’s Corporate Governance Overview
Audit Committee Report
Remuneration and Nomination Committee Report
Directors’ Report
Directors’ Responsibilities Statement
Financials
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68
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Independent Auditors’ Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Company Statement of Financial Position
Company Statement of Changes in Equity
Notes to the Company Financial Statements
Directors, Secretary and Advisers
Notice of Annual General Meeting
Glossary(cid:98)
The Strategic Report comprising the inside cover to page 43 has been
approved by the Board and signed on its behalf by(cid:98)
(cid:54). (cid:48). Chapman(cid:98)
4 June 2019
Welcome
Annual Report 2019
“Technology is playing an increasingly significant
role in our daily lives. I(cid:98)am immensely proud
of the role that Draper Esprit is able to play
in helping entrepreneurs who have the vision,
passion, and creativity to deliver this future.”
Karen Slatford
Non-Executive Chair
Performance highlights 2019
Please note that some of the below measures are Alternative Performance Measures (“APMs”).
Please see note 28 to the consolidated financial statements for further details.
£111.2m
524p
Profit after tax of £111.2 million
(2018: £60.9 million)
NAV per share increased by 26% to
524.0 pence (2018: 416.0 pence)
£594.0m
Gross Portfolio value increased by
144% to £594.0 million (2018: 116%
increase to £243.5 million).
£226.4m
Invested £226.4 million (2018:
£71.5(cid:98)million) by the Group,
including £106.2 million via
Earlybird. In addition, a further
£35.1 million (2018: £24.8 million)
was invested by EIS/VCT
£618.6m
Net Assets including goodwill
of £618.6 million (2018:
£300.5 million)
£150.0m+
Available investment resources to
deploy across plc (existing cash and
£50.0 million debt) and EIS and VCT
funds
58%
Gross Portfolio fair value increased
by 58% in the 12-month period
(2018: 66%)
£16.0m
Cash realisations of £16.0 million
(2018: £15.9 million). A further
£15.3 million was realised post-
period end
£215.0m
Additional capital raised of
£215.0(cid:98)million (£207.6 million net)
by plc and £64.0 million across EIS
and VCT funds) (31(cid:98)March 2018:
Plc £95.3 million net/ EIS/VCT
£55.0 million)
$1.6bn
Total raised by the core portfolio in
the period
<1% of NAV
Operating costs are less than 1% of year end NAV
Operational highlights
- The Company has invested in 21 new (including 9 via Earlybird VI)
and 12 existing portfolio companies*
- The Group has invested £5.3 million in seed funds (and made
further commitments of £24.0 million in 13 new seed funds
invested over 5(cid:98)years)
- The value of the Core Portfolio Companies has increased by 143%
to £415.3 million
*Reporting threshold - companies with a NAV of £1.0 million or more.
Summary
In June 2016, Draper Esprit listed on AIM (LSE: GROW), operated by
the London Stock Exchange, and Euronext Growth Dublin, in order
to bring technology entrepreneurs long-term, patient capital to build
the global businesses of the future. Since then, we have scaled up
our capital base and resources, invested in five unicorns (companies
worth over $1.0 billion), and returned over £81.6 million (including
£15.3 million post period end) of cash to the balance sheet.
FY2019 was another successful year for the Group. We generated
strong returns, and the fair value of the Company’s Gross Portfolio
has increased by 58% since 2018. In addition, the Company signed a
strategic partnership with Earlybird Digital West to share resources,
talent, and dealflow opportunities, particularly in the German
speaking market.
Market environment
FY2019 was a year dominated by global politics and increasing
uncertainty across the world. However, venture capital markets
in Europe have remained strong and in the past year the number
of companies in Europe that gained growth-funding (funding of
£5.0(cid:98)million or above) increased by c.22.4%.
Meanwhile, the global trend of companies staying private for longer
has continued. Funds have had to adapt to this new reality, and we
have seen the entrance of new pre-IPO tech funds, which sit later in
the company lifecycle. Appetite to invest in technology companies
at a later stage has not been tempered; Merian Global Investors
launched their first fund for unquoted companies, meanwhile Baillie
Gifford’s launched a new pre-IPO fund, Schiehallion. As the market
has scaled, we have scaled the number of investments made in the
period.
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draperesprit.com
Chairman’s Introduction
Annual Report 2019
Chairman’s Introduction
we work with, in line with the strategy we
outlined at our 2016 IPO. This has enabled
the technology entrepreneurs in our portfolio
to access the capital they need to grow
their businesses, while simultaneously giving
our investors exposure to exciting early and
growth-stage technology companies.
Our own business has evolved significantly
over the course of the last year. We have
further scaled the business through
investment and acquisition and entered
a strategic partnership with Earlybird
Digital West (“Earlybird”), with whom
we share dealflow, investment resources,
and expertise to co-invest including in
the German speaking market. In parallel,
we have grown our own team and
extended our market reach through this
partnership. We were also able to deliver two
successful fundraisings during the period,
strengthening our commitment to invest in
the very best technology companies across
Europe. We are grateful for the ongoing
support of our shareholders and welcome
new investors to our register.
Our investments in FY19 spanned a
number of sectors and geographies, from
a Finnish microsatellite company and a
Dublin-based travel software business, to
a London-headquartered fintech Unicorn
and a Cambridge-based surgical guidance
company. All have big ambitions and a clear
focus with the energy and dynamism needed
to deliver on their growth ambitions.
Our success this year was driven by the
teams who run our portfolio companies
and the excellence of our people. Therefore,
on behalf of the Board, I would like to
thank all of them for their contribution and
commitment to building the very best early
and growth-stage technology companies
Europe has to offer.
The European venture capital market
continues to gather strength and winning
firms are beginning to emerge. As one of
Europe’s largest venture capital firms in
terms of capital deployment, we are at the
vanguard of this movement. In addition,
with the continued support of our team,
Board colleagues, shareholders, advisers,
and our wider network of contacts, I am very
confident that Draper Esprit can build on
our impressive 2019 performance in the
years ahead.
Karen Slatford(cid:98)
Non-Executive Chair
See more at:
draperesprit.com
I am pleased to be able to introduce our
third annual report as a listed company,
following our listing on the AIM and
Euronext Growth markets in 2016.
Once again, we have exceeded our targeted
portfolio return of 20% per annum while
investing in the future of our business and
helping our portfolio companies push the
boundaries of what is possible.
Technology is playing an increasingly
significant role in our daily lives. I am
immensely proud of the role that Draper
Esprit is able to play in helping entrepreneurs
who have the vision, passion, and creativity
to deliver this future across our four key
subsectors; enterprise, digital health
& wellness, hardware & deeptech and
consumer technology.
During the period, we continued to provide
long-term, patient capital to the businesses
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3
CEO’s Statement
Annual Report 2019
CEO’s Statement
Overview
The year ended 31 March 2019 was a period
of significant development for Draper Esprit.
We continue to deliver on our strategy
of providing early and growth-stage
technology companies with the capital,
international networks, and hands-on
support they need in order to achieve their
global growth ambitions. Meanwhile, we
have considerably increased the scale and
breadth of our own business.
During the year, we undertook two
successful fundraisings, signed a strategic
partnership with Earlybird Digital West, and
invested £226.4 million in new and existing
companies, including £106.2m through our
strategic fund acquisition and strategic
partnership with Earlybird, and a further
£35.1 million from EIS and VCT, cementing
our standing as one of Europe’s largest VCs.
Our mission is to empower Europe to invent
the future, and the progress we have made
towards achieving this aim is reflected in the
growth across our portfolio, our strong
financial performance for the period,
exciting new investments and multiple exits.
We remain passionate about democratising
entrepreneurship and the twelve months
ended 31 March 2019 have seen us deliver
growth and scale in our portfolio, as well as
our own business, that will drive long-term
and sustainable returns for our shareholders.
Operating review
The strong momentum generated by the
Company in 2018 has continued into 2019
with further progress made across all areas
of the business.
The pace at which new technologies are
disrupting, shaping and improving the world
around us shows no signs of relenting with
developments around machine learning,
artificial intelligence, mobility, and
blockchain opening up exciting new
possibilities across our areas of focus in
enterprise, digital health, hardware &
deeptech, and consumer technology.
At the same time, we continue to invest
in high quality companies, which fulfill our
strict investment criteria; we met thousands
of businesses over the course of the year,
but only the very best met these criteria and
secured investment from us. Similarly, as the
private capital markets continue to evolve,
with greater funding opportunities available
for companies to stay private for longer, we
remain focused on price discipline.
Over the course of the 2019 financial year,
we scaled our investments in line with the
opportunities presented. The plc invested
£89.0 million into new and existing portfolio
companies, £5.3 million invested in fund of
funds vehicles, with a further £25.9 million
via the acquisition of DFJ Europe X,
increasing our stakes in existing portfolio
companies, and a further £35.8 million
invested via Earlybird. We also furthered our
relationship with Earlybird, acquiring
underlying holdings in Earlybird IV and
Earlybird Digital East for £70.4 million.
During the year, we generated cash of
£16.0(cid:98)million through exits including
amounts held in escrow (with a further
£15.3(cid:98)million gross post period end). We
once again exceeded our core strategic aim
of targeting a portfolio return of 20% per
annum, with 58% fair value growth in the
portfolio across the period.
We achieved this with costs of less than 1%
of year end NAV.
Successful exits
During the year, the Company announced
two disposals, with one further exit post the
period end.
In April 2018, we announced the sale of our
portfolio company Tails.com, the direct-to-
consumer, tailor-made dog nutrition
business to Purina Petcare, a subsidiary of
Nestlé SA. The transaction was executed at
a valuation supportive of NAV and
represented an attractive return for Draper
Esprit.
In February 2019, we sold our holding in
Graze, the UK’s leading healthy snacking
brand, as part of its acquisition by Unilever
plc, generating an IRR of 19%.
draperesprit.com
A substantial year
of change and
progress
“The strong
momentum
generated by the
Company in 2018
has continued into
2019, with further
progress made
across all areas of
the business.”
Simon Cook
CEO
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CEO’s Statement
Annual Report 2019
£16.0m
£226.4m
Cash realisations with further £15.3m
realisations post period end (2018: £15.9m)
Cash invested in next generation companies
(2018: £71.5m) (£120.2m ex. Earlybird)
£215.0m
Additional capital raised by the plc
Post period end, we also announced a
partial disposal of our share in TransferWise,
the international money transfer platform,
following its successful $292.0 million share
sale which values the business at $3.5(cid:98)billion.
Having originally acquired a stake in
TransferWise as part of the acquisition
of Seedcamp Funds I and II, which were
acquired for £17.9 million in October 2017, we
took the opportunity in April 2019 to sell
down part of our stake while retaining an
ongoing investment in the business.
Following this partial sale, Draper Esprit will
have generated cash realisations of £18.1
million from TransferWise and three other
companies from the Seedcamp portfolio,
exceeding the original £17.9 million initial
investment for the portfolio in October 2017.
The remaining stake in Seedcamp I and II are
also currently valued at above the
£17.9(cid:98)million original cost.
This transaction can be seen as part of an
active secondary market developing within a
maturing European ecosystem.
In addition, Grapeshot, part of the EIS
portfolio, was sold to Oracle in April. Since
the IPO, we have exited 18 companies,
realising over £81.6 million in cash (including
£15.3(cid:98)million for Transferwise post period-
end).
Building scale to invest in high-growth
technology companies
As companies are able to access larger pools
of capital in order to achieve their growth
ambitions, firms are remaining private for
longer.
However, investment into technology on
a per capita basis is over 165% higher in the
US and 79% higher in China than in Europe.
Europe is still under-ventured and, if
entrepreneurs from Europe are to compete
on an international level, they need to
access funds with the ability to back their
businesses over the long term.
In order to maintain continued access to the
best dealflow across Europe, alongside our
ambition to build a platform of scale, we
entered into a Strategic Partnership
Agreement with Earlybird Digital West
(“Earlybird”) with a view to sharing dealflow,
investment resources, and expertise.
This partnership has already delivered
success and, having taken a significant
stake in Earlybird’s VI fund as part of the
original agreement, we further strengthened
our partnership in January 2019 when we
acquired interests in two of Earlybird’s funds,
EB IV and DEF, increasing the Group’s
underlying position within the German-
speaking market and our broader position
with fast-growing European companies.
With over 100 high growth companies across
Europe in our respective portfolios, the
Draper Esprit and Earlybird teams perfectly
complement one another with our existing
offices in London, Dublin, Paris, and
Cambridge, working closely with Earlybird’s
offices in Berlin, Munich, Cologne, and
Istanbul to create one of the most active
venture capital partnerships in Europe.
To fund our continued growth, we
successfully raised £115.0 million and £100.0
million in June 2018 and February 2019
respectively, from both new and existing
shareholders. These placings broadened our
shareholder base and were accompanied by
a further £64.0 million raised from across
Draper Esprit’s EIS and VCT funds.
The proceeds from the placings have
been used to fund our primary strategy of
direct investing as well as the acquisitions of
the Earlybird funds. More broadly, our
ambition is to grow NAV organically through
investment and realisations to over £1.0
billion, utilising selective secondary
acquisitions to generate scale and enhance
returns.
New investments in portfolio
businesses
During the period, we invested in a range
of innovative and high growth technology
businesses, which, we believe, have the
potential to become global leaders in
their respective fields. These included the
following new core holdings in:
- £25.4 million in Peak Games, the leading
mobile games company based in Turkey.
The plc acquired the underlying holding in
the company via its relationship with
Earlybird in February 2019. Peak Games
is one of the top 10 mobile games
companies in the USA, with over 275
million users.
- £14.5 million in Smava, the consumer loans
portal based in Germany, striving to make
loans transparent, fair, and affordable. The
plc acquired the underlying holding in the
company via its relationship with Earlybird
in February 2019. The company has raised
$135 million to date and has over 300,000
customers who have made transactions of
over (cid:252)3(cid:98)billion on the platform.
- £13.3 million in UiPath, the comprehensive
robotic software solution for IT-based
process automation. The plc acquired the
underlying holding in the company via its
relationship with Earlybird in February 2019
based on a value of UiPath of $3.0 billion.
Post period end, UiPath raised a further
$568.0 million at a post-money valuation
of $7.0 billion.
- £12.4 million in FINALCAD, the leading
building, infrastructure and construction
mobile software platform, bringing the
total funds raised by FINALCAD to $60m to
date, with the proceeds being used
to extend the product platform into the
energy, operations, and maintenance
sectors, increase headcount globally, and
further invest in R&D.
- £9.9 million in Aircall, a leading provider of
cloud-based call centre software bringing
the total funds raised by Aircall to
$40.5(cid:98)million to date, with the proceeds
from the round being used to accelerate
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5
CEO’s Statement
Annual Report 2019
CEO’s Statement
the buildout of Aircall’s cloud-based phone
system.
In addition, £49.3 million has been invested
into a further 28 new emerging portfolio
companies including 6 via Earlybird
VI.* These include Iceye, the Finnish
microsatellite company, Revolut, the
London-headquartered fintech company,
Fluidic Analytics, the Cambridge-based
protein detection platform with research,
medical and consumer applications, N26,
the digital mobile bank, Onefootball, the
football app, and Hadean, the London-
based deep tech company building a cloud-
first operating system.
Seed fund strategy
As we have consistently outlined, our seed
fund strategy gives us access to the best
early stage deals across the sectors and
geographies in which we operate while also
ensuring that the early stage market in
Europe is well seeded with capital.
During the period, Draper Esprit plc has
continued to expand its fund of funds
strategy and has invested £5.3 million in
top seed funds. This £5.3 million investment
gives strategic seed stakes of an average
of £30,000 in 150 companies, enhancing
future dealflow as the best will seek growth
capital. We have now invested in 17 seed
funds, having committed £34.0 million in
total, which will be invested by the funds
across a broad range of subsectors within
the European technology market over the
next five years.
Fund secondaries
Secondary activity has always been central
to the entrepreneurs we support given the
role it plays in driving value and creating
liquidity in the market, allowing founders to
scale their businesses for the long term. By
investing in primary and secondary deals,
we are able to provide entrepreneurs with
broader capital solutions to allow them to
build their companies while finding high
quality opportunities for our shareholders at
attractive valuations.
During the period, we invested £70.4 million
in Earlybird Fund IV and Digital East, where
we gained underlying holdings in companies
such as UiPath, Smava, Peak Games, B2X,
and Socialbakers.
£50.0 million in cash, £50.0 million debt,
and £50.0 million from our co-investment
funds, EIS and VCT, to invest in new, exciting
investment opportunities and continue
backing the winners in our portfolio.
As we continue to source the best deals
via the provision of growth capital to
entrepreneurs, we have been able to deliver
both consistent returns for investors and
increased scale across our business.
Our relationship with Earlybird continues
to strengthen our position in the German
speaking market, providing us with exciting
opportunities to invest in some of Europe’s
brightest tech start-ups, while the ongoing
revenue growth within our portfolio,
combined with attractive exits and a healthy
pipeline of future investment opportunities,
means we are well placed to build on our
strong track record of delivery to date.
I would also like to place on record my
thanks to the management teams of our
portfolio companies who remain central to
our whole business model.
We enter the new financial year well
positioned to capitalise further on
opportunities in 2019/20 and remain focused
on executing our strategy driving long-term,
sustainable returns for our shareholders.
* Reporting threshold – companies with a NAV of
£1.0(cid:98)million or more.
In addition, we acquired DFJ X for £25.9
million, increasing our stakes in existing core
portfolio companies including Trustpilot, M-
Files, Sportspursuit, and Lyst.
Follow on investments and
portfolio update
Our core portfolio companies have
performed strongly, driven by revenue
growth and from financing rounds at higher
valuations. As the European venture capital
market matures, the ability for companies to
stay private for longer, by raising significant
capital in later rounds, is generating global
companies that can compete with the very
best internationally. Our growing scale and
patient capital model means we can back
the companies we invest in for longer.
Graphcore and Trustpilot are two particularly
good examples of this model in action, with
Draper Esprit working closely with both
businesses since our original investment.
These firms, and others such as Ravenpack
and Perkbox, have been in our portfolio
from an early stage. We have continued to
support their development via participation
in later funding rounds, as well as hands-
on support to help them to scale in their
respective markets.
Building on our momentum – outlook
and summary
We have entered the new financial year
in a strong position and have built on this
positive momentum with strong progress
within the portfolio, including the recent
equity raises by Perkbox, UiPath, and the
secondary sale of Transferwise.
In May 2019, we have secured a new
revolving credit facility, provided by Silicon
Valley Bank (“SVB”) and Investec, of £50.0
million over a 3 year term which will provide
us with greater financing flexibility. We enter
the new financial year with over £150.0
million investment capacity, including over
6
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Case Study — Graphcore
Annual Report 2019
Advancing machine intelligence
Case Study
Graphcore
£13.7m
Total invested
(with a further
£0.8m from EIS
funds).
From autonomous vehicles, personalised medicine,
intelligent mobile devices, to collaborative robots—
machine intelligence applications have the ability to
impact a vast number of industries. However, training
complex deep neural networks takes far too long,
and most of the architecture is outdated. Many new
machine-learning approaches need 100x to 1000x more
compute power. To achieve this level of performance
requires a new system solution that can scale to the
level of compute required.
To solve this problem, Graphcore have developed a
completely new kind of processor and software specifically
designed for machine intelligence. Their IPU (Intelligence
Processing Unit) and IPU-Pod enable massive machine
intelligence training tasks that can support huge
deployments with thousands of users. In 2018, the company
generated its first revenues, just two years after the
company was founded.
We back companies as they grow, giving shareholders
access to high quality opportunities. Over the past year, we
participated in their $200.0 million funding round, investing
a further $12.0 million in the company, at a $1.7 billion
valuation.
At Draper Esprit, we have a long history of backing
hardware and semiconductor businesses. In fact, we knew
the founders of Graphcore when we backed their former
company Icera (sold to Nvidia) and then XMOS, from which
Graphcore was a spinout. We have backed Graphcore from
seed stage and have since partnered with them as they
achieved unicorn status.
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7
Strategic Report
Annual Report 2019
“Our investments in the year
spanned a number of sectors
and geographies. All have big
ambitions and a clear focus
with the energy and dynamism
needed to deliver on their
growth ambitions.”
Karen Slatford(cid:98)
Non-Executive Chairman
8
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Strategic Report
Annual Report 2019
Strategic
Report
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9
Our investment platform
Annual Report 2019
Our pools of capital
A multiplatform strategy
In the past 3 years, we have scaled our platform to
enable the plc to access the best dealflow across
Europe. Our co-investment partners bring third
party capital, enabling the plc to build a more
material stake in companies, while also increasing
our reach into the best companies. Meanwhile, the
management and performance fees received from
the tax-efficient funds offset management costs for
plc shareholders.
The plc balance sheet forms the core investment
vehicle for the Group. 30% of the Group investment
capital goes towards smaller and early stage
investments. In the UK, Draper Esprit EIS and Draper
Esprit VCT invest alongside the plc. In Europe, these
deals are done either directly through or alongside
Earlybird Digital West via our strategic partnership.
70% of the deals we do are invested in larger and
growth stage deals (either follow on from our
emerging portfolio or new companies), these deals
are done, predominantly, through the plc balance
sheet. As the European market matures, there
is an increasing market for these growth deals.
The permanent capital model of a listed vehicle
also provides additional flexibility to build stakes
in the top performing investments over time as
opportunities arise.
Plc co-investment structure
UK INVESTMENTS
EUROPEAN INVESTMENTS
FICIENT C O -I N
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s p r i t EIS
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SERIES A
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Draper Esprit Plc
SERIES B
Plc only
SERIES C+
(growth deals)
Draper Esprit VCT
In 2016, Draper Esprit acquired a 30.77%
stake in leading VCT manager Elderstreet
Holdings Limited, which manages Draper
Esprit VCT plc (LSE:EDV). At the last publicly
released NAV 30 September 2018, it had
AUM in excess of £41.7 million. Since then, it
has closed a further £7.0 million fund raising.
The funds co-invest with the plc in UK deals.
Draper Esprit EIS
The Company owns 70% of Encore Ventures,
an FCA-regulated management vehicle.
With six co-investment funds, it has raised
over £100.0 million to date.
The Encore Funds have been independently
reviewed for five years in a row as the
highest ranked growth EIS fund. They
scored 89/100 in the Tax Efficient Review,
the highest ranked growth EIS fund as of
April 2019. The funds co-invest with the
plc in UK deals.
Earlybird Digital West
In July 2018, Draper Esprit announced a
strategic partnership with Earlybird Digital
West to share dealflow and resources to co-
invest in high growth technology companies
across Europe, in particular the German-
speaking market. As a part of this, Draper
Esprit has taken a 50% stake in Earlybird’s
latest fund Digital West Early Stage Fund VI
(“Earlybird Fund VI”), initial investment of
€18.0 million (£16.0 million) is being followed
by further commitments of €17.0 million
(£15.0 million) a year.
For more information on the partnership,
please see page 18.
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Our Portfolio
Annual Report 2019
Our Portfolio
We invest across four sectors in high growth European technology companies*:
Consumer Technology
New consumer-facing
products, innovative business
models, and proven execution
capabilities that bring
exceptional capabilities
enabled by technology.
Enterprise Technology
The software infrastructure,
applications and services
that make enterprises more
productive, cost-efficient, and
smoother to run.
Hardware and Deeptech
The deeper technologies that will
spark advances in computing,
consumer electronics and other
industries.
Digital Health and Wellness
Using digital and genomic
technologies to create new
products and services for the
health and wellness market.
draperesprit.com
*Companies represented here represent over £1.0 million of NAV.
11
The investment opportunity
Annual Report 2019
The investment opportunity
“We find the most
promising private
technology companies
in Europe, with the
potential to become
global leaders.”
The investment opportunity: access high
growth private technology companies
We are guided by years of experience in scaling high-growth technology companies.
We invest incrementally, with a long-term outlook, to build value over time.
Invest in Europe’s most ambitious
tech companies
We find the most promising private
technology companies in Europe, with the
potential to become global leaders. We
meet thousands of companies a year and
invest in approximately 20 a year, including
follow-on. Our brand, access to the Draper
Venture Network (see page 16), and seed
fund strategy (see page 20), mean we have
a large pipeline of deals in the ecosystem
to ensure we can take a market wide view
before investing. The Group’s investment
team originate new attractive investments
from key geographies across Europe while
remaining focused on price discipline.
Sustainable investment in growing
companies
As part of our strategy for sustainable
growth, we invest small amounts early, and
reserve more capital for later stage rounds.
This type of investment is not a “win or lose”
game: we invest incrementally, building
value over time.
The portfolio we have is diversified across
sectors and geographies, and our core
portfolio holdings have conservative
valuations based on forecast revenues.
Experience drives our success
Our team is highly experienced: we have
been investing in technology for over 20
years. We take a seat on the board of
our portfolio companies, with significant
investor rights. Many of the team also
offer specific domain expertise and have
experience as technology entrepreneurs,
which aids our decision-making and ability
to give the companies the right connections
and advice.
As a Group we have a track record of
delivering 20% annual portfolio returns,
driven by the revenue growth of the
underlying portfolio companies. As a public
company, we continue to deliver these
returns through the cycle. To date, we
have exceeded this target with strategic
acquisitions of portfolio companies and by
increasing our stakes in our core holdings.
12
draperesprit.com
What’s in a share?
Annual Report 2019
What’s in a share?
~8%
~28%
~64%
“A share in Draper Esprit
gives investors access
to Europe’s technology
innovators, years of
investor expertise,
and a sustainable
investment model.”
As our companies grow, we provide follow-on capital to
build our stakes. 70% of Gross Portfolio Value and 64% of
our Net Asset Value is distributed in the top 15 companies,
representing our core holdings. By doubling down on the
winners in our portfolio, we manage the risk exposure of
the portfolio and generate improved upside.
Equally, the more flexible approach to capital enables
the companies themselves to grow over a longer period,
creating value to the benefit of our shareholders. When the
companies exit, the cash is returned to the balance sheet,
so we can re-invest it in new opportunities.
~64%
~28%
~8%
Core Holdings
The top 15 companies in the
portfolio representing 70% of
Gross Portfolio Value, which
is 64% of the Net Asset Value
(NAV). Draper Esprit provides
follow-on capital, developing
a more significant stake in the
business once it has proven its
business model.
Emerging Companies
The Group invests in
entrepreneurial and fast growing
tech businesses.
Cash
When companies exit, the
cash generated is returned to
the balance sheet and re-
invested into new opportunities
in the market.
Exits
Businesses exit either to a
strategic buyer, by going public
through IPO, or increasingly via
the private secondary market.
Benefits of this approach
Gain access to private technology
companies
As companies stay private for longer, it is
getting harder for investors to access high
growth technology companies in the public
markets. Our listed evergreen vehicle provides
investors with ongoing liquidity that private
limited partnership models do not allow.
It is not a blind pool
Investors can see the assets upfront and
gain exposure to a range of companies
across a range of maturities.
Build stakes
The permanent capital model of a listed
vehicle provides the flexibility to build stakes
in the top performing investments over time,
as opportunities arise.
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13
Our investment strategy
Annual Report 2019
“We source the best deals from thousands
of companies and provide them with the
capital, expertise and networks to fuel
their growth.”
Our investment strategy
How we back businesses
We invest in growing technology companies from across Europe. We source the best deals from thousands of
companies and provide them with the capital, expertise and networks to fuel their growth.
Growth investing from series A onwards is our core business, with the majority of our capital allocated to later stage investment rounds. We
recognise the needs of the entrepreneur and are dynamic in finding the best capital solutions to fit their requirements.
Series A
Businesses scale up and raise their series A
usually at the point that companies have
found product-market fit and need to scale
their operations quickly.
Series B, C & onwards
As businesses look to expand internationally
and dominate globally, we invest as part of
the Series B+ part of funding cycle. In order
that shareholders capture the best value,
we increasingly invest later stage in growth
rounds.
Secondaries
Whether it is helping companies find liquidity
for their early backers, or a fund that has
timed out looking to sell a whole portfolio,
we look at the best opportunities in the
market. We look for the same characteristics
as our primary investment operations:
ambitious tech businesses looking to grow.
Follow on
We can back businesses at all stages of
their growth until exit - often right up to
acquisition or IPO.
Seed fund of funds
While we do not make direct seed
investments, we support companies from
their inception. By partnering with funds
from across Europe investing in earlier stage
businesses, we can support their businesses
as they scale.
14
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Our investment strategy
Annual Report 2019
The investment process
Together with Earlybird, we screen thousands of businesses every year
in order to find the best opportunities.
Screen thousands
Across our investment platform, we look at thousands of
businesses a year – searching for the brightest opportunities, and
the clearest visions. We do not start from nothing: our fund of
funds strategy helps us spot the best ideas to back.
Meet 1,000+
We meet around half of the businesses we screen,
getting to know the teams, their ways of thinking and
their ambitions.
Invest in 15-30
We make 15-30 investments a year, including
follow on investments, bringing the
most ambitious tech companies into our portfolio.
Facilitate growth and
build stakes
We put cash in for rapid
scale-ups, to help bring a team’s
vision to life. We
make introductions, and
fuel global ambitions.
Exit
We are not confined to five-year
cycles. Whether to a strategic
buyer or as an IPO, companies
exit when they reach maturity
or when they have established
a strategic position in their
ecosystem.
Our investment criteria
We invest in high-growth technology companies
We look for high-growth companies with strong
technology products and business models,
experienced and visionary management teams
that have the ability to be a category leader. They
operate in new markets, with serious potential for
global expansion. Significantly, they have strong
gross margins and capital-efficient business
models to enable sustainable growth and future
profitability. We look for businesses that will be
attractive candidates for eventual acquisition or
IPO, with valuations from US$50.0 million to US$1.0
billion and beyond.
We invest in companies as they grow
Companies are staying private for longer – so public
market investors have reduced access to the value
generated by early-stage growth companies.
Private equity and mutual funds are becoming
an increasingly attractive option for late-stage
funding, over the time-consuming and costly
process of going public. As many start-ups are
prioritising growth over profits in an effort to gain
market share, they may not prosper in a public
market environment which values profitability.
Draper Esprit enables investors to access such
companies, which are increasingly taking longer to
go public. By investing at the high-growth phase
of a company’s lifecycle, before companies go for
acquisition or IPO, we give our investors access to
the value this phase generated.
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15
Supporting companies for growth
Annual Report 2019
“To enable growth, we actively
support the businesses we back,
take a board seat and provide
hands on advice through our
global networks and decades of
experiences building businesses.”
Supporting companies for growth
Global firepower
Long-term capital
Hands on support
We are the only growth focused technology
venture capital firm listed on the stock
market. As we are no longer tied to a 5+5-
year investment structure, we have the
flexibility to find the best opportunities for
entrepreneurs – and to back companies from
scale-up all the way to IPO or acquisition.
With a public balance sheet, we can take a
longer view, allowing investors to capture
value as companies reach their full potential.
When we invest, we offer a lot more than
money. We take a seat on the board of the
company, to offer support and guidance
as it grows and scales. This means we can
actively manage our investments and put
valuable experience to good use, right where
it matters.
We also run events and offer specific
training for portfolio companies: including
trend spotting, panel discussions, and
focused networking to help our companies
get ahead.
As the European arm of the Draper Venture
Network, we help companies with rapid and
international growth. Founded by Tim Draper,
the network reaches from Silicon Valley to
China, Brazil to Japan. The network allows us
to gather like-minded funds from around the
world to invest in the brightest companies. As
our recent success with Ledger demonstrates,
the network allows us to gather with like-
minded funds from around the world to invest
in the brightest companies.
The network helps us support companies as
they grow – providing the sort of international
introductions that can spark years of growth,
or put companies in touch with potential
acquirers.
It is also a chance to share expertise on
markets and hear from the world’s brightest
entrepreneurs and investors in the world. Each
year, we host our annual CEO Day in Silicon
Valley, where CEOs from across the globe
gather to gain fresh insight, speed date with
corporates and get a grasp of technology
trends shaping the globe.
16
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Case Study — Trustpilot
Annual Report 2019
Trustpilot offers a free and open review
platform, enabling people to make
informed buying decisions. Since 2007,
Trustpilot has built a market leading
business model, gathering 56 million
reviews of over 265,000 company
domains from 150+ countries.
We first invested in Trustpilot in 2013 but
have since doubled down on the team
through three subsequent follow-on rounds,
including secondary transactions. By
building a stake over time, we have both
enabled the company to grow over the
long term while also capturing value for our
shareholders.
We worked to expand the senior leadership
team, taking a seat on the board, and built
a solid financial foundation for the company
to scale. Our support continues. During this
year, we participated in a series E fundraise
of $55m to accelerate its leading position.
Founded to be a transparent and
collaborative platform, Trustpilot has
international expansion and growth of its
team on the horizon. We look forward to
continue working with the company as its
position solidifies within the global market.
Case Study
Trustpilot
£29.7m
Total invested
Building trust and ever-improving
experiences online
draperesprit.com
17
Earlybird × Draper Esprit
Annual Report 2019
×
Our Strategic Partnership with Earlybird:
scaling into the German speaking market
The last five years have seen a number of start-up hubs emerge or mature across Europe. The entrepreneurs no
longer need to move to Silicon Valley to access capital and build their businesses; it is now possible
to build the next unicorn from London, Berlin, Paris or Stockholm.
Our ambition is to support entrepreneurs building global businesses,
no matter where they base themselves across the continent. To
do that well, it requires local connections to build long lasting
relationships with entrepreneurs in the cities they live and work in.
Over the past decade, Germany has become an international hub
for entrepreneurship centred around Berlin and Munich. Last year,
Germany was the second largest destination for venture capital
funding in Europe, after the UK, with €4.9 billion invested in the
region in 2018.1
Partnerships are rare in our industry. However, at a time when China
is increasingly catching up with the US, Europe cannot afford to
stand still. According to CB Insights and KPMG’s latest report, the
Americas invested $102.0 billion in tech companies; Asia invested
$81.0 billion, while Europe invested $21.0 billion.(cid:283) Simply put, scale
matters and growth capital is less available to entrepreneurs in
Europe. That is not to say that the market is not growing; last year
we saw later stage investments grow by 16.7% in Europe;(cid:284) however,
it is to say that entrepreneurs need platforms of scale, and that
those who can offer this can be more competitive within the VC
market. Through this strategic partnership, we believe we can offer
our shareholders access to the very best companies in Europe.
“Annual Venture Capital Report 2018,” Dealroom
“Q4’18 Global Analysis of Venture Funding,” KPMG and CB Insights
“Draper Esprit research, Pitchbook.”
1
2
3
18
About Earlybird
Earlybird is a leading venture capital firm based in Berlin, Munich
and Istanbul. Earlybird has 23 investment professionals and
3 active funds:
- Digital West
- Digital East
- Health Tech
Earlybird has a strong track record of delivering results and
since 2004 have achieved 7 IPOs and 23 trade sales. We have
known the team at Earlybird now for over twenty years and have
complementary teams and focuses. Like the team here at Draper
Esprit, they have deep experience in investing in digital technology.
“Together, we have the
equivalent of a $1.3 billion
fund, one of the largest in
Europe, and a portfolio of
over 100 exciting European
tech businesses.”
draperesprit.com
Earlybird × Draper Esprit
Annual Report 2019
“Through this strategic
partnership, we believe
we can offer our
shareholders access
to the very best
companies in Europe.”
Joining forces as strategic partners
In July 2018, Draper Esprit signed a strategic partnership with Earlybird
Digital West to share dealflow, talent, and resources. When thinking of
a new partner, “fit” is everything. We focus on series A, B, and beyond.
The name is on the tin for Earlybird: they invest early: from seed to
series A. We invest from offices in the UK and Ireland. They, from Berlin,
Munich and Istanbul.
Powering up
Together, we have the equivalent of a $1.3 billion fund, one of the
largest in Europe, and a portfolio of over 100 exciting European tech
businesses. Together we deploy €200 million a year in Seed, Series A,
B and C technology companies. We collaborate on 15-20 new deals
together annually by combining our capital.
Our underlying holdings
The partnership with Earlybird not only gives Draper Esprit a
platform of further scale (particularly in the German- speaking
market), a larger pipeline of deals, and a larger pool of expertise,
it also gives Draper Esprit shareholders greater exposure to some of
Europe’s best companies. As European venture capital markets mature,
we have scaled our platform to ensure we provide our shareholders with
the best opportunities.
To date, we have invested £106.2(cid:98)million into Earlybird, valued at
£145.0(cid:98)million at balance sheet date.
Milestones of the partnership so far
July
2018
Feb
2019
March
2019
Announcement of the strategic partnership between
Earlybird Digital West & Draper Esprit.
As part of this, Draper Esprit committed €85.0 million
over five years to Earlybird Fund VI. Draper Esprit acquired
stakes in companies including Shapeshift, Everoad,
Movinga, Fraugster, Medidate, Xain & Crossengage.
Acquisition of stakes in 2007 Earlybird IV fund and
Earlybird Digital East.
Draper Esprit plc now has stakes in 19 new companies including
Smava, Peak Games, UiPath,
B2X, Nfon, Socialbakers.
Draper Esprit invest £4.3 million in N26 as part of the
strategic partnership with Earlybird Digital West.
Acquisition of stake in N26
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19
Seed fund strategy
Annual Report 2019
Seed fund strategy
In October 2017, we launched our seed fund of fund programme. Since then, we have invested in 17 seed funds
from across Europe, having committed £34.0 million, which will be invested over 5-10 years. Those funds already
have over 150 portfolio companies and have raised £1 billion in aggregate. This year we invested £5.3 million from
the plc.
The strategy is simple: by seeding the early stage ecosystem, we
can source the best companies for series A & B, pool expertise from
sector specific funds, and benefit from scouts based in every corner
of Europe. Whether hunting for a company about to change the way
we eat in France, how we manufacture products in Berlin, or the
next piece of hardware in Cambridge, they always have one eye on
the next trend.
In return, we ensure that the early stage market is well funded and
can help many of their companies scale up when they need later
stage funding to grow.
This is a long-term strategy but it is already baring fruit. Draper
Esprit invested in Apperio, a legal-tech business, and Fluidic
Analytics, both of which originated in the portfolio of our seed fund
IQ Capital, in August 2018.
Our seed fund program in numbers*
Fund Investments
17
£1bn
Aggregated Funds Size*
£61m on average
£97m
Invested by Seed Funds*
Across all Companies
£34m
Total Commitments
£5.5m called (16%)
150
Portfolio Companies*
Invested across all Funds
£835m
Raised by Fund Program*
Portfolio Companies
*Numbers at at January 2019
Portfolio companies of the seed funds by sector
3% 2% 1%
3%
3%
7%
9%
12%
15%
28%
17%
Enterprise Software
Hardware/IoT
Consumer Tech
Deep Tech
Health Tech
Fintech/Insurtech
Industry 4.0
Proptech
Food Tech
Blockchain
Gaming
Other
20
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Seed fund strategy
Annual Report 2019
“The strategy is simple: by seeding the
early stage ecosystem, we can source
the best companies for series A & B,
pool expertise from sector specific
funds and benefit from scouts based in
every corner of Europe.”
A M A R A N T H I N E
draperesprit.com
21
Emerging trends
Annual Report 2019
Emerging trends
The Draper Esprit investment team analyse the technology trends that will shape the industries of the future.
Understanding the fundamentals of new technologies, such as machine learning or blockchain, and their
commercial platforms, is critical to our investment decisions.
Each year, we make a number of investments into early stage companies at series A, from across diverse industries. These companies sit
in our emerging portfolio. As these companies grow, we can double down on them to become part of our core holdings. Here are a few
examples of new companies we backed this year:
Enabling online simulated worlds of
unprecedented scale
We are still using a technology stack, which
is, at its foundation, 40 years old. Thanks to
cloud development platforms, software is
increasingly able to scale across thousands
of servers. The apps on your phone, the
websites you browse, or the storage you use
online for photos can now be powered by
vast computer power, which used to cost
millions and was only available if you had
a supercomputer. However, the operating
systems used today were not designed for
the cloud.
Current architectures are built upon
outdated infrastructure and involve
clunky layers of middleware, and hours
of development time. The result is that
many complex applications struggle to
be built without high rates of failure and
unpredictability (large- scale simulations, for
example), or simply require more time and
manpower to manage (big data processing,
for instance).
In March 2019, we led a £7.2 million round in
Hadean, who are developing a cloud-first
operating system, with the goal of redefining
the technology stack for modern computing.
Hadean’s operating system enables
programmers to scale their code, treating
entire cloud-data centres as a single and
gigantic computer.
Their technology has already been used by
game studios, including CCP Games, the
creators of MMO Eve Online, to build the
largest online battle ever fought. Meanwhile,
the Francis Crick Institute is using it to simulate
large and complex models of protein-protein
interactions, researching novel binding sites for
tackling diseases like cancer.
Redefining modern satellites
Traditionally, satellites have been outdated,
titanic objects mostly in high earth orbit.
They are slow to react, taking days or even
weeks to adjust the position to see a specific
view of earth. Over time, microsatellites
have emerged as an alternative by
combining a constellation of satellites you
can achieve a higher quality of data at a
much lower cost. This data can then be used
to solve some of the toughest challenges in
maritime industry, disaster management,
insurance, finance, security and intelligence.
In May 2018, we invested in ICEYE, the first
satellite company in the world to have
successfully launched a SAR (Synthetic
Aperture Radar) satellite with a launch mass
of under 100kg. Their radar satellite has the
ability to see through cloud cover and can
work day or night, allowing for much more
reliable earth observation. The reliability of
this data is crucial to its commercialisation
and technical progress. We invested
alongside the Draper Venture Network
funds, including Draper Associates (based in
the US) and DNX (based in Japan).
DNA gives us clues about what is likely to
happen over a lifetime. Proteins and their
behaviours tell us what is actually happening
now. Proteins and their behaviours are crucial
to understanding how diseases develop,
identifying the ways that drugs interact
with their targets, and helping to match the
right treatment to the right patient at the
right time. To date, the emergence of deep
understanding of the biology underlying
disease and health in real time has been
hampered by the shortcomings of existing
tools for protein characterisation.
In November 2018, we invested in Fluidic
Analytics who have built a platform to give
insights into the way that proteins fold,
aggregate and interact by characterising
them in solution- precisely as they exist in the
body. These products have the potential to
help researchers, pharmaceutical companies
and patients gain more accurate diagnostics.
22
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Case Study — RavenPack
Annual Report 2019
Democratising big data in finance
£7.5m
Total invested
Case Study
Ravenpack
Financial services handle vast amounts
of data. They need reliable software
to analyse unstructured datasets from
social media, news wires, regulatory
filings and their own textual assets
to make sound investment decisions.
Combined with analytics including
sentiment scoring, RavenPack empowers
its clients with a better understanding
of global events and how markets might
react to them.
Over the past year, the company has
grown at pace. They now count over 70%
of the world’s leading hedge funds as their
customers, and have closed deals with
big hitters Citi Bank, CloudQuant, and
Wolfe Research. Priding itself on producing
clarity in emotional and unstable financial
environments, RavenPack is quickly
becoming the product of choice for financial
services.
We back our winners, and Ravenpack this
year moved from our emerging portfolio of
promising companies to a core holding. The
company is on track to achieve excellent
results, and we are excited to be a partner
with them as they continue to scale.
draperesprit.com
23
Activity in the year
Annual Report 2019
Activity in the year*
April
May
June
July
August
September
Deal Sourcing Strategy
Initial investments
Follow-on investments
Portfolio additions
Exits
Seed funds
Via Earlybird
*All companies listed represent investments of over £1.5 million.
**Partial sale of shares, remains a core holding.
24
draperesprit.com
Activity in the year
Annual Report 2019
£226.4 million investment in new and existing
companies from 1st April 2018 to 31st March 2019
£91.7m
Initial investments
(including £35.8m via
Earlybird)
£33.1m
Follow-on investments
£96.3m
Secondaries (including
£70.4m via Earlybird)
£16.0m*
Exits (plus £15.3 million
post period end)
£5.3m
Seed funds
October
November
December
January
February
March
Post
Period End
**
draperesprit.com
25
Portfolio Review
Annual Report 2019
Portfolio Review
Backing disruptive
technology
businesses across
Europe
65%
Approximate average gross
margin of core companies.
58%
Annual growth in
portfolio value.
Overview
This year has seen an increase in the
investment rate, taking advantage of
the opportunities in the market that are
afforded by our flexible model and strategic
co-operation with our partnership with
Earlybird. Our core portfolio companies
have performed strongly, driven by revenue
growth and from financing rounds.
At the year ended 31 March 2019, the fair
value of the Group’s Gross Portfolio had
increased to £594.0 million (2018: £243.5
million).
During the year, the Group has realised its
investment holdings in Graze and Tails.com
with £16.0 million (2018: £15.9 million) of
cash generated including amounts held in
escrow. The Group invested £226.4 million
in the year (2018: £71.5 million), with a
further £35.1 million co-invested from EIS/
VCT funds (2018: £24.8 million), into the
next generation of high-growth digital
technology companies as well as supporting
our existing portfolio companies.
The increase in gross fair value in the
period of £140.1 million (58%) is driven by
continued strong performance across the
portfolio with notable uplifts in the value of
the core portfolio companies, in particular
Graphcore, UiPath, Peak Games,
Trustpilot, Transferwise, and Smava.
At year-end, the portfolio held by the plc
including via Earlybird consists of significant
minority interests in 54* companies (2018:
31 companies). The fair value of the Gross
Portfolio is underpinned by 15 core holdings
(2018: 10), which account for approximately
70% (2018: 70%) of the total portfolio value,
with the remaining value spread across
emerging investee companies, which have
the potential to grow into the core holdings
of the future. The investments made in the
period and over the last number of years
have added strength and breadth to the
portfolio.
As we scale the business, the fair value of
the core portfolio holdings is increasing. New
investments in the year and realisations have
been reflected such that the core companies
now comprise of: Graphcore, Trustpilot,
Number of Companies —
split by sector
Hardware &
Deeptech
15%
Digital Health
& Wellness
15%
Enterprise
Tech
40%
Consumer
Tech
30%
Peak Games, UiPath, Lyst, TransferWise,
Smava, Perkbox, Ledger, M-Files, Ravenpack,
SportPursuit, Finalcad, Podpoint and Aircall.
This is a natural progression of the portfolio
as the core companies scale and meet
value inflexion points that highlight an
acceleration in their growth.
These portfolio companies now have an
average turnover in excess of US$142.0
million (2018: $98.0 million), growing in
aggregate over 45% annually from 2018.
The high average revenues continue to grow
in excess of our 30% per annum target and
now reflects the scale and maturity of the
core companies. The gross profit margin of
the core holdings average approximately
65% and demonstrates the ability of the
companies to reinvest for future revenue
growth and also the opportunity for future
profitability at the appropriate time in the
company’s life cycle.
The fair value growth in the period reflects
the strong revenue growth of the portfolio
companies, the flexible model of the plc to
be able to acquire positions at a discount
by providing liquidity to private markets and
the upside impact of portfolio companies
achieving financing rounds at higher
valuations.
* Reporting threshold – companies with a NAV of
£1.0(cid:98)million or more.
Please note, some of the below measures are Alternative Performance Measures (“APMs”). Please see note 28 to the consolidated financial statements for further details.
26
draperesprit.com
Portfolio Review
Annual Report 2019
Average Revenue — Core
Cash realisations
Cash invested
45%
$142m
$98m
102%
$49m
$150m
$120m
$90m
$60m
$30m
$0m
£35m
35m
30m
25m
20m
15m
10m
5m
0m
FY19
£226m
£15m
£16m
FY18
£72m
FY17
£37m
2017A
2018B
2019B
FY17
FY18
FY19
0m 50m 100m 150m 200m 250m
Number of Companies
Gross Portfolio Value Progression (£ millions)
700
600
500
400
300
200
100
0
39
15
21
8
21
10
31 March
2017
31 March
2018
31 March
2019*
Core
Emerging
*Reporting threshold – companies with a NAV
of £1.0 million or more.
£140m
£594m
£16.0m
£226m
£244m
£163m
£113m
31 March
2017
30 Sept.
2017
31 March
2018
Invested
Realised Fair value
movement
31 March
2019
draperesprit.com
27
Portfolio Review
Annual Report 2019
Portfolio Review
Investments
To date, the we have targeted investments of £60.0 million per annum
from the plc and £40.0 million from co-invest funds into primary
investments. In addition, the Group looks to opportunistically acquire
portfolios of assets to provide investors with access to the best
technology companies in Europe at attractive valuations.
During the financial year a total of £226.4 million (2018: £71.5 million)
was deployed by the plc and a further £35.1 million (2018: £24.8
million) from EIS/VCT funds in 21 new companies (plc: 12, Earlybird:
9), 12 existing companies, and 12 seed funds. The Group continues to
balance the portfolio by deploying approximately 30% of the Group’s
investment capital towards smaller rounds in early stage companies with
approximately 70% being invested in larger later-stage growth rounds.
The intention is to increase the size of the equity interest held in the
portfolio companies over time in line with the available capital of the
Group.
New investments
In the year, the Company invested £91.7 million in 21 new investments
(including £31.5 million in 9 new investments via Earlybird VI), with a
further £21.0 million invested from EIS/VCT funds. Some of the notable
new investments made in the financial year include:
- £12.4 million into FINALCAD, the leading building, infrastructure and
construction mobile software platform.
- £9.9 million into Aircall, the leading provider of cloud-based call centre
software.
- £8.0 million (including £4.0 million from EIS/VCT funds) into Fluidic
Analytics, the Cambridge based deep tech protein detection platform
with research, medical and consumer applications.
- £7.4 million into Revolut, the London headquartered fintech company.
- £7.3 million (including £5.0 million from EIS/VCT funds) into
Endomagentics, the Cambridge based cancer diagnostic clinical
platform.
- £6.0 million (including £2.0 million from EIS/VCT funds) into
Crowdcube, the UK based lending platform.
- £6.0 million (including £3.0 million from EIS/VCT funds) into Roomex,
the Dublin headquartered SaaS enabled business travel platform.
- £4.3 million via Earlybird into N26, the Berlin headquartered digital
banking company.
- £3.7 million into ICEYE, the Finnish microsatellite manufacturer.
- £31.2 million via Earlybird VI in high profile growing technology
companies including Crosslend (a digital marketplace for loans),
Shapeshift (the cryptocurrency exchange which offers global trading
of a variety of digital assets via web and mobile platforms) together
with further follow-on opportunities in the remaining portfolio.
Follow-on investments
To grow our holdings in line with our stated strategy, and to continue to
back the growth of our best companies, the Group invested £33.1 million
into 12 existing portfolio companies. A further £14.1 million was invested
from EIS/VCT funds increasing existing holdings in:
- Graphcore, a machine intelligence semiconductor company.
- Trustpilot, the global online review community.
- Ravenpack, the provider of analytics as a service to financial
professionals by transforming unstructured data / content into
actionable information in real-time.
- Perkbox, digital employee engagement platform.
- Pod Point, the UK’s leading provider of electric car charging solutions
for home, workplace and public charging.
- Resolver, the customer support and complaints resolution software
business.
- Realeyes, machine learning technology measuring emotions through
facial recognition.
Secondary investments
To provide investors with access to the best high growth technology
companies in Europe, the Company sources investment opportunities
through secondary acquisitions.
In the period, the Company acquired a 27% stake in Earlybird IV and a
5% stake in Earlybird Digital East which added a further £70.4 million of
notable investments in the year including:
- £25.4 million in Peak Games (the leading mobile games company
based in Turkey) and £14.5 million in Smava (the consumer loans
portal based in Germany), which have been added to the Core
Portfolio, via Earlybird VI together with further follow-on opportunities
in the remaining portfolio.
- £13.3 million in UiPath the comprehensive robotic software solution
for IT-based process automation acquired via Earlybird Digital East
Fund together with further follow-on opportunities in the remaining
portfolio.
The secondary acquisition of DFJ Europe X Fund for £25.9 million in the
year increased our % holdings in several of our Core Portfolio companies,
including Ravenpack, Trustpilot, M-Files and Lyst.
Seed funds
In addition to the above, the Company has continued to expand its seed
fund strategy investing £5.3 million in the year together with further
commitments to a number of Europe’s top seed funds: Byfounders
(Denmark), Hardware Club (France), Five Seasons (France), Episode
1(UK), Seedcamp Fund IV (UK), Join Capital (Germany), Icebreaker
(Finland). During the year, commitments have been made to 13 new
seed funds across Europe.
Post-year end the following investments were made:
–
–
–
–
A further £2.5 million invested by the Company in Verve.
A further £2.2 million invested by the Company in Realeyes.
A further £0.5 million invested by the Company in Push Doctor.
A further £0.4 million invested by the Company in Kaptivo.
Realisation
During the year, the Company realised £16.0 million from the disposal
of Graze and Tails.com, including amounts held in escrows. Post period
end £15.3 million gross proceeds were received for the part realisation of
Transferwise bringing the total cash returned since IPO to £81.6 million to
the balance sheet.
28
draperesprit.com
Portfolio Review
Annual Report 2019
Gross Portfolio Progression — by Portfolio Company
(£ millions)
£78.6m
£62.0m
£41.7m
£33.0m
31st March 2018
Invested
Fair Value movement
31st March 2019
£27.8m
£27.7m
£23.7m
£23.7m
£17.7m
£17.2m
£15.6m
£13.3m
£12.4m
£11.1m
£9.9m
Remaining
Portfolio
Total
£178.6m
£594.0m
£0m £50m £100m £150m £200m £250m £300m £350m £400m £450m £500m £550m £600m £650m £700m
draperesprit.com
29
Core Portfolio Companies
Annual Report 2019
Core Portfolio Companies
Draper Esprit invested £9.9 million in 2018.
Draper Esprit invested £12.4 million in 2018.
Aircall makes phone support easy to manage. It offers instant phone
numbers in over 40 countries for over 3000 business customers and
provides a collaborative phone app for teams using connective CRM
or customer support tools.
In 2018, the company raised a series B round, led by Draper Esprit
totalling US$29.0 million. Opening new offices in New York and Paris,
Aircall has hired a team of over 150 people and released integrations
with ecommerce giant Shopify as well as CRM systems MS Dynamics
and Copper.
In May, Aircall announced a partnership with Intercom. Aircall Now,
an application that instantly transitions text chat with customers
into a phone conversation within Intercom Messenger, streamlines
the sales, marketing, and customer workflow. This partnership sees
Aircall Now available to Intercom’s 25,000+ customers, giving the
company ample firepower to scale globally.
Alongside Draper Esprit, other investors include Balderton Capital,
NextWorld Capital, eFounders and Newfund.
FINALCAD improves construction companies’ operational efficiency
through a mobile digital platform. Site engineers, Foremen,
Architects and Consultants can collaborate using FINALCAD’s app,
enabling collaboration across a wide variety of workflows both on
site and at the office. The app is not just a communication tool, but
also enables users to work on drawings, BIM models, tasks, controls,
safety procedures and progress monitoring. FINALCAD then provide
insights and best practices at a company level.
During the period, the company launched FINALCAD Live, an
app allowing users to write a digital site diary with images, a
location, and description, creating a news feed for short duration
construction projects. The app transforms the way in which site
managers oversee costs, collaboration, and processes.
The company also made key hires in its sales teams, bringing in
Olivier Remy, Head of Sales for Northern Europe and Jaime Urquiza,
Head of Sales for Southern Europe and Latam. Additionally, it signed
Groupe Fayat, France, the no.1 independent construction group in
France and worldwide leader in road equipment.
Investors alongside Draper Esprit are CapHorn Invest, Aster, Serena
Capital, Salesforce Ventures, and Cathay innovation.
£9.9m
Invested
£9.9m
£12.4m
Investment valuation
Invested
£12.4m
Investment valuation
30
draperesprit.com
Core Portfolio Companies
Annual Report 2019
Draper Esprit first backed Graphcore in 2016 and has invested
£13.7 million to date with the most recent investment of £9 million
in December 2018, part of a wider US$200.0 million plus Series D
funding round. This latest round valued Graphcore at $1.7 billion,
making it one of a handful of British technology unicorns.
Graphcore is a machine intelligence semiconductor company,
changing the way that developers can build AI and machine learning
applications through its cutting-edge processing capabilities. Its
technology will be indispensable for advancements in artificial
intelligence and machine learning across diverse industries – from
autonomous vehicles to personalised healthcare, intelligent mobile
devices and collaborative robots. The appetite for an easier and
more powerful way to develop such applications is growing rapidly.
During the year, the company began product rollout. In May, it
shipped its C2 IPU (Intelligence Processing Unit) cards to early
access customers. In December, it announced the Rackscale
IPU-Pod™ reference design, which takes full advantage of the
IPU’s scale-up and scale out features, harnessing its capability of
massive machine intelligence training tasks or the support of huge
deployments with 1000s of users.
The team are also scaling significantly, with around 500 new hires
expected across the business by end of Q1 2019. Notable hires
include Scott Hover-Smoot as SVP and General Counsel bringing
considerable experience of the semiconductor industry and Jason
Lu as VP of China Sales in October 2018, building out the Graphcore
team in China.
Investors alongside Draper Esprit are Sequoia Capital, Atomico,
Microsoft, and BMW iVentures.
Draper Esprit invested £17.7 million from the plc in January 2018.
During the period, Ledger, the hardware security wallet for
cryptocurrencies and blockchain applications, launched three
new products: the Ledger Nano X, a bluetooth hardware wallet
that received an innovation award at the CES, the Ledger Vault,
a security solution for financial institutions and Ledger Live, the
standalone companion computer app for Ledger devices.
Ledger has opened new offices in New York and Hong Kong,
deploying sales teams to the ground for the Ledger Vault. The
Ledger Plex, a 3500m² production facility in Vierzon (France), has
broken ground and will be delivered in September 2019.
To date the company has clients in over 165 countries and has sold
over 150 million wallets globally. In May, the team also announced
a joint-venture named Komainu with global investment bank,
Nomura, and pioneer investment house, Global Advisors. Komainu
is being established to bring together the traditional and disruptive
worlds of asset custody, paving the way for secure and compliant
institutional investment in digital assets.
Other investors include Draper Network funds, Draper Associates
(US), Draper Dragon (China) and Boost VC (US), as well as
FirstMark Capital, Cathay Capital and Korelya Capital.
£13.7m
£78.6m
£17.7m
Invested
Investment valuation
Invested
£17.7m
Investment valuation
draperesprit.com
31
Core Portfolio Companies
Annual Report 2019
Core Portfolio Companies continued
Draper Esprit has invested a total of £5.3 million in the Company.
Draper Esprit has invested a total of £4.0 million to date.
Lyst is a global fashion search platform used by over 72 million
shoppers from 120 countries. It is one of the world’s largest
e-commerce websites, bringing together 5 million products from
12,000 of the world’s leading fashion brands and retailers. Lyst keeps
customers at the centre of its offering, providing a one stop solution
to find fashion that’s perfectly right for them.
M-Files is a software company which provides enterprise content
management (ECM) solutions to eliminate information silos and to
provide access to content from core business systems and devices.
By using software based on the meta-data contained within the
document, it is not constrained by where the document is stored or
resides.
In 2018, the French multinational luxury goods conglomerate LVMH,
led a funding round of US$60.0 million in the company. This new
funding will be used to drive global expansion. During the period,
revenues grew by 23%, it opened offices in The Netherlands, Russia,
and Japan, now operates in over 11 markets, and had a big brand
refresh.
Investors include LVMH, Balderton Capital, Accel Partners, and Susa
Ventures.
During the period, the company launched M-Files Online, a fully
cloud-enabled subscription-only offering, and began selling to
new customers exclusively via recurring subscription licenses while
growing annual recurring revenue (ARR) by more than 30% year on
year. M-Files also raised €27.0 million from the European Investment
Bank (EIB), fuelling technology development and international
expansion.
With this recent investment, the company has aggressively scaled its
team, totalling 500 employees globally and now has 9,000
worldwide customers, including Thyssenkrupp, Mazars, Apex Oil
Company and Kinsmen Group.
M-Files was honoured with the prestigious Internationalisation Award
by the President of the Republic of Finland for its global success,
innovative intelligent information management solutions and
positive impact on the Finnish economy.
Investors include Partech Ventures, Tesi, and the European
Investment Bank.
£5.3m
£27.8m
£4.0m
Invested
Investment valuation
Invested
£17.2m
Investment valuation
32
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Core Portfolio Companies
Annual Report 2019
As part of our strategic partnership with Earlybird, the plc acquired a
27 per cent. interest in Earlybird GmbH & Co. Beteiligungs-KG IV (“EB
IV”) for £55.0 million, adding Peak Games to the core portfolio.
Peak Games is a leading name in the gaming industry. Founded in
2010 and based in Turkey, Peak Games produces highly-rated mobile
games which includes the top-10 grossing Toy Blast and the launch
of Toon Blast in July 2018. Peak Games is one of the top 10 mobile
games companies in the USA, with over 275 million users globally
having installed at least one product.
In July 2018, to support the debut of puzzle game, Toon Blast,
the company launched the first celebrity performance marketing
campaign with actor, Ryan Reynolds. This saw the creation of
30 unique videos, promoted across online channels to varying
demographics, allowing the company to measure the effectiveness
of each video in precise detail. Toon Blast has now achieved over 80
million downloads.
Investors include Earlybird VC, Hummingbird Ventures, and Endeavor
Catalyst.
Draper Esprit has invested a total of £14.0 million to date.
Perkbox is a platform that provides a unique employee experience,
enriching the personal and working life of employees. It offers a suite
of products including a platform with access to best in class Perks,
Perkbox Recognition and Perkbox Insights. It serves organisations of
all sizes from SMEs to large companies in the UK such as OpenTable,
Rentalcars, and Purplebricks.
In February 2019, the company opened an office in Sydney, Australia,
sending existing team members from its London HQ to ensure the
company starts off with an experienced talent pool. The company
has already signed up several providers including coworking
workspace, Emerge Sydney; food and beverage startup, Hey You;
suit maker, Institchu and SME loans company, Valiant Finance. It is
estimating to onboard another 2,000 companies by the end of the
year.
Perkbox also expanded their team with several key hires including
ex Yahoo! Veteran, Paul Schulz as CTO and Edenred CEO, Jacques
Stern as a Non-exec director. It has grown the size of its tech team
from 32 to 65 employees in order to accelerate product development
cycles.
Draper Esprit first invested in Perkbox in 2016 alongside the crowd on
the Seedrs platform.
£25.4m
£41.7m
£14.0m
Invested
Investment valuation
Invested
£23.7m
Investment valuation
draperesprit.com
33
Core Portfolio Companies
Annual Report 2019
Core Portfolio Companies continued
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Draper Esprit has invested a total of £5.4 million to date.
Draper Esprit has invested a total of £7.5 million to date.
The electric charge point supplier, which has now partnered with 13
car manufacturers including household names Audi, Volkswagen,
and Volvo raised £13.0 million of funding from Legal and General in
March 2019, taking a 13 per cent. stake in the company.
PodPoint is one of the UK’s largest electric vehicle charging point
operators, boasting more than 1,500 charging stations across the
UK. The company has charged over 44 million miles of electric
motoring and shipped in excess of 40,000 charging points.
During the year, the company signed a partnership with Tesco to
roll out POD Points across their 400 stores, installed the UK’s largest
workplace charging array with Skanska and began installing across
the Lloyds Bank estate.
Investors include Legal and General, Barclay’s Capital, QVentures.
During the year, the company closed deals with several large
financial institutions and research houses, including Citi Bank,
CloudQuant, and Wolfe Research. Meanwhile, they launched a new
portfolio sentiment ranking tool, enabling users to search from
50,000 companies, addressing specific risks across 19,000 sources
including news, social media, regulatory filings, and transcripts.
Hundreds of thematic factors can be considered for their stock
rankings to monitor for headline risk, identify sentiment leaders and
laggards, or flag companies that are no longer aligned with their
strategy.
Investors can also apply a selection of screening criteria and better
manage reputational risks by identifying controversial companies
in their portfolio. For example, users can filter out companies
experiencing negative environmental, social, or governance (ESG)
events, or rank higher those with positive earnings and product
sentiment. Combined with RavenPack’s sentiment scoring and
analytics, the company can now empower their clients with a better
understanding of events and how markets might react to them.
During the year, the plc made a follow-on investment of £4.3 million,
enabling the company to expand internationally and scale its team.
By end of Q2 2019 the company will have over 100 employees
£5.4m
£11.1m
£7.5m
Invested
Investment valuation
Invested
£15.6m
Investment valuation
34
draperesprit.com
Core Portfolio Companies
Annual Report 2019
As part of our strategic partnership with Earlybird, the plc acquired
a 27 per cent. interest in Earlybird Fund IV for £55.0 million, adding
Smava to the core portfolio.
Launched in 2007, Smava is consumer loans portal based in
Germany, striving to make personal loans transparent, fair, and
affordable. Based on digital processes, Smava provides a market
overview of 70 loan offers from 25 banks, ranging in value from
€1,000 to €120,000. Borrowers can then choose a deal that suits
them best.
In August 2018, the company announced a partnership with eBay’s
car portal in Germany, mobile.de, so users can access financing
facilities when purchasing vehicles.
The company has raised $135.0 million to date and has over 300,000
customers who have transacted over €3 billion through its platform
over the lifetime of the start-up.
Investors include Earlybird VC, Vitruvian, Phenomen Ventures and
Neuhaus Partners.
Draper Esprit has invested a total of £5.6 million to date.
Founded in 2011, SportPursuit is as a UK-based sport-specific
ecommerce website where members receive access to sales from
brand partners within the technical sportswear and outdoor clothing
and equipment space. It aims to be the world’s largest private
shopping club for sports enthusiasts, helping them to find the best
clothing for them at the best rates.
During the period the company partnered with Eurosport, the
Discovery-owned sports broadcaster, to launch a white-label
platform for sports fans to purchase clothing, footwear, equipment
and accessories. The Eurosports shop is now live in France, Germany
and the UK via dedicated local-language microsites, with plans to
extend this to Belgium, Monaco, Austria and Switzerland. In efforts
to build a stronger brand presence in Germany and bolstering
its move towards Europe, the company launched TV advertising
campaigns raising brand awareness in new markets.
SportPursuit made several moves to improve its carbon footprint. It
became the first online retailer to use sustainable packaging made
entirely from sugar cane, achieving a carbon negative impact and
planted 10,000 new trees in Uganda alongside the “Size of Wales”
charity organisation.
Investors include CIT Growth Capital and Scottish Equity Partners,
Secret Escapes co-founder Alex Saint and Zoopla founder Alex
Chesterman.
£14.5m
Invested
£23.7m
Investment valuation
£5.6m
Invested
£13.3m
Investment valuation
draperesprit.com
35
Core Portfolio Companies
Annual Report 2019
Core Portfolio Companies continued
Draper Esprit has invested a total of £10.5 million to date.
Draper Esprit has invested a total of £29.7 million to date.
TransferWise is an international money transfer platform – using real
exchange rates with no hidden fees. Co-founded by Taavet Hinrikus and
Kristo Kaarmann, TransferWise was launched in 2010 with the vision of
making international money transfers cheap, fair, and simple.
During the period, TransferWise became the first fintech company to
hold a settlement account, allowing the company direct access to
Bank of England’s Real Time Gross Settlement. Through the settlement
account, TransferWise became the first tech company to be a direct
member of the Faster Payment Scheme.
In June 2018, they announced a partnership with UK neobank Monzo,
and France’s second largest bank, BCPE, making exchange rates low-
cost and transparent. Additional partnerships include accountancy
software company Xero, Dutch digital banking company Bunq, and
food delivery service Wolt.
TransferWise continues to demonstrate strong growth. In September
2018, the company released their FY18 annual report, showing 75%
revenue growth to £117.0 million and £6.2 million net profit after tax.
The company now serves 5 million customers worldwide, now
processing £4.0 billion every month.
Post period end, the company announced a $292.0 million share sale in
which (through a partial sale of its stake) Draper Esprit generated cash
of £15.3 million.
Founded in 2007, Trustpilot is a global, multi-language review
community. Trustpilot has customers in 65 countries including
Denmark, Sweden, the UK, France, Italy, Germany, The Netherlands
and the US. The company has more than 58 million reviews of over
265,000 companies from 150+ countries and is one of the top 1% most
visited websites worldwide.
With offices in Copenhagen, London, New York, Denver, Berlin,
Melbourne and Vilnius, Trustpilot’s 700 employees represent more than
40 different nationalities. In June 2018, the company also launched a
successful brand refresh, alongside plans for changes and upgrades to
its platform after a year of research and collaboration with consumers.
Trustpilot will now offer companies new features for customer
engagement and has launched its “Find Reviewer” tool, which enables
companies and reviewers to engage with each other more freely and
directly. The company has also now secured partnerships with leading
ecommerce platforms, Magento (based in the US) and PrestaShop
(based in Paris) alongside leading digital knowledge platform, Yext
(based in the US). The partnerships will enable Trustpilot to expand its
business further while improving user experience by providing them
with more opportunity to gain insights. In March 2019, the company
successfully raised $55.0 million in a Series E equity round led by
Sunley House Capital Management. This funding will enable Trustpilot
to strengthen its market leading position through investment in
marketing, platform development and team expansion.
Investors include Sunley House Capital management, Vitruvian
Partners, Index Ventures, Northzone, and SEED Capital Denmark.
£10.5m
£27.7m
£29.7m
Invested
Investment valuation
Invested
£62.0m
Investment valuation
36
draperesprit.com
Core Portfolio Companies
Annual Report 2019
“We find the most
promising private
technology companies
in Europe, with the
potential to become
global leaders.”
As part of our strategic partnership with Earlybird, the plc acquired a
5 per cent. interest in the Digital East Fund 2013 SCA SICAR for £16.0
million, adding UiPath to the portfolio. When Draper Esprit invested,
UiPath was valued at $3.0 billion. Post period end, the company
announced in April a $568.0 million investment round at a post-money
valuation of $7.0 billion.
UiPath provides a comprehensive robotic software solution for IT-
based process automation. Built on a comprehensive, fully integrated
platform with centralised instrumentality, UiPath is designed for the
highest standards of enterprise management, security, scalability and
auditability.
In February 2019, the company released the UiPath Computer Vision
which enables human-like recognition of user interfaces, enabling
robots to “see” the screen and visually identify individual elements of
software platforms such as Citrix, VMware, VNC, and Windows Remote
Desktop. This development is a huge leap in the path to empowering
robots AI skills to solve complex problems in the most effective way.
In April 2019, Bruno Ferreira joined the company as VP of UK & Ireland.
Bringing with him 20+ years of experience in the technology sector,
Ferreira will help the firm to continue its exponential growth. In
the same month, UiPath announced a partnership with RPAbox, a
specialist UiPath implementation partner helping organisations scale
RPA capabilities in their business units by providing a fast, reliable and
efficient delivery model. This partnership will assist clients and partners
with projects and increase the reach of UiPath globally.
Investors include Accel, Coatue, Capital IG, Credo, Earlybird VC, IVP,
KPCB, Madrona, Meritech, Seedcamp, and Sequoia.
£13.3m
Invested
£33.0m
Investment valuation
draperesprit.com
37
37
Financial Review
Annual Report 2019
Financial Review
Please note, some of the below measures are Alternative Performance Measures (“APMs”). Please see note 28 to the consolidated financial statements for further details.
“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.”
Ben Wilkinson
CFO
The year ended 31 March 2019 has been
another active year for the Group with
significant investment activity and two equity
raises in the period. The progress in the year has
built on the strategy of scaling our operations
while providing investors with access to the
best private technology companies in Europe.
New equity capital of £100.0(cid:98)million was raised
in June 2018 to further scale the balance sheet
and broaden the shareholder base. In February
2019, a further raise of £115.0(cid:98)million was
undertaken to secure the secondary acquisition
of 27% in Earlybird IV and 5% in Earlybird Digital
East. With a strong balance sheet, the Group
has been able to increase investments in high
growth technology companies, take advantage
of secondary opportunities to create value and
increase the breadth of operations.
The Gross Portfolio Value, the gross value of the
Group’s investment holdings before deductions
for carry and any deferred tax, has more than
doubled to £594.0(cid:98)million (2018: £243.5(cid:98)million)
as a consequence of the £226.4(cid:98)million of
investment (2018: £71.5(cid:98)million) and fair value
growth of £140.1(cid:98)million (2018: £73.6(cid:98)million)
net of realisations of £16.0(cid:98)million (2018:
£15.9(cid:98)million).
The Gross Portfolio Value is subject to
deductions for the fair value of the carry
liabilities and deferred tax to generate the
net investment value of £562.1(cid:98)million (2018:
£231.9(cid:98)million) which is reflected on the
consolidated statement of financial position
as financial assets held at fair value through
the profit or loss. The below table has been
generated to reflect gross and net movement
in value of the portfolio during the period.
The net fair value gain on investments of
£114.7(cid:98)million (31 March 2018: £66.6(cid:98)million)
is reflected in the consolidated statement of
comprehensive income. A deferred tax provision
of £5.4(cid:98)million (2018: £1.8(cid:98)million) is accrued
against the gains in the portfolio where future
tax liabilities are anticipated to be due. This
amount is netted against the investments in
the consolidated statement of comprehensive
income. Carry balances of £27.7(cid:98)million (2018:
£11.2(cid:98)million) are accrued to management
teams, including previous and current
employees of the Group based on the current
fair value at the year-end and deducted from
the Gross Portfolio Value.
Net assets have increased by 106% to
£618.6(cid:98)million (£300.5(cid:98)million at 31 March 2018)
and net assets excluding goodwill have grown
by 109% to £608.9(cid:98)million (£290.8(cid:98)million at
31 March 2018). The increase in the balance
sheet assets reflects the positive portfolio
performance, particularly in the core portfolio,
including the new secondary acquisitions, and
the equity raises undertaken in the year of
£215.0(cid:98)million (£207.6(cid:98)million net of fees) from
both existing and new institutional investors.
Fair value growth of the gross portfolio of
£140.1 million (2018: £73.6 million) reflects fair
value gains in the portfolio of £157.5 million and
fair value reductions of £17.4 million including
£16.2 million of positive currency movements.
In the Summer of 2018 the Group entered
into a Strategic Partnership Agreement with
Earlybird to share dealflow and resources
to co-invest in high growth technology
companies across Europe. The first stage of
this partnership included a 50% commitment
of £76.0(cid:98)million to 2022 to Earlybird Fund VI,
of which £31.5(cid:98)million has been deployed to
date. As approximately 20% of the European
Venture Capital dealflow occurs in Germany,
this commitment reflected the amount the
Company would have otherwise invested in
that market directly. As part of this first stage,
the Company acquired a minority stake in
the Earlybird Fund VI management company
for a total consideration of £0.6(cid:98)million. The
consideration was satisfied by cash and the
issuance of 64,820 new ordinary shares of one
pence each in the capital of the Company to
the Earlybird Digital West partners.
The subsequent phase of the partnership
trajectory was enacted in February of 2019
with the acquisition of stakes in Earlybird IV
and Earlybird Digital East. These acquisitions
strengthened the relationship and provided
significant value creation opportunity for the
Group.
In addition to the shares outlined above, the
fund raises led to an increase in the issued
share capital with the issuance of 27,380,952
and 18,867,925 new shares on 14 June 2018 and
38
draperesprit.com
Financial Review
Annual Report 2019
Gross Portfolio Value Table(cid:98)
Investments
Graphcore
Trustpilot
Peak
UiPath
Lyst
TransferWise
Smava
Perkbox
Ledger
M-Files
Ravenpack
SportPursuit
FinalCad
Podpoint
Aircall
Remaining Portfolio
Total
Co-invest assigned to plc
Gross Portfolio Value
Carry external
Portfolio deferred tax
Trading carry & co-invest
Draper Esprit (Ireland) Limited
Net portfolio value
Fair Value of
Investments
31st(cid:98)March
2018
£’000
23,381
34,333
–
–
18,341
12,189
–
17,495
17,703
14,359
5,478
13,366
–
9,884
–
74,663
241,192
2,320
243,512
(11,177)
(1,848)
1,423
–
231,910
Investments
£’000
Realisations*
£’000
Draper Esprit
(Ireland) Limited
£’000
9,491
11,623
25,374
13,250
2,633
–
14,549
5,740
–
1,506
4,207
1,959
12,444
–
9,916(cid:98)
113,740
226,432
–
226,432
–
–
–
–
226,432
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–(cid:98)
(15,984)
(15,984)
–
(15,984)
–
–
–
–
(15,984)
–
–
–
–
–
–
–
–
–
–
(cid:98)–
–
–
–
–
–
–
–
–
–
–
–
4,988
4,988
Movement
in Fair
Value
£’000
45,740
16,016
16,312
19,704
6,788
15,530
9,138
455
–
1,308
5,930
(1,990)
–
1,175
–
4,258
140,364
(308)
140,056
(16,534)
(3,504)
(315)
(4,988)
114,715
Fair Value of
Investments
31st(cid:98)March
2019
£’000
Interest
FD category **
at reporting
date
B
C
B
A
C
A
B
C
B
B
D
E
C
C
B
–
78,612
61,972
41,686
32,954
27,762
27,719
23,687
23,690
17,703
17,173
15,615
13,335
12,444
11,059
9,916
176,677
592,004
2,012
594,016
(27,711)
(5,352)
1,108
–
562,061
* Realisations do not include amounts held in escrow. Total cash realisations including amounts held in escrow were £16.0 million (2017: £15.9 million)
** Fully diluted interest categorised as follows: Cat A: 0-5%, Cat B: 6-10%, Cat C: 11-15%, Cat D: 16-25%, Cat E: (cid:33)25%
8 February 2019 respectively to trading on AIM
and Euronext Growth.
During the year, a change in the underlying
accounting treatment of the Company’s
acquisition of Esprit Capital Partners (ECP) in
June 2016 has led to a reduction in the goodwill
carried on the balance sheet of £10.8(cid:98)million.
This is not indicative of an impairment to the
goodwill or the inherent value of Esprit Capital
Partners LLP but a change in presentation.
The reduction in the goodwill is matched
by a reduction in the merger reserve on the
balance sheet of £10.8(cid:98)million and the income
statement reflects an equivalent charge over
the current and restated reporting periods.
The prior period balance sheet and income
statement comparatives have been restated
to reflect how the reduced goodwill would
have impacted the accounts in those periods.
There are no ongoing charges related to this
accounting change.
Year-end cash balances of £50.4(cid:98)million
reflect the cash balance of £56.6(cid:98)million at
31 March 2018, the subsequent equity raise of
£207.6(cid:98)million net of fees, investments in the
period of £226.4(cid:98)million net of proceeds from
disposals in the portfolio and the operating
costs of the business.
Consolidated statement of
comprehensive income
Investment income for the year comprises the
£114.7(cid:98)million (2018: £66.6(cid:98)million) of unrealised
investment gains and fee income of £6.1(cid:98)million
which is generated from management fees
and director fees. At the year-end 31 March
2018, performance fees were recognised
of £3.5(cid:98)million, of which £1.0(cid:98)million was
attributable to the plc with the remainder
reflected in non-controlling interests. Under
the new IFRS 15 accounting standard, there
has been a change in the test for recognition
and this revenue has not been recognised in
the current period; it is anticipated that these
balances will now be recognised at the point
of cash realisation. General administrative
costs of £7.8(cid:98)million (2018: £5.8(cid:98)million)
predominantly relate to employment,
professional and office expenses, while
investment and acquisition costs of £0.2(cid:98)million
(2018: £0.4(cid:98)million) relate directly to portfolio
investment costs. The cost base of the Group
in the year is less than 1% of year end NAV on a
net basis (costs less income).
Post balance sheet events
The Group has made further investments and
realised £15.3(cid:98)million gross proceeds from the
partial sale of TransferWise.
Post year-end the Company entered into a
£50.0 million Revolving Credit Facility with
Silicon Valley Bank and Investec. The facility is
for a 3 year term and carries an interest rate
at the Bank of England base rate + 6.75% (min
7.5%). The facility provides additional funding
flexibility to fund the future growth plans of
portfolio companies.
After a further successful year of
transformational growth, the Group has a
strong balance sheet with the cash resources to
harvest the opportunities presented by its deep
networks across Europe.
Ben Wilkinson
CFO
draperesprit.com
39
Financial Review
Annual Report 2019
Key Performance Indicators
KPI
How measured
Progress
1. Growth in value of
the portfolio
Fair value determined using International Private Equity and Venture Capital
Valuation Guidelines for the year-end and interim reporting periods.
2.
Realising cash
Cash generated from portfolio company exits against original cost.
3. New investments
Deploying funds for investments into new portfolio companies, follow-on
investments into existing companies, stake building into existing companies
and secondary investments.
Gross Portfolio Value has
increased to £594.0(cid:98)million,
re(cid:411)ecting a fair value increase of
58% (2018: £243.5(cid:98)million).
£16.0(cid:98)million (2018: £15.9(cid:98)million)
realised in the period, with a
further £15.3 million gross
proceeds received post year end,
including amounts held in
escrow.
£226.4(cid:98)million (2018: £71.5(cid:98)million)
invested in the period from plc,
with a further £35.1(cid:98)million across
EIS/VCT.
4. Deal(cid:411)ow
Tracking the private company (cid:410)nancing rounds across Europe and analysing
against the Group’s internal CRM database to determine if we saw the
opportunity.
Through our brand and network,
we continue to access high quality
deal (cid:411)ow across Europe.
5. Cash balances
Maintaining su(cid:408)cient liquidity to meet operational requirements and to
take advantage of investment opportunities and support the growth of
portfolio companies.
£50.4 million (2018: £56.6 million)
at year-end with a further £15.3
million of gross proceeds received
post year-end. A Revolving Credit
Facility for a further £50.0 million
was signed post year-end.
40
draperesprit.com
Principal risks
Annual Report 2019
Principal risks
The Board considers the following to be
the principal key business risks faced by the
Group. The Group’s strategy is aligned to
mitigate these risks as outlined below.
The Board regularly reviews the risks faced
by the Group and ensures the mitigation
strategies in place are the most effective
and appropriate to the Group. There may
be additional risks and uncertainties, which
are not known to the Board, and there are
risks and uncertainties, which are currently
deemed to be less material, which may also
adversely impact performance. It is possible
that several adverse events could occur
and that the overall impact of these events
would compound the possible impact on
the Group. Any number of the below risks
could have a material adverse impact on the
Group’s business, financial condition, results
of operations and/or the market price of the
ordinary shares.
Risk
Possible consequences
Mitigation strategies
1.
2.
3.
4.
5.
The investment
portfolio businesses
are at an early stage
and carry inherent
risk
The technology and o(cid:407)ering developed by these businesses
may fail and/or these businesses may not be able to
develop their o(cid:407)ering or technology into commercially
viable products or technologies.
Portfolio value
may be dominated
by single or
limited number of
companies
There is a risk that if one or more such investee companies
experience di(cid:408)culties or su(cid:407)er from poor market
conditions and if, as a result, their value were to be
adversely a(cid:407)ected, this would have a material adverse
impact on the overall value of the Group’s portfolio of
investee companies.(cid:98)
The Group will hold
non-controlling
interests in the
investment
portfolio businesses
Proceeds from the
sale of investments
may vary
substantially from
year to year
Fluctuations in
foreign exchange
rates may adversely
a(cid:407)ect the
performance of the
Group’s portfolio
Non-controlling interests may lead to a limited ability to
protect the Group’s position in such investments.
The timing of portfolio company realisations is uncertain
and cash returns to the Group are therefore not
predictable.
Certain investments of the Group are made or operate in
currencies other than Sterling and the Group may make
certain future investments in other currencies and in
companies that use other currencies as their functional
currency. Accordingly, changes in exchange rates may
have an adverse e(cid:407)ect on the valuations and/or revenues
of the Group’s investments, and on its investments’ ability
to make debt payments, pay dividends or make other
distributions to investors such as the Group.
The Investment team, comprised of
experts in their sector, undertakes rigorous
due-diligence prior to any investment.
The team provides active management,
secures a significant minority stake with
board participation and rights in portfolio
companies. The (cid:410)nancial structure of the
investment provides downside protection.
The Group adopts a broad sector approach
with a focus on four core sectors. Risk is
diversi(cid:410)ed within the portfolio by not focusing
on any one sector and by deploying capital
across growth stages.
The Board expects to allocate approximately
30% of the Group’s investment capital
towards smaller rounds of seed and series A
investments with approximately 70% being
invested in larger follow-on series B+ and
series C+ investments to scale technology
companies to fund later stage growth.
The Group is an active manager of its
investments and usually takes a board position
on the investee company. Investments are
made with suitable minority protections,
including veto rights on key decisions.
Investments are often made in investee
companies in which other institutional
investors are also shareholders. Collectively a
greater degree of protection can be a(cid:407)orded.
The Group maintains sufficient cash
resources to manage its ongoing operational
and investment commitments. Regular
working capital reviews are undertaken
using cash flow projections.
The Board regularly reviews and considers
the possible impacts of currency movements
on the Group’s portfolio. The portfolio
companies generate revenues across a
range of currencies, predominantly US
Dollars, Sterling and Euro, and a degree of
natural hedge therefore exists.
The Group does not currently intend to enter
into any hedging arrangements to mitigate
its exposure to fluctuations in exchange
rates.
draperesprit.com
41
Principal risks
Annual Report 2019
6.
Portfolio company
valuations subject
to change
The valuations of the Group’s underlying portfolio of
investments are substantially based on the revenue
generated by these businesses.
Each of these businesses, and therefore their ability to
generate revenue, are subject to the macroeconomic
environment in the countries, in which the businesses
operate.
Similarly, where comparable peer groups are used as a
benchmark to determine valuations based on revenue
multiples, the performance of the peer group will impact
portfolio valuations.
The decision by one of these shareholders to dispose of
their holding in the Group might have an adverse e(cid:407)ect on
the Group’s operations.
The Group invests in market leaders, across
a spread of geographies and sub-sectors,
which provide diversification in revenue
sources, macroeconomic risks and peer
groups.
The Directors seek to build a mutual
understanding of objectives between
the Group and its shareholders. Regular
communication is maintained with
all shareholders through the Group’s
announcements and its annual and half-
yearly reports. The Directors maintain regular
contact with institutional shareholders
through presentations and meetings held
throughout the year.
7.
The Group is
dependent on
a small number
of shareholders
who hold a large
proportion of the
total share capital
of the Group
8. As a publicly listed
entity, any group
or individual can
acquire shares in
the Company.
9.
The Group and its
portfolio companies
are subject to
competition risk
The actions or reputations of those shareholders are
outside the control of the Company but can impact on the
reputation of the Group by association.
The Board clearly communicates the culture
and ideals of the Group and actively seeks
to work with likeminded partners (where
possible).
The execution of the Group’s investment strategy
depends primarily on the ability of the Group to identify
opportunities to make investments and to capitalise on
these opportunities. A number of entities compete with
the Group for investment opportunities, including public
and private investment funds, commercial and investment
banks, commercial (cid:410)nance companies, business
development companies and operating companies acting
as strategic buyers.
The competitive pressures faced by the Group may
prevent it from identifying investments that are
consistent with its investment objectives or that
generate attractive returns for shareholders. The Group
may lose investment opportunities in the future if it
does not match investment prices, structures and terms
offered by competitors. Alternatively, the Group may
experience decreased rates of return and increased risks
of loss if it matches investment prices, structures and
terms offered by competitors.
Competition for investment opportunities
is based primarily on pricing, terms and
structure of a proposed investment,
certainty of execution and, in some cases,
brand or reputational presence.
The Group seeks to mitigate competition
risks by having diversified sources of
opportunities, by creating a strong brand
based on a reputation of successful
experiences with entrepreneurs and by
demonstrating ongoing financial discipline
in its investment decision process.
42
draperesprit.com
Principal risks
Annual Report 2019
10.
The Group may not
be able to retain and
attract investment
team members and
support sta(cid:407) with
the right skills and
experience
The industry, in which the Group operates, is a specialised
area and the Group requires highly quali(cid:410)ed and
experienced management and personnel. If the Group
does not succeed in retaining skilled personnel or is unable
to continue to attract all personnel necessary for the
development and operation of its business, it may not
be able to grow its business as anticipated or meet its
(cid:410)nancial objectives.
11.
Esprit Capital
Partners or Encore
Ventures cease to be
authorised by FCA
Should Esprit Capital and/or Encore Ventures cease to be
authorised and regulated by the FCA as a full scope UK
AIFM (in respect of Esprit Capital) or as a small authorised
UK AIFM (in respect of Encore Ventures) then they would
no longer be authorised to act as the investment manager
of the Company or the Encore Funds respectively or as the
UK AIFM to the Group.
12. UK future exit from
the EU may impact
on the Group
The terms, timescale and likelihood of the UK’s departure
from the EU are currently unknown. It could result in a
short-term UK recession and, particularly in a no deal
scenario, a signi(cid:410)cant fall in GDP, which would a(cid:407)ect
investor con(cid:410)dence and access to capital for both the
Group and its portfolio companies with a presence in the
UK. Brexit may also a(cid:407)ect the Group’s ability to make
investments into Europe, and expose the Group and its
portfolio companies to currency risk (a(cid:407)ecting valuations/
revenues), recruitment and retention challenges, and
regulatory changes.
13. Cyber security
incidents may a(cid:407)ect
the operations and
reputation of the
Group
A signi(cid:410)cant cyber security or information security breach
could result in (cid:410)nancial liabilities, reputational damage,
severe business disruption and/or the loss of business-
critical or commercially sensitive information.
The Group carries out regular market
comparisons for sta(cid:407) and Executive
remuneration. Senior Executives are
shareholders in the business and the Group
operates appropriate incentive programmes to
align individuals with the Group’s strategy over
the long term.
The Group encourages sta(cid:407) development and
inclusion through coaching and mentoring.
The Group ensures that Esprit Capital
and Encore Ventures fulfil their ongoing
requirements under FCA rules.
The Board continues to monitor Brexit
developments and consider their impact on
the Group.
The Company is dual listed on AIM in London
and Euronext Growth in Dublin, thereby
providing (cid:411)exibility to participate in European
investments going forward.
During the period, the Group entered into a
strategic partnership with Earlybird Digital
West, part of the German-originated
Earlybird VC (cid:410)rm, and made investments in
certain Earlybird funds, further increasing the
diversi(cid:410)cation of our investment portfolio
and improving our access to investment
opportunities in continental Europe.
We operate (cid:410)rewalls, anti-virus protection
systems and backup procedures to minimise
the risk of cyber security incidents and the
impact on our operations should an incident
occur.
We recently introduced Mimecast software to
enhance our email risk management systems,
with features including enhanced protection
against advanced cyber security threats
and regular phishing awareness tests to help
maintain a security minded culture.
The Group will continue to review its cyber
security and information security systems,
policies and procedures with the support of
our outsourced IT provider, and is seeking
to recruit an in-house Head of IT during the
coming year, which will improve our internal
expertise in this area.
draperesprit.com
43
Governance
Annual Report 2019
“The Directors share the view
that sound governance is
fundamental to the successful
growth of the business.”
Karen Slatford
Chairman
44
draperesprit.com
Governance
Annual Report 2019
Governance
draperesprit.com
45
Governance
Annual Report 2019
Board of Directors
Karen Slatford
Non-Executive Chairman
Age 62
Simon Christopher Cook
Chief Executive Officer
Age 50
Stuart Malcolm Chapman
Chief Operating Officer
Age 49
Karen Slatford has significant experience
of working in the global technology and
business arenas. She spent the majority of
her career working for Hewlett Packard,
where she was Vice President of Worldwide
Sales and Marketing.
In 2001, Karen began working with smaller
technology businesses. She is currently a
senior independent non-executive director
at both Micro Focus International plc
and accesso Technology Group PLC, and
Chairman of MYCOM OSI.
Karen holds a BA honours degree in
European Studies from Bath University and a
Diploma in Marketing.
Simon has been active in the UK venture
capital industry since 1995. Previously, Simon
was a partner with Cazenove and with
Elderstreet Investments and a director at 3i
in Cambridge.
Prior to establishing the Group with Simon
in 2006, Stuart was a Director of 3i Ventures
in London. Having joined 3i in 1992, he has
over 25 years’ venture capital experience in
Europe and the US.
He was a founding partner of 3i US, based in
Menlo Park, CA from 1999 until 2003. Stuart
was responsible for Esprit’s investments in
Lagan Technology (sold to Verint), Redkite
(sold to Nice) and Kiadis (IPO). Stuart
currently serves as a director or observer
with Conversocial, Displaydata, Graphcore,
Metalysis, Realeyes and Resolver.
Prior to 3i, Stuart was involved in software
and systems implementations for Midland
Bank. He is a graduate of Loughborough
University and currently serves on
the Strategic Advisory Board for the
Loughborough School of Business.
In 2006, he led the management buy-out
of Cazenove Private Equity and acquisition
of Prelude Ventures and he negotiated the
Group’s partnership with the Draper Venture
Network. Simon has invested in a number of
successful technology start-ups, including
Cambridge Silicon Radio (IPO), Virata (IPO),
Horizon Discovery (IPO), nCipher (IPO),
Lovefilm (sold to Amazon), Zeus (sold to
Riverbed) and KVS (sold to Veritas). Simon
currently serves as a director or observer
with Ledger, Perkbox, Pod Point, Revolut and
Trustpilot.
Prior to venture capital, Simon worked as
a strategy and IT consultant at KPMG,
where he established the Digital Media
strategy consulting practice, and as a
computer games developer, running his
own development company started at age
19. Simon is a graduate of the University
of Manchester Institute of Science and
Technology (“UMIST”) with a BSc in
Computation. He is a former member of the
EVCA Venture Platform group and was voted
VC Personality of the Year 2008.
46
draperesprit.com
Governance
Annual Report 2019
Board skills matrix
Equity Capital Markets
Venture Capital
Healthcare/Biotech
Corporate Finance and M&A
Proportion of directors with strong competency
Proportion of directors with experience
Strategy
Tech/Software
Finance & Accounting
Governance & Compliance
Grahame David Cook
Non-Executive Director
Age 60
Richard Fowler Pelly OBE
Non-Executive Director
Age 63
Ben Wilkinson
Chief Financial Officer
Age 38
Grahame Cook is an experienced FTSE
and AIM non-executive Director, with
extensive experience as an audit committee
chairman. With a background in banking,
where he has specialised in the life sciences,
pharma, and biotech sectors, Grahame has
over 20 years’ experience of M&A, equity
capital markets, and investor relations.
Grahame started his career at Arthur
Andersen, where he qualified as a chartered
accountant and worked within audit and
corporate investigations. Subsequent
positions include at UBS, where he was a
member of the global investment banking
management committee and global head
of equity advisory, and at WestLB Panmure,
where he was joint chief executive officer
and ran a €100m technology fund.
Grahame is currently a Non-Executive
Director of Horizon Discovery Plc,
Morphogenesis Inc, and Minoan Group plc
and has previously served on the board of
West Private Equity (now Horizon Capital).
Grahame holds a Double First Class honours
degree from the University of Oxford.
Richard is a non-executive director and
advisor in the area of micro, small and
medium-sized businesses. Up until April
2014, Richard was the chief executive of the
European Investment Fund (‘‘EIF’’), Europe’s
largest investor in venture capital funds.
Ben has been appointed to the Board with
effect from 4(cid:98)June 2019, having joined the
Group as CFO in 2016. In addition to his
responsibilities for the Group’s finance and
investor relations functions, Ben serves as a
member of the Investment Committee.
Before joining EIF in April 2008, Richard
was managing director of structured asset
finance at Lloyds TSB Bank in London from
2005 to 2007. From 1998 to 2005, he worked
for GE Capital, first as chairman and CEO
of Budapest Bank in Hungary and then
as CEO of UK Business Finance within GE
Commercial Finance.
Prior to his career at GE, Richard worked for
Barclays Bank in various functions in the UK
and in France from 1977 to 1997, including
business development, corporate finance,
structured finance and retail banking.
Richard holds an honours degree in
Psychology from Durham University, a
diploma from the Institute of Bankers and
obtained an MBA with distinction from
INSEAD Fontainebleau. In 2003, he was
awarded an OBE in the Queen’s Honours List
for Services to the community in Hungary.
Ben is an experienced leader of public
company finance teams having served for
five years as CFO of AIM-listed President
Energy PLC where he was responsible for all
financial aspects of the group. During his
time at President, Ben was a key part of
the Board that undertook investments into
Argentina and Paraguay and raised $175
million across several equity issuances with
shareholders such as IFC/World Bank and
significant UK institutional investors.
Ben is a Chartered Accountant, FCA, with
a background in M&A investment banking
from ABN Amro/RBS where he was involved
with multiple cross border transactions
and corporate financings, both debt
and equity. Ben is a graduate of Royal
Holloway, University of London with a BSc in
Economics.
draperesprit.com
47
Governance
Annual Report 2019
Chairman’s Corporate Governance
Overview
As Chairman, I am responsible for leading the Board and upholding high
standards of corporate governance throughout the Group, and particularly
at Board level. I am therefore pleased to introduce our Corporate
Governance Statement.
My colleagues share the view that sound
governance is fundamental to the successful
growth of the business. We continue
to apply the principles of the corporate
governance code for small and mid-size
quoted companies published by the Quoted
Companies Alliance, an updated version of
which was published in April 2018 (the “QCA
Code”). This Corporate Governance
Statement sets out how we apply the QCA
Code principles, and summarises both how
our Board and Committees operate, and
their key activities during the year.
Compliance with the QCA Code
The Board believes that it applies the
ten principles of the QCA Code, but
recognises the need to continue to review
and develop our governance practices and
disclosures in order to ensure they support
the growth and strategic progress of the
business and the effective application of the
principles going forwards. Our governance
structure provides a framework of
established and clearly articulated roles,
authority limits and controls, which allows
the executive team to focus on delivering
the investment strategy of the Group. These
systems are designed to support our
compliance with the QCA Code, the AIM
Rules, the Euronext Growth Rules and other
legal, regulatory and compliance
requirements, which apply to us.
Deliver Growth
The Board has collective responsibility for
setting the strategic aims and objectives of
the Group. Our strategy is articulated in the
Strategic Report on pages 14 to 15 and on
our website. The fundraisings, portfolio
investments and strategic partnership
that we have undertaken during the year
demonstrate how we have continued to
execute against our strategy and deliver
growth and scale in our portfolio, as well as
our own business, which we believe will
continue to drive long-term, sustainable
returns for our shareholders. The Board has
at least one dedicated strategy session each
year, and in determining strategy, and in the
course of implementing our strategic aims,
takes into account the expectations of the
Company’s shareholder base and its wider
stakeholder and social responsibilities.
The Board also has responsibility for
the Group’s internal control and risk
management systems. The Board regularly
reviews the risks faced and ensures the
mitigation strategies in place are effective
and appropriate to the Group’s operations.
More information on the principal risks faced
by the Group is set out on pages 41 to 43.
Dynamic Management
Framework
As Chairman, I consider the operation of
the Board as a whole, and the performance
of the Directors individually and regularly.
During the year, we conducted a detailed
Board performance evaluation process, as
described in further detail on page 51. The
results of the evaluation have highlighted
a number of areas of focus for the coming
year to improve the balance, composition
and effectiveness of the Board. These
included a recommendation to appoint the
CFO as a member of the Board (which we
have done, effective from 4 June 2019), a
review of the frequency of Board meetings
to ensure the most efficient use of our
time spent together, and the development
of a more robust approach to succession
planning in line with the growth of the
business.
The Company operates an open and
inclusive culture and this is reflected in the
way that the Board conducts itself. We
believe this makes a valuable contribution
to our ability to execute our strategy and
deliver value for our shareholders and other
stakeholders. The Non-Executive Directors
and I regularly attend the Company’s offices
and other Company events, and I frequently
draperesprit.com
“Recognising the
increasing focus
on environmental,
social & governance
(“ESG”) issues in
the investment
community, the
Board considered
and approved the
Company’s ESG
strategy during
the year.”
Karen Slatford
Chairman
48
Governance
Annual Report 2019
attend the Company’s weekly Investment
Committee meeting. With a relatively small
employee base, such interactions mean it
is fairly straightforward for the Board to
promote and assess the desired corporate
culture. Our open and inclusive approach is
important not just in the way we operate as
an internal team, but also in the hands-on
way in which our team supports the growth
of our investee companies. The Board
recognises the importance of retaining a
proactive focus on culture as the Company
grows, and in line with the outcomes of the
Board evaluation detailed on page 51, will be
continuing our focus on this area during the
coming year.
Build Trust
The Board recognises the importance of
understanding the expectations of our
shareholders, and a description of our
activity in this area is set out on page 51.
Investor relations is a standing item on
the Board’s agenda and we receive regular
feedback from the Executive team on their
discussions with shareholders and potential
investors. Recognising the increasing focus
on environmental, social and governance
(“ESG”) issues in the investment community,
the Board considered and approved the
Company’s ESG strategy during the year.
More detail is provided on page 51, with
the first steps being to ensure the ESG
credentials of our investee companies are
assessed and monitored effectively.
The Board will continue to monitor its
application of the QCA Code principles
on an ongoing basis in future, and ensure
that our corporate governance framework
continues to evolve in line with the strategic
development of the Group.
Composition of the Board
Including the Chairman, the Board currently
comprises six Directors, of whom three
are Executive Directors and three are
Non-Executive Directors. The Board has
determined that each of the Non-Executive
Directors are independent, and the
Company therefore complies with the QCA
Code with respect to the independence of
the Board. The skills and experience of the
Board are set out in their biographies and
the board skills matrix on pages 46 and 47.
Collectively, the Non-Executive Directors
bring an appropriate balance of functional
and sector skills and experience such that
they are able to provide constructive support
and challenge to the Executive Directors. The
Directors believe that between them, the
Board as a whole possesses the necessary
mix of experience, skills, personal qualities
and capabilities to deliver the strategy of the
Company for the benefit of its shareholders
over the medium to long-term.
The combined Remuneration and
Nomination Committee has responsibility
for succession planning at Board and Senior
Executive level and, consistent with the
outcomes of the Board evaluation detailed
on page 51, the Committee intends to
increase its focus on this area during the
coming years as the Board and Senior
Executive team matures.
The Board recognises the benefits of
diversity, including as to gender, whilst
ultimately seeking to appoint the best
candidate for the role based on objective
criteria when considering new Board and
Senior Executive appointments. The Board
currently consists of one female and five
male Directors.
The Non-Executive Directors each attend
external events and seminars to receive
updates on matters such as financial
reporting requirements and corporate
governance. The Company Secretary also
ensures that the Board is updated as to
developments to corporate governance
practice and forthcoming changes to
legislation or regulation, which may impact
the Company.
How the Board operates
The Directors are responsible for the
determination of the Company’s investment
policy and strategy and have overall
responsibility for the Company’s activities,
including the review of investment activity
and performance. The operation of the
Board is documented in a formal schedule
of matters reserved for its approval. This
is reviewed annually, and includes matters
relating to:
– the Group’s strategic aims, objectives
and investment strategy.
– the approval of any single investment
greater than £10.0 million or the sale
of any assets where the proceeds
will be greater than 10% of market
capitalisation.
– the approval of any investment decision
where a conflict of interest exists.
– structure and capital of the Group.
– financial reporting, financial controls and
dividend policy and approving annual
budgets.
– internal control and risk management
(including the Group’s appetite for risk).
– the approval of significant contracts and
expenditure.
– appointments to the Board and its
Committees.
Day-to-day management of the Group is
the responsibility of the CEO, COO, CFO and
the Executive Management team.
Board meetings
The Board met formally ten times during the
year. Board meetings may also be convened
on an ad-hoc basis from time to time in
order to consider specific corporate activity,
and in the financial year ended 31 March
2019 the Board met on two such occasions
in connection with capital raising and
acquisition opportunities.
The Directors are expected to attend all
meetings of the Board and the Committees
on which they sit. The Executive Directors
are required to devote their full time and
attention to the business of the Company
and the Non-Executive Directors are
expected to devote sufficient time to the
Company to enable them to fulfil their
duties as Directors. The Board is satisfied
that the Chairman and each of the Non-
Executive Directors is able to devote
sufficient time to the business, and they
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49
Governance
Annual Report 2019
Chairman’s Corporate Governance
Overview continued
Internal controls
The Board has ultimate responsibility for the
Group’s system of internal controls and for
the ongoing review of their effectiveness.
Systems of internal control can only identify
and manage risks and not eliminate them
entirely. As a result, such controls cannot
provide an absolute assurance against
misstatement or loss. The Board considers
that the internal controls, which have
been established and implemented, are
appropriate for the size, complexity and risk
profile of the Group.
The main elements of the Group’s internal
control system include:
– Close management of the day-to-day
activities of the Group by the Executive
Directors.
– An organisational structure with defined
levels of responsibility.
– Specified investment approval levels and
financial authority limits.
– An annual budgeting process, which is
approved by the Board.
– Monthly management reporting against
agreed KPIs (KPIs are further outlined on
page 40 of the Strategic Report).
– Financial controls to ensure that the
assets of the Group are safeguarded and
that appropriate accounting records are
maintained.
The Board continues to review the system of
internal controls to ensure it is fit for purpose
and appropriate for the size and nature of
the Company’s operations and resources.
each maintain open communication with
the Executive Directors and the Executive
Management team between the formal
Board meetings.
The table below shows Directors’ attendance
at formal scheduled Board and Committee
meetings during the year.
Board
(out of 10
meetings)
Audit
Committee
(out of 3
meetings)
Remuneration
and
Nomination
Committee
(out of 4
meetings)
10
10
10
10
10
3
N/A
N/A
3
3
4
N/A
N/A
4
4
Director
Karen Slatford
Simon Cook
Stuart Chapman
Grahame Cook
Richard Pelly
Following the annual Board performance
evaluation, described in more detail below, it
has been agreed that the number of formal
scheduled Board meetings will reduce to six
per year. The Board will continue to meet on
an ad-hoc basis when necessary between
the scheduled meetings.
Board activity during the year
The Board has an agreed schedule of
activity covering regular business updates
and financial, operational and governance
matters. Each Board Committee has also
compiled a schedule of work to ensure
that all areas for which the Board has
overall responsibility are addressed and
reviewed during the course of the year.
These schedules of activity are reviewed at
least annually to ensure that key matters
and developments are discussed at the
appropriate time.
Board and Committee papers are
distributed to Directors in advance of the
meetings, and each meeting is minuted by
the Company Secretary. Every Director is
aware of their right to have any concerns
minuted.
Board Committees
The Board has delegated specific
responsibilities to the Audit Committee
and the combined Remuneration and
Nomination Committee, details of which
are set out in the respective reports of the
Committees below.
Each Committee has written terms of
reference setting out its duties, authority
and reporting responsibilities. The terms of
reference of each Committee were reviewed
by the Committees and the Board during
the year, and these will continue to be
reviewed on an annual basis going forward
to ensure they remain appropriate and
reflect any changes in legislation, regulation
or best practice. The terms of reference
are available on the Company’s website:
https://draperesprit.com/investors/plc.
External advisers
The Board seeks advice and guidance on
various matters from its Nomad (Numis
Securities), Euronext Growth adviser
(Goodbody Stockbrokers), and its lawyers
Gowling WLG (UK law) and Maples and
Calder (Irish law). The Board also uses the
services of an external company secretarial
provider, Prism Cosec and is advised on
compliance matters by IQ-EQ.
Conflicts of interest
At each meeting of the Board or its
Committees, the Directors are required to
declare any interests in the matters to be
discussed and are regularly reminded of
their duty to notify any actual or potential
conflicts of interest. The Company’s Articles
of Association provide for the Board to
authorise any actual or potential conflicts of
interest if deemed appropriate to do so.
The Group also has a long established
conflicts of interest policy, under which
employees and Executive Directors are
prohibited from investing in companies that
fall within the target investment focus of the
Group, and which requires Non-Executive
Directors to seek approval from the Group
Compliance Officer, Stuart Chapman, if
they wish to invest in companies falling
within the mandate of the Group.
50
draperesprit.com
Governance
Annual Report 2019
Board is also in attendance and available
for shareholder questions. Investor relations
are a standing item on the Board’s agenda,
and the executive team routinely updates
the Board as to outcomes of their meetings
with shareholders and potential investors.
These initiatives help us to understand
shareholders’ views and to address their
concerns.
Due to the Company’s relatively small
employee base, the Directors are able to
engage directly with employees, and the
Non-Executive Directors have an open
invitation to attend the Company’s weekly
Investment Committee meetings.
The Company’s other key stakeholders are
our investee companies, with which we
have regular contact, in particular where
we have a seat as a director or Board
observer of that company. We host an
annual CEO day for our investee companies,
to which our Directors, shareholders and
key advisers are also invited. This forms part
of a wider events programme targeted
towards our investee companies and early
stage companies. For our portfolio
companies, we hold an annual CEO
conference in Silicon Valley via the Draper
Venture Network to connect them to
corporates, partners and investors globally.
We also frequently host networking events
for the C-Suite, including a recent CFO
dinner focusing on US expansion and CMO
breakfast focusing on scaling marketing
teams. For the wider community, we
regularly hold thematic events across the
regions and sectors we focus on. In addition
to enabling our investee companies and
wider partners to meet each other and gain
valuable insight, these events also give us
regular opportunities to engage with these
communities and thereby strengthen our
relationships with them.
Environmental & Social
Governance (“ESG”)
During the year, the Board considered and
approved the Group’s ESG strategy, with
the intention that the Board’s oversight of
ESG issues will increase over time. The initial
objectives of the policy include the approval
of a responsible investment policy to ensure
that the ESG credentials of the companies
in which we invest are assessed as part of
our due diligence process, and to seek a
commitment from investee companies to
regularly consider ESG matters as part of
their standing board agenda. We also signed
up to the UN Principles of Responsible
Investment post period end.
The Board also considered the Company’s
own ESG risks during the year, and more
information relating to such risks is set out
in the risks and uncertainties section on
page(cid:98)41.
Annual General Meeting
The Annual General Meeting will take place
at 11.00 a.m. on 24 July 2019 at the offices
of Gowling WLG (UK) LLP, 4 More London
Riverside, London SE1 2AU. The Notice of the
Annual General Meeting and the ordinary
and special resolutions to be put to the
meeting are included at the end of this
Annual Report.
Shareholders will have an opportunity
to raise questions with the Board at the
Group’s Annual General Meeting.
Karen Slatford
Chairman
Board evaluation
The Board conducted a formal performance
evaluation process during the year, building
on the previous Board evaluation, which
took place in March 2018. The process was
carried out by way of detailed questionnaires
completed by each member of the Board,
covering topics such as the composition
of the Board, the quality and timeliness
of information provided, relationships
between the Board, shareholders,
employees and other stakeholders, and
succession planning. The responses were
collated by the Chairman who presented a
summary of the results to the Board for
discussion at its meeting in February 2019.
As a result of that open follow-up discussion,
the Board agreed a number of specific
actions to take forward during 2019 in order
to improve its efficiency and effectiveness.
These included:
– Reducing the number of formal Board
meetings to six per year with extended
time so as to allow for more focused and
detailed discussion at each meeting.
– Appointing the CFO as a member of the
Board (which we have done, effective
from 4 June 2019).
– Increasing the Remuneration and
Nomination Committee’s focus on
succession planning at Board and Senior
Executive level.
– Continuing to ensure that the Company’s
culture is properly articulated, understood
and embedded across the business.
Relations with shareholders
and stakeholders
Regular communication with institutional
shareholders is maintained through
individual meetings with the Executive
Directors, particularly following the
publication of interim and full-year results.
During the year, the Chairman also wrote
to the Company’s largest investors, and
attended meetings with significant
shareholders. The Board also encourages
shareholders to attend and vote at the
Company’s General Meetings, at which the
draperesprit.com
51
Governance
Annual Report 2019
Audit Committee Report
On behalf of the Board, I am pleased to
present the Audit Committee Report for the
year ended 31 March 2019.
The Audit Committee is responsible for
ensuring that the financial performance
of the Group is properly reported on and
monitored. Its role includes monitoring
the integrity of the Group’s financial
statements, reviewing significant financial
reporting issues, reviewing the effectiveness
of the Company’s internal control and
risk management systems and overseeing
the relationship with the external auditors
(including advising on their appointment,
agreeing the scope of the audit and
reviewing the audit findings). It is also
responsible for establishing, monitoring
and reviewing procedures and controls for
ensuring compliance with the AIM Rules and
Euronext Growth Rules.
Members of the Audit
Committee
The Committee consists of three
independent Non-Executive Directors:
Grahame Cook (as Chairman of the
Committee), Karen Slatford and Richard
Pelly. The Board is satisfied that Grahame
Cook, who is a qualified Chartered
Accountant and an experienced Non-
Executive Director and audit committee
chair, has recent and relevant financial
experience.
The Audit Committee met three times
during the year (and on one occasion
since the year-end) and going forward will
continue to meet at least three times per
year in future at appropriate times in the
reporting and audit cycle and otherwise as
required. The Audit Committee also meets
frequently with the Company’s external
auditors.
Duties
The duties of the Audit Committee are
set out in its terms of reference, which are
available on request from the Company
Secretary or on the Company’s website:
https://draperesprit.com/investors/plc.
The(cid:98)terms of reference were reviewed by the
Committee during the year, with no changes
proposed. The main items of business
considered by the Audit Committee during
the year included:
– Running a process to tender the external
audit contract.
– Review of the risk management and
internal control systems.
– Review and approval of the interim
financial statements and the external
auditor’s report thereon.
– Review of the year-end audit plan, and
consideration of the scope of the audit
and the external auditor’s fees.
– Review of the Annual Report and financial
statements, including consideration of
the significant accounting issues relating
to the financial statements and the going
concern review.
– Consideration of the external audit report
and management representation letter.
– Meeting with the external auditor without
management present.
– Assessment of the need for an internal
audit function.
– Review of whistleblowing arrangements.
– Review of terms of reference.
External Audit Tender
During the year, the Audit Committee
agreed and led a process to tender the
external audit contract. The tender process
consisted of written submissions followed
by tendering firms presenting to the Audit
Committee Chair and CFO. Following this
process, the Audit Committee approved the
appointment of PricewaterhouseCoopers
LLP (“PwC”) as the Company’s external
auditor.
Role of the external auditor
The Audit Committee is responsible for
monitoring the relationship with the external
auditor, PwC, in order to ensure that the
auditor’s independence and objectivity are
maintained. As part of this responsibility,
the Audit Committee reviews the provision
of non-audit services by the external auditor
and the Audit Committee Chairman is
consulted by management prior to the
external auditor being engaged to provide
any such non-audit services. The breakdown
of fees between audit and non- audit
services is provided in Note 8.
Having reviewed the auditor’s independence
and performance, the Audit Committee has
recommended to the Board that a resolution
to re-appoint PwC as the Company’s auditor
be proposed at the forthcoming Annual
General Meeting.
Audit process
The external auditor prepares an audit
plan for its review of the full-year
financial statements, and the audit plan
is reviewed and agreed in advance by
the Audit Committee. Prior to approval
of the financial statements, the external
auditor presents its findings to the Audit
Committee, highlighting areas of significant
financial judgement for discussion.
Internal Audit
The Audit Committee has again considered
the need for an internal audit function
during the year and continues to be of the
view that, given the size and nature of the
Group’s operations and finance team, there
is no current requirement to establish a
separate internal audit function.
52
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Governance
Annual Report 2019
Risk management and internal
controls
As described in the Corporate Governance
Report on pages 48 to 51, the Group has
established a system of risk management
and internal controls. The Audit Committee
is responsible for reviewing the systems
of risk management and internal controls
and has reviewed both the risk register and
management’s progress in implementing
and maintaining such control systems
during the year. The Committee is satisfied
that the internal control systems, which
have been established, are operating
effectively.
Share dealing, anti-bribery and
whistleblowing
The Group has adopted a share dealing code
in conformity with the requirements of Rule
21 of the AIM Rules. All employees, including
new joiners, are required to agree to comply
with the code. The Group has also adopted
anti-bribery and whistleblowing policies,
which are included in every employee’s staff
handbook, as well as systems and controls
to ensure compliance with those policies.
The Group operates an open and inclusive
culture and employees are encouraged to
speak up if they have any concerns. The
aim of such policies is to ensure that all
employees observe ethical behaviours and
bring matters, which cause them concern to
the attention of either the Executive or
Non-Executive Directors.
Grahame Cook
Chairman of the Audit Committee
4(cid:98)June 2019
Significant issues considered
in relation to the Financial
Statements
Significant issues and accounting
judgements are identified by the finance
team and the external audit process and
then reviewed by the Audit Committee. The
significant issues considered by the Audit
Committee in respect of the year ended
31(cid:98)March 2019 are set out below:
Significant issue/
accounting
judgement identified
How it was
addressed
Accounting treatment
of acquisition of Esprit
Capital Partners LLP in
June 2016
Accounting treatment
of fair value of unlisted
securities
During the year, PwC
considered with the
Audit Committee the
underlying accounting
treatment of the
Company’s acquisition
of Esprit Capital
Partners LLP in June
2016 in accordance
with IFRS(cid:98)3 Business
Combinations.
Under advice, the
Audit Committee
agreed that it was
appropriate to reduce
the goodwill recognised
on the consolidated
statement of (cid:410)nancial
position by £10.8 million
to £9.7 million.
The Audit Committee
reviewed the fair
value of unlisted
securities established
with reference to the
International Private
Equity and Venture
Capital Valuation
Guidelines (“IPEV
Guidelines”) by
management. The
Audit Committee
agreed that
management’s
approach was
appropriate and was
satis(cid:410)ed with the
fair value recognised
as at 31 March 2019
in respect of these
unlisted securities.
draperesprit.com
53
Governance
Annual Report 2019
Remuneration and
Nomination Committee Report
I am pleased to present our Remuneration
and Nomination Committee Report, which
summarises the work of the Remuneration
and Nomination Committee, as well as the
remuneration policy and remuneration, paid
to Directors during the year. This report has
been included in accordance with the QCA
Code.
Remuneration and Nomination
Committee
The members of the combined
Remuneration and Nomination Committee
(the “Committee”) are Richard Pelly
(Chairman of the Committee), Grahame
Cook and Karen Slatford, all of whom are
independent Non-Executive Directors of the
Company.
The Committee operates under terms of
reference, which are reviewed annually and
approved by the Board. The Committee’s
core responsibilities include:
–
–
determining the policy for the
remuneration of the Chairman and
Executive Directors and recommending
the total remuneration packages
(including bonuses, incentive payments
and share options or other awards) for
those individuals; and identifying and
nominating members of the Board and
recommending the composition of each
Committee of
the Board (including the Chair of each
Committee).
The Committee met on four occasions
during the year under review and has met
once since the year-end. The Committee will
meet at least twice per year going forward.
The activity of the Committee during
the year was predominately focused on
remuneration matters, including approving
Executive Director allocations under the
Carried Interest plan and awards of options
under the Company Share Option Plan,
approving bonus payments to the Executive
Directors following the assessment of
performance against agreed financial Key
Performance Indicators, and approving
the performance measures for the 2019/20
annual bonus. The bonus amounts paid in
respect of the year ended 31 March 2019 are
set out in the table on page 56.
The Committee also approved a 25% salary
increase for the CEO and COO. As a result
of these changes, which are effective from
1 April 2019, the CEO’s annual salary will
be £348,000 and the COO’s salary will be
£289,000. These salary increases result
from a thorough benchmarking exercise
undertaken by an external consultant on
the instructions of the Committee, which
revealed that there had been a market shift
in compensation and that we had fallen
behind. It was determined that a significant
increase was appropriate for the CEO and
COO in order to ensure remuneration is
in line with the market and recognise the
Group’s continued increase in value as
demonstrated by the 106% increase in
the Group’s overall net assets during the
year. It has been agreed that there will
be no further review of Executive Director
remuneration for another two years. In the
coming year, the Committee intends to
appoint an external consultant to advise on
remuneration matters on an ongoing basis.
With respect to its nomination
responsibilities, there have been no
appointments to the Board during the
year. Further to the results of the Board
performance evaluation, Ben Wilkinson, who
joined the Group as CFO in 2016, has been
appointed to the Board with effect from
4(cid:98)June 2019, and the Committee intends to
increase its focus on succession planning in
the coming years as the Board and Senior
Executive team matures.
Remuneration policy
The objective of the Company’s
remuneration policy is to attract, motivate
and retain high calibre, qualified executives
with the necessary skills and experience
in order for the Company to achieve its
strategic objectives. The Directors also
recognise the importance of ensuring that
employees are incentivised and identify
closely with the success of the Company.
Accordingly, the Committee’s aim is to
provide a framework for remuneration,
which creates an appropriate balance
between fixed and performance-related
elements.
It is the Committee’s intention that
performance-related remuneration is linked
to the achievement of objectives, which are
closely aligned with shareholders’ interests
over the medium term.
The main elements of the remuneration
package for Executive Directors are:
– Base salary.
– Performance-related annual bonus.
– Other benefits (including life and health
insurance).
– Participation in the Company’s carried
interest plans.
– Participation in the Company’s Share
Option Plan.
Executive Directors’ service
contracts
The Executive Directors are appointed
under service contracts, which are not for a
fixed duration and are terminable upon six
months’ notice by either party.
Non-Executive Directors
Each of the Non-Executive Directors is
appointed under a letter of appointment
with the Company. Subject to their re-
election by shareholders, the initial term
of appointment for each Non-Executive
Director is three years from Admission to
AIM, and their appointments are terminable
upon three months’ notice by either party.
The Non-Executive Directors’ fees are
determined by the Board, subject to the
limit set out in the Company’s Articles of
Association. There have been no changes
to Non-Executive Directors’ fees during the
year.
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Governance
Annual Report 2019
The Draper Esprit plc Share
Option Plan (“CSOP”)
The Committee is responsible for granting
awards of options under the CSOP, which
was adopted by the Company on 1 August
2016. All Executive Directors and employees
are eligible to participate in the CSOP.
The CSOP comprises two parts. Options
granted under the first part are intended to
be qualifying CSOP Options under the CSOP
Code set out in Schedule 4 to the Income
Tax (Earnings and Pensions) Act 2003. This
means that options granted under that part
are subject to capital gains tax treatment.
Options granted under the second part are
not tax-favoured options. The CSOP Rules
specify that no options may be granted
more than ten years after its adoption,
and that the number of ordinary shares in
the Company over which options may be
granted on any date is limited so that the
total number of ordinary shares issued and
issuable in respect of options granted in
any ten-year period under the CSOP and
any other employees’ share scheme of the
Company will be restricted to 5% of the
issued ordinary shares from time to time.
Following successful capital raisings in
June 2018 and February 2019 (raising gross
proceeds of £115 million and £100 million
respectively), the Committee approved
grants to the Executive Directors (including
Ben Wilkinson) of options under the CSOP
over a total of 534,300 ordinary shares
on 30 July 2018 at an exercise price of 492
pence per share, and over a total of 535,302
ordinary shares on 12 February 2019 at an
exercise price of 530 pence per share. The
options have a performance condition of
an 8% per annum share price hurdle and,
subject to continued employment, are
exercisable three years after, and within ten
years of, the date of grant.
Carried interest plan
The Company has established carried
interest plans for the Executive Directors,
other members of the investment team
and certain other employees (together,
the ‘‘Plan Participants’’) in respect of any
investments and follow-on investments
made from Admission. Each carried interest
plan operates in respect of investments
made during a 24-month period and related
follow-on investments made for a further
36-month period.
Subject to certain exceptions, Plan
Participants will receive, in aggregate, 15%
of the net realised cash profits from the
investments and follow-on investments
made over the relevant period once the
Company has received an aggregate
annualised 10% realised return on
investments and follow-on investments
made during the relevant period. The Plan
Participants’ return is subject to a ‘‘catch-
up’’ in their favour. Plan Participants’ carried
interests vest over five years for each carried
interest plan and are subject to good and
bad leaver provisions. Any unvested carried
interest resulting from a Plan Participant
becoming a leaver can be reallocated by the
Remuneration and Nomination Committee.
Annual bonus
The 2019/20 annual bonus for Executive
Directors will be assessed against financial
KPIs. Challenging targets have been set,
with 50% of the annual bonus potential (i.e.
30% of base salary) earned for achieving
threshold performance, increasing on a
straight-line basis to 80% (48% of base
salary) for achieving target performance
then increasing on a straight-line basis
to 120% of bonus potential (72% of base
salary) for achieving stretch levels of
performance. Actual performance targets
are not disclosed as they are considered to
be commercially sensitive at this time.
The remuneration policy for 2019/20 will operate as follows:
Executive
Simon Cook
Stuart Chapman
Ben Wilkinson
Non-Executive
Karen Slatford
Grahame Cook
Richard Pelly
Role
Chief Executive O(cid:408)cer
Chief Operations O(cid:408)cer
Chief Financial O(cid:408)cer
Chairman
Chairman of Audit Committee
Chairman of Remuneration and Nomination
Committee
Basic salary/fee
£’000s
Maximum bonus
potential
348
289
274
80
40
40
60%
60%
60%
–
–
–
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55
Governance
Annual Report 2019
Remuneration and
Nomination Committee Report continued
Statutory information
The following information includes disclosures required by the AIM Rules and UK company law in respect of Directors who served during the
year to 31(cid:98)March 2019.
Directors’ remuneration (audited)
The following table summarises the gross aggregate remuneration of the Directors who served during the year to 31 March 2019:
Basic salary/fees
£’000s
Pension
contributions
£’000s
Taxable bene(cid:410)ts
£’000s
Performance–
related bonus
£’000s
Year end 2018/19
Total
£’000s
Period ended
2017/18 Total
£’000s
Executive Directors
Simon Cook
Stuart Chapman
Non-Executive Directors
Karen Slatford
Grahame Cook
Richard Pelly
Total
278
231
80
40
40
669
42
35
–
–
–
77
17
11
–
–
–
28
166
138
–
–
–
304
503
415
80
40
40
1,078
466
347
80
40
40
973
Share options (audited)
The individual interests of the Executive Directors who served during the year under the CSOP are as follows:
Simon Cook
Stuart Chapman
Date of grant
Number of CSOP
options
28/11/16
28/11/17
30/07/18
12/02/19
28/11/16
28/11/17
30/07/18
12/02/19
8,450
–
–
–
8,450
–
–
–
Number of
unapproved
options
226,385
234,835
178,100*
178,434 *
226,385
234,835
178,100*
178,434*
First exercise
date
Exercise price
28/11/19
28/11/20
30/07/21
12/02/22
28/11/19
28/11/20
30/07/20
12/02/21
£3.55
£3.87
£4.92
£5.30
£3.55
£3.87
£4.92
£5.30
* Options subject to a performance condition of an 8% per annum share price hurdle.
The details of the CSOP are set out in Note 13 to the consolidated financial statements.
Directors’ share interests (audited)
The interests of the Directors who served in the year and who held an interest in the ordinary shares of the Company are as follows:
Simon Cook
Stuart Chapman
None of the Non-Executive Directors currently holds shares in the Company.
Richard Pelly
Chairman of the Remuneration and Nomination Committee 4(cid:98)June 2019
Number of
ordinary shares
as at 31 March
2019
Number of
ordinary shares
as at 31 March
2018
1,619,306
1,619,306
2,119,306
2,119,306
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Governance
Annual Report 2019
Directors’ Report
The Directors present their report together
with the audited financial statements for
the year ended 31 March 2019.
Results and dividends
The Group’s profit for the year was
£111.2(cid:98)million (year ended 31 March 2018
(restated): £60.9(cid:98)million). In accordance
with our dividend policy as stated in our
Admission document, the Directors do not
recommend the payment of a dividend.
Future developments
Details of future developments and events
that have occurred after the balance sheet
date can be found in the Strategic Report
starting on page 2.
Review of business
The Chairman’s Introduction on page 3
and the Strategic Report, comprising the
inside cover page to page 43, provide a
review of the business, the Group’s
performance for the year ended 31 March
2019, key performance indicators and an
indication of future developments and
risks, and form part of this Directors’
Report.
Directors
The Directors of the Company who held
office during the year were:
Invesco Asset Management
National Treasury Management Agency
Merian Global Investors
British Business Bank
Canaccord Genuity Wealth Management
T Rowe Price Global Investments
Brunei Investment Agency
Baillie Gi(cid:407)ord
Blackrock
draperesprit.com
Stuart Chapman
Grahame Cook
Simon Cook
Richard Pelly
Karen Slatford
Brief biographical details for each of the
Directors are given on pages 46 and 47.
Directors’ interests
A table showing the interests of the
Directors in the share capital of Draper
Esprit plc is set out in the Remuneration and
Nomination Committee Report on page(cid:98)56.
Directors’ indemnity provisions
As permitted by the Articles of Association,
the Directors have the benefit of an
indemnity, which is a qualifying third
party indemnity provision as defined by
Section(cid:98)234 of the Companies Act 2006.
The indemnity was in force throughout the
financial period and at the date of approval
of the financial statements.
The Company has purchased and
maintained throughout the financial period
Directors’ and Officers’ liability insurance in
respect of itself and its Directors.
Political donations
The Company made no political donations
during the year up to 31 March 2019.
Financial instruments
The financial risk management objectives of
the Group, including details of the exposure
of the Company and its subsidiaries to
financial risks including credit risk, interest
rate risk and currency risk, are provided in
Note(cid:98)27 of the financial statements.
Share capital structure
At 31 March 2019, the Company’s issued
share capital was £1,179,254.70 (2018:
£716,117.73) divided into 117,925,470 (2018:
71,611,773) ordinary shares of £0.01 each.
Details of the movements in issued share
capital in the year are set out in Note 22 to
the financial statements.
The holders of ordinary shares are entitled
to one vote per share at meetings of the
Company. There are no restrictions on the
transfer of shares.
Substantial shareholdings
As at 31 March 2019, the Group had been
notified, in accordance with Chapter 5 of
the Disclosure and Transparency Rules,
of the following holdings of significant
shareholders in the Company:
Number of
ordinary shares
% of total
voting rights
26,788,486
14,004,502
10,725,050
7,142,857
6,875,065
6,722,000
4,761,904
4,462,879
3,878,343
22.72
11.88
9.09
6.06
5.83
5.70
4.04
3.78
3.29
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Governance
Annual Report 2019
Directors’ Report continued
Disclosure of information to
auditors
As far as the Directors are aware, there
is no relevant audit information of which
the Group’s auditor is unaware, and each
Director has taken all reasonable steps that
he or she ought to have taken as a Director
in order to make himself or herself aware of
any relevant audit information to establish
that the Group’s auditors are aware of that
information.
Going concern
After making enquiries, the Directors have
a reasonable expectation that the Group
has adequate resources to continue in
operational existence for the foreseeable
future. For this reason, they continue to
adopt the going concern basis in preparing
the financial statements.
Auditor
PwC has indicated its willingness to continue
in office as auditor and a resolution to
re-appoint them will be proposed at the
forthcoming Annual General Meeting.
Annual General Meeting
The Annual General Meeting will be held
at 11.00 a.m. on 24 July 2019 at the offices
of Gowling WLG (UK) LLP, 4 More London
Riverside, London SE1 2AU. The Notice of the
Annual General Meeting and the ordinary
and special resolutions to be put to the
meeting are included at the end of this
Annual Report and financial statements.
Employees
Employees are encouraged to be involved
in decision-making processes and are
provided with information on the financial
and economic factors affecting the Group’s
performance, through team meetings,
updates from the Chief Executive Officer
and via an open and inclusive culture.
Applications for employment by disabled
persons are always fully considered, bearing
in mind the aptitudes of the applicant
concerned. In the event of a member of
staff becoming disabled, every effort is
made to ensure that their employment
within the Group continue and that
workspace and other modifications are
made as appropriate. It is the policy of the
Group that the training, career development
and promotion of a disabled person should,
as far as possible, be identical to that of a
person who does not suffer from a disability.
The Directors’ Report was approved by the
Board on 4(cid:98)June 2019 and is signed on its
behalf by:
Stuart Chapman
Chief Operating Officer
4 June 2019
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Governance
Annual Report 2019
Directors’ Responsibilities Statement
The Directors are responsible for preparing
the Annual Report and the financial
statements in accordance with applicable
law and regulation.
Company Law requires the Directors
to prepare financial statements for
each financial year. Under that Law,
the Directors have prepared the Group
financial statements in accordance with
International Financial Reporting Standards
(IFRSs) as adopted by the European Union
and the Company financial statements in
accordance with United Kingdom Generally
Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising
FRS 101 ‘Reduced Disclosure Framework’,
and applicable law).
Under Company Law, the Directors must not
approve the financial statements unless they
are satisfied that they give a true and fair
view of the state of affairs and profit or loss
of the Group and Company for that period.
In preparing the Group financial statements,
the Directors are required to:
– select suitable accounting policies and
then apply them consistently;
– make judgements and accounting
estimates that are reasonable and
prudent;
– state whether applicable IFRSs as
adopted by the European Union have
been followed, subject to any material
departures disclosed and explained in the
financial statements;
– prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the Group
will continue in business.
In preparing the Company financial
statements, the Directors are required to:
establish that the Group and Company’s
auditors are aware of that information.
To the best of their knowledge, each Director
in office at the date of approval of the
Directors’ Report further confirms that:
– the Group financial statements, prepared
in accordance with IFRSs as adopted
by the European Union, give a true
and fair view of the assets, liabilities,
financial position and profit or loss of the
Company and the undertakings included
in the consolidation taken as a whole;
and
– the Strategic Report and Directors’
Report include a fair review of the
development and performance of
the business and the position of the
Company and the undertakings included
in the consolidation taken as a whole,
together with a description of the
principal risks and uncertainties that they
face.
The Directors’ Responsibilities Statement
was approved by the Board on 4(cid:98)June 2019
and signed on its behalf by:
Stuart Chapman
Chief Operating Officer
4(cid:98) June 2019
– select suitable accounting policies and
then apply them consistently;
– make judgements and accounting
estimates that are reasonable and
prudent;
– state whether applicable UK Accounting
Standards, comprising FSR 101, have
been followed, subject to any material
departures disclosed and explained in the
financial statements;
– prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group
and Company’s transactions and disclose
with reasonable accuracy at any time
the financial position of the Group and
Company and enable them to ensure
that the financial statements comply
with the Companies Act 2006. They are
also responsible for safeguarding the
assets of the Group and Company and
hence for taking reasonable steps for the
prevention and detection of fraud and
other irregularities. The Directors are further
responsible for ensuring that the Annual
Report is made available on the Company’s
website and for the maintenance and
integrity of the Company’s website.
Legislation in the United Kingdom governing
the preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
Each Director in office at the date of
approval of the Directors’ Report confirms
that:
– so far as they are aware, there is no
relevant audit information of which
the Group and Company’s auditors are
unaware; and
– they have taken all the steps that they
ought to have taken as a Director in
order to make themselves aware of
any relevant audit information and to
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59
Financials
Welcome
Annual Report 2019
Annual Report 2019
60
60
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Financials
Welcome
Annual Report 2019
Annual Report 2019
Financials
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61
Financial Statements
Annual Report 2019
Independent Auditors' Report
to the Members of Draper Esprit plc
Report on the Audit of the Financial Statements
Opinion
In our opinion:
· Draper Esprit plc’s Group financial statements and Company financial statements (the “financial statements”) give a true and fair view of
the state of the Group’s and of the Company’s affairs as at 31 March 2019 and of the Group’s profit and cash flows for the year then ended;
· the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the European Union;
· the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law); and
· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Draper Esprit plc Annual Report (the “Annual Report”), which comprise: the
Consolidated and Company Statements of Financial Position as at 31 March 2019; the Consolidated Statement of Comprehensive Income,
the Consolidated Statement of Cash Flows, and the Consolidated and Company Statements of Changes in Equity for the year then ended;
and the notes to the financial statements, which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Our audit approach
Overview
· Overall Group materiality: £12,371,000 based on 2% of net assets.
Materiality
Income line items: £1,126,000 based on 10% of Total operating costs.
· Specific Group materiality applied to certain Consolidated Statement of Comprehensive
Audit scope
Key audit
matters
· Overall Company materiality: £11,765,000 based on 2% of net assets.
· We tailored the scope of our audit to ensure that we performed enough work to be able to give
an opinion on the financial statements as a whole. The Group financial statements are prepared
on a consolidated basis, and the audit team carries out an audit over the consolidated Group
balances in support of the Group audit opinion.
· Valuation of unquoted investments (Group and Company).
· Carrying value of goodwill (Group).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In
particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting estimates that
involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of
management override of internal controls, including evaluating whether there was evidence of bias by the Directors that represented a risk
of material misstatement due to fraud.
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Financial Statements
Annual Report 2019
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Valuation of unquoted investments (Group and Company)
Refer to pages 77 and 78 (Significant accounting policies), pages
81 and 82 (Critical accounting estimates and judgments), pages
88, 95, and 103 (Notes) and page 53 (Audit Committee Report).
The fair value of unquoted investments is £562m (Group) and
£533m (Company) as at 31 March 2019. This is an area of focus
due to the fact that unquoted investments (“investee entities” or
“investment”) do not have readily determinable prices. The
valuation methodologies primarily used by the Group are the ‘price
of recent investment’ and ‘revenue multiple’ approaches.
The price of a recent investment approach, resulting from an
orderly transaction in an investee entity, generally represents Fair
Value as of the transaction date.
The revenue multiple approach is a comparable analysis method
that seeks to value similar companies using the same financial
metrics to generate a fair value. Due to the stage of the investee
entities a revenue based multiple metric is used, with a discount
based on individual investee entities characteristics applied to the
public comparatives.
Whilst the underlying investments are held within funds or other
investment entities such as Draper Esprit (Ireland) Limited, which
are valued by the Group at Net Asset Value, management look
through these vehicles to value the underlying investments.
We understood and evaluated the valuation methodologies
applied, by reference to industry practice and applicable
accounting standards, and tested the techniques used by
management in determining the fair value of the investee entities.
We performed the following:
· Agreed the price of recent investments to supporting
documentation such as purchase agreements, funding
drawdown requests or bank statements;
· Obtained management information and board reports to
evaluate post transaction performance to assess that the
investee entity had not significantly varied from budget or
achieved milestones that indicate the methodology and fair
value was inappropriate;
· For the revenue multiple approach we held meetings with
management to understand the estimates used in the valuations
of their investments. These included but were not restricted to
review of the comparative companies, discounts and budgeted
earnings figures used; and
· We evaluated the range of comparable companies used in the
valuation and verified revenue multiples to independent sources.
· Agreed inputs into the valuation model to financial information,
board papers from the investee entities and publicly available
information.
Where the Group has invested capital into a separately managed
fund (“a Fund”), the engagement team:
· Confirmed the commitments and capital drawn down with the
Fund;
· Reviewed the latest investor reports of the Fund; and
· Reviewed the look-through valuation performed by management
on individually material investments to the Group held in the Fund.
Furthermore, for a sample of investments, we confirmed the
capital structure with the investee entity and reviewed the
allocation of value between the capital structure to ensure the
amount attributable to the Group entities was appropriate.
Overall based on our procedures, we found that management’s
valuation of investments and the assumptions used were
supported by the audit evidence obtained and appropriately
disclosed in the financial statements.
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63
Financial Statements
Annual Report 2019
Independent Auditors' Report
to the Members of Draper Esprit plc continued
Key audit matter
How our audit addressed the key audit matter
Carrying value of goodwill (Group)
The Group’s accounting policy on goodwill impairment is shown
in note 3 (impairment), to the financial statements and related
disclosures are included in note 4 (Critical accounting estimates
and judgements) and note 14 (Intangible assets). It is also included
on page 53 (Audit Committee Report).
There is a risk that the carrying value of the goodwill that was
recognised on formation of the Group has not been recognised
appropriately in-line with IFRS 3 Business Combinations or
adequately assessed for impairment in-line with IAS 36 Impairment
of assets.
The goodwill impairment calculation includes management’s
estimates, judgements and assumptions regarding the allocation
of the initial consideration as well as the growth and discount rates
used in the impairment review.
We therefore identified the carrying value of goodwill as a key audit
matter.
As at 31 March 2018 the Group had recognised £20.5m of goodwill
on the Consolidated Statement of Financial Position as a result
of the acquisition of Esprit Capital Partners LLP. As part of our
opening balances and predecessor auditor work papers review, we
noted that included in the Lock-in and Vesting Deed associated
with the acquisition, is a clause around ‘bad leaver’ provisions,
whereby when one of the sellers subsequently resigns or ceases to
be an ‘Eligible Person’ this results in the repurchase of the shares
issued for the purchase of the LLP for a notional value of £1. We
considered this clause to represent a contingent payment to
former members with the corresponding asset being amortised
in line with the Lock-in period of 2.5 years rather than being
accounted for as goodwill and for the price of the transaction
to be allocated into its constituent parts of consideration and
compensation.
Management restated the Group financial statements to
appropriately reflect the accounting for the transaction, adding
a disclosure in the notes to the financial statements explaining
this restatement. The resulting impact was to reduce goodwill
to £9.7m, a balance below our materiality, and to recognise a
share based payment charge over the separate vesting periods
identified.
We reviewed the restatement of the previously reported goodwill
balance and the adjustments disclosed in the notes to the financial
statements. Based on the procedures performed, we found that
the carrying value of goodwill is prepared in accordance with the
stated accounting policy and supported by the audit evidence
obtained.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which
they operate.
In establishing the overall approach to our audit, we assessed the risk of material misstatement, taking into account the nature, likelihood
and potential magnitude of any misstatement. Following this assessment, we applied professional judgment to determine the extent of
testing required over each balance in the financial statements.
The financial statements are produced using a single consolidation spreadsheet that takes information from the general ledger. The Group
audit team performed all audit procedures over the consolidation for the purposes of the Group audit.
This allowed us to adequately address the key audit matters for the audit and, together with procedures performed over the consolidation,
gave us sufficient appropriate audit evidence for our opinion on the Group financial statements as a whole.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually
and in aggregate on the financial statements as a whole.
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Financial Statements
Annual Report 2019
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
£12,371,000
£11,765,000
Group (cid:410)nancial statements
Company (cid:410)nancial statements
How we determined it
Rationale for benchmark applied
2% of net assets.
Net assets is the primary measure used
by the shareholders in assessing the
performance of the Group, and is a
generally accepted auditing benchmark for
business such as the Group, which invests in
other businesses for capital appreciation.
2% of net assets.
Net assets is the primary measure used
by the shareholders in assessing the
performance of the Company, and is a
generally accepted auditing benchmark for
business such as the Company, which invests
in other businesses for capital appreciation.
In addition to overall Group materiality, a specific materiality was also applied to certain areas of the Consolidated Statement of
Comprehensive Income. Our specific materiality is aligned with the metrics in the Consolidated Statement of Comprehensive Income that
we believe are of particular interest to the members and we determined those metrics to be fee income, general administration expenses
and share based payments. We applied a materiality level of 10% of Total operating costs, £1,126,000, in order to reflect their specific
characteristics.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £618,000 (Group
audit) and £588,000 (Company audit) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative
reasons.
Conclusions relating to going concern
ISAs (UK) require us to report to you when:
· the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
· the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about
the Group’s and Company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised for issue.
We have nothing to report in respect of the above matters.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s and Company’s
ability to continue as a going concern. For example, the terms on which the United Kingdom may withdraw from the European Union are
not clear, and it is difficult to evaluate all of the potential implications on the Group’s trade, customers, suppliers and the wider economy.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form
of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform
procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act
2006 have been included.
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65
Financial Statements
Annual Report 2019
Independent Auditors' Report
to the Members of Draper Esprit plc continued
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report certain
opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report
for the year ended 31 March 2019 is consistent with the financial statements and has been prepared in accordance with applicable legal
requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did
not identify any material misstatements in the Strategic Report and Directors’ Report.
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the (cid:410)nancial statements
As explained more fully in the Directors’ Responsibilities Statement set out on page 59, the Directors are responsible for the preparation
of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The
Directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as
a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the (cid:410)nancial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of
Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior
consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
· we have not received all the information and explanations we require for our audit; or
· adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from
branches not visited by us; or
· certain disclosures of Directors’ remuneration specified by law are not made; or
· the Company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
66
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Financial Statements
Annual Report 2019
Other voluntary reporting
Directors’ remuneration
The Company voluntarily prepares a Directors’ Remuneration Report (called the Remuneration and Nomination Committee Report) in
accordance with the provisions of the Companies Act 2006. The Directors requested that we audit the part of the Remuneration and
Nomination Committee Report specified by the Companies Act 2006 to be audited as if the Company were a quoted Company, as defined
by Companies Act 2006.
In our opinion, the part of the Remuneration and Nomination Committee Report to be audited has been properly prepared in accordance
with the Companies Act 2006.
Richard McGuire (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
4 June 2019
draperesprit.com
67
Financial Statements
Annual Report 2019
Consolidated Statement of Comprehensive Income
for the year ended 31(cid:98)March 2019
Unrealised gains on investments held at fair value through the pro(cid:410)t and loss
Fee income
Total investment income
Operating expenses
General administrative expenses
Depreciation and amortisation
Share based payments – resulting from company share option scheme
Share based payments – resulting from acquisition of subsidiary
Investments and acquisition costs
Exceptional items
Total operating costs
Pro(cid:410)t from operations
Net foreign exchange gain/(loss)
Finance income on cash and cash equivalents
Operating pro(cid:410)t before tax
Income taxes
Pro(cid:410)t for the year
Other comprehensive income/(expense)
Total comprehensive income for the year
Pro(cid:410)t attributable to:
Owners of the parent
Non-controlling interest
Earnings per share attributable to owners of the Parent:
Basic earnings per weighted average shares (pence)
Diluted earnings per weighted average shares (pence)
Note
5
6
7
14, 17, 21
9
18
10
11, 21
Year ended
31(cid:98)Mar 2019
£’000s
114,715
6,101
120,816
(7,774)
(163)
(1,100)
(1,989)
(207)
(34)
(11,267)
109,549
1,481
120
111,150
11
111,161
–
111,161
Year ended
31(cid:98)Mar 2018
£’000s
Restated*
Year ended
31(cid:98)Mar 2017
£’000s
Restated*
66,603
7,163
73,766
(5,785)
(160)
(490)
(4,406)
(424)
(229)
(11,494)
62,272
(1,530)
112
60,854
43
60,897
–
60,897
35,744
1,673
37,417
(3,705)
(127)
(123)
(4,428)
–
–
(8,383)
29,034
221
–
29,255
(438)
28,817
–
28,817
110,579
582
57,766
3,131
28,487
330
12
12
115
110
89
88
88
87
* Certain amounts shown here do not correspond to the Annual Report for the year ended 31(cid:98)March 2018 and 31(cid:98)March 2017 and reflect adjustments made, refer to
Note(cid:98)3(a) and Note 18.
The Notes on pages 72 to 99 are an integral part of these consolidated financial statements.
68
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Financial Statements
Annual Report 2019
Consolidated Statement of Financial Position
As at 31(cid:98)March 2019
Non-current assets
Non-current assets
Intangible assets
Investments in associates
Financial assets held at fair value through the pro(cid:410)t or loss
Property, plant and equipment
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Total current liabilities
Non-current liabilities
Deferred tax
Total non-current liabilities
Net assets
Equity
Share capital
Share premium account
Merger relief reserve
Share-based payments reserve – resulting from company share option scheme
Share-based payments reserve – resulting from acquisition of subsidiary
Retained earnings
Equity attributable to owners of parent
Non-controlling interests
Total equity
Note
31(cid:98)Mar 2019
£’000s
31(cid:98)Mar 2018
£’000s
Restated*
31(cid:98)Mar
2017
£’000s
Restated*
14
15
16
17
19
20
21
22
22
22
10,130
258
562,061
209
572,658
1,140
50,358
51,498
(4,959)
(4,959)
(631)
(631)
618,566
1,179
395,783
13,097
1,713
10,823
195,737
618,332
234
618,566
10,232
258
231,910
229
242,629
4,840
56,641
61,481
(2,948)
(2,948)
(651)
(651)
300,511
716
188,229
13,097
613
8,834
86,230
297,719
2,792
300,511
10,335
258
105,971
152
116,716
527
24,892
25,419
(1,548)
(1,548)
(716)
(716)
139,871
407
93,248
13,097
123
4,428
28,464
139,767
104
139,871
Net assets per share (pence)
12
524
416
343
* Certain amounts shown here do not correspond to the Annual Report for the years ended 31(cid:98)March 2018 and 31(cid:98)March 2017 and reflect adjustments made, refer to Note
3(a) and Note 18.
The financial statements on pages 68 to 99 were approved by the Board of Directors on 4 June 2019 and signed on its behalf by
S. M. Chapman
Chief Operating Officer
The Notes on pages 72 to 99 are an integral part of these consolidated financial statements.
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69
Financial Statements
Annual Report 2019
Consolidated Statement of Cash Flows
for the year ended 31(cid:98)March 2019
Cash (cid:411)ows from operating activities
Operating pro(cid:410)t after tax
Adjustments to reconcile operating pro(cid:410)t to net cash (cid:411)ows used in operating activities:
Revaluation of investments held at fair value through the pro(cid:410)t and loss
Depreciation and amortisation
Share-based payments – resulting from company share option scheme
Share-based payments – resulting from acquisition of subsidiary
Bad debt provision
Exchange di(cid:407)erences on cash and cash equivalents
Decrease/(increase) in trade and other receivables
Increase in trade and other payables
Purchase of investments
Proceeds from disposals in underlying investment vehicles
Net loans made to/returned from underlying investment vehicles
Purchase of initial portfolio
Net cash (used in)/generated from operating activities
Tax paid
Net cash (out(cid:411)ow)/in(cid:411)ow from operating activities
Cash (cid:411)ows from investing activities
Purchase of property, plant and equipment
Interest received
Cash acquired on purchase of subsidiary
Net cash in(cid:411)ow/(out(cid:411)ow) from investing activities
Cash (cid:411)ows from (cid:410)nancing activities
Cash paid to non-controlling interests
Proceeds from issue of share capital
Equity issuance costs
Net cash in(cid:411)ow from (cid:410)nancing activities
Net (decrease)/increase in cash & cash equivalents
Cash and cash equivalents at beginning of year
Exchange di(cid:407)erences on cash and cash equivalents
Cash and cash equivalents at end of year
Year ended
31(cid:98)Mar 2019
£’000s
Note
Year ended
31(cid:98)Mar 2018
£’000s
Restated*
Year ended
31(cid:98)Mar 2017
£’000s
Restated*
111,161
60,897
28,817
5
10
16
16
16
22
22
10
(114,715)
163
1,100
1,989
–
(1,481)
189
2,011
(226,432)
15,984
(4,679)
–
(214,710)
(32)
(214,742)
(58)
120
–
62
(638)
215,035
(7,481)
206,916
(7,764)
56,641
1,481
50,358
(66,603)
160
490
4,406
–
1,530
(4,314)
1,401
(74,674)
15,338
–
–
(61,369)
(107)
(61,476)
(204)
112
–
(92)
(443)
100,000
(4,710)
94,847
33,279
24,892
(1,530)
56,641
(35,744)
155
123
4,428
37
(221)
681
441
(20,602)
17,137
–
(40,000)
(44,478)
–
(44,748)
(166)
–
495
329
(246)
72,060
(2,724)
69,090
24,671
–
221
24,892
*Certain amounts shown here do not correspond to the Annual Report for the year ended 31(cid:98)March 2018 and 31(cid:98)March 2017 and reflect adjustments made, refer to
Note(cid:98)3(a) and Note 18.
The Notes on pages 72 to 99 are an integral part of these consolidated financial statements.
70
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Financial Statements
Annual Report 2019
Consolidated Statement of Changes in Equity
for the year ended 31(cid:98)March 2019
Balance at 1 April 2016
Total comprehensive Income for the year
Pro(cid:410)t for the year
Acquired reserves due to non-controlling interest
Amounts withdrawn by non-controlling interest
Total comprehensive income/(loss) for the year
Contributions by and distributions to the owners:
Issue of share capital (Note 22)
Share premium (Note 22)
Merger relief reserve (Note 22)
Share based payments – resulting from company share
option scheme (Note 13)
Share based payments – resulting from acquisition of
subsidiary (Note 18)
Balance at 31(cid:98)March 2017 (Restated*)
Comprehensive Income for the year
Pro(cid:410)t for the year
Amounts withdrawn by non-controlling interest
Total comprehensive income for the year
Contributions by and distributions to the owners:
Issue of share capital (Note 22)
Share premium (Note 22)
Share based payments – resulting from company share
option scheme (Note 13)
Share based payments – resulting from acquisition of
subsidiary (Note 18)
Balance at 31(cid:98)March 2018 (Restated*)
Comprehensive Income for the year
Adjustments for transitioning to IFRS 15 (Note 2i)
Pro(cid:410)t for the year
Amounts withdrawn by non-controlling interest
Total comprehensive income for the year
Contributions by and distributions to the owners:
Issue of share capital (Note 22)
Share premium (Note 22)
Share based payment (Note 13)
Share Based payment resulting from acquisition of
Subsidiary (Note 18)
Balance at 31(cid:98)March 2019
Attributable to equity holders of the parent (£’000s)
(£’000s)
(£’000s)
Share-based payments
reserve resulting from:
Share
capital
50
Share
premium
–
Merger
relief
reserve
–
Company
share option
scheme
–
Acquisition
of subsidiary
–
Retained
earnings
(3)
Total
47
Attributable
to non-
controlling
interests
–
Total
equity
47
–
–
–
–
357
–
–
–
–
–
–
–
–
–
–
–
–
93,248
–
–
–
13,097
–
–
–
–
407 93,248
–
13,097
–
–
–
–
–
–
309
–
–
94,981
–
–
–
–
–
–
–
–
–
–
716 188,229
–
13,097
–
–
–
–
–
–
–
–
463
–
– 207,554
–
–
–
–
–
–
–
–
–
–
–
1,179 395,783
–
13,097
–
–
–
–
–
–
–
123
–
123
–
–
–
–
–
490
–
613
–
–
–
–
–
–
1,100
–
1,713
–
–
–
–
–
–
–
–
28,487
(20)
–
28,467
28,487
(20)
–
28,467
330
20
(246)
104
28,817
–
(246)
28,571
–
–
–
–
357
93,248
13,097
123
–
–
–
–
357
93,248
13,097
123
4,428
4,428
4,428
28,464 139,767
–
4,428
104 139,871
–
–
–
–
–
–
57,766
–
57,766
–
–
–
57,766
–
57,766
309
94,981
490
60,897
3,131
(443)
(443)
2,688 60,454
–
–
–
309
94,981
490
4,406
8,834
–
4,406
86,230 297,719
–
4,406
2,792 300,511
(1,072)
(1,072)
–
110,579 110,579
–
–
–
–
– 109,507 109,507
(2,502) (3,574)
111,161
(638)
(2,558) 106,949
582
(638)
–
–
–
–
463
– 207,554
1,100
–
1,989
1,989
10,823 195,737 618,332
–
–
463
– 207,554
1,100
–
–
1,989
234 618,566
* Certain amounts shown here do not correspond to the Annual Report for the year ended 31(cid:98)March 2018 and 31(cid:98)March 2017 and reflect adjustments made, refer to
Note(cid:98)3(a) and Note 18.
The Notes on pages 72 to 99 are an integral part of these consolidated financial statements.
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71
Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements
1. General information
Draper Esprit plc (the “Company”) is a public company limited by shares incorporated and domiciled in England and Wales. The Company is
listed on the London Stock Exchange’s AIM market and the Irish Stock Exchange’s Euronext Dublin market.
The Company is the ultimate parent company into which the results of all subsidiaries are consolidated. The consolidated financial
statements for the years ended 31 March 2019, 31 March 2018, and 31 March 2017 comprise the financial statements of the Company and its
subsidiaries (together, “the Group”).
The consolidated financial statements are presented in Pounds Sterling (£), which is the currency of the primary economic environment the
Group operates in. All amounts are rounded to the nearest thousand, unless otherwise stated.
2. Adoption of new and revised standards
Information on the Draper Esprit Group’s structure is given in Note 3(b). Information on other related party relationships of the Draper Esprit
Group is provided in Note 29.
In the current year, the new and revised Standards and Interpretations below have been adopted which affected the amounts reported in
these consolidated financial statements:
i.
IFRS 15 Revenue from Contracts with Customers is a new Standard, effective from 1 January 2018. IFRS 15 establishes principles for
reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash
flows arising from an entity’s contracts with customers.
The core principal of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration, which the entity expects to be entitled in exchange for those goods, or services.
The only material impact from the adoption of this standard relates to the recognition of performance fees, which under IFRS 15 will no
longer be recognised following analysis in line with the Standard’s higher threshold for recognition. The underlying status of the fees has
not changed.
The impact on the consolidated statement of financial position and consolidated statement of changes in equity can be seen in the
table below:
Performance fee revenue (recognised in year ending 31 March 2018)
Performance fees attributable to the Group
Performance fees attributable to non-controlling interest
Accrued Revenue
Previously
reported
£000’s
IFRS 15
reclassi(cid:410)cation
£000’s
PY reported
under IFRS 15
£000’s
3,574
1,072
2,502
3,574
(3,574)
(1,072)
(2,502)
(3,574)
0
0
0
0
The Group has elected not to restate comparative information from prior periods upon adoption of IFRS 15 and has applied the practical
expedient under which contracts that began and were completed prior to 1 April 2018 are not restated. For ongoing contracts, any
changes required are taken straight to the condensed consolidated interim statement of changes in equity.
ii.
In the current year, the Group has applied IFRS 9 Financial Instruments (as revised in July 2014) and the related consequential
amendments to other IFRSs. IFRS 9 introduces new requirements for the 1) classification and measurement of financial assets and
financial liabilities, 2) impairment for financial assets and 3) general hedge accounting. There is no material impact on the Group in
relation of the implementation of IFRS 9. The Standard has been adopted from 1 April 2018 with no restatement of prior periods required.
72
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Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
1) Classification and measurement
On 1 April 2018, the Group has classified its financial instruments in the appropriate IFRS 9 categories; there were no changes.
Impairment of financial assets
2)
The Group has one type of financial asset that is subject to IFRS 9’s new expected credit loss model:
· Trade and other receivables (See Note 19)
On 1 April 2018, there was no material impact on the trade and receivables balance resulting from the expected credit loss model.
3) General Hedge Accounting
The Group does not use hedge accounting. Therefore, there is no impact on the financial statements from this change to IFRS 9.
Standards not a(cid:407)ecting the reported results or (cid:410)nancial position
At the date of authorisation of these consolidated financial statements, the following Standards and Interpretations that have not been
applied in these financial statements were in issue but not yet effective:
· IFRS 16 Leases applies to annual reporting periods beginning on or after 1 January 2019. It will result in almost all leases being recognised
on the balance sheet, as the distinction between operating and finance leases is removed. Under the new Standard, an asset (the right to
use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. The
accounting for lessors will not significantly change. The Standard will affect primarily the accounting for the Group’s operating leases. As
at the reporting date, the Group has non-cancellable operating lease commitments (See Note 23). The Directors have determined that
commitments of £1.6(cid:98)million would be recognised on the balance sheet as a liability with an equivalent asset in fixed assets for the
financial year commencing 1 April 2019. There will not be a material impact on the Consolidated Statement of Comprehensive Income.
The impact on the Consolidated Statement of Comprehensive Income is expected to be to reclassify operating lease expenses to
depreciation and interest expenses.
3. Significant accounting policies
Basis of preparation
To note within the year are the adoption by the Group of IFRS 9 and IFRS 15, which is discussed in further detail above, as well as the
restatement discussed in 3(a) below. The consolidated financial statements have been prepared and approved by the Directors in
accordance with all relevant IFRSs as issued by the International Accounting Standards Board (“IASB”), and interpretations issued by the
IFRS Interpretations Committee and endorsed by the European Union (“EU”) and with those parts of the Companies Act 2006 applicable
to companies reporting under IFRS. The financial reporting framework that has been applied in the preparation of the Company financial
statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). The
Company has taken advantage of disclosure exemptions available under FRS 101 as explained further in Note 1 of the Company’s financial
statements. The financial statements are prepared on a going concern basis as disclosed in the Directors’ Report.
The consolidated financial statements have been prepared under the historical cost convention as modified for the revaluation of financial
assets and financial liabilities held at fair value.
A summary of the Group’s principal accounting policies, which have been applied consistently across the Group, is set out below.
a) Prior period restatements
In accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, the comparative periods presented in these
financial statements have been restated in line with IFRS 3 Business Combinations to recognise the impact of terms in the Lock-in and
Vesting Deed dated 10 June 2016 on the acquisition of Esprit Capital Partners LLP (See Note 18 for further details).
The impact on net assets in the consolidated statement of financial position as at 31 March 2017 and 31 March 2018 was £10.8(cid:98)million. The
impact on profit for the year ended 31 March 2018 in the consolidated statement of comprehensive income was £4.4(cid:98)million (31 March 2017:
£4.4(cid:98)million). For further details of the restatements, see the primary statements and Note 18.
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73
Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
b) Basis of consolidation
The consolidated financial statements comprise the Company and the results, cash flows and changes in equity of the following subsidiary
undertakings:
Name of undertaking
Nature of business
Investment Management
Esprit Capital Partners LLP^
Dormant
Draper Esprit (Nominee) Limited^
Investment Management
Encore Ventures LLP^
General Partner
Esprit Capital I GP Limited^
Esprit Capital II GP Limited^^^
General Partner
Esprit Capital III Founder GP Limited^^ General Partner
General Partner
Esprit Capital III GP LP^^
General Partner
Encore I GP Limited^^^
Encore I Founder GP Limited^^
General Partner
Esprit Capital Management Limited^ Admin company
Esprit Capital Holdings Limited^
Esprit Nominees Limited^
Esprit Capital I CIP Limited^
Esprit Capital III MLP LLP^
Esprit Capital III GP Limited^
Dormant
Dormant
Dormant
Dormant
Dormant
Country of
incorporation
% ownership
England
England
England
England
Cayman
Scotland
Scotland
Cayman
Scotland
England
England
England
England
England
England
100%
100%
71%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Registered addresses
^20 Garrick Street, London, England, WC2E 9BT
^^50 Lothian Road, Festival Square, Edinburgh, Scotland, EH3 9WJ
^^^Appleby Trust (Cayman) Limited, PO Box 1350, Clifton House, 75 Fort Street, Grand Cayman, KY1-1108, Cayman Islands
Subsidiaries
Subsidiaries are entities controlled by the Group. Control, as defined by IFRS 10, is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Subsidiaries are fully consolidated from the date on which the Group effectively obtains control. They are deconsolidated from the date
that control ceases. Control is reassessed whenever circumstances indicate that there may be a change in any of these elements of control.
Refer to Note 4(c) for further information. The Group has accounted for the acquisition of Esprit Capital Partners LLP on 15 June 2016 as
an acquisition in accordance with IFRS 3 Business Combinations, rather than a reverse acquisition having assessed the substance of the
transaction, including control and changes in ownership. All transactions and balances between Group subsidiaries are eliminated on
consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group
asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a Group perspective. Amounts reported
in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted
by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the
effective date of acquisition, or up to the effective date of disposal, as applicable. The Group attributes total comprehensive income or loss
of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests.
Associates
Associates are all entities over which the Group has significant influence, but not control or joint control. This is generally the case where
the Group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of
accounting, after initially being recognised at cost. Under the equity method of accounting, the investments are initially recognised at
cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and
the Group’s share of movements in other comprehensive income. Dividends received or receivable from associates and joint ventures are
recognised as a reduction in the carrying amount of the investment. When the Group’s share of losses in an equity-accounted investment
equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses,
unless it has incurred obligations or made payments on behalf of the other entity. The carrying amount of equity-accounted investments
is tested for impairment where there are indications that the carrying value may no longer be recoverable. For further details, please see
investment in associate Note 15.
74
draperesprit.com
Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
Investment Company
In accordance with the provisions of IFRS 10, Draper Esprit plc considers itself to be an investment entity and considers its wholly-owned
subsidiary, Draper Esprit (Ireland) Limited, as well as the limited partnerships listed below to be investment companies, as their sole purpose
is to hold investments on behalf of the Group. Consequently, Draper Esprit (Ireland) Limited and the limited partnerships listed below are
not consolidated in accordance with IFRS10, instead they are recognised as investments held at fair value through profit and loss on the
consolidated balance sheet. Loans to investment vehicles are treated as net investments at fair value through the profit and loss.
The below is a list of entities that are controlled and not consolidated but held as investments at fair value through the profit and loss on the
consolidated balance sheet.
Name of undertaking
Principal activity
Draper Esprit (Ireland) Limited^^
Esprit Capital III LP^
Esprit Capital IV LP^
Esprit Investments (1) LP^
Esprit Investments (2) LP^
Esprit Investments (1) (B) LP^
Esprit Investments (2) (B) LP^
Investment company
Limited partnership
Limited partnership
Limited partnership
Limited partnership
Limited partnership
Limited partnership
^20 Garrick Street, London, England, WC2E 9BT
^^ 32 Molesworth Street, Dublin 2, Ireland, D02 Y512
Country of
incorporation
% ownership
Ireland
England
England
England
England
England
England
100%
100%
100%
100%
100%
100%
100%
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
Encore I GP LP^
Esprit Capital II Founder LP^
Esprit Capital II Founder 2 LP^
Encore I Founder LP^
Encore I Founder 2014 LP^
Encore I Founder 2014-A LP^
Esprit Capital III Founder LP^^
General partner
Co–investment limited partnership
Co–investment limited partnership
Co–investment limited partnership
Co–investment limited partnership
Co–investment limited partnership
Co–investment limited partnership
Country of
incorporation
Cayman
Cayman
Cayman
Cayman
Cayman
Cayman
Scotland
^Appleby Trust (Cayman) Limited, PO Box 1350, Clifton House, 75 Fort Street, Grand Cayman, KY1-1108, Cayman Islands
^^50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
The Group’s management does not consider there to be a material exposure to these entities.
c) Operating Segment
The Group’s management considers the Group’s investment portfolio represents a coherent and diversified portfolio with similar economic
characteristics and as a result these individual investments have been aggregated into a single operating segment. In the view of the
Directors, there is accordingly one reportable segment under the provisions of IFRS 8.
d) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in
the normal course of business, net of discounts, VAT and other sales-related taxes. All revenue from services is generated within the UK and
is stated exclusive of value added tax.
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Fund management services
Revenue from services comprises:
i.
Fund management fees are either earned at a fixed annual rate or are set at a fixed percentage of funds under management, measured
by commitments or invested cost, depending on the stage of the fund being managed. Revenues are recognised as the related services are
provided.
ii. Portfolio Directors’ fees
Portfolio Directors’ fees are annual fees, charged in arrears, to an investee company and payable to Draper Esprit plc as the fund manager.
Draper Esprit plc only charges Directors’ fees on a limited number of the investee companies. Revenues are recognised as services are
provided.
iii. Performance fees
Performance fees are earned on a percentage basis on returns over a hurdle rate in the statement of comprehensive income. Amounts are
recognised as revenue when it can be reliably measured and highly probable funds will flow to the Group.
e) Deferred income
The Group’s management fees are typically billed annually, either quarterly or half-yearly in advance. Where fees have been billed for an
advance period, the amounts are credited to deferred income, and then subsequently released through the profit and loss accounting the
period the fees relate to.
f) Business combinations
The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the Group to obtain
control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity
interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement.
Acquisition costs are expensed as incurred. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair
values.
The Group recognises identifiable assets acquired and liabilities assumed in a business combination, regardless of whether they have been
previously recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally
measured at their acquisition-date fair values. Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated
as the excess of the sum of: a) fair value of consideration transferred; b) the recognised amount of any non-controlling interest in the
acquiree; and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable
net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase)
is recognised in profit or loss immediately.
g) Goodwill and other intangible assets
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree,
and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net 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 one year from the
acquisition date) about facts and circumstances that existed at the acquisition date.
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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: eight years.
Impairment
h)
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.
Foreign currency
i)
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.
Financial assets
j)
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.
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Fair value through pro(cid:410)t 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) i t forms part of a contract containing one or more embedded derivatives, and IFRS 9 Financial Instruments permits the entire combined
contract (asset or liability) to be designated as at FVTPL.
The Group considers that the investment interests it holds in Esprit Capital III LP, Esprit Capital III Founder LP, Esprit Capital II Founder LP,
Esprit Capital IV LP, Esprit Investments(I) LP, Esprit Investments (1)(B) LP, Esprit Investments (2) LP, and Esprit Investments (2)(B) LP are
appropriately designated as at FVTPL as they meet criteria (b) above.
Amortised cost
A financial asset is held at amortised cost under IFRS 9 where it is held for the collection of cash flows representing solely payments of
principal and interest. These assets are measured at amortised cost using the effective interest method, less any expected losses. Financial
assets which were part of the category of ‘loans and receivables’ under IAS 39 Financial Instruments: Recognition and measurement are now
categorised within this group.
The Group’s financial assets held at amortised cost comprise trade and most other receivables, and cash and cash equivalents in the
consolidated statement of financial position.
k) Financial liabilities
The Group’s financial liabilities may include borrowings and trade, and other payables.
All financial liabilities are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract
whose terms require delivery of the financial asset within the timeframe established by the market concerned and are initially measured at
fair value, plus transaction costs.
Financial liabilities are measured subsequently at amortised cost using the effective interest Method. All interest-related charges and, if
applicable, changes in an instrument’s fair value that are reported in profit or loss are included within finance costs or finance income.
l) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the
outflow of resources embodying the economic benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation.
m) Share capital
Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial
liability or financial asset.
The Group’s ordinary shares are classified as equity instruments. Equity instruments are recorded at the proceeds received, net of direct issue
costs.
n) Defined contribution schemes
Contributions to defined contribution pension schemes are charged to the consolidated statement of comprehensive income in the year to
which they relate.
o) Share-based payments
Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the
consolidated statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by
78
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Financial Statements
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Notes to the Consolidated Financial Statements continued
adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised
over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are
factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of
whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition
or where a non-vesting condition is not satisfied.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately
before and after the modification, is also charged to the consolidated statement of comprehensive income over the remaining vesting
period. Where equity instruments are granted to persons other than employees, the consolidated statement of comprehensive income is
charged with the fair value of goods and services received.
p) Leased assets
Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a “finance
lease”), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair value of
the leased property and the present value of the minimum payments payable of the term of the lease. The corresponding lease commitment
is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the consolidated
statement of comprehensive income over the period of the lease and is calculated so that it represents constant proportion of the lease
liability. The capital element reduces the balance owed to the lessor.
Where substantially all of the risks and rewards incidental to the ownership are not transferred to the Group (an “operating lease”), the total
rentals payable under the lease are charged to the consolidated statement of comprehensive income on a straight-line basis over the lease
term. The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis.
q) Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when the dividend
is paid. In the case of final dividends, this is when the dividend is approved by the shareholders at the AGM.
r) Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement
because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes items that are never
taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by
the balance sheet date.
s) Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be
utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the
initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit
nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests
in joint ventures, except where the group is able to control the reversal of the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such
investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to
utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised based
on tax laws and rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the
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Annual Report 2019
Notes to the Consolidated Financial Statements continued
income statement, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also
dealt with in other comprehensive income.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group
expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and
liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities, and when they relate
to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
t) Property, Plant and equipment
Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is recognised to
write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method, on the following basis:
Leasehold improvements – over the term of the lease
Fixtures and equipment – 33% p.a. straight line
Computer equipment – 33% p.a. straight line
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any
changes in estimate accounted for on a prospective basis.
u) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits at bank and highly liquid investments with a term of no more than 90 days that
are readily convertible into known amounts of cash and that are subject to an insignificant risk of changes in value. No cash equivalents are
held as at 31 March 2019 (31 March 2018: nil).
v) Segmental reporting
IFRS 8, “Operating Segments,” defines operating segments as those activities of an entity about which separate financial information is
available and which are evaluated by the Chief Operating Decision Maker to assess performance and determine the allocation of resource.
The Chief Operating Decision Maker has been identified by the Board of Directors as the Chief Executive Officer.
w) Financial instruments
Financial assets and financial liabilities are recognised in the consolidated balance sheet when the Group becomes a party to the contractual
provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition
or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are
added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
x) Exceptional items
The Group classifies items of income and expenditure as exceptional when the nature of the item or its size is likely to be material, to assist
the reader of the financial statements to better understand the results of the operations of the Group. Such items by their nature are not
expected to recur and are shown separately on the face of the consolidated statement of comprehensive income.
Interest income
y)
Interest income earned on cash and deposits and short-term liquidity investments is recognised when it is probable that the economic
benefits will flow to the Group and the amount of income recognised can be measured reliably. Interest income is accrued on a time basis,
with reference to the principal outstanding and at the effective interest rate applicable.
z) Carried interest
The Group has established carried interest plans for the Executive Directors, other members of the investment team and certain other
employees (together, the ‘‘Plan Participants’’) in respect of any investments and follow-on investments made from Admission. Each carried
interest plan operates in respect of investments made during a 24-month period and related follow-on investments made for a further
36-month period.
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Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
Subject to certain exceptions, Plan Participants will receive, in aggregate, 15% of the net realised cash profits from the investments
and follow-on investments made over the relevant period once the Group has received an aggregate annualised 10% realised return
on investments and follow-on investments made during the relevant period. The Plan Participants’ return is subject to a ‘‘catch-up’’ in
their favour. Plan Participants’ carried interests vest over five years for each carried interest plan and are subject to good and bad leaver
provisions. Any unvested carried interest resulting from a Plan Participant becoming a leaver can be reallocated by the Remuneration and
Nomination Committee.
The Group’s interest in carried interest is measured at fair value through the profit and loss (FVTPL) with reference to the performance
conditions described above, and is deducted from the valuation of investments measured at FVTPL.
Fair value measurement
Management uses valuation techniques to determine the fair value of financial assets. This involves developing estimates and assumptions
consistent with how market participants would price the assets. Management bases its assumptions on observable data as far as possible,
but this is not always available, in that case management uses the best information available. Estimated fair values may vary from the
actual prices that would be achieved in an arm’s length transaction at the reporting date (See Note 4(a)).
4. Critical accounting estimates and judgements
The Directors have made the following judgements and estimates that have had the most significant effect on the carrying amounts of
the assets and liabilities in the consolidated financial statement. The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both current and future periods. Actual results may differ from
estimates. The key estimates, (4)(a) and (4)(b), and judgements, (4)(c) and (4)(d), are discussed below. There have been no changes to
the accounting estimates and judgements in the financial year ended 31 March 2019.
a) Valuation of unquoted equity investments at fair value through the profit and loss
The Group invests into Limited Companies and Limited Partnerships which are considered to be investment companies that invest in
unquoted equity for the benefit of the Group. These investment companies are measured at fair value through the profit or loss based on
their NAV at the year end. The Group controls these entities and is responsible for preparing their NAV which is based on the valuation of
their unquoted investments. The Group’s valuation of investments measured at fair value through profit or loss is therefore dependent upon
estimations of the valuation of the underlying portfolio companies.
The Group, through its controlled investment companies also invests in investment companies which primarily focus on German or seed
investments. These investments are considered to be ‘Fund of Fund investments’ for the Group and are recognised at their NAV at the
year-end date. These Fund of Fund investments are not controlled by the Group and some do not have coterminous year ends with the
Group. To value these investments management obtain the latest audited financial statements of the investments and discuss further
movements with the management of the companies. Where the Fund of Funds hold investments that are individually material to the Group,
management perform further procedures to determine that the valuation of these investments has been prepared in accordance with the
Group’s valuation policies for portfolio companies outlined below and these valuations will be adjusted by the Group where necessary based
on the Group valuation policy for valuing portfolio companies. (cid:98)
The estimates required to determine the appropriate valuation methodology of unquoted equity investments means there is a risk of
material adjustment to the carrying amounts of assets and liabilities. These estimates include whether to increase or decrease investment
valuations or not and require the use of assumptions about the carrying amounts of assets and liabilities that are not readily available or
observable.
The fair value of unlisted securities is established with reference to the International Private Equity and Venture Capital Valuation
Guidelines (“IPEV Guidelines”). In line with the IPEV Guidelines, the Group may base valuations on earnings or revenues where applicable,
market comparables, price of recent investments in the investee companies, or on net asset values. An assessment will be made at each
measurement date as to the most appropriate valuation methodology.
The Group invests in early-stage and growth technology companies, through predominantly unlisted securities. Given the nature of these
investments, there are often no current or short-term future earnings or positive cash flows. Consequently, although not considered to
be the default valuation technique, the appropriate approach to determine fair value may be based on a methodology with reference to
observable market data, being the price of the most recent transaction. Fair value estimates that are based on observable market data will
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81
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Annual Report 2019
Notes to the Consolidated Financial Statements continued
be of greater reliability than those based on estimates and assumptions and accordingly where there have been recent investments by third
parties, the price of that investment will generally provide a basis of the valuation.
If this methodology is used, the length of period for which it remains appropriate to use the price of recent investment depends on the
specific circumstances of the investment, and the Group will consider whether this basis remains appropriate each time valuations are
reviewed.
If the “price of recent investment” methodology is not considered appropriate, the Group considers alternative methodologies in the IPEV
Guidelines, being principally price-revenue or price-earnings multiples, depending upon the stage of the asset, requiring management to
make assumptions over the timing and nature of future revenues and earnings when calculating fair value.
Where a fair value cannot be estimated reliably, the investment is reported at the carrying value at the previous reporting date unless there
is evidence that the investment has since been impaired.
In all cases, valuations are based on the judgement of the Directors after consideration of the above and upon available information
believed to be reliable, which may be affected by conditions in the financial markets. Due to the inherent uncertainty of the investment
valuations, the estimated values may differ significantly from the values that would have been used had a ready market for the investments
existed, and the differences could be material. Due to this uncertainty, the Group may not be able to sell its investments at the carrying
value in these financial statements when it desires to do so or to realise what it perceives to be fair value in the event of a sale. See Notes 26
and 27 for information on unobservable inputs used and sensitivity analysis on investments held at fair value through the profit and loss.
b) Carrying amount of goodwill
Determining whether goodwill is impaired requires an estimation of the recoverable amount of the cash-generating units to which goodwill
is allocated. An impairment review is performed on an annual basis unless there is a trigger event during the period. The recoverable amount
is based on “value in use” calculations, which requires estimates of future 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 restated goodwill as at the statement
of financial position date was £9.7(cid:98)million, which was recognised during the year ended 31 March 2017 in according with IFRS 3 Business
Combinations. Other than the restatement during the period (See Notes 3(a) and 18 for further details), the Group has conducted a
sensitivity analysis on the impairment test of the CGU and the carrying value. A higher discount rate in the range of 15%-20% does not
reduce the carrying value of goodwill to less than its recoverable amount.
The CGU was determined to be the fund managers. This is a critical management judgement, as they are responsible for generating
dealflow 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.
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Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
5. Unrealised gains on investments held at fair value through the profit and loss
Year ended
31(cid:98)Mar 2019
£’000s
Year ended
31(cid:98)Mar 2018
£’000s
Year ended
31(cid:98)Mar 2017
£’000s
Unrealised gains on investments held at fair value through the pro(cid:410)t and loss (Note 16)
114,715
66,603
35,744
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:
Management fees
Performance fees attributable to the Group (Note 2i)
Performance fees attributable to non-controlling interests (Note 2i)
Portfolio Directors’ fees
Other Income
7. General administrative expenses
Administrative expenses comprise:
General employee and employee related expenses (Note 9)
Operating lease rentals
Legal and professional
Irrecoverable VAT
Travel expenses
Marketing expenses
Other administrative costs
8. Profit from operations
The profit for the year has been arrived at after charging:
Audit fees for the consolidated (cid:410)nancial statements
Audit of the accounts of any related undertakings of the Company
Audit-related assurance services
Other assurance services
Taxation compliance services
Other taxation advisory services
Total fees payable to the Company’s auditors
Bad debt provision
Year ended
31(cid:98)Mar 2019
£’000s
Year ended
31(cid:98)Mar 2018
£’000s
Year ended
31(cid:98)Mar 2017
£’000s
6,052
–
–
44
5
6,101
3,546
1,072
2,502
43
–
7,163
1,632
–
–
41
–
1,673
Year ended
31(cid:98)Mar 2019
£’000s
Year ended
31(cid:98)Mar 2018
£’000s
Year ended
31(cid:98)Mar 2017
£’000s
4,401
246
1,241
278
333
472
803
7,774
3,765
246
1,096
85
280
186
127
5,785
2,349
115
666
130
122
–
323
3,705
Year ended
31(cid:98)Mar 2019
£’000s
Year ended
31(cid:98)Mar 2018
£’000s
Year ended
31(cid:98)Mar 2017
£’000s
87
47
20
16
–
–
170
–
47
41
22
15
78
27
230
–
47
32
22
15
58
3
177
37
The fees payable to the Company’s auditors in the years ended 31 March 2017 and 31 March 2018 were payable to Grant Thornton UK LLP.
draperesprit.com
83
Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
9. Employee and employee related expenses
Employee benefit expenses (including Directors) comprise:
Wages and salaries
De(cid:410)ned contribution pension costs
Bene(cid:410)ts (Healthcare and Life Assurance)
Recruitment Costs
Social security contributions and similar taxes
General employee and employee related expenses
Share-based payment expense arising from company share option scheme
Total employee bene(cid:410)t expenses
Year ended
31(cid:98)Mar 2019
£’000s
Year ended
31(cid:98)Mar 2018
£’000s
Year ended
31(cid:98)Mar 2017
£’000s
3,447
354
74
67
459
4,401
1,100
5,501
2,884
342
111
24
404
3,765
490
4,255
1,858
167
16
62
246
2,349
123
2,473
The monthly average number of persons (including Executive and Non-executive Directors) employed by the Group during the year was:
Technology Investment
Corporate functions
Year ended
31(cid:98)Mar 2019
Number
Year ended
31(cid:98)Mar 2018
Number
Year ended
31(cid:98)Mar 2017
Number
15
13
28
13
7
20
10
7
17
Corporate functions comprise non-executive directors, finance, marketing, human resources 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 page 46 and 47 (including the CFO who has been appointed to the
Board post financial year-end).
Wages and salaries
Short-term non-monetary bene(cid:410)ts
De(cid:410)ned contribution pension costs
Share-based payment expense
Social security contributions and similar taxes
Year ended
31(cid:98)Mar 2019
£’000s
Year ended
31(cid:98)Mar 2018
£’000s
Year ended
31(cid:98)Mar 2017
£’000s
1,317
10
108
631
133
2,199
1,171
12
102
196
145
1,626
730
39
90
63
89
1,011
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 54 to 56, form part of these consolidated financial statements.
10. Net foreign exchange gain/(loss)
The net foreign exchange gain/(loss) during the year ended 31 March 2019 of £1,481k (Year ended 31 March 2018: (£1,530k) / Year ended
31(cid:98)March 2017: £221k) related to cash and cash equivalents.
84
draperesprit.com
Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
Income taxes
11.
The charge to tax, which arises in the Group and the corporate subsidiaries included within these financial statements, is:
Current tax expense
Current tax on pro(cid:410)ts for the year
Adjustments for under/(over) provision in prior years
Total current tax
Deferred tax expense
Arising on business combinations (Note 21)
Reversal of amounts previously recognised
Total deferred tax
Year ended
31(cid:98)Mar 2019
£’000s
Year ended
31(cid:98)Mar 2018
£’000s
Year ended
31(cid:98)Mar 2017
£’000s
–
–
–
(11)
–
(11)
–
–
–
(64)
21
(43)
–
–
–
578
(140)
438
The UK standard rate of corporation tax is 19% (2018: 19%, 2017: 20%). There is no current tax charge in the year (2018: £nil, 2017: £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:
Pro(cid:410)t/(loss) for the year before tax
Pro(cid:410)t/(loss) on ordinary activities of Group companies before tax
Tax using the Company’s domestic tax rate of 19% (2018: 19%, 2017: 20%)
Expenses not deductible for tax purposes
Unrealised gains on investments
Other timing differences
Total tax (credit)/charge for the year
Year ended
31(cid:98)Mar 2019
£’000s
Year ended
31(cid:98)Mar 2018
£’000s
Year ended
31(cid:98)Mar 2017
£’000s
111,150
60,854
29,255
21,119
–
(21,796)
666
(11)
11,562
–
(12,654)
1,049
(43)
5,851
–
(6,791)
1,378
438
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
31 March 2019
31 March 2018 *Restated (Notes 3a & 18)
31 March 2017 *Restated (Notes 3a & 18)
Diluted earnings per ordinary share
31 March 2019
31 March 2018 *Restated (Notes 3a & 18)
31 March 2017 *Restated (Notes 3a & 18)
draperesprit.com
Pro(cid:410)t after tax
£’000s
Weighted
average no. of
shares ‘000
110,579
57,766
28,487
96,051
65,011
32,230
Pro(cid:410)t after tax
£’000s
Weighted
average no. of
shares ‘000
110,579
57,766
28,487
100,506
65,512
32,740
Pence
per share
115
89
88
Pence
per share
110
88
87
85
Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
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
31 March 2019
31 March 2018 *Restated (Notes 3a & 18)
31 March 2017 *Restated (Notes 3a & 18)
Diluted net asset value per ordinary share
31 March 2019
31 March 2018 *Restated (Notes 3a & 18)
31 March 2017 *Restated (Notes 3a & 18)
Net assets
£’000s
618,332
297,719
139,767
Net assets
£’000s
618,332
297,719
139,767
No. of shares at
balance sheet
date ‘000
117,925
71,612
40,748
No. of shares at
balance sheet
date ‘000
123,325
74,636
42,261
Dividends: There were no Dividends paid out in the year to 31 March 2019 (2018: nil)
13. Share-based payments
31 March 2019
Date of Grant
Number of CSOP
Options 1 Apr
2018
Number
of Options
(lapsed)/granted
in the period
Number of
CSOP Options 31
March 2019
Number of
approved
Options
Vesting period
Exercise Price
(pence)
Draper Esprit plc 2016
Company Share Option
Scheme (CSOP)
28–Nov–16
28–Nov–16
11–Nov–17
28–Nov–17
28–Nov–17
30-July-18
30-Jul-18
20-Feb-19
20-Feb-19
1,384,132
152,528
180,000
1,191,913
116,016
–
–
–
–
(23,099)
–
–
(11,549)
–
1,205,000
102,750
876,868
75,000
1,361,033
152,528
180,000
1,180,364
116,016
1,205,000
102,750
876,868
75,000
101,400
–
–
48,926
–
–
–
–
–
3 Years
5 Years
3 Years
3 Years
5 Years
3 Years
5 years
3 Years
5 Years
355
355
354
387
387
492
492
530
530
Pence per
share
524
416
343
Pence per
share
501
399
331
Fair value
per granted
instrument
(pence)
64.1
89.3
89.8
70.9
97.9
152.9
186.4
67.8
95.2
On 20 February 2019, 876,868 and 75,000 shares under option were granted to employees of the Group, Directors and Trusts. The share price
at grant dates was 530 pence.
During the period, 34,648 options lapsed which had an exercise price of 355 pence and 387 pence on the grant date.
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. Following successful
capital raisings in June 2018 and February 2019 (raising gross proceeds of £115.0 million and £100.0 million respectively), the Remuneration
and Nomination Committee approved grants to the Executive Directors (including Ben Wilkinson) of options under the CSOP over a total
of 534,300 ordinary shares on 30 July 2018 at an exercise price of 492 pence per share, and over a total of 535,302 ordinary shares on 12
February 2019 at an exercise price of 530 pence per share. The options have a performance condition of an 8% per annum share price
hurdle and, subject to continued employment, are exercisable three years after, and within ten years of, the date of grant. There are no
performance conditions attached to other share options. The share-based payment charge for the year is £1.1(cid:98)million (year ended 31 March
2018: £0.5(cid:98)million).
86
draperesprit.com
Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
14. Intangible assets
31 March 2019
Cost
Cost carried forward as at 1 April 2018
Additions during the year
Cost as at 31 March 2018
Accumulated amortisation
Amortisation carried forward as at 1 April 2018
Charge for the year
Accumulated amortisation as at 31 March 2019
Net book value:
As at 31 March 2019
As at 31 March 2018
31 March 2018
*Restated (Notes 3a & 18)
Cost
Cost carried forward as at 1 April 2017
Additions during the year
Cost as at 31 March 2018
Accumulated amortisation
Amortisation carried forward as at 1 April 2017
Charge for the year
Accumulated amortisation as at 31 March 2018
Net book value:
As at 31 March 2018
As at 31 March 2017
31 March 2017
*Restated (Notes 3a & 18)
Cost
Cost carried forward as at 15 June 2016
Additions during the year
Acquired through business combinations (Note 18)
Cost as at 31 March 2017
Accumulated amortisation
Amortisation carried forward as at 15 June 2016
Charge for the year
Accumulated amortisation as at 31 March 2017
Net book value:
As at 31 March 2017
Goodwill1
£’000s
9,653
–
9,653
–
–
–
9,653
9,653
Goodwill1
£’000s
9,653
–
9,653
–
–
–
9,653
9,653
Goodwill1
£’000s
–
9,653
9,653
–
–
–
9,653
Customer
contracts2
£’000s
818
–
818
(239)
(102)
(341)
477
579
Customer
contracts2
£’000s
818
–
818
(136)
(103)
(239)
579
682
Customer
contracts2
£’000s
–
818
818
–
(136)
(136)
682
Total
£’000s
10,471
–
10,471
(239)
(102)
(341)
10,130
10,232
Total
£’000s
10,471
–
10,471
(136)
(103)
(239)
10,232
10,335
Total
£’000s
–
10,471
10,471
–
(136)
(136)
10,335
1
Goodwill of £9.7(cid:98)million (restated – see Notes 3(a) and 18) arose on the acquisition of all the capital interests in Esprit Capital Partners LLP, a Venture Capital manager
based in the UK, on 15 June 2016 and represents the value of the acquired expertise and knowledge of the fund managers. The Directors have identified the fund
managers as the cash-generating unit (“CGU”) being the smallest group of assets that generates cash inflows independent of cash flows from other assets or groups
of assets. The fund managers are responsible for generating dealflow 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 five-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(cid:98)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.
draperesprit.com
87
Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
15. Investments in associates and related undertakings
Investments in associates
On 24 November 2016, Draper Esprit acquired a 30.77% stake in Draper Esprit VCT (formerly Elderstreet Holdings Limited) (registered office:
20 Garrick Street, London, United Kingdom, WC2E 9BT), the holding company of Draper Esprit VCT with an option to acquire the balance of
the Draper Esprit VCT shares. The initial consideration of £0.26(cid:98)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
SportPursuit Limited
Bright Computing Holding B.V.
RavenPack Holding AG
Earlybird IV
Earlybird VI
Unit 1.18 Canterbury Court Kennington Park,
1-3 Brixton Road, London, England, SW9 6DE
Kingsfordweg 151, 1043 GR Amsterdam,
the Netherlands
Churerstrasse 135, CH-8808 Pf(cid:166)(cid:408)kon
Switzerland
c/o Earlybird Venture Capital, Maximilianstr.
14, 80539, München
c/o Earlybird Venture Capital, Maximilianstr.
14, 80539, München
Type of share holding
Ordinary shares
Preference shares
Ordinary shares
Preference shares
Ordinary shares
Preference shares
Partnership interest
Partnership interest
*Fully diluted interest categorised as follows: Cat A: 0-5%, Cat B: 6-10%, Cat C: 11-15%, Cat D: 16-25%, Cost E: >25%
Interest FD category*
at reporting date /
partnership interest
E
E
D
27%
56.5%
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 26. The table below sets out
the movement in the balance sheet value of investments from the start to the end of the year, showing investments made, cash receipts
and fair value movements.
As at 1 April
Initial portfolio acquired on 15 June 20161
Carry and Co-invest acquired on 15 June 2016
Investments made in the year2/3
Investments settled in shares3
Loans repaid from underlying investment vehicles
Loans made to underlying investment vehicles
Unrealised gains on the revaluation of investments
As at 31 March
Year ended
31(cid:98)Mar 2019
£’000s
Year ended
31(cid:98)Mar 2018
£’000s
Year ended
31(cid:98)Mar 2017
£’000s
231,910
–
–
226,432
309
(15,984)
4,679
114,715
562,061
105,971
–
–
74,674
–
(15,338)
–
66,603
231,910
–
63,940
2,822
20,602
–
(17,137)
–
35,744
105,971
1
The initial portfolio was acquired on 15 June 2016 as part of the IPO, which was satisfied by a mixture of cash (£40.0(cid:98)million) and shares of (£23.9(cid:98)million) issued by the
Company.
2 Investments made in the year are amounts the Company has invested in underlying investment vehicles. This is not the equivalent to the total amount invested in
portfolio companies as existing cash balances from the investment vehicles are reinvested.
3 Investments made in the period include non-cash consideration of £0.3(cid:98)million. See separate line.
88
draperesprit.com
Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
17. Property, plant and equipment
31 March 2019
Cost
Cost carried forward as at 1 April 2018
Additions during the year
Cost as at 31 March 2019
Accumulated depreciation
Depreciation carried forward as at 1 April 2018
Charge for the year
Accumulated depreciation as at 31 March 2019
Net book value:
As at 31 March 2019
As at 31 March 2018
31 March 2018
Cost
Cost carried forward as at 1 April 2017
Additions during the year
Cost as at 31 March 2018
Accumulated depreciation
Depreciation carried forward as at 1 April 2017
Charge for the year
Accumulated depreciation as at 31 March 2018
Net book value:
As at 31 March 2018
As at 31 March 2017
31 March 2017
Cost
Cost carried forward as at 15 June 2016
Additions during the year
Acquired through business combinations (Note 18)
Cost as at 31 March 2017
Accumulated depreciation
Depreciation carried forward as at 15 June 2016
Charge for the year
Accumulated depreciation as at 31 March 2017
Net book value:
As at 31 March 2017
draperesprit.com
Leasehold
Improvements
£’000s
Computer
Equipment
£’000s
285
42
327
(80)
(67)
(147)
180
205
41
16
57
(17)
(11)
(28)
29
24
Leasehold
Improvements
£’000s
Computer
Equipment
£’000s
138
147
285
(13)
(67)
(80)
205
125
33
8
41
(6)
(11)
(17)
24
27
Total
£’000s
326
58
384
(97)
(78)
(175)
209
229
Total
£’000s
171
155
326
(19)
(78)
(97)
229
152
Leasehold
Improvements
£’000s
Computer
Equipment
£’000s
Total
£’000s
–
138
–
138
–
(13)
(13)
125
–
28
5
33
–
(6)
(6)
27
–
166
5
171
–
(19)
(19)
152
89
Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
18. Acquisition of Esprit Capital Partners LLP
On 15 June 2016, the Company acquired 100% of the member’s capital of Esprit Capital Partners LLP, a venture capital manager based in
the UK. The business was acquired in order for Draper Esprit plc to become a self-managed investment entity. The revenues and profits of
the acquired entity and its subsidiaries would have been £1.2(cid:98)million and £32.9(cid:98)million had the entity been acquired at the beginning of the
accounting period being 15 June 2016. Details of the business combination are as follows:
Fair value of equity shares issued
Total
Recognised amounts of identi(cid:410)able net assets:
Property, plant and equipment
Intangible assets
Investments
Trade and other receivables
Cash and cash equivalents
Deferred tax liabilities
Trade and other payables
Net identi(cid:410)able assets and liabilities
Goodwill
As reported
previously
£’000s
24,000
24,000
5
818
2,675
1,165
495
(310)
(1,324)
3,524
20,476
Adjustment
Restated
(10,823)
(10,823)
–
–
–
–
–
–
–
–
(10,823)
13,177
13,177
5
818
2,675
1,165
495
(310)
(1,324)
3,524
9,653
Consideration transferred
The acquisition was settled by issuing 8,000,000 shares of Draper Esprit plc. The fair value of the equity shares issued was based on the
market value of Draper Esprit plc’s traded shares on the acquisition date. Certain Directors each received 2,911,311 ordinary shares pursuant
to the terms of the Esprit Capital Acquisition Agreement on 15 June 2016 and agreed to immediately each sell 681,156 ordinary shares. In
the year, a change in the underlying accounting treatment of the Company’s acquisition of Esprit Capital Partners LLP (“ECP”) in June
2016 has led to a reduction in the goodwill carried on the balance sheet of £10.8(cid:98)million. In accordance with IFRS 3, Business Combinations,
£10.8(cid:98)million (3,607,668 shares at £3.00 each) was reclassified to the consolidated statement of changes in equity as a contingent
payment to the members of Esprit Capital Partners LLP and charged to the consolidated statement of comprehensive income over 2.5
years in accordance with the Lock-in And Vesting Deed dated 10 June 2016 and subsequent Waiver Agreement. This is not indicative of an
impairment to the goodwill or the inherent value of ECP but a change to present approximately half of the original consideration (8(cid:98)million
shares at 300p per share) as a contingent payment.
The reduction in the goodwill is matched by a reduction in the merger reserve on the balance sheet of £10.8(cid:98)million and the income
statement reflects an equivalent charge over the current and restated reporting periods.
The comparative periods’ consolidated statements of financial position and consolidated statements of comprehensive income presented in
these consolidated financial statements have been restated to reflect this reclassification from the period commencing 1 April 2016 through
to 31 March 2018. There are no ongoing charges related to this accounting change.
90
draperesprit.com
Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
Please see below a table reflecting the movements during prior periods and during the year ended 31 March 2019 resulting from this
restatement:
Account
Merger Reserve
Goodwill
Retained earnings – b/f
Share-based payment reserve -arising
from acquisition of subsidiary
Retained earnings – b/f
Share-based payment reserve -arising
from acquisition of subsidiary
Share-based payment charge -arising
from acquisition of subsidiary
Share-based payment reserve -arising
from acquisition of subsidiary
Date
15/06/2016
15/06/2016
Year ended 31 March 2017
Year ended 31 March 2017
Year ended 31 March 2018
Year ended 31 March 2018
Period ended 30 September 2018
Period ended 30 September 2018
Balance Sheet
Equity
Dr
Cr
£10,823,004
–
–
£10,823,004
Dr
–
–
–
–
–
–
–
–
–
£4,427,855
£4,427,855
–
–
£4,405,506
£4,405,506
–
£1,989,643
–
–
–
P&L*
Dr
–
–
–
–
–
–
£1,989,643
–
Cr
–
–
–
–
–
–
–
–
Cr
–
–
–
–
–
–
–
–
£10,823,004 £21,646,008 £8,833,361
– £1,989,643
–
* Consolidated Statement of Comprehensive Income
19. Trade and other receivables
Trade receivables
Bad debt provision
Accrued performance fees
Other receivables and prepayments
The ageing of trade receivables at reporting date is as follows:
Not past due
Past due 1-30 days
Past due 31-60 days
More than 60 days
31(cid:98)Mar 2019
£’000s
31(cid:98)Mar 2018
£’000s
31(cid:98)Mar 2017
£’000s
424
–
–
716
1,140
324
–
3,574
942
4,840
272
(37)
–
292
527
31(cid:98)Mar 2019
£’000s
31(cid:98)Mar 2018
£’000s
31(cid:98)Mar 2017
£’000s
268
5
9
142
424
78
92
–
154
324
59
43
97
73
272
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.
draperesprit.com
91
Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
20. Trade and other payables
Trade payables
Other taxation and social security
Other payables
Accruals and deferred income^
All trade and other payables are short-term.
^Deferred income increases relating to deferred management fees.
31(cid:98)Mar 2019
£’000s
31(cid:98)Mar 2018
£’000s
31(cid:98)Mar 2017
£’000s
(239)
(290)
(481)
(3,949)
(4,959)
(292)
(619)
(93)
(1,944)
(2,948)
(36)
(208)
(82)
(1,222)
(1,548)
21. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19% (2018: 19%, 2017:19%). The
movement on the deferred tax account is shown below:
31(cid:98)Mar 2019
£’000s
31(cid:98)Mar 2018
£’000s
31(cid:98)Mar 2017
£’000s
Arising on business combination
Arising on co-invest and carried interest
Other timing di(cid:407)erences
At 31 March
(89)
(599)
57
(631)
(100)
(578)
27
(651)
Deferred tax arising on business combination is subject to amortisation within the consolidated statement of comprehensive income.
22. Share capital and share premium
Ordinary share capital
31 March 2019 - Allotted and fully paid
At the beginning of the year
Issue of share capital during the year for cash1 / 2
Issue of share capital during the year as consideration for investment purchase3
At the end of the year
Number
Pence
71,611,773
46,248,877
64,820
117,925,470
1
1
1
1
(164)
(578)
26
(716)
£’000s
716
462
1
1,179
1
On 14 June 2018, the Company raised gross proceeds of approximately £115.0(cid:98)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(cid:98)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(cid:98)million at an issue price of 478 pence per share by way of the placing of 64,820 new ordinary shares.
31 March 2018 - Allotted and fully paid
At the beginning of the year
Issue of share capital during the year
At the end of the year
Number
Pence
£’000s
40,747,576
30,864,197
71,611,773
1
1
1
407
309
716
92
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Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
On 5 June 2017, the Company announced a placing and subscription for £100.0(cid:98)million. 29,012,346 new shares were issued on 20 June 2017 to
trading on AIM and ESM with a further 1,851,851 new shares issued for 324 pence each on 4 August 2017.
31 March 2017 - Allotted and fully paid
At the beginning of the year
Redeemed during the year1
Issue of share capital during the year
At the end of the year
Number
Pence
£’000s
50,000
(50,000)
40,747,576
40,747,576
100
100
1
1
50
(50)
407
407
1 During the year, 50,000 management shares were redeemed by the Company at par for 100 pence each.
On 15 June 2016, 40,673,909 new ordinary shares of 1 pence each were issued for trading on the AIM and ESM at a price of 300 pence per
share as part of an IPO transaction to purchase Esprit Capital III LP and acquire the Esprit Capital Partners LLP Group. The shares were issued
as follows:
i. 23,829,017 shares (£69.3(cid:98)million) were issued to investors for cash proceeds, net of issuance costs;
ii. 8 ,844,892 shares (£23.9(cid:98)million) were issued for the acquisition of investment interests held by Draper Esprit Ireland in Esprit Capital
III LP as described in Note 16 (net of insurance costs);
iii. 8 ,000,000 shares (£24.0(cid:98)million) were issued for the acquisition of Esprit Capital Partners LLP, as described in Note 18.
On 26 November 2016, a further 73,667 new ordinary shares of 1 pence each were issued at a price of 350 pence per share to purchase
Elderstreet Holdings limited as described in Note 15.
Share premium
Allotted and fully paid
At the beginning of the year
Premium arising on the issue of ordinary shares^
Equity issuance costs
At the end of the year
Year ended
31(cid:98)Mar 2019
£’000s
188,229
215,035
(7,481)
395,783
Year ended
31(cid:98)Mar 2018
£’000s
93,248
100,000
(5,019)
188,229
Year ended
31(cid:98)Mar 2017
£’000s
–
95,972
(2,724)
93,248
^ The premium on ordinary shares in the year arises from the issue of 27,380,952 new ordinary shares of 1 pence each on 14 June 2018, the issue of 64,820 new ordinary
shares of 1 pence each on 4 July 2018, and the issue of 18,867,925 of 1 pence each on 8 February 2019.
Merger relief reserve
In accordance with the Companies Act 2006, a Merger Relief Reserve of £13.1(cid:98)million (restated) (net of the cost of share capital issued of
£80k) was created on the issue of 8,000,000 ordinary shares for 300 pence each in Draper Esprit plc as consideration for the acquisition of
100% of the capital interests in Esprit Capital Partners LLP on 15 June 2016.
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Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
23. Leases
Operating leases – lessee
The total future value of minimum lease payments is due as follows:
Not later than one year
Later than one year but not later than (cid:410)ve years
Later than (cid:410)ve years
31(cid:98)Mar 2019
£’000s
31(cid:98)Mar 2018
£’000s
31(cid:98)Mar 2017
£’000s
333
1,277
–
1,610
333
1,332
278
1,943
333
1,332
611
2,276
24. 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.
25. 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:
31 March 2019
Financial assets
Long-term (cid:410)nancial assets
Trade and other receivables
Cash and cash equivalents
Short-term (cid:410)nancial assets
Total (cid:410)nancial assets
Financial Liabilities
Trade and other payables
Total (cid:410)nancial liabilities
31 March 2018
Financial assets
Long-term (cid:410)nancial assets
Trade and other receivables
Cash and cash equivalents
Short-term (cid:410)nancial assets
Total (cid:410)nancial assets
Financial Liabilities
Trade and other payables
Total (cid:410)nancial liabilities
Designated
FVTPL
£’000s
562,061
562,061
–
–
–
562,061
Amortised cost
£’000s
Total
£’000s
–
–
1,140
50,358
51,498
51,498
562,061
562,061
1,140
50,358
51,498
613,559
–
–
(4,959)
(4,959)
(4,959)
(4,959)
Designated
FVTPL
£’000s
Amortised cost
£’000s
Total
£’000s
231,910
–
–
–
231,910
–
4,840
56,641
61,481
61,481
231,910
4,840
56,641
61,481
293,391
–
–
(2,948)
(2,948)
(2,948)
(2,948)
94
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Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
31 March 2017
Financial assets
Long-term (cid:410)nancial assets
Trade and other receivables
Cash and cash equivalents
Short-term (cid:410)nancial assets
Total (cid:410)nancial assets
Financial Liabilities
Trade and other payables
Total (cid:410)nancial liabilities
26. Fair value measurements
Designated
FVTPL
£’000s
Amortised cost
£’000s
Total
£’000s
105,971
–
–
–
105,971
–
–
–
527
24,892
25,419
25,419
(1,548)
(1,548)
105,971
527
24,892
25,419
131,390
(1,548)
(1,548)
This section should be read with reference to Note 4(a) and Note 16. The Group classifies financial instruments measured at fair value
through the profit and loss according to the following fair value hierarchy:
(a) Level 1: inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date;
(b) Level 2: inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or
indirectly; and
(c) Level 3: inputs are unobservable inputs for the asset or liability.
All investments are held at fair value through the profit and loss are classified as Level 3 in the fair value hierarchy. Consequently, the values
of investments at balance sheet date are considered to be entirely based on Level 3 inputs. There were no transfers between Levels 1, 2 and 3
during the year.
Significant unobservable inputs for Level 3 valuations
The Group’s investments are all classified as Level 3 investments. The Group may base valuations on earnings or revenues where applicable,
market comparables, price of recent investments in the investee companies, or on net asset values. See Note 4(a) where valuation policies
are discussed in more detail.
Financial instruments, measured at fair value, categorised as Level 3 within the fair value hierarchy can be split into two main valuation
techniques. Valuation techniques can be categorised as based on last round price or revenue-multiple. As at 31 March 2019, financial
instruments measured using last round price valuation methodology £405.9(cid:98)million (year ended 31 March 2018: £114.7(cid:98)million). As at
31(cid:98)March 2019, financial instruments measured using revenue-multiple valuation methodology £186.1(cid:98)million (year ended 31 March 2018:
£117.2(cid:98)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 3x.
If the multiple used to value each unquoted investment valued on a revenue-multiples basis as at 31 March 2019 was to decrease by 10%,
the investment portfolio would decrease by £15.2(cid:98)million (31 March 2018: £10.8(cid:98)million). If the multiple increases by 10% then the investment
portfolio would increase by £15.2(cid:98)million (31 March 2018: £10.8(cid:98)million).
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Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
27. 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 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
Investments
10% decrease in GBP*
10% increase in GBP**
31 March 2019
£’000s
31 March 2018
£’000s
31 March 2017
£’000s
412,146
456,632
375,948
109,887
122,097
99,983
105,971
110,573
101,369
* £305.0 million (2018: £97.0 million) denominated in USD and £151.0 million (2018: £25.0 million) denominated in EUR.
** £250.0 million (2018: £79.0 million) denominated in USD and £126.0 million (2018: £21.0 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
Cash denominated in EUR
10% decrease in EUR:GBP
10% increase in EUR:GBP
Cash denominated in USD
10% decrease in USD:GBP
10% increase in USD:GBP
31 March 2019
£’000s
31 March 2018
£’000s
31 March 2017
£’000s
10,522
9,470
11,574
9,746
8,771
10,721
9,355
8,419
10,290
9,116
8,205
10,032
3,081
2,773
3,389
3,225
2,902
3,547
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
Shareholders’ Equity
10% decrease in EUR:GBP/USD:GBP
10% increase in EUR:GBP/USD:GBP
31 March 2019
£’000s
618,332
556,499
680,166
31 March 2018
£’000s
Restated
31 March 2017
£’000s
Restated
297,719
267,947
327,491
139,767
125,790
153,744
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.
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 the profit and loss (Note 25). 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 where applicable as discussed
more fully in Note 4(a). Revenue or earnings multiples of quoted comparable companies 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.
96
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Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
Liquidity risk
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three 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.
All Group payable balances as at 31 March 2019 fall due for payment within one year.
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 (cid:410)nancial assets, carrying amounts
Trade receivables
Cash at bank and in hand
31 March 2019
£’000s
31 March 2018
£’000s
31 March 2017
£’000s
424
50,358
50,782
324
56,641
56,965
272
24,892
25,164
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 2019.
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 wholly equity funded and has no debt at the balance sheet date.
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.
28. 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 39 for a reconciliation to the net investment balance.
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97
Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
29. Related party transactions
Draper Esprit plc may require that one of its members be appointed to the board of an investee company in a non-executive role. In such
circumstances, Draper Esprit plc charges an administration fee to the investees for the provision of Director services. These fees which
amounted to £26,957 (2018: £9,527, 2017: £29,825) have been included in the turnover for the year. At year end, there was a balance of
£16,357 outstanding (2018: £8,307). Draper Esprit does not exercise control or management through any of these non-executive positions.
On Admission, Simon Cook and Stuart Chapman assigned a portion of their personal entitlements in the carried interest in Esprit Capital
Fund III(i) LP to the Group. The fair value of the Esprit Capital Fund III(i) LP interest assigned, calculated in accordance with the policies
applied with the Group’s financial statements, was £656,000. A payment of £75,000 each was made in favour of Simon Cook and Stuart
Chapman in recognition of the transfer. The members of the LLP also assigned a 61.5% interest in the gains of Esprit Capital III FP LP for
£nil consideration. The fair value of the Esprit Capital III FP LP interest assigned, calculated in accordance with the policies applied with the
Group’s financial statements, was £444,000. All amounts had been settled by the 31 March 2018. The payments made to Directors during
the year ended 31 March 2019 only include salaries and other forms of compensation disclosed in Remuneration and Nomination Committee
Report starting on page 54.
During the year, £840,000 (2018: £208,800) was received from Encore Ventures LLP for overheads, at year-end there was a balance of
£70,000 (2018: £17,400) remained outstanding.
During the year £53,737 (2018: £59,287) was received from Draper Esprit VCT for overheads, at year-end a balance of £39,154 (2018: £4,858)
remained outstanding.
Unconsolidated structured entities
The Group has exposure to a number of unconsolidated structured entities as a result of its venture capital investment activities.
The Group invests funds via a number of limited partnerships. These are controlled by the Group and not consolidated, but they are held as
investments at fair value through the profit and loss on the consolidated balance sheet in line with IFRS 10 (See Note 3b for further details).
The list of these investment companies and limited partnerships can also be seen in Note 3b. Within these limited partnerships, there
are commitments made to fund of funds investments that are disclosed in Note 30 below. The material assets and liabilities within these
investment companies are the investments, which are held at FVTPL in the consolidated accounts.
A Strategic Partnership Agreement was entered into during the financial year with Earlybird. Total exposure to the Group is £144.6 million of
NAV and further commitments of £44.8 million.
The Group also co-invests or historically co-invested with a number of limited partnerships (See Note 3b for further details). The exposure to
these entities is immaterial.
30. Capital commitments
At 31 March 2019, the Group was committed to £33.9(cid:98)million in relation to investments in fund of funds vehicles. In the summer of 2018,
the Company entered into a Strategic Partnership Agreement with Earlybird to share dealflow and resources to co-invest in high growth
technology companies across Europe. The first stage of this partnership included a 50% commitment in EB VI of £76.0 million to 2022, of
which £31.2 million has been deployed to date.
31. Ultimate controlling party
The Directors of Draper Esprit plc do not consider there to be a single ultimate controlling party of the Group.
32. Post balance sheet events
The Group has made further investments of:
98
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Financial Statements
Annual Report 2019
Notes to the Consolidated Financial Statements continued
· £2.2 million invested in Realeyes;
· £0.5 million invested in Pushdoctor;
· £2.5 million invested in Verve; and
· £0.4 million invested in Kaptivo.
The Group has realised £15.3 million gross proceeds from the partial sale of TransferWise.
Post year-end the Company entered into a £50.0 million Revolving Credit Facility with Silicon Valley Bank and Investec. The facility is for
a 3(cid:98)year term and carries an interest rate at the Bank of England base rate + 6.75% (min 7.5%). The facility provides additional funding
flexibility to fund the future growth plans of portfolio companies.
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Financial Statements
Annual Report 2019
Company Statement of Financial Position
as at 31(cid:98)March 2019
Assets
Non-current assets
Financial assets held at fair value through the pro(cid:410)t and loss
Investments in subsidiary undertaking
Investments in associates
Property, plant and equipment
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Total current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Merger relief reserve
Share-based payments reserve arising from company options scheme
Share-based payments reserve arising from acquisition of subsidiary
Retained earnings
Total equity
Year ended
31(cid:98)Mar 2019
£’000s
Note
Year ended
31(cid:98)Mar 2018
£’000s
Restated*
Year ended
31(cid:98)Mar 2017
£’000s
Restated*
6
7
7
8
9
10
11
11
11
12
532,897
13,177
258
209
546,541
993
48,568
49,561
(7,851)
(7,851)
(7,851)
588,251
1,179
395,783
13,097
1,713
10,823
165,656
588,251
213,625
13,177
258
227
227,287
1,064
53,587
54,651
(2,007)
(2,007)
(2,007)
279,931
716
188,229
13,097
613
8,834
68,442
279,931
93,877
13,177
258
146
107,458
227
24,122
24,349
(932)
(932)
(932)
130,875
407
93,248
13,097
123
4,428
19,572
130,875
* Certain amounts shown here do not correspond to the Annual Report for the years ended 31(cid:98)March 2018 and 31(cid:98)March 2017 and reflect adjustments made (Refer to
Notes(cid:98)3(a) and 18 of the consolidated financial statements for further details on the adjustments made).
The Directors have taken advantage of the exemption available under Section 408 of the Companies Act 2006 and have not presented a
statement of comprehensive income for the Company.
The Company’s profit for the year ended 31 March 2019 was £97.2(cid:98)million (year ended 31(cid:98)March 2018: £48.9(cid:98)million / year ended 31(cid:98)March
2017: £19.6(cid:98)million).
These financial statements on pages 100 to 108 were approved by the Board of Directors on 4(cid:98)June 2019 and signed on its behalf by
S. M. Chapman
Chief Operating Officer
Company registration number: 09799594
100
draperesprit.com
Financial Statements
Annual Report 2019
Company Statement of Changes in Equity
for the year ended 31(cid:98)March 2019
Balance at 31(cid:98)March 2016
Comprehensive Income for the year
Pro(cid:410)t for the year
Share-based payments
Total comprehensive income for the year
Contributions by and distributions to the owners:
Issue of share capital (Note 11)
Share premium (Note 11)
Merger relief reserve (Note 11)
Share-based payment arising from acquisition of subsidiary
Share-based payment (Note 12)
Balance at 31(cid:98)March 2017 (Restated*)
Comprehensive Income for the year
Pro(cid:410)t for the year
Total comprehensive income for the year
Contributions by and distributions to the owners:
Issue of share capital (Note 11)
Share premium (Note 11)
Share-based payment arising from acquisition of subsidiary
Share-based payment (Note 12)
Balance at 31(cid:98)March 2018 (Restated*)
Comprehensive Income for the year
Pro(cid:410)t for the year
Total comprehensive income for the year
Contributions by and distributions to the owners:
Issue of share capital (Note 11)
Share premium (Note 11)
Share-based payment arising from acquisition of subsidiary
Share-based payment (Note 12)
Share capital
£’000s
Share
premium
£’000s
Merger relief
reserve
£’000s
50
–
–
–
357
–
–
–
–
407
–
–
–
–
–
–
–
–
–
93,248
–
–
–
–
–
13,097
–
–
93,248
13,097
–
–
–
–
–
–
–
309
–
–
–
716
–
94,981
–
–
188,229
13,097
–
–
463
–
–
–
–
207,554
–
–
–
–
–
–
–
Balance at 31(cid:98)March 2019
1,179
395,783
13,097
Share-based
payments
reserve
resulting
from
company
share option
scheme
£’000s
Share-based
payments
resulting
from
acquisition
of subsidiary
(£’000s)
Retained
earnings
£’000s
Total equity
£’000s
(3)
47
19,575
–
19,575
–
–
–
–
–
19,575
–
19,575
357
93,248
13,097
4,428
123
–
–
–
–
–
–
–
4,428
–
4,428
19,572
130,875
–
–
–
–
–
–
–
–
123
123
–
–
48,870
48,870
–
–
–
490
613
–
–
4,406
–
8,834
–
–
–
–
309
94,981
4,406
490
68,442
279,931
–
–
97,214
97,214
–
–
–
1,100
1,713
–
–
1,989
–
–
–
–
–
463
207,554
1,989
1,100
10,823
165,656
588,251
* Certain amounts shown here do not correspond to the Annual Report for the years ended 31(cid:98)March 2018 and 31(cid:98)March 2017 and reflect adjustments made (Refer to
Notes 3(a) and 18 of the consolidated financial statements for further details on the adjustments made).
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101
Financial Statements
Annual Report 2019
Notes to the Company Financial Statements
for the year ended 31(cid:98)March 2019
1. Basis of preparation
These financial statements have been prepared in accordance with Financial Reporting Standard 101, Reduced Disclosure Framework,
and the Companies Act 2006 as applicable to companies using FRS 101. FRS 101 sets out a reduced disclosure framework for a “qualifying
entity” as defined in the standard which addresses the financial reporting requirements and disclosure exemptions in the individual financial
statements of qualifying entities that otherwise apply the recognition, measurement and disclosure requirements of EU-adopted IFRS.
The financial statements have been prepared on a going concern basis and under the historical cost convention modified by revaluation of
financial assets and financial liabilities held at fair value through profit and loss. A summary of the more important Company accounting
policies, which have been consistently applied except where noted, is set out below.
The following exemptions from the requirements of IFRS have been applied in the preparation of these financial statements, in accordance
with FRS 101:
· paragraphs 45(b) and 46 to 52 of IFRS 2 Share-based Payment (details of the number and weighted average exercise prices of share
options, and how the fair value of goods or services received was determined);
· IAS 7 Statement of Cash Flows;
· the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into and between two or more
members of a group;
· IAS 1 Presentation of Financial Statements and the following paragraphs of IAS 1: (d) (statement of cash flows), 16 (statement of
compliance with all IFRS), 111 (cash flow statement information), and 134-136 (capital management disclosures).
a) Prior period restatements
In accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, the comparative periods presented in these
financial statements have been restated in line with IFRS 3 Business Combinations to recognise the impact of terms in the Lock-in and
Vesting Deed dated 10 June 2016 on the acquisition of Esprit Capital Partners LLP (See Note 18 of the consolidated financial statements for
further details).
The impact on net assets in the statement of financial position as at 31(cid:98)March 2017 and 31(cid:98)March 2018 was £10.8(cid:98)million. The impact
on profit for the year ended 31(cid:98)March 2018 in the consolidated statement of comprehensive income was £4.4(cid:98)million (31(cid:98)March 2017:
£4.4(cid:98)million).
Whilst, in the consolidated financial statements, the adjustment is made to goodwill, the restatement in the Company financial statements
is reflected in the investment in Esprit Capital Partners LLP as subsidiary.
Fair value of equity shares issued
As reported
previously
£’000s
24,000
Adjustment
Restated
£’000s
(10,823)
£’000s
13,177
The reduction in the goodwill is matched by a reduction in the merger reserve on the balance sheet of £10.8 million and the income
statement reflects an equivalent charge over the current and restated reporting periods.
For further details of the restatements, see the primary statements and Note 18 of the consolidated financial statements.
Investments in subsidiary undertakings
2.
Unlisted investments are held at cost less any provision for impairment.
3. Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments
maturing within 90 days from the date of acquisition that are readily convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value. No cash equivalents are held in the current or prior years.
102
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Financial Statements
Annual Report 2019
Notes to the Company Financial Statements continued
4. 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
Fixtures and equipment
Computer equipment
– over the term of the lease
– 33% p.a. straight line
– 33% p.a. straight line
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting Year, with the effect of any
changes in estimate accounted for on a prospective basis.
5. Results for the Parent Company
The auditor’s remuneration for audit services and other services is disclosed in Note 8 to the consolidated financial statements.
6.
Investments held at fair value through the profit and loss
Name of subsidiary undertaking
Registered o(cid:408)ce
Activity
Draper Esprit (Ireland) Limited 32 Molesworth Street,
Investment company
Holding
100%
Country
Ireland
31(cid:98)March
2019
Fair value
£’000
451,556
31(cid:98)March
2018
Fair value
£’000
194,399
31(cid:98)March
2017
Fair value
£’000
93,877
Limited Partnership
100%
England
37,699
19,226
Limited Partnership
100%
England
43,642
–
–
–
Esprit Investments (1) (B) LP
Esprit Investments (2) (B) LP
Totals
Dublin 2, Ireland.
20 Garrick Street,
London, WC2E 9BT
20 Garrick Street,
London, WC2E 9BT
As at 1 April
Initial investment in Draper Esprit (Ireland) Limited on 15 June 20161
Investments made in the year2/3
Investments settled in shares3
Loans repaid from underlying investment vehicles
Unrealised gains on the revaluation of investments
As at 31(cid:98)March
532,897
213,625
93,877
£’000s
213,625
–
226,432
309
(11,305)
103,836
532,897
£’000s
93,877
–
74,674
–
(15,338)
60,412
213,625
£’000s
–
63,940
20,602
–
(16,273)
25,608
93,877
1
The initial investment made in Draper Esprit (Ireland) limited on 15 June 2016 as part of the IPO to acquire the initial portfolio satisfied by a mixture of cash
(£40.0(cid:98)million) and shares (£23.9(cid:98)million) issued by the Company.
2 Investments made in the year are amounts the Company has invested in underlying investment vehicles. This is not the equivalent to the total amount invested in
portfolio companies, as existing cash balances from the investment vehicles are reinvested.
3 Investments made in the period include non-cash consideration of £0.3(cid:98)million. See separate line above for “Investments settled in shares”.
See Notes 3 and 4 in the consolidated financial statements for the accounting policies in respect of investments held at fair value through
the profit and loss.
Investments in subsidiary undertakings and associates (restated)
7.
On 15 June 2016, the Company acquired the entire capital interests of Esprit Capital Partners LLP for £13.2(cid:98)million, which was satisfied in
shares as explained in Note 18 of the consolidated financial statements and is held at cost on the Company’s balance sheet.
On 26 of November 2016, the Company acquired 30.77% of the capital interests in Draper Esprit VCT for £0.26(cid:98)million as explained in Note 15
of the consolidated financial statements, which is held at cost on the Company’s balance sheet.
8. Property, plant and equipment
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Financial Statements
Annual Report 2019
Notes to the Company Financial Statements continued
31(cid:98)March 2019
Cost
Cost carried forward as at 1 April 2018
Additions during the year
Cost as at 31(cid:98)March 2019
Accumulated depreciation
Depreciation carried forward as at 1 April 2018
Charge for the year
Accumulated depreciation as at 31(cid:98)March 2019
Net book value
As at 31(cid:98)March 2019
As at 31(cid:98)March 2018
31(cid:98)March 2018
Cost
Cost carried forward as at 1 April 2017
Additions during the year
Cost as at 31(cid:98)March 2018
Accumulated depreciation
Depreciation carried forward as at 1 April 2017
Charge for the year
Accumulated depreciation as at 31(cid:98)March 2018
Net book value
As at 31(cid:98)March 2018
As at 31(cid:98)March 2017
31(cid:98)March 2017
Cost
Cost carried forward as at 1 April 2016
Additions during the year
Cost as at 31(cid:98)March 2017
Accumulated depreciation
Depreciation carried forward as at 1 April 2016
Charge for the year
Accumulated depreciation as at 31(cid:98)March 2017
Net book value
As at 31 March 2016
As at 31(cid:98)March 2017
No ‘fixtures and equipment’ are held by the Company.
Leasehold
improvements
£’000s
Computer
equipment
£’000s
285
42
327
(80)
(67)
(147)
180
205
31
18
49
(9)
(11)
(20)
29
22
Leasehold
improvements
£’000s
Computer
equipment
£’000s
138
147
285
(13)
(67)
(80)
205
125
24
7
31
(3)
(6)
(9)
22
21
Total
£’000s
316
60
376
(89)
(78)
(167)
209
227
Total
£’000s
162
154
316
(16)
(73)
(89)
227
146
Leasehold
improvements
£’000s
Computer
equipment
£’000s
Total
£’000s
–
138
138
–
–
(13)
(13)
–
125
–
24
24
–
–
(3)
(3)
–
21
–
162
162
–
–
(16)
(16)
–
146
104
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Financial Statements
Annual Report 2019
Notes to the Company Financial Statements continued
9. Trade and other receivables due within one year
Trade receivables
Other debtors
Intercompany debtors
Total
31(cid:98)Mar 2019
£’000s
31(cid:98)Mar 2018
£’000s
31(cid:98)Mar 2017
£’000s
175
702
116
993
93
661
310
1,064
227
–
–
227
All amounts are short-term. The net carrying value of all financial assets is considered a reasonable approximation of fair value.
10. Trade and other payables due within one year
Accruals and trade creditors
Total
31(cid:98)Mar 2019
£’000s
31(cid:98)Mar 2018
£’000s
31(cid:98)Mar 2017
£’000s
(7,851)
(7,851)
(2,007)
(2,007)
(932)
(932)
All amounts are short-term. The net carrying value of all financial liabilities is considered a reasonable approximation of fair value.
11. Share Capital and other reserves
31(cid:98)March 2019 – Allotted and fully paid
At the beginning of the year
Issue of share capital during the year for cash1/2
Issue of share capital during the year as consideration for investment purchase3
At the end of the year
Number
Pence
71,611,773
46,248,877
64,820
117,925,470
1
1
1
1
1
On 14 June 2018, the Company raised gross proceeds of approximately £115.0(cid:98)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(cid:98)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(cid:98)million at an issue price of 478 pence per share by way of the placing of 64,820 new ordinary.
31(cid:98)March 2018 – Allotted and fully paid
At the beginning of the year
Issue of share capital during the year
At the end of the year
Number
Pence
40,747,576
30,864,197
71,611,773
1
1
1
On 5 June 2017, the Company announced a placing and subscription for £100.0(cid:98)million. 29,012,346 new shares were issued on 20 June 2017 to
trading on AIM and ESM with a further 1,851,851 new shares issued for 324 pence each on 4 August 2017.
31(cid:98)March 2017 – Allotted and fully paid
At the beginning of the year
Redeemed during the year1
Issue of share capital during the year
At the end of the year
Number
Pence
50,000
(50,000)
40,747,576
40,747,576
100
100
1
1
1
During the year ended 31 March 2017, 50,000 management shares were redeemed by the Company at par for 100 pence each.
Movements in share capital and other reserves are explained in Note 22 of the consolidated financial statements.
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Financial Statements
Annual Report 2019
Notes to the Company Financial Statements continued
12. Share-based payments
The Company operates a share option scheme that is explained in Note 13 of the consolidated financial statements. The Company operates
the share option scheme within the Group, therefore the details provided in Note 13 are also applicable to the Company.
13. Directors’ emoluments and employee information
Employee benefit expenses (including Directors) comprise:
Wages and salaries
De(cid:410)ned contribution pension costs
Bene(cid:410)ts (Healthcare and Life Assurance)
Recruitment costs
Social security contributions and similar taxes
General employee and employee related expenses
Share-based payment expense arising from company share option scheme
Total employee bene(cid:410)t expenses
Year ended
31 Mar 2019
£’000s
Year ended
31 Mar 2018
£’000s
Year ended
31 Mar 2017
£’000s
3,447
354
74
67
459
4,401
1,100
5,501
2,884
342
111
24
404
3,765
490
4,255
1,858
167
16
63
246
2,350
123
2,473
The monthly average number of persons (including Executive and Non-executive Directors) employed by the Group during the year was:
Technology Investment
Corporate functions
Year ended
31 Mar 2019
Number
Year ended
31 Mar 2018
Number
Year ended
31 Mar 2017
Number
15
13
28
13
7
20
10
7
17
Corporate functions comprise non-executive Directors, finance, marketing, human resources 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 page 46 and 47 (including the CFO who has been appointed to the
Board post financial year-end).
Wages and salaries
Short-term non-monetary bene(cid:410)ts
De(cid:410)ned contribution pension costs
Share-based payment expense
Social security contributions and similar taxes
Year ended
31 Mar 2019
£’000s
Year ended
31 Mar 2018
£’000s
Year ended
31 Mar 2017
£’000s
1,317
10
108
631
133
2,199
1,171
12
102
196
145
1,626
730
39
90
63
89
1,011
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 54 to 56, form part of these financial statements.
106
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Financial Statements
Annual Report 2019
Notes to the Company Financial Statements continued
14. Subsidiary undertakings
Name of subsidiary undertaking
Activity
Holding
Registered o(cid:408)ce
Draper Esprit (Ireland) Limited
Esprit Capital Partners LLP
Esprit Investments (1) (B) LP^
Esprit Investments (2) (B) LP^
Draper Esprit (Nominee) Limited1
Investment company
Investment management
Limited partnership
Limited partnership
Dormant
100%
100%
100%
100%
100%
(Note 6)
32 Molesworth Street, Dublin 2, Ireland
20 Garrick Street, London WC2E 9BT, United Kingdom (Note 7)
20 Garrick Street, London WC2E 9BT, United Kingdom (Note 6)
20 Garrick Street, London WC2E 9BT, United Kingdom (Note 6)
20 Garrick Street, London WC2E 9BT, United Kingdom
1 Draper Esprit Nominee Limited is held at cost £nil (2018: £nil, 2017: £nil) on the Company’s balance sheet
^ Esprit Investments (1) (B) LP and Esprit Investments (2) (B) LP were registered UK limited partnerships on 17 September 2017 and 29 March 2018 respectively.
Refer to Group Note 3 for a full list of the Company's related undertaking.
15. Critical accounting estimates and judgements
The Directors have made judgements and estimates with respect to those items that have made the most significant effect on the carrying
amounts of the assets and liabilities in the financial statements. The Directors have concluded that the judgements and estimates in the
Company financial statements are consistent with those applied in the consolidated financial statements, further details of which can be
found in Note 4.
16. 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:
31(cid:98)March 2019
Financial Assets
Investments
Long-term (cid:410)nancial assets
Trade and other receivables
Cash and cash equivalents
Short-term (cid:410)nancial assets
Total (cid:410)nancial assets
Financial Liabilities
Total (cid:410)nancial liabilities
31(cid:98)March 2018
Financial Assets
Investments
Long-term (cid:410)nancial assets
Trade and other receivables
Cash and cash equivalents
Short-term (cid:410)nancial assets
Total (cid:410)nancial assets
Financial Liabilities
Total (cid:410)nancial liabilities
draperesprit.com
Designated
FVTPL
£’000s
Amortised
cost
£’000s
532,897
532,897
–
–
–
532,897
-
-
–
–
993
48,568
49,561
49,561
(7,851)
(7,851)
Designated
FVTPL
£’000s
Amortised
cost
£’000s
213,625
213,625
–
–
–
213,625
–
–
–
–
1,064
53,587
54,651
54,651
(2,007)
(2,007)
Total
£’000s
532,897
532,897
993
48,568
49,561
582,458
(7,851)
(7,851)
Total
£’000s
213,625
213,625
1,064
53,587
54,651
268,276
(2,007)
(2,007)
107
Financial Statements
Annual Report 2019
Notes to the Company Financial Statements continued
31(cid:98)March 2017
Financial Assets
Investments
Long-term (cid:410)nancial assets
Trade and other receivables
Cash and cash equivalents
Short-term (cid:410)nancial assets
Total (cid:410)nancial assets
Financial Liabilities
Total (cid:410)nancial liabilities
Designated
FVTPL
£’000s
Amortised
cost
£’000s
93,877
93,877
–
–
–
93,877
–
–
–
–
227
24,122
24,349
24,349
(932)
(932)
Total
£’000s
93,877
93,877
227
24,122
24,349
118,226
(932)
(932)
17. Fair value measurements
The Company holds investments at fair value through the profit and loss. Refer to Note 26 for the Group’s policies with respect to fair value
measurements and Note 6 of the Company financial statements.
18. Financial instruments risk
In the normal course of business, the Company uses certain financial instruments including cash, trade and other receivables and
investments. The Company is exposed to a number of risks through the performance of its normal operations. Refer to Note 27 of the
consolidated financial statements.
19. Post balance sheet events
The Group has made further investments of:
– £2.2 million invested in Realeyes;
– £0.5 million invested in Pushdoctor;
– £2.5 million invested in Verve; and
– £0.4 million invested in Kaptivo.
The Group has realised £15.3 million gross proceeds from the partial sale of TransferWise.
Post year-end the Company entered into a £50.0 million Revolving Credit Facility with Silicon Valley Bank and Investec. The facility is for
a 3(cid:98)year term and carries an interest rate at the Bank of England base rate + 6.75% (min 7.5%). The facility provides additional funding
flexibility to fund the future growth plans of portfolio companies.
20. Related party transactions
During the year the Company recharged Encore Ventures LLP £840,000 (2018: £208,800) administrative costs of which £70,000 (2018:
£17,400) remains unpaid at balance sheet date.
Please refer to note 29 to the consolidated financial statements for further details.
108
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Annual Report 2019
Directors, Secretary and Advisers
Directors
Karen Slatford (Non-executive Chair)
Simon Cook (Chief Executive Officer)
Stuart Chapman (Chief Operating Officer)
Grahame Cook (Non-executive Director)
Richard Pelly (Non-executive Director)
Ben Wilkinson (Chief Financial Officer) – appointed on 4 June 2019
Independent auditor
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
United Kingdom
Registered office
20 Garrick Street, London, England, WC2E 9BT
Website
www.draperesprit.com
Broker and Nominated Adviser
Numis Securities Limited
10 Paternoster Row
London EC2M 7LT
United Kingdom
Broker and ESM Adviser
Goodbody Stockbrokers
Ballsbridge Park
Ballsbridge
Dublin 4
Ireland
Legal Advisers to the Company
(as to English law)
Gowling WLG (UK) LLP
4 More London Riverside
London SE1 2AU
United Kingdom
Legal Advisers to the Company
(as to Irish law)
Maples and Calder
75 St. Stephen’s Green
Dublin 2
Ireland
Public relations adviser
Powerscourt Limited
1 Tudor Street
London,
EC48 0AH
United Kingdom
Principal Bankers
Barclays Bank Plc,
9-11 St Andrews St,
Cambridge, CB2 3AA
United Kingdom
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
United Kingdom
Company Secretary
Prism Cosec Limited
42-50 Hersham Road
Walton-On-Thames
Surrey
KT12 1RZ
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Annual Report 2019
Notice of Annual General Meeting
Draper Esprit plc
(Incorporated and registered in England and Wales under number 9799594)
Notice is hereby given that the annual general meeting (“AGM”) of Draper Esprit plc (the “Company”) will be held at the offices of Gowling
WLG (UK) LLP, 4 More London Riverside, London SE1 2AU on Wednesday 24 July 2019 at 11.00 a.m. for the purpose of considering and, if
thought fit, passing the following resolutions (which will be proposed in the case of resolutions 1 to 10 as ordinary resolutions and resolutions
11 to 13 as special resolutions):
Ordinary business
1
2
ORDINARY RESOLUTIONS
To receive and adopt the Annual Report and Accounts of the Company for the financial year ended 31 March 2019 together with the
Directors’ Report and Auditors’ Report thereon.
To approve the Remuneration and Nomination Committee Report for the financial year ended 31 March 2019, which, inter alia, sets out
the remuneration policy and remuneration paid to Directors during the year.
3
That Simon Cook be re-elected as a Director of the Company with effect from the end of the AGM.
4
That Stuart Chapman be re-elected as a Director of the Company with effect from the end of the AGM.
5
That Karen Slatford be re-elected as a Director of the Company with effect from the end of the AGM.
6
That Grahame Cook be re-elected as a Director of the Company with effect from the end of the AGM.
7
That Richard Pelly be re-elected as a Director of the Company with effect from the end of the AGM.
8
That Ben Wilkinson be elected as a Director of the Company with effect from the end of the AGM.
9
To re-appoint PricewaterhouseCoopers LLP as auditors of the Company to hold office from the conclusion of the AGM until the
conclusion of the next annual general meeting of the Company at which the Company’s accounts are laid and to authorise the Audit
Committee to determine the amount of the auditors’ remuneration.
Special business
10
ORDINARY RESOLUTION
That the Directors be and are hereby generally and unconditionally authorised pursuant to section 551 of the Companies Act 2006
(the “Act”) to exercise all powers of the Company to allot shares in the Company and to grant rights to subscribe for or convert any
security into shares in the Company up to an aggregate maximum nominal amount of £389,154.05, provided that this authority shall
expire (unless renewed, varied or revoked by the Company in general meeting) on the earlier of the conclusion of the next annual
general meeting of the Company and 30 September 2020 save that the Company shall be entitled to make, prior to the expiry of such
authority, any offer or agreement which would or might require shares to be allotted or rights to subscribe for or convert any security
into shares to be granted after the expiry of such authority and the Directors may allot shares or grant rights to subscribe for or convert
securities into shares in pursuance of such offer or agreement as if the authority conferred hereby had not expired. The authority
granted by this resolution shall replace all existing authorities to allot any shares in the Company and to grant rights to subscribe for or
convert any security into shares in the Company previously granted to the Directors pursuant to section 551 of the Act.
SPECIAL RESOLUTIONS
11 T hat, subject to the passing of resolution no. 10, the Directors be and are hereby empowered pursuant to sections 570 and 573 of the
Act to allot equity securities (as defined in section 560 of the Act) for cash either pursuant to the authority conferred by resolution no.
10 above or by way of sale of treasury shares as if section 561(1) of the Act did not apply to such allotment, provided that this power
shall be limited to the allotment and/or sale of equity securities up to an aggregate nominal amount of £58,962.73 and provided that
this authority shall expire (unless renewed, varied or revoked by the Company in general meeting) on the earlier of the conclusion of
the next annual general meeting of the Company and 30 September 2020 save that the Company shall be entitled to make, prior to
the expiry of such authority, offers or arrangements which would or might require equity securities to be allotted and/or sold after such
110
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Annual Report 2019
Notice of Annual General Meeting continued
expiry, and the Directors may allot and/or sell equity securities in pursuance of any such offer or agreement as if the power conferred
by this resolution had not expired. The authority granted by this resolution shall replace all existing authorities previously granted to the
Directors to allot equity securities for cash or by way of a sale of treasury shares as if section 561(1) of the Act did not apply.
12 T hat, subject to the passing of resolution no. 10, the Directors be and are hereby empowered, in addition to any authority granted under
resolution no. 11, pursuant to sections 570 and 573 of the Act to allot equity securities (as defined in section 560 of the Act) for cash
either pursuant to the authority conferred by resolution no. 10 above or by way of sale of treasury shares as if section 561(1) of the Act
did not apply to such allotment, provided that this power shall be limited to the allotment and/or transfer of equity securities up to an
aggregate nominal amount of £58,962.73, provided that this authority shall expire (unless renewed, varied or revoked by the Company
in general meeting) on the earlier of the conclusion of the next annual general meeting of the Company and 30 September 2020 save
that the Company shall be entitled to make, prior to the expiry of such authority, offers or arrangements which would or might require
equity securities to be allotted and/or transferred after such expiry, and the Directors may allot and/or transfer equity securities in
pursuance of any such offer or agreement as if the power conferred by this resolution had not expired. The authority granted by this
resolution shall replace all existing authorities previously granted to the Directors to allot equity securities for cash or by way of a sale of
treasury shares as if section 561(1) of the Act did not apply.
13
That the Company be authorised generally and unconditionally, in accordance with section 701 of the Act, to make market purchases
(within the meaning of section 693(4) of the Act) of Ordinary Shares provided that:
(a) the maximum number of Ordinary Shares that may be purchased is 11,792,547;
(b) the minimum price which may be paid for an Ordinary Share is one penny; and
(c) the maximum price which may be paid for an Ordinary Share is the higher of: (i) five per cent. above the average of the mid-
market value of the Ordinary Shares for the five business days before the purchase is made; and (ii) the higher of the last
independent trade and the highest current independent bid for any number of Ordinary Shares on the trading venue where the
purchase is carried out.
The authority conferred by this resolution will expire on the earlier of the conclusion of the next annual general meeting of the Company
and 30 September 2020 save that the Company may, before the expiry of the authority granted by this resolution, enter into a contract to
purchase Ordinary Shares which will or may be executed wholly or partly after the expiry of such authority.
By order of the Board of Directors
Prism Cosec Limited
Company Secretary of Draper Esprit plc
4 June 2019
Registered Office: 20 Garrick Street, London WC2E 9BT
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111
Annual Report 2019
Notice of Annual General Meeting continued
Notes:
Proxies
1
A member is entitled to appoint one or more proxies to exercise all or any of the member’s rights to attend, speak and vote at the
AGM. A proxy need not be a member of the Company and a member may appoint more than one proxy in relation to a meeting to
attend, speak and vote on the same occasion provided that each proxy is appointed to exercise the rights attached to a different share
or shares held by a member. To appoint more than one proxy, the proxy form should be photocopied and the name of the proxy to be
appointed indicated on each form together with the number of shares that such proxy is appointed in respect of (which, in aggregate,
should not exceed the number of shares held by you). Please also indicate if the proxy instruction is one of multiple instructions being
given. All forms must be signed and should be returned together in the same envelope.
2
A form of proxy is enclosed with this notice. Forms of proxy may also be obtained on request from the Company’s registered office.
In order to be valid any proxy form or other instrument appointing a proxy must be returned duly completed by one of the following
methods no later than 48 hours before the time of the AGM (excluding non-working days), in hard copy form by post, by courier, or by
hand to the Company’s registrar, Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA. Submission of a proxy
appointment will not preclude a member from attending and voting at the AGM should they wish to do so. To direct your proxy on how
to vote on the resolutions, mark the appropriate box on your proxy form with an ‘X’. To abstain from voting on a resolution, select the
relevant “Vote withheld” box. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of
votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your
proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the AGM.
3
Any power of attorney or other authority under which your proxy form is signed (or a duly certified copy of such power or authority)
must be returned to the Company’s registrar with your proxy form.
Thresholds and entitlement to vote
4
To be passed, ordinary resolutions require a majority in favour of the votes cast and special resolutions require a majority of not less
than 75 per cent. of members who vote in person or by proxy at the meeting. On a show of hands every shareholder who is present in
person (or, being a company, is present by a representative not himself a shareholder) and who is allowed to vote at a general meeting
shall have one vote. Upon a poll every member holding Ordinary Shares who is present in person or by proxy (or being a company is
represented) shall have one vote for every Ordinary Share of which he is the registered holder.
5
6
7
8
The Company, pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 (as amended), specifies that only those
members registered in the register of members of the Company at 6.30 p.m. on 22 July 2019 (or if the AGM is adjourned, members
entered on the register of members of the Company no later than 48 hours before the time fixed for the adjourned AGM) shall be
entitled to attend, speak and vote at the AGM in respect of the number of Ordinary Shares registered in his or her name at that time.
Changes to entries on the register of members of the Company after 6.30 p.m. on 22 July 2019 shall be disregarded in determining the
rights of any person to attend, speak or vote at the AGM.
In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted
by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the
Company’s register of members in respect of the joint holding (the first named being the most senior).
A corporation which is a member can appoint one or more corporate representatives who may exercise, on its behalf, all its powers as a
member provided that no more than one corporate representative exercises powers over the same share.
As at 3 June 2019, being the latest practicable date before the publication of this notice of AGM (the “Latest Practicable Date”), the
Company’s issued share capital consisted of 117,925,470 Ordinary Shares, each carrying one vote. Therefore, the total voting rights in the
Company as at the Latest Practicable Date is 117,925,470.
Miscellaneous
9
Copies of the Directors’ service contracts and letters of appointment are available for inspection at the registered office of the
Company during normal business hours and will be available for inspection at the place where the AGM is being held from 15 minutes
prior to and during the AGM.
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Members who have general queries about the AGM should write to the Company Secretary at the Company’s Registered Office; 20
Garrick Street, London WC2E 9BT.
Explanation of the resolutions
1
Resolution 1 – annual accounts – the Directors are required to present the Accounts, Directors’ Report and Auditors’ Report to the AGM.
These are contained in the Company’s Annual Report and Financial Statements 2019.
2
3
4
5
6
7
Resolution 2 – Remuneration and Nomination Committee Report – the Directors’ are required to approve the Remuneration and
Nomination Committee Report, which sets out the remuneration policy and remuneration paid to Directors for the financial year.
Resolutions 3 to 8 – re-appointed and appointment of Directors – in accordance with good corporate governance, each Director shall
retire and submit themselves for re-election by shareholders at each AGM. The Board, led by the Chairman, has considered each of
the Directors and has concluded that each of them makes positive and effective contributions to the meetings of the Board and the
committees on which they sit, and that they demonstrate commitment to their roles. The Board is satisfied that each independent non-
executive director offering themselves for re-appointment is independent in character and there are no relationships or circumstances
likely to affect their character or judgement. Biographies of each of the directors are provided on pages 46 and 47 of the Annual Report
and Financial Statements 2019 and are also available from the Company’s website: https://draperesprit.com/investors/plc/leadership.
The Board unanimously recommends the re-appointment of each of the Directors.
Resolution 9 – auditor re-appointment and remuneration - at each meeting at which the Company’s accounts are presented to its
shareholders, the Company is required to appoint an auditor to serve until the next such meeting and seek shareholder consent for the
Directors to set the remuneration of the auditors.
Resolution 10 – general authority to allot - this resolution, to be proposed as an ordinary resolution, relates to the grant to the Directors
of authority to allot unissued Ordinary Shares until the earlier of the conclusion of the annual general meeting to be held in 2020 and
30 September 2020 (being six months after the financial year end of the Company), unless the authority is renewed or revoked prior
to such time. This authority is limited to a maximum nominal amount of £389,154.05 (representing approximately one-third of the
issued Ordinary Share capital of the Company as at the Latest Practicable Date). This percentage is in line with corporate governance
guidelines.
Resolutions 11 and 12 – disapplication of statutory pre-emption rights – the passing of these resolutions, which are to be proposed as
special resolutions, would allow Directors to allot Ordinary Shares (or sell any Ordinary Shares which the Company may purchase and
hold in treasury) without first offering them to existing holders in proportion to their existing holdings. The authority set out in resolution
11 is limited to up to an aggregate nominal amount of £58,962.73 (representing 5,896,273 Ordinary Shares), being five per cent. of the
issued ordinary share capital of the Company (excluding treasury shares) as at the Latest Practicable Date. The authority set out in
resolution 12 is limited to allotments or sales of up to an aggregate nominal amount of £58,962.73 (representing 5,896,273 Ordinary
Shares), being five per cent. of the issued ordinary share capital of the Company (excluding treasury shares) as at the Latest Practicable
Date. This authority will expire at the conclusion of the next AGM of the Company or, if earlier, at the close of business on 30 September
2020.
Resolution 13 – market purchases – the Directors are requesting authority by way of special resolution for the Company to make market
purchases of Ordinary Shares up to a maximum of 11,792,547 Ordinary Shares (representing ten per cent. of the issued Ordinary
Share capital of the Company as at the Latest Practicable Date). There is no present intention to exercise such general authority. Any
repurchase of Ordinary Shares will be made subject to the Act and within guidelines established from time to time by the Directors
(which will take into account the income and cash flow requirements of the Company) and will be at the absolute discretion of the
Directors, and not at the option of shareholders. Subject to shareholder authority for the proposed repurchases, general purchases of
the Ordinary Shares in issue will only be made through the market. Such purchases may only be made provided the price to be paid
is not more than the higher of: (i) five per cent. above the average of the middle market quotations for the Ordinary Shares for the
five Business Days before the purchase is made; or (ii) the higher of the price of the last independent trade and the highest current
independent bid at the time of purchase.
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Glossary
In this document, where the context permits, the terms and expressions set out below shall have the meanings assigned thereto:
“Admission” or “IPO”
the Admission of the enlarged share capital to trading on AIM and ESM on 15 June 2016 and such
admission becoming effective in accordance with the AIM Rules and the ESM Rules respectively. The IPO
included the acquisition of Esprit Capital Partners LLP and Draper Esprit (Ireland) Limited.
“Act”
“AIM”
the UK Companies Act 2006.
AIM, the market of that name operated by the London Stock Exchange.
“Audit Committee”
the Audit Committee of the Board.
“Company” or “Draper
Esprit” or “plc”
Draper Esprit plc, a company incorporated in England and Wales with registration number 09799594 and
having its registered office at 20 Garrick Street, London, England, WC2E 9BT.
“Core Portfolio Companies” Top 15 portfolio companies by value.
“DEF” / “Digital East Fund”
Digital East Fund 2013 SCA SICAR
“Directors” or “Board”
the Directors of the Company whose names, as at the date of this document, appear on page 46 and 47
of this document.
“Draper Esprit Funds”
the Esprit Funds and the Encore Funds.
“Draper Venture Network”
the self–governed network of ten independent growth and venture funds, of which Esprit Capital is a
member.
“EB IV” / “Earlybird Fund IV” Earlybird GmbH & Co. Beteiligungs-KG IV
“EB VI” / “Earlybird Fund VI” Earlybird DWES Fund VI GmbH & Co. KG
“EIS”
“Encore Funds”
“Encore Ventures”
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.
DFJ Esprit Angels’ EIS Co–Investment Fund, DFJ Esprit Angels’ EIS Co–Investment II, DFJ Esprit EIS III and DFJ
Esprit EIS IV and each an “Encore Fund”.
Encore Ventures LLP, a limited liability partnership incorporated in England and Wales under the
registration number OC347590 with its registered office at 20 Garrick Street, London, WC2E 9BT.
“ESM”
the Enterprise Securities Market operated and regulated by the Irish Stock Exchange.
“Esprit Capital”
Esprit Capital Partners LLP (previously Draper Esprit LLP) , a limited liability partnership incorporated in
England and Wales under the registration number OC318087 with its registered office at 20 Garrick Street,
London, WC2E 9BT, the holding vehicle of the Group immediately prior to Admission.
“Esprit Ireland”
Draper Esprit (Ireland) Limited, a wholly owned subsidiary of the Company incorporated in Ireland under
the registration number 572006 with its registered office at 32 Molesworth Street, Dublin 2, Ireland.
“FCA”
the UK Financial Conduct Authority.
“FOF” or “FoF”
Fund of Funds.
“Gross Portfolio Value”
Gross portfolio value is the value of the portfolio of investee companies held by funds controlled by the
Company before accounting for deferred tax, external carried interest and amounts co–invested.
“HMRC”
HM Revenue & Customs.
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“IFRS” or “IFRSs”
International Financial Reporting Standards, as adopted for use in the European Union.
“Irish Stock Exchange”
Irish Stock Exchange Plc.
“IPO”
“IRR”
“NAV”
The Company’s listing on the London Stock Exchange’s AIM market and the Irish Stock Exchange’s Euronext
Dublin market on 15 June 2016.
the internal rate of return.
Net asset value.
“Ordinary Shares”
ordinary shares of £0.01 pence each in the capital of the Company.
“PwC”
Pricewaterhousecoopers LLP, a limited liability partnership registered in England and Wales under the
registration number OC303525 with its registered office at 1 Embankment Place, London, England, WC2N
6RH.
“International Private
Equity and Venture Capital
Valuation Guidelines”
“VC”
“VCT”
the International Private Equity and Venture Capital Valuation Guidelines, as amended from time to time.
venture capital.
The VCT funds managed by Draper Esprit VCT. VCT (venture capital trust) funds being UK closed–ended
collective investment schemes.
London (cid:95) HQ
20 Garrick Street London, WC2E 9BT
Tel: +44 (0)20 7931 8800
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Annual Report 2019
Notes
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Produced by
london@blackandcallow.com
www.blackandcallow.com
020 3794 1720
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Draper Esprit London HQ
20 Garrick Street
London, WC2E 9BT
Tel: +44 (0)20 7931 8800
draperesprit.com