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Draper Esprit Plc Interims reveal value creation – Zeus Capital View

In June Draper Esprit Plc (LON:GROW) was listed on the LSE. Today its maiden interim results reveal substantial progress since IPO. In addition to strengthening the executive team with the appointment of Ben Wilkinson as CFO, the company has created shareholder value through new investment and realisations.

In the period the Group’s Primary Portfolio is up £28m to £107m in the period from IPO to 30 September, benefiting from:

  • Gains on realisations of Movidius.
  • Uplifts in valuation of Graze & other investment which have US dollar exposure.

 

During the period the group invested £8.9m (alongside an additional £6.2m from co-investment funds) in Lifesum, Graphcore and Resolver. Post period end it has invested in Pushdoctor and Perkbox. Current net cash & deposit available for investment of £48.0m pre Qomos exit & co-funds.

Overall since IPO, Group NAV including goodwill increased 11% to £143.3m; NAV per share rose to 352p (at IPO: 316p).

Zeus view

Draper Esprit is enjoying good momentum with attractive gains on realisation, and numerous opportunities to invest in portfolio companies and new ventures.

We are particularly impressed with the continued growth in portfolio revenues which rose 28% over the past year (top 8 portfolio companies: 33%) to $711m. Continued revenue growth and sterling weakness should benefit portfolio revaluations in subsequent periods when additional funding prompt revaluations.

Valuation

The company’s IPO on 15 June 2016 was priced at 300p a share (i.e. £122m) when the “unaudited pro-forma Net Asset Value (“NAV”) including goodwill [was] £128.7m with the disclosed audited NAV of the holding in Movidius of £7.5m as at 31 December 2015.” Movidius was 6% of April 2016 NAV and 10% NAV ex goodwill and cash. We analyse the increase in NAV in Exhibit 1 overleaf.

With GROW shares trading above historic reported NAV of 352p (up 11% since IPO) investors should recognise the shareholder value that is being created in the primary portfolio and in the management company. In our opinion Draper Esprit should be valued at a premium to reported book value per share of 352p reflecting this shareholder value creation.