Draper Esprit brings in new CEO as it continues 'prudent' approach
Technology-focussed venture capital company Draper Esprit announced the expansion of its management team and updated the market on its trading on Monday, ahead of its interim results for the period ended 30 September, due on 26 November.
The AIM-traded firm said that, following a period of “significant development” since Draper Esprit's successful 2016 initial public offering, Martin Davis was joining the company as chief executive officer, while current CEO and co-Founder Simon Cook would become chief investment officer.
It said that, together with co-founder and chief operating officer Stuart Chapman and chief financial officer Ben Wilkinson, the enhanced senior leadership team would continue to implement the company's strategy of providing investors with access to “the best” private technology companies in Europe.
Draper Esprit said Davis had more than 20 years of experience in financial services and technology, and was most recently CEO of investment management business Kames Capital.
Prior to joining Kames, he was CEO at Cofunds - the largest adviser platform for financial intermediaries in the market - which he joined after eight years at Zurich Insurance Group, where he ran the International and global emerging markets life businesses.
Davis was also CEO of Zurich's joint venture, Openwork, which was described as a network of financial advice firms.
Prior to that, he held senior management roles at fintech business Misys, online banking business Corillian and data business Reuters, and he was originally an officer in the Royal Irish Rangers.
In his role as chief investment officer, Simon Cook would lead the investment team, continuing to seek out fast growing, private digital technology businesses with global potential from across Europe, in line with the company's decade-long track record of generating 20% net returns.
On the trading front, Draper Esprit said the positive momentum had continued in the past six months, with progress reportedly achieved across all areas of the business.
The group said it was continuing to see on-target growth within its portfolio through revenue increases, financing rounds and exits, alongside a “healthy pipeline” of investment opportunities.
As a result, trading remained in line with its stated financial objective of a 20% increase in the portfolio fair value per annum.
Draper Esprit said that as a consequence of the portfolio companies' growth during the period, combined with further realisations in the portfolio, the directors were anticipating that the gross portfolio value would have increased to approximately £683m - up 15% from £594m at 31 March, or 93% from £354m at 30 September 2018.
The increase in the value of the gross primary portfolio reflected further investments made during the period of £42m, or £203m during the 12 months ended September, the board explained.
It said a fair value increase of £70 million in the six months ended 30 September, or £162m fair value increase for the 12 months ended 30 September, had been primarily driven by the continued positive performance across the portfolio, combined with financing rounds led by third parties at higher valuations.
Foreign exchange contributions also had a positive impact, the board said.
The board said the core portfolio was expected to consist of 18 companies, which in aggregate represented 70% of the fair value of the total portfolio.
It said the average characteristics of the core companies reflected revenue growth of 56% to more than $120m (£92.9m) in 2019, gross margins of more than 60%, and Draper Esprit holding an average equity stake in the core companies of over 9.0% with the average fair value for each of £27m.
Those characteristics were described by the board as indicative of an average enterprise value of approximately three times forecast 2019 revenues, which it believed to be prudent.
Due to prevailing market headwinds and ongoing political uncertainty, the company said it had maintained a prudent investment pace, investing £42m in the period across new and existing portfolio companies.
During the period, Draper Esprit said it also generated £23m from the partial sales of its stakes in Transferwise, UiPath and Codility, alongside proceeds from escrows of previous sales.
Plc cash at the period-end was £46m, with a further £50m available to deploy within EIS/VCT co-investment funds.
Along with the revolving debt facility the firm secured in May, the group said it had £126m of investment capacity, affording the business a high degree of financial flexibility when assessing future investment opportunities.
“Martin brings extremely relevant experience and strategic thinking at large companies within the financial services sector, as well as in emerging technology companies,” said Draper Esprit chair Karen Slatford.
“His appointment and Simon's new role as CIO will build on the momentum evident in our continued strong performance and add firepower as we seek to scale our business further.
“Trading has remained in line with the guidance we gave at our AGM and we are once again set to deliver the stated objective of a portfolio return of 20% per annum for the full year.”
Martin Davis said Draper Esprit's reputation for helping high quality technology companies was “unparalleled”, and he was “looking forward” to working with Cook and the wider team as he focussed on building infrastructure to accelerate the growth of the business.
“With companies staying private for longer, our role in helping to democratise venture capital and provide our shareholders with access to high growth technology companies is more important now than ever before.
“Generating value for our shareholders while helping the very best entrepreneurs to secure the right capital to grow their businesses is central to this approach, and I am tremendously excited to be joining Draper Esprit to lead the team in the next stage of our development.”
Simon Cook added that the firm often advised its companies that they needed additional management skills for new phases of growth, making it “fitting” that it followed its own advice.
“Investing in technology startups is my great passion and I am excited by the prospect of focusing on our investment activity in depth as CIO.
“Now is a good time to enhance our management team to build on our status as Europe's most active in the venture capital asset class.
“Martin's unique experience in both technology and building highly scalable financial services companies will help enable us to scale Draper Esprit to reach new heights.”
As at 1028 GMT, shares in Draper Esprit were flat at 449p.