Venture capital firm Draper Esprit has said a substantial majority of its portfolio is “well positioned” to benefit from coronavirus, as the adoption of cloud and automation tech is accelerated.
Companies in the secure cloud, automation and online financial services are trading well, said Draper Esprit, and evidence from public markets and funding rounds suggests there is strong demand.
Prior to the pandemic, Draper Esprit was on track to achieve its targeted annual 20 per cent growth, and said despite the market backdrop has delivered strong growth.
However, the firm has lowered growth forecasts for 2020 and 2021 for portfolio companies negatively impacted by coronavirus. “The group consistently applies multiples lower than those prevailing for comparable quoted companies to mitigate stock market volatility,” Draper Esprit said in a statement.
The firm has made provisions of around £99m across the portfolio, but only a third of these adjustments relate to the 18 core portfolio assets. The firm reiterated that the pandemic could help some of its portfolio companies.
“The long-term potential of the portfolio remains positive and we expect the value of the portfolio to grow post COVID-19 particularly in light of the accelerated transition to digital.”
Investments since September 2019 amount to £48m, bringing the total for the year to £90m. The core portfolio accounts for £2m of investments since September 2019.
The unaudited gross portfolio value is expected to be not less than £695m, of which the core portfolio accounts for approximately 70 per cent. NAV per share is expected to be not less than 550p.
Chief executive Martin Davis said: “Over the medium term, we believe the recovery from the pandemic will sharply accelerate the trends which Draper Esprit’s portfolio businesses focus on. Transformations such as secure cloud infrastructure, remote financial services, online gaming and entertainment, and digital health, all stand to benefit from the societal shifts which the crisis has engendered.”
“These dynamic businesses are weathering the current environment well and we are confident they will emerge stronger when economic activity normalises.”