Draper Esprit hypes home working, telemedicine to push profits higher (GROW)

By Patricia Miller


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Of all the sectors that could grow in a coronavirus-hit world, there are few better prospects than remote health diagnosis. 

A 23 March RNS from London VC firm Draper Espirit (LSE:GROW) highlights its portfolio companies that produce recurring revenues, positioning it to come through the global pandemic crisis with a robust balance sheet. 

A review of the 72 companies in which it has investments found that 80% had strong cash balance sheets, it said. Companies exposed to the travel, leisure and hospitality sectors represented just 7% of its net asset value.

The group has a debt facility of £50 million, of which £45 million is currently drawn, it said. The lack of headroom here may be a concern. However, Draper says £36 million of that value is currently undeployed. 

The portfolio of companies in which it holds significant stakes represent some of the fastest-growing private companies in the world. They include UK digital banking challengers Revolut, Transferwise and Germany’s N26, as well as reviews giant Trustpilot and crowdfunding platforms Crowdcube and Seedrs. 

Chief executive Martin Davis noted: “As an investor in high growth technology businesses we are acutely aware of the positive role that technology can play in helping the world to recover from this crisis.

We have taken early steps to prudently manage our business and remain well financed,” he said. 

The diversity of Draper’s portfolio means “we are not overly exposed to any individual market or sector and we remain very positive about the long-term areas of growth in the markets our companies address such as AI, cloud computing for remote working and digital health.”

Remote chance

The UK telemedicine market is highly concentrated, with around 45 main players. Draper Esprit has investments in the likes of Manchester-based Push Doctor, which offers prescriptions, referrals and advice for would-be patients. 

Research by the General Medical Council from 2018 suggests: “Telemedicine has become an important form of healthcare around the world.” 

With the extreme pressure on the NHS reaching all-time highs, and the capacity of the 111 service reaching breaking point, the fact is that alternative services will become more important in the months to come. 

The sector also retains a high barrier to entry, giving early movers a relatively wider economic moat. 

Draper also has investments in remote mental health support service Ieso Digital Health. 

Work from home

Investors may be looking at the likes of NASDAQ-listed Zoom (NASDAQ:ZM) as a sensible investment as millions of workers have been sent home. Indeed, in the last three months its share price has rocketed by 103%. 

But in the UK there are few options that are publicly traded. I would suggest that GROW’s portfolio of related businesses, like cloud phone call company Aircall, whiteboard camera firm Kaptivo and customer service platform Conversocial represent some of the best opportunities to profit from this macro environment. 

Like most shares in the UK market, coronavirus-induced panic selling has erased any price appreciation. In the case of GROW, the share price at 262p is now 40p below its IPO price.

I suggested on 3 March that a share price of 525p represented decent value. Now at half the price, GROW has hit the top of my watchlist.


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Author: Patricia Miller

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

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