REG - Chrysalis Invs Ltd - Interim Results
30/06/2022 07:16
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220630:nRSd7260Qa&default-theme=true
RNS Number : 7260Q Chrysalis Investments Limited 30 June 2022
The information contained in this announcement is restricted and is not for
publication, release or distribution in the United States of America, any
member state of the European Economic Area (other than to professional
investors in Belgium, Denmark, the Republic of Ireland, Luxembourg, the
Netherlands, Norway and Sweden), Canada, Australia, Japan or the Republic of
South Africa.
30 June 2022
Chrysalis Investments Limited ("Chrysalis" or the "Company")
Interim Results
Financial Summary
31 March 2022 30 September 2021 % Decrease
NAV per share 211.76p 251.96p 16.0%
Share price 177.00p 267.00p 33.7%
Total net assets £1.260 billion £1.379 billion 8.6%
Highlights
- NAV per share of 211.76p, representing a 16.0% decrease over the first
half of the financial year, driven by weakening valuations of listed peers in
the tech space
- Net realisations of c£33 million were generated in the period,
following the sale of Embark Group, net of follow-ons made in Smart Pension,
THG and Sorted
- Private markets have switched focus from growth to profitability; the
Investment Adviser expects investors to become more selective over the
business models they wish to back
- Approximately 40% of the portfolio is already profitable, including
the major unit in Starling Bank; comments by Klarna, which accounts for c19%
of the portfolio, in its 1Q22 report potentially indicates it is also driving
towards break-even
- The Investment Adviser has been working with the unprofitable
companies within the portfolio on refining funding plans and on how to
elongate cash runways. The average cash runway for this group is approximately
14 months
- The Company has sufficient cash - c£55 million as of 27 June 2022 -
to extend these runways substantially, assuming it invests according to its
pro rata ownership alongside other investors
- Supporting the existing portfolio will be the Company's primary
objective in this challenging environment; capital allocation remains under
constant review
- As has been previously announced, from 1st July, the Company will be a
self-managed AIFM. The nature of the portfolio advisory services provided by
Jupiter will remain unchanged, as will the investment team
Andrew Haining, Chair, commented:
"The investment landscape has changed materially over the last six months with
central banks responding to elevated levels of inflation by tightening
monetary policy. Rising yields have impacted the valuations of long duration
assets, with the derating of growth stocks being particularly marked. The
appetite or ability to provide capital has reduced and, consequently, those
investors who are providers of capital are demanding very attractive terms.
Therefore, Chrysalis has positioned itself with enough capital to ensure it
can support its portfolio appropriately."
Nick Williamson and Richard Watts, co-portfolio managers, commented:
"Profitability, not growth at any cost, is now the focus as companies look to
extend funding runways. Chrysalis' portfolio companies have not been immune to
this environment, although for our profitable companies, or those with very
strong balance sheets, the difficult funding market is of less or no concern.
In spite of the difficult backdrop, the portfolio continues to demonstrate its
ability to deliver robust growth and operationally is performing well in
aggregate. With approximately 40% of the portfolio already profitable, our
focus has been working with the 60% that has yet to break even, where we have
supported a number of companies to balance opex budgets with growth
aspirations. This has extended cash runways, which currently average
approximately 14 months for this group.
The current cash position allows us to extend the cash runways of our
unprofitable companies by at least a year, should current conditions persist.
The listed portion of the portfolio will provide potential further liquidity
on top of this if needed.
Material falls in listed valuations typically create headwinds for our
near-term NAV progression, but in our experience, shakeouts of this type also
provide opportunities for the best companies to exploit in the medium term.
While we recognise the current discount to NAV Chrysalis trades on, our
current stance is that we should reserve sufficient capital to support the
existing portfolio while this market dislocation remains. If and when market
conditions allow, or Chrysalis generates capital, share buybacks or new
investments might be considered."
-ENDS-
For further information, please contact
Media
Montfort Communications +44 (0) 7542 846 844
Charlotte McMullen / Georgia Colkin / Lesley Kezhu Wang chrysalis@montfort.london
Jupiter Asset Management: +44 (0) 20 3817 1696
James Simpson
Liberum: +44 (0) 20 3100 2000
Chris Clarke / Darren Vickers / Owen Matthews
Numis: +44 (0) 20 7260 1000
Nathan Brown / Matt Goss
Maitland Administration (Guernsey) Limited: +44 (0) 1481 749364
Elaine Smeja / Aimee Gontier
LEI: 213800F9SQ753JQHSW24
A copy of this announcement will be available on the Company's website at
https://www.chrysalisinvestments.co.uk
The information contained in this announcement regarding the Company's
investments has been provided by the relevant underlying portfolio company and
has not been independently verified by the Company. The information contained
herein is unaudited.
This announcement is for information purposes only and is not an offer to
invest. All investments are subject to risk. Past performance is no guarantee
of future returns. Prospective investors are advised to seek expert legal,
financial, tax and other professional advice before making any investment
decision. The value of investments may fluctuate. Results achieved in the past
are no guarantee of future results. Neither the content of the Company's
website, nor the content on any website accessible from hyperlinks on its
website for any other website, is incorporated into, or forms part of, this
announcement nor, unless previously published by means of a recognised
information service, should any such content be relied upon in reaching a
decision as to whether or not to acquire, continue to hold, or dispose of,
securities in the Company.
Chairman's Statement
The six-month period from September 2021 to March 2022 and through June 2022
has seen a reversal of much of the value growth seen in our sector over the
last couple of years. This downward movement in asset prices has been driven
by a number of macro forces in the world economy - increased geopolitical risk
with the war in eastern Europe, supply dislocations caused by COVID globally
and Brexit for the UK, reduced availability of skilled labour in most markets
- all coupled with an unwinding of almost universal central bank expansionary
policies. The net result has been to see inflation return as a concern,
central bank interest rates rising and economies struggling to generate
satisfactory growth rates.
Against this backdrop, I am pleased to say that our portfolio companies
continue to generate above average growth rates in their sectors. Our NAV,
which is, for the majority of our investments, valued using comparable metrics
with public company peers, declined in the period from 251.96p per share to
211.76p per share; subsequent to the period end, the derating in the key
comparables continues - this is explored in more detail in the Investment
Adviser's report.
Whilst "growth" has seemingly fallen out of favour in stock market terms, we
believe growth in our underlying companies is the key to driving Chrysalis
shareholder value and hopefully our share price over time. So our focus, and
that of the Investment Adviser, is how to ensure our companies are positioned
correctly to continue to grow in challenging markets and also take advantage
of opportunities that such conditions typically bring.
Given the nature of our portfolio of unlisted investments, the Company's NAV
necessarily provides a snapshot at an historic point in time and reflects the
best estimate of portfolio and Company value by your Board and its advisers at
that time. Given the profile of a number of our investments, press reports on
potential funding rounds post the quarter end do emerge. For example, two of
our larger investments are rumoured to be raising capital - Klarna at a
discount and Wefox at a premium to our holding values. To the extent these
funding rounds are verified before our next quarterly valuation, these will be
reflected in the next valuation, but it is not our intention to comment on
unverified events.
Given the current market dislocation, the Company has focused its attention on
its existing portfolio as opposed to seeking out new investments. We firmly
believe that investment in our portfolio during the next 12 to 18 months will
ensure that our companies are best placed to benefit from the cyclical
recovery as and when it comes.
When we consider the outlook for the portfolio, we have in mind both the
relative strengths of our portfolio assets' business cases, but also their
growth and profit potential. Looking across our investments, we believe we
have a number of companies with market-leading propositions, typically with
substantial runways for growth and high near-term growth potential.
So, despite the recent market uncertainty, on a medium-term view, we believe
the portfolio should be able to drive robust value creation for our
shareholders. The Investment Adviser goes into much greater detail on both the
macro and micro factors affecting our individual investments in its review. We
remain confident that we have a portfolio of outstanding potential across a
number of tech-enabled sectors. If we can continue to support these businesses
with both strategic guidance, and further capital where needed, we believe we
will be able to build valuable growth into the portfolio over the medium term.
There are a number of corporate initiatives which your Board has been pursuing
through the first half of this year which we believe will also assist in
generating shareholder value.
Environmental, Social and Corporate Governance Report ("ESG")
I set out in the last set of interims, and in more detail in our year-end
report, the ESG approach the Board wanted to see adopted both by our
companies, and by the Investment Adviser. I would like to thank Jupiter for
its ongoing work in this area.
We firmly believe that in order to grow successfully, companies and their
founders must not only execute strategically; they must also lay the
foundations for future growth by fostering a healthy corporate culture, a
talented and diverse workforce, and creating appropriate corporate governance
structures.
Not only should Chrysalis' investee companies show how they have minimised
their direct and indirect negative impact on the environment and broader
society, they should also be expected to each demonstrate how they positively
contribute solutions to these global issues.
We have set out in our Environmental, Social and Governance Report more detail
as to how this is both implemented and how it impacts our investee companies.
We were pleased that Jupiter has allocated a dedicated ESG executive to the
portfolio to assist the investment team and our investee companies.
Self-Management
As has been previously announced, from 1st July, the Company will be a
self-managed AIF. The nature of the portfolio advisory services provided by
Jupiter will remain unchanged, as will the investment team. The two key
reasons for adopting this approach are efficiency and independence.
The Company will be making savings on the fees it was paying for the provision
of AIFM services by going in-house; the Board will be using risk and
management consultants to assist it to perform the necessary oversight, but
their costs should show a saving over the current arrangement.
Perhaps more importantly, this self-management approach has enabled the Board
to assemble an independent Valuation Committee, as previously announced. The
three new members of that committee, Lord Rockley, Diane Seymour Williams and
Jonathan Biggs bring significant and relevant experience to the valuation
process. I would like to take this opportunity of thanking the Jupiter
Unlisted Asset Valuation Committee for their work over the last two years.
We believe the new approach will enable us to continue to improve the
valuation process. Credibility and confidence in our valuation process is
fundamental to what I believe shareholders need and expect.
Performance Fee Structure
In last year's annual report, the Board said that it would be reviewing the
management fee arrangements with Jupiter. To assist these deliberations, it
asked Rothschilds to conduct a perception study of our top 20 investors; I am
grateful to those shareholders for contributing to this work.
The Board has been able to derive useful ideas from that study and I have had
discussions directly with a number of those shareholders subsequently.
The study confirmed that these shareholders shared the Board's view of the
shortcomings of the existing performance fee structure and wished to see
amendments made. The Board has provided Jupiter with a framework for how a new
arrangement could work, which would align the payment of any performance fee
due to Jupiter with shareholders more appropriately over the medium term. The
Board is working with Jupiter over the next quarter to finalise this and aims
to provide shareholders with more details prior to the Company's year end,
with the intention that the new arrangement would operate from the beginning
of the next financial year.
Buy Back Policy
The Board has the authority to buy back shares and originally this was
designed to enable distribution of excess capital after asset liquidations
(absent further investment opportunities).
At the current time, both the Board's and Investment Adviser's firm belief is
that the best use of our available capital is to support the development of
our portfolio of assets. This is elaborated on in our Investment Advisory
report.
Our share price has moved in a very similar way to our peer group and now
stands at a significant discount to NAV. Given this disconnect, buying back
shares at a discount is accretive, and potentially attractive for those
shareholders who choose to stay on the register. However, we believe that
greater asset value growth will occur by the Company being in a position to
manage these next 12 to 18 months appropriately. We have to assume that
capital markets stay closed for the foreseeable future and therefore any
available liquid capital should be held for reinvestment, not buy backs.
Moreover, we are seeing the private capital market fundraising processes quite
naturally reflecting the scarcity of cash with increasingly punitive terms for
those investors who choose not to support their growth companies.
Consequently, for both positive and defensive reasons, we believe deploying
capital in our underlying companies will offer the best value accretion for
all shareholders over time.
Given the exceptionally dynamic nature of current markets, considerations
around our capital allocation decisions are under regular review.
Finally, I'd like to extend the Board's thanks to our shareholders for their
support. While the current conditions are proving tricky for growth
valuations, I share the Investment Adviser's confidence in the ability of the
portfolio to drive value over the medium term.
Andrew Haining
Chairman
29 June 2022
Portfolio Statement
As at 31 March 2022 Cost Opening value Net invested / returned Fair value movements Closing Value % of net assets
(£'000) (£'000) (£'000) (£'000) (£'000)
Company Location
Starling Bank Limited UK 88,248 210,767 - 48,505 259,272 20.6
Klarna Holding AB Sweden 64,381 386,999 - (145,943) 241,056 19.1
wefox Holding AG Germany 65,624 108,657 - 33,074 141,731 11.2
Smart Pension Limited UK 90,000 88,600 15,000 9,240 112,840 9.0
The Brandtech Group LLC (formerly You & Mr Jones LLC) USA 46,440 94,837 - 8,926 103,763 8.2
Graphcore Limited UK 57,589 61,545 - (1,638) 59,907 4.8
Featurespace Limited UK 24,546 34,729 97 5,485 40,311 3.2
Tactus Holdings Limited UK 40,130 40,079 - (346) 39,733 3.2
Wise PLC UK 15,287 108,700 (17,630) (56,420) 34,650 2.7
Cognitive Logic Inc. ("InfoSum") USA 47,126 48,435 - (16,134) 32,301 2.6
Deep Instinct Limited USA 47,289 48,430 - (17,253) 31,177 2.5
Revolution Beauty Group PLC UK 44,879 41,373 - (10,519) 30,854 2.4
Sorted Holdings Limited UK 27,941 17,705 12,940 (1,455) 29,190 2.3
THG PLC UK 74,018 86,683 15,220 (80,857) 21,046 1.7
Secret Escapes Limited UK 21,509 24,427 - (8,518) 15,908 1.2
Growth Street Holdings Limited UK 11,372 1,332 (1,240) - 93 0.0
Rowanmoor Group Limited UK 13,363 - 13,363 (13,363) - 0.0
Embark Group Limited UK - 56,900 (70,601) 13,701 - 0.0
Total investments 779,742 1,460,198 (32,851) (233,515) 1,193,832 94.7
Cash and cash equivalents 72,503 5.8
Other net current liabilities (6,046) (0.5)
Total net assets 1,260,289 100.0
Investment Adviser's Report
Overview
The first six months of the financial year saw continued robust revenue growth
from our portfolio assets in aggregate. However, the backdrop of weakening
share prices for a number of listed market peers used by the valuer to assess
fair value of our unlisted holdings, meant that Net Asset Value (NAV) per
share fell 16%.
The median revenue growth of the portfolio companies has been relatively
consistent since 2020, at around 40%. However, the blended revenue growth for
the portfolio, weighted by position size, has been materially better than
this, reflecting the fact that many of our larger holdings are growing more
quickly.
As of March 2022, the year-on-year blended revenue growth over the first half
of the Company's year was over 80%, similar to the level of a year earlier.
The 2021 performance was assisted by an extremely strong performance from
Starling Bank, as lending began to drive revenue growth, which has now
annualised out. This has been partly offset by a first-time contribution from
Smart Pension, which has seen a period of exceptional growth. Our expectation
is that this growth rate could be viewed as "super-normal" and may attenuate
somewhat in the coming periods, but nevertheless, still represents a very
strong performance.
Against a backdrop of increased geopolitical and macroeconomic stresses, the
private market continued to see significant levels of activity over the
period, as shown below.
Given prevailing market conditions, and despite the strong start to 2022, we
expect investors to:
• become more selective in committing capital over the coming months, which
has already led to a slowdown in funding activity post period end;
• put pressure on deal pricing, particularly for assets with weaker
economics; and
• look to increase the use of investor protections via capital structuring.
With this in mind, our current focus is on managing liquidity within the
portfolio, to ensure we can support the growth of our existing units, and
react appropriately to any further volatility in the markets. We explore the
market dynamics and our funding situation in more detail below, but suffice to
say we believe we have sufficient capital to support those of our holdings
that are currently unprofitable for a considerable period, giving substantial
leeway for the current turmoil in investment markets to abate.
Activity
Activity over the six months was at a more measured pace than that seen over
most of the preceding periods. No new investments were made, with the focus on
follow-on investments - as articulated in the rationale for our December 2021
fund raise - where we invested approximately £43 million. The largest part of
this was the acquisition of further shares in Smart Pension (approximately
£15 million), following very strong progress since our initial investment,
with a similar amount invested in THG - the bulk of which was undertaken at a
price of 195p. In addition, approximately £12.5 million was invested in
Sorted, as part of a $40 million fund raise, to enable the acquisition of
Clicksit, which operates in the US automated returns market. We believe this
investment will meaningfully boost Sorted's addressable market and product
offering.
Against these investments, approximately £76 million was realised, the
majority (approximately £57 million) coming from the sale of Embark Group to
Lloyds Bank PLC. In addition, approximately £18 million was raised via
disposals of Wise - partly to increase liquidity in light of the war in
Ukraine - at an average sale price of 588p. There were also two separate
realisations from the liquidation process being undertaken at Growth Street,
which netted slightly over £1 million, at a valuation in line with the
position's carrying value.
Thus, the Company's investment activities over the period generated a net
capital increase of approximately £33 million. This position was supplemented
by the £60 million fund raise undertaken in December, primarily to provide
funds to drive existing portfolios companies via follow-on investments. This
takes the total funds raised by the Company to date to £830 million.
Markets and market developments
Equity markets struggled to make significant progress over the six months to
31 March 2022, driven by concerns over rising yields as a result of growing
inflationary pressures, further exacerbated later in the period by the war in
Ukraine. While many major indices reported gains, for example the FTSE All
Share was up 3.2% and the tech-heavy NASDAQ recorded a marginal 1% increase,
this masked considerable intra-period volatility, as well as certain rotations
occurring between sectors and themes in the market. One of the most
high-profile of these themes was the weakness of certain technology names,
particularly those that are currently unprofitable.
The Goldman Sachs Non-Profitable Tech Index, which comprises approximately 60
US technology stocks that have yet to achieve profitability, fell by
approximately 35% over the period. Logically, the long duration nature of
unprofitable companies means that as yields, and thus discount rates, rise
they are more exposed to valuation pressure than those companies with
near-term cash flows.
Looking at this index as of 31 March 2022 and freezing the index weights, it
is apparent that forecasts for revenue growth for 2022 have actually risen
over the six-month period, meaning that valuation has been the driver of this
index performance. We estimate this performance has led to a contraction in
the 2022 EV/sales metric, based on the 31 March 2022 index weights, from
approximately 8 times to less than 6 times.
Post period end, market weakness became more pronounced, with the NASDAQ
falling approximately 24% from the end of March to the time of writing, and
the Goldman Sachs Non-Profitable Tech Index falling approximately 38%. This
means that these two indices are down approximately 32% and 71% respectively
from their peaks and down 23% and 60% respectively from their 30 September
2021 levels.
What does this mean for Chrysalis?
In answering this question, we would differentiate between the likely short
term and long term impacts.
In the short term, the impact of weaker stock markets is likely to feed
through into valuations for our portfolio assets, given the requirement for
the valuer to determine "fair value" at the respective valuation dates. This
is an effect we have already seen to some degree, with the Company's NAV as of
31 March 2022 16% lower than the peak in September 2021, which roughly
coincided with the recent peaks in the NASDAQ and Goldman Sachs Non-Profitable
Tech indices. While we do have protection mechanisms - typically in the form
of capital structuring instruments, which should help to offset valuation
declines - certeris paribas, further falls in equity markets are likely to
have an impact on the Company's NAV.
Accepting both that we have no way to influence the path of markets, and that
the current environment is definitively worse than it was even six months ago,
our focus is on the long term, where we can have an impact on the outcome for
shareholders.
With much more difficult funding markets now upon us, our long term focus is
on helping our portfolio companies to weather the storm, and allow them to
emerge in the best possible shape. Experience has taught us that, although
current market conditions are grim, they will pass in time. So, given that
there are likely to be casualties in the market, those companies that can
successfully navigate the current conditions are also likely to find plenty of
opportunities to continue to grow and disrupt.
With that in mind, our focus has been on:
· ensuring our companies are prepared for tighter funding conditions; and
· ensuring Chrysalis has the required capital to assist our companies across
a potentially prolonged period.
The discussions and considerations we have had vary by company, but, at a high
level, the key differentiator is whether a particular company is profitable,
and thus more likely to be self-sustaining, or not. As of March 2022,
approximately 59% of the portfolio is unprofitable. This includes names such
as Klarna, where the underlying unit economics at maturity are highly
profitable and where it has demonstrated profitability at a group level
historically.
Klarna's decision to expand aggressively in new markets, notably the US, has
driven significant sales growth, but has moved the company back into losses,
as expected. This implies 41% of the portfolio, however, is profitable. This
includes the listed names as well as our major unit in Starling, which first
achieved profitability in late 2020. Anecdotally, we believe investors are
becoming more discerning about profitability, which is corroborated by the
relative outperformance of many profitable technology names versus
unprofitable ones.
As a result, our main focus has been on the unprofitable companies in the
portfolio, where we have been having discussions with them over recent months
regarding the state of the market, and what this is likely to mean in terms of
availability of capital. Typically, this results in a discussion about cash
"burn" rates and the resulting cash runways - or how long the current cash
position will last - with a view to looking at ways in which to elongate the
runway, with as little impact on growth as possible. To a large degree, the
tightness that has been in evident in hiring markets, particularly for
software engineers, has meant that companies have secured staff in advance of
their deployment in projects, meaning that there are efficiencies available.
While these are difficult conversations for founders - who have been used to a
growth-focused environment - to have, this is occurring on an industry wide
basis, and for good reason.
We have also been working on how to best place Chrysalis to respond to these
changing conditions, which primarily centres around our ability to provide
capital. This ranges through a variety of scenarios, from continuing to help
fund growth - potentially exploiting opportunities that this selloff will
generate - to ensuring we can protect our shareholdings and avoid dilution in
more extreme scenarios, where funding is required to extend cash runway.
Considering this unprofitable element of the portfolio, the average cash
runway is 14 months. Given the uncertainty over how long the current
environment will persist, we believe it is prudent to budget conservatively.
To do that, we consider each of our unprofitable companies' cash burn, and
what is the likely cash requirement for one year's extra funding. We can then
calculate the capital commitment that would be needed to maintain the
Company's shareholding, i.e. investing pro rata to its current percentage
ownership, in the event of a funding round. This is particularly relevant if
the funding round is struck at a lower valuation than previously - a "down
round" - as, while the lower valuation is likely to have a negative impact on
our short-term NAV, our ability to participate will help prevent dilution of
the Company's stake.
On this basis, we believe our current available cash position, invested pro
rata alongside other existing investors, is sufficient to elongate the runway
of all of the companies within the unprofitable basket for at least one year
should they look to raise capital, and our total liquidity (including our
listed assets) would give at least two years of extra runway, implying over
three years of total runway for these companies, when combined with their
current cash positions.
In our minds, this should provide ample runway for our companies to transit
this moment of particular stress.
Looking more generally, our expectation is that private market investors will
become increasingly discerning in terms of what they choose to fund and will
focus on best-in-class operators. While we are not complacent about the
current conditions, in this regard we feel well positioned, with many of our
portfolio assets, particularly our larger holdings, such as Klarna, Starling
and wefox, leading their respective market segments.
Outlook
As at 31 March 2022, the Company had approximately £72.5 million of cash
available for investment, with another £86.6 million held in listed assets,
giving total potential liquidity of approximately £159.1 million. At the time
of writing, the war in Ukraine is still ongoing, heightening geopolitical and
macroeconomic uncertainty.
In addition, investors are grappling with the likely speed of tightening
monetary policy by central banks, particularly the US Federal Reserve, to
control inflation. As of 30 September 2021, the market was implying a
relatively flat Fed Funds curve, rising from approximately 10 basis points
("bps") to 75 bps two years out; by 31 March 2022 expectations had risen
sharply, to approximately 280 bps two years out. Post period end, they have
risen further, to approximately 340 bps as of late June.
These changes in the yield environment have shifted the primary driver of
valuations away from a company's ability to grow and more on to its ability to
generate cash flow. While long term, we still believe growth will be one of
the key determinants of a business' terminal valuation, we accept that we must
adjust to the current market conditions, and so too do our companies.
As discussed in the previous section, we believe we have the capital required
to see our portfolio companies through a prolonged period of stress, and this
is our primary consideration. While we recognise the current share price
discount to NAV is significant, and thus there is a valid question over the
possibility of buybacks, the impact of undertaking the latter on the former
must be considered.
At the current time, we believe undertaking a buyback of a sufficient quantum
to be meaningful, over a sufficient time period to prove effective, and with
sufficient reserve "dry powder" to be credible, would put at risk our ability
to fund our companies, which could prove highly damaging to the Company's long
term prospects.
In a similar way that many of our portfolio companies are adjusting to the
"new normal", so we have also needed to pivot. The realities of the current
capital position, while being adequate to protect the hard work since IPO of
building out a portfolio of exciting assets, is that it is not of a sufficient
scale to allow us to either expand the portfolio with new investments or look
to retire a significant quantum of shares.
So saying, our capital allocation process is dynamic and involves continual
reassessment of the best use of our capital base. This means that buybacks
could well become appropriate in future.
The Company section below gives commentary around how each of the individual
assets has performed. While the market backdrop has been difficult, we are
pleased to report that the portfolio in aggregate continues to perform very
well operationally.
Company section
Starling Bank Limited ("Starling")
Progress at Starling continues to be rapid.
At the start of 2022, the bank had opened over 2.7 million accounts, including
475,000 small and medium enterprise ("SME") accounts. The growth in SME
accounts is particularly impressive, given the business bank was only opened
in 2018, and has managed to grow to approximately half the market share of
Barclays (by number of accounts), which was founded over 125 years ago, in a
bit over three years.
Growth in other metrics has also been impressive. As of early 2022, the
deposit base was £8.4 billion, having grown 75% over the year, and lending
had expanded by over 60% to £3.1 billion.
Starling has consistently said it has been profitable since October 2020 - a
rarity among global neobanks - despite operating at a lowly 37% loan to
deposit ratio ("LDR"). The rapid shift in yield expectations, driven by
inflation in the global economy, has profound implications for banks that have
been operating in a low yield environment for many years.
For Starling, the ramifications are highly significant: the implied £5.3
billion sitting in treasury, and earning minimal yield over the course of
2021, will begin to generate meaningful amounts of income, which crucially, is
risk-free.
Starling: illustrative impact of rising yields on revenues
£bn Jan-22
Deposits 8.4
Loans 3.1
Implied treasury 5.3
LDR 37%
Dec-21 Apr-22 Mar-23
Base rates 0.10% 0.75% 2.50%
Implied treasury revenue (£m) 5 40 133
Source: Jupiter and Bloomberg
Looking at market derived base rate expectations, which are predicted to rise
to over 3% by March 2023, compared to the 10bps experienced since the onset of
COVID-19, there is the potential for Starling to generate over £160 million
of revenue on an incremental basis, if it chose to maintain its treasury
balances - in other words, do nothing.
In practice, there should be opportunities to increase lending. To this end,
last year saw the acquisition of Fleet Mortgages Limited - a Buy-to-Let
mortgage originator - to supplement organic lending undertaken via COVID-19,
government backed schemes.
In April 2022, Starling closed a £130.5 million funding round. This means the
bank is not only profitable, but also extremely well funded, and this will
provide the capital to explore organic origination opportunities, in addition
to possible forward flow agreements, and the potential to target the
acquisition of select lending businesses.
Starling is also looking to further develop its Software as a Service ("SaaS")
offering and in the period launched "engine by Starling". This enables any
bank to set up and run a digital bank efficiently and quickly. An example of
this was Standard Chartered's use of Starling's technology to launch its new
green savings product, Shoal. In our view, this opens up an exciting new
avenue for generating shareholder returns, by investing in the types of
recurring revenues streams that investors typically value highly.
Klarna Holding AB ("Klarna")
Klarna continued to exhibit strong growth over 2021, driven by the success of
the US market. The compound annual growth rate ("CAGR") in Gross Merchant
Value ("GMV") was 27% between 2017 to 2019, reflecting the period before the
US expansion strategy was implemented. Post the focus on the US, which
Chrysalis helped to fund over two capital raises in 2019 and 2020, group
growth has accelerated to a CAGR of over 50% between 2019 and 2021.
Over the year, US GMV rose more than threefold, we believe substantially
outperforming US credit card originations. For example, Mastercard US payments
volumes (excluding cash) grew at 29% over 2021 - rebounding from a contraction
caused by COVID-19 in 2020. This implies that Klarna's US growth was at least
seven times as fast as Mastercard's, and likely quicker.
This was achieved while tightly controlling credit losses. While the rate of
impairment (as a percentage of GMV) rose in 2021 to 67bps (equivalent to
approximately USD500m) from 56bps in 2019, much of this increase came from
volume growth in new markets, including the US. Expansion in the US was
anticipated to attract higher loss rates, so this was not unexpected (credit
losses as a percentage of GMV in the US have begun to moderate and are down
60% as a percentage of GMV since 2019, despite a fivefold increase in the
number of customers). Adjusting for this new market effect, and improved
underwriting on mature markets, losses (based on 2019 volumes) would have
fallen to 36bps.
In May 2022, Klarna detailed its 1Q22 results, which saw GMV growth of a more
modest 19% - reflecting the fact it was lapping a very strong comparative from
1Q21, and likely some throttling of credit. Given the change in market
sentiment, Klarna said it will be making some job cuts and will balance its
focus on profitability versus growth more evenly, which we believe is a
sensible response to the current market environment.
We believe these comments will mark a turning point in Klarna's financial
performance, and could see the company move towards profitability during 2023.
Looking back at 2021, a significant investment in opex, as well as an increase
in impairments, drove the company further into loss. Of these, the increase in
non-staff opex was the biggest driver, being the largest element of the cost
base and seeing the largest increase year-on-year: over 2021, non-staff opex
almost doubled to over $1.3 billion.
Our assumptions regarding Klarna's ability to move into profit are:
· revenues grow at a compound rate of 25% over 2022 and 2023 - a
conservative level versus recent history, but roughly in line with 1Q22;
· the cost cutting measures that Klarna is looking to enact this
year limit non-staff opex to roughly the same level in 2023 as in 2021;
· 10% staff opex cuts are achieved; and
· impairments trend back towards their historical levels.
The impact of these changes would mean Klarna could be at a point of breakeven
in 2023, as illustrated below.
If Klarna is able to achieve breakeven in 2023, and it should be remembered
that it has been profitable for most of its existence, prior to tackling the
US, in our view this would substantially transform the perception of the
company in the eyes of the market.
wefox Holding AG ("wefox")
Following a record $650 million Series C funding round in June 2021, wefox has
continued to scale rapidly. The company has more than doubled its annual
turnover every year since its inception in 2015 and reported revenues of over
$300 million in 2021. wefox has successfully expanded across channels, as well
as across geographies, and is now present in five territories across Europe.
The company has indicated that it will increase its presence in Europe in 2022
and look to expand into both Asia and the US in the medium term.
Over the past few months, listed InsureTech assets such as Lemonade, Hippo and
Root Inc. have materially derated. The extent of that derating has been
exacerbated by the fact that each of these companies is heavily loss-making,
with an apparently long path to profitability. The direct insurance model -
where companies sell straight to consumers - that they operate currently is
hampered by unit economics that are compromised by high loss ratios and
customer acquisition costs; the combined ratio makes it virtually impossible
to generate a profit and a huge amount of capital is therefore required to
reach scale.
wefox operates a very different business model to these peers, and it is the
reason why we initially invested in the business and why the company is on
track to reach profitability. wefox focuses on digitising indirect
distribution channels (advisers, brokers and affinity partners) which in total
represent 90% of its target markets. Lower customer acquisition costs through
indirect acquisition and lower loss ratios through targeted selection is
allowing the company to scale quickly internationally, at superior unit
economics.
As a result, wefox is gaining market share in its core markets, which, along
with its offering's ease of use, is allowing it to grow rapidly.
Smart Pension Limited ("Smart")
2021 was an exceptional year for Smart with a number of notable achievements,
including the continued rollout of technology partnerships with financial
institutions in the US, Ireland and Dubai; securing a cornerstone technology
transformation contract in Hong Kong; and growing revenue by +300%
year-on-year.
Originally set up to provide a digital solution to pension auto-enrolment in
the UK, Smart realised its technology platform was applicable internationally,
especially as many countries face similar savings problems as the UK: an aging
population that has not saved enough. This has pushed other countries to
consider auto-enrolment schemes of their own.
Over the course of 2022, Smart completed the strategic acquisition of the US
managed account provider, Stadion Money Management, further bolstering its
product capabilities in the world's largest defined contribution market. Smart
will also be launching organically with a small plan focused 401k offering
later in the first half of 2022, targeting the five million US workers who
currently lack access to a workplace saving plan.
As of March 2022, nearly two million savers have entrusted over £4 billion in
assets to the Smart Platform (+150% growth year-on-year), and the company
anticipates seeing a significant acceleration in the near term, through
continued growth of the captive Smart Master Trust and the licensing of
technology to leading insurers, banks and asset managers in the UK and core
international territories (USA, Australia and the Middle East).
To date, outside of the US, Smart's international expansion includes a
programme in Ireland to deliver a bespoke Platform as a Service (PaaS)
offering to New Ireland Assurance; an employee workplace savings scheme in
Dubai for 22,000 members in partnership with Zurich; and an agreement to
tackle the Australian market with Link Group.
As a result of numerous avenues for growth, Smart expects to end 2022 with
approximately $10 billion (£8 billion) of AUM on its platform.
The Brandtech Group LLC (formerly You & Mr Jones LLC)
You & Mr Jones was renamed The Brandtech Group LLC ("Brandtech") earlier
this year and aims to help businesses do their marketing better, faster and
cheaper using technology. The Brandtech is now a global market leader in
content in-housing and is delivering enterprise-level marketing solutions for
some of the world's biggest brands, including Unilever, Google, Adidas,
Microsoft, LVMH, Danone, Uber and Reckitt Benckiser.
The company generated 27% and more than 50% organic net revenue growth in 2020
and 2021 respectively, and recently reported on-going strong growth into 1Q22;
we consider these rates of growth to be market leading.
Total growth has been boosted by selective M&A and Brandtech recently
acquired DP6, which is Latin America's leading marketing technology and data
company, and Acorn-i, an ecommerce SaaS platform.
DP6 is based in Brazil and delivers technology and data solutions for many of
the region's largest businesses as well as numerous global brands, including
Carrefour, CNN, BASF, Nubank and Whirlpool. The company provides technology
and data expertise, from data measurement to media attribution, data science,
AI-powered analytics, and content optimisation.
Acorn-i helps brands to market on ecommerce platforms, particularly Amazon
where it helps companies to improve advertising effectiveness and search
engine optimisation.
Brandtech generated more than $500 million in revenues in 2021 and we now
consider the company to be a global platform. In 2019, David Jones described
the business as "strongly profitable" and we believe EBITDA margins in this
sector typically range from 15% to 25%. Brandtech is well positioned to serve
enterprise clients at scale, and this is critical given the emergence of
digitisation and other technologies and trends such as AI, Blockchain and the
Metaverse.
Graphcore Limited ("Graphcore")
Technical progress at Graphcore continues to be impressive. Following on from
its strong showing in the MLPerf industry measure of comparative benchmark
testing, which showed a significant advantage (between 1.3x-1.6x) for
Graphcore over incumbent Nvidia on a performance-per-dollar basis, the company
has recently released new hardware.
The third-generation system, called Bow, is the first chip ever to feature
wafer-on-wafer technology, which allows a significant improvement in
performance, at greater efficiency. Bow contains 1,472 independent cores that
can allow 9,000 separate programmes to be run at the same time, for true
parallel computing.
Performance gains in the industry are key, as model sizes have been rising
aggressively. When we first invested in late 2018, models contained about 330
million parameters. Fast forward to today, and models of up to one trillion
parameters are on the cards. Bow also increases the performance advantage over
Nvidia's comparable machines, with a fivefold decrease in time to train and a
tenfold lower total cost of ownership.
The company has greater ambitions in the pipeline. Graphcore is working on an
Ultra Intelligence Machine alongside several technology third parties, that
will be able to handle up to 500 trillion parameters.
While both the hardware and software have come on significantly since our
initial investment, the company now needs to demonstrate that it can
successfully commercialise its products widely across the market.
Featurespace Limited ("Featurespace")
Featurespace continued to demonstrate strong growth over the first half, with
considerable sales traction, driven by its award-winning product.
As evidence of the quality of its offering it:
· won the Next Generation Payments award in the 2021 FinTech
Rankings;
· was recognised as Best-in-Class among fraud and AML (Anti Money
Laundering) machine learning platforms by Aite-Novarica Group;
· won "Best Technology Initiative" via Worldpay's Fraudsight
(powered by Featurespace) at the 2022 Cards & Payments Awards; and
· was a finalist in the 2021-22 Cambridge Independent Science and
Technology Awards for AI Company of the Year and Technology Company of the
Year.
This enabled the company to win over 70 new customers, both directly and
indirectly, over the course of last year, including Marqeta and eftpos -
Australia's debit card system, which handled over 2 billion card transactions
in 2020. NASDAQ listed Marqeta - which provides a cloud-based card issuing
platform to customers that include Klarna - partnered with Featurespace to
deliver real-time decisioning for card transactions to help manage payment
fraud and allow customers to monitor and modify rules as threats develop.
The global market for fraud detection and prevention is expected to grow at a
CAGR of over 20% from 2022 to 2029, supporting our expectation of on-going
strong growth from Featurespace, particularly given the quality of its
offering.
Tactus Holdings Limited ("Tactus")
The gaming industry is now the largest and fastest growing form of
entertainment globally, with the gaming PC market rapidly expanding as more
gamers, from casual players to e-sports professionals, immerse themselves in
their own virtual communities. As a leading provider of own and third-party
branded custom gaming PCs, component parts, equipment, and accessories, Tactus
is ideally positioned to benefit from these structural dynamics.
Tactus is looking to strengthen its position in the gaming and technology
sector and has completed a number of acquisitions over the last twelve months
including PC gaming specialist CCL, coding and robotics firm pi-top, B2B IT
hardware provider BIST Group and award winning PC gaming brand Chillblast.
More recently, Tactus announced the acquisition of online gaming and
technology retailer Box.
Box is an online retailer of consumer technology and specialist devices, with
a customer base across the UK and Europe. Founded in 1996, the company had
grown to over £100 million of revenues in 2021.Box takes the group's
headcount to over 350 individuals and its purpose built 120,000 sq ft
logistics centre significantly expands the scale of Tactus' supply chain and
operations across the UK and beyond, while providing enhanced capacity to
accommodate future growth.
As a result of organic growth and this significant acquisition activity,
Tactus has experienced very strong revenue growth over the course of the last
year.
Wise PLC ("Wise")
Since successfully listing on the London Stock Exchange in July 2021, Wise has
continued to trade well. The company reported strong financials during the
period and has consistently exceeded market guidance.
Wise released its 3Q trading update (for the quarter to December 2021) on 19
January which demonstrated strong financial and operational progress since the
Initial Public Offering ("IPO"). Over 4 million customers transacted on Wise
over the period with the number of active personal customers increasing +26%
year-on-year to 4.1 million while the number of active business customers
increased +39% year-on-year to 250,000. Volume grew +38% year-on-year to
£20.6 billion (driven by customer growth and volume per customer growth) and
revenues grew +34% year-on-year and +13% quarter-on-quarter to £149.8 million
(broadly in line volume growth). Sequential volume added was £2.6 billion,
which was more than double some consensus estimates (approximately £1.2
billion), representing the highest level of sequential volume ever added
quarter-on-quarter. Following the trading update, Wise increased its full year
revenue guidance to +30% (from mid-to-high 20s at H1) which we view as highly
encouraging.
Wise has a relentless focus on customer service and user experience, and we
have been pleased to see that the company has continued to invest in these
areas. The time it takes to complete a transfer continues to improve with 40%
of all transfers delivered instantly. At the same time, Wise continues to make
transfers more convenient, and customers can now send money to India using
their smartphones, without needing to know their recipients bank details. The
launch of "Assets" in the UK gives customers a potential return on their Wise
cash balance by holding it in a different asset classes.
Wise's business proposition is also improving. Business customers can now
attach notes to card transactions, delegate tasks, approve payments and assign
spending limits to accountants and team members. Business customers can also
get verified quicker with 98% of verification tasks resolved within 24 hours.
Cognitive Logic Inc. ("InfoSum")
Despite Google's decision to delay its self-imposed deadline to deprecate
third-party cookies in its Chrome browser, InfoSum is benefitting from many
structural tailwinds that are also driving the purchasing decisions of
prospective clients. The launch of App Tracking Transparency by Apple in April
2021 and regulatory changes such as GDPR in the UK and CCPA in the US are
making it increasingly difficult for brands and publishers alike to gather
information on consumers, and thus to target specific cohorts.
These tailwinds have led to the emergence and increased momentum of data clean
rooms - secure environments where Personally Identifiable Information can be
anonymised and processed to gain insights into customer cohort behaviours, in
a privacy-compliant way - in recent months. Disney publicly announced a data
clean room solution in October 2021 for advertisers, harnessing more than one
thousand first-party data segments to boost measurement and campaign insights,
using InfoSum as a partner. InfoSum also announced a partnership with The
Trade Desk in an effort to scale its clean room network.
InfoSum continues to expand internationally and, in the first half of the
year, the company announced that it has entered Germany, Italy, Australia and
New Zealand. We recognised the scale of the opportunity globally for InfoSum
at the point of investment and are encouraged by the company's progress in
these jurisdictions.
Deep Instinct Limited ("Deep Instinct")
Deep Instinct's review of the cyber security market over 2021 makes for
sobering reading. While the rate of growth in one of the highest profile
threats, ransomware, has slowed since its peak over COVID-19, it still
recorded an approximate 16% increase over the year in incidences. However,
there was a 125% increase in all threat types combined, confirming that the
post COVID-19 level of cyber-attack activity is significantly elevated
compared with those in existence pre the pandemic.
A number of the attacks are now focusing on short-duration, high-impact
events. Notable was the breach at Colonial Pipelines, which caused a halt to
operations for several days, triggering major disruption across the US and an
increase in gas prices. Events like this demonstrate the importance of
cybersecurity to combat an increased prevalence of attack.
In terms of the efficacy of its offering, Deep Instinct took part in the MITRE
Engenuity ATT&CK Evaluations for the first time. MITRE Engenuity is a tech
foundation set up for the public good, and Deep Instinct was pleased to
announce a 100% prevention score against simulated attacks in the vein of two
well know malicious threat groups.
With strong market growth and a product boasting greater than 99% zero-day
accuracy, we believe Deep Instinct is excellently positioned to grow strongly
in the coming years. In terms of commercial development, the partnership with
Tanium, announced in late 2021, could be highly significant. Tanium is trusted
by nearly half of the Fortune 100 to give visibility and control over their
endpoints and offers another route for Deep Instinct to go-to-market.
Revolution Beauty Group PLC ("Revolution Beauty")
Revolution Beauty's share price has been reasonably resilient over the period,
considering market conditions, (albeit post period end it suffered more
significant declines) and we are highly encouraged by the trading performance
of the business, particularly versus many other retailers.
The company released a trading update for its year to the end of February
2022, which was broadly in line with market expectations. Revenues were £194
million over the year, which compared to analysts' consensus of approximately
£198 million, and represented a growth rate of 42% year-on-year.
We consider this to be positive progress given the tough backdrop and a
volatile trading environment. Adjusted EBITDA of £22 million implies a growth
rate of 73% year-on-year and a margin of 11.3%; the margin for FY21 was 8.6%.
The strength of Revolution Beauty's financial results demonstrates the
resilience of the omnichannel model. For example, UK store sales grew +85%
year-on-year as high street footfall recovered post-pandemic and Makeup
Revolution was launched in Boots stores. Similarly, Rest-of-World ("ROW")
stores were +79% year-on-year with ROW now representing 35% of the global
business. Retail stores currently represent 79% of the sales mix.
The USA is now Revolution's biggest single market at 20% of sales and
delivered sales growth of +27% for the full year. This growth was achieved
against a strong FY21 comparator, where Makeup Revolution was rolled out
across Target stores for the first time.
At a share price of 82p, Revolution Beauty currently trades on 1.0x FY23
revenue and 8.0x EBITDA. We view these multiples as particularly undemanding
and are still seeing private beauty businesses that generate strong rates of
organic growth transact at 4-7x revenues.
Our original thesis on Revolution Beauty therefore remains unchanged: we still
think management is capable of doubling revenues over a 3-5-year period and we
believe that there is rerating potential in the medium term; this should
contribute to a strong IRR for Chrysalis.
Sorted Holdings Limited ("Sorted")
As Sorted looks to enter its next stage of growth, a decision was made to
recruit a new CEO and senior leadership team. In October 2021, Sorted
announced Carmen Carey, who has been a Non-Executive Director on Sorted's
board of directors for the past two years, as its new CEO. Carmen has a strong
SaaS background and was previously CEO at Brady Technologies, Big Data
Partnership and ControlCircle and COO at Metapack (a major carrier platform
competitor to Sorted).
Other key appointments made include an interim COO, the Vice President of
Product, and Vice President of Sales. The company also appointed Colin Tenwick
as its new chairman, who currently serves as non-executive chairman of
ecommerce platform Wowcher.
The company closed a Series C funding round of $40 million in December 2021,
which enabled it to acquire Clicksit, an automated returns company. This
acquisition marks Sorted's continued expansion into the US market and will
also enable the group to target the Small and Mid-sized Business ("SMB")
market. Returns are a crucial step in the customer journey and Clicksit will
enable Sorted to provide a complete delivery experience platform to both
enterprise and SMB clients.
We note that Sorted saw a +137.5% increase in UK shipment volume in 2021
year-on-year through its returns platform, which highlights both the continued
growth in ecommerce and Sorted's ability to win market share.
THG PLC ("THG")
THG's share price performance has been disappointing over the period, driven
by both negative sentiment towards the company and due to wider ecommerce
sector issues.
Elevated shipping, freight and labour costs hit margins through H2 2021, but
the company has continued to report double-digit organic growth - despite very
strong sales growth in the comparable period in 2020 - and good progress has
been made scaling Ingenuity, the company's proprietary technology platform.
For the financial year ending 31 December 2021, Group revenues increased +35%
year-on-year to £2.2 billion. On a two-year basis, THG has grown revenues
+95%; effectively doubling the size of the business. Revenues have been driven
organically and through selective M&A. Acquisitions such as Dermstore,
Cult Beauty and Bentley Laboratories, which are the three largest acquisitions
since IPO, enhance the THG Beauty offering; provide additional scale to its US
operations; and increase control of the supply chain through vertical
integration.
Adjusted EBITDA rose to £161 million over the same period, which implies a
margin of 7.4%. This compares against an adjusted EBITDA margin of 9.3% in
FY20, and reflects the substantial cost headwinds the company faced in the
second half of 2021. This is a trend we have witnessed across the sector and
broader economy, with commodity inflation, foreign exchange movements,
increased cost of labour, and freight and duty having an impact on
profitability. We believe that these headwinds will ease through H2 2022 and
that THG is still capable of generating an adjusted EBITDA margin of 9-10% in
the medium term, consistent with the expectations set out by the company at
the point of IPO.
THG's monetisation of its Ingenuity platform has been a central part of our
investment thesis, and considerable progress has been made from a standing
start a few years ago. Ingenuity Commerce revenues increased +135% year-
on-year through FY21 to £45.4 million, with FY22 revenue guidance increased
from £90 million to approximately £110 million in the Q3 2021 trading
update. A record number of customers were signed in H2 2021 and the Ingenuity
operational infrastructure and technology platform is now powering an
expansive list of global brands across a range of sectors, and the number of
third-party websites on the platform more than doubled during over 2021.
Ingenuity ecommerce revenue development 2018-2022E
Secret Escapes Limited ("Secret Escapes")
Secret Escapes has continued to develop its customer proposition over the past
twelve months with an increased focus on the "Always-on Hotel-Only" offering,
which has resonated well with customers. The company has also developed its
website and smartphone application further and these initiatives appear to be
driving key performance indicators and unit economics.
However, the trading environment for the business has been extremely
challenging since the onset of the COVID-19 Pandemic in early 2020 since when
booking patterns and consumer behaviour have remained volatile and difficult
to predict. Secret Escapes has taken proactive measures to embed operational
efficiencies, and this has proven effective at driving profitability when
bookings have improved. Frustratingly, a series of travel restrictions and the
war in Ukraine have perpetuated the "stop-start" environment since the start
of the pandemic, masking the benefits of this improved operating model.
Secret Escapes has got a very strong customer proposition and has more
recently proven its ability to generate robust profit margins from a much
lower revenue base. This has given us increased confidence in the outlook of
the business. As demand-side shocks ease, we believe the business has a strong
chance of realising its potential.
Growth Street Holdings Limited
The company is currently going through the final stages of liquidation.
Chrysalis has already received most of the expected proceeds from the
liquidation of the business and this is reflected in the carrying value of the
asset.
Embark Group Limited / Rowanmoor Group ("Embark")
During the period Embark was sold to Scottish Widows Group Limited, a
subsidiary of Lloyds Banking Group plc for
£390 million. Chrysalis received net cash proceeds of £57 million as part of
the transaction which implies a cash-on- cash return of 2.1x from the date of
our initial investment in July 2019. This deal represents a great outcome for
our shareholders and a key milestone for Chrysalis, given that it is the
company's first full realisation.
When Chrysalis first invested in Embark, the platform was approaching scale
and had approximately £16 billion of Assets under Administration ("AuA").
Through selective M&A, Embark was able to scale AuA to over £35 billion
which drove revenues and profitability and resulted in the asset becoming
strategically valuable to a number of incumbent self-invested personal pension
administrators. This highlights the importance of being able to provide
follow-on capital and the extent to which we can maximise value and drive
returns across our portfolio.
Chrysalis maintains an interest in the Rowanmoor SIPP and SSAS administration
business. Due to ongoing issues in the business the investment has a zero
carrying value.
Environmental, Social and Corporate Governance Report
The role of ESG in our investment process
Chrysalis provides primary capital to innovative and disruptive businesses.
Although no new investments were made during the period, we have continued to
implement the ESG policy established by the Board and Investment Adviser to
enhance the systematic integration of ESG analysis across the portfolio.
The investment team continues to engage with portfolio company leadership
teams and provide input on how to meet their strategic objectives, as well as
discussing broader governance and sustainability topics. We have also
developed a dashboard of metrics we use to track our companies' ESG
performance and development.
We firmly believe that in order to grow successfully, companies and their
founders must not only execute their strategies; they must also lay the
foundations for future growth by fostering a healthy corporate culture, a
talented and diverse workforce and creating appropriate corporate governance
structures. They must also seek to minimise any direct and indirect negative
impact on the environment and broader society.
As investors with decades of experience in investing in public markets, we
believe we are well-placed to advise companies not only on their growth
strategy, but also on their ESG development as they prepare to be acquired by
a strategic buyer, or IPO.
The portfolio
From an ESG perspective, the type of businesses we invest in are likely to be
significant job creators, with positive spill over effects elsewhere in the
economy. We estimate that Chrysalis companies have collectively increased
their headcount by over 13,600 employees since the initial date of our
investment, illustrating the powerful second order effects of the primary
capital we deploy. We are pleased that many of the jobs created are in the UK.
The current portfolio includes many companies which provide solutions to
urgent business problems with broader societal costs - such as fraud, cyber
risks, data privacy and affordable pension provision - or which disrupt highly
profitable financial services incumbents and share cost savings with
consumers. The demand to reduce these broader societal costs are a crucial
driver which underpins the long-term growth story of these investments.
We also have investments in other consumer-facing companies which are taking
tangible steps to enhance the sustainability profile of their operations,
using techniques such as ethical sourcing of raw materials, reduced freight
emissions and building circular economy principles into their manufacturing
capabilities. We support these strategies and believe they will translate into
a stronger brand proposition and a closer relationship with customers over
time, while mitigating a range of risks posed by changing customer preferences
and future regulatory costs.
Tracking performance
Metric Number of portfolio companies Percentage of AUM
Scope 1 & 2 Greenhouse Gas Emissions ("GHG") calculated 8/15 63%
Net zero commitment made 5/15 53%
Independent board chair 6/15 48%
Female CEO 3/15 26%
Average proportion of women in senior leadership roles (CEO and direct 24% N/A
reports)
We have developed an internal dashboard of metrics we use to assess our
portfolio companies' ESG performance. This data is collected directly from our
private investee companies or sourced from the sustainability disclosures of
our listed holdings. It covers a broad range of environmental, social and
governance factors drawing on recognised public sustainability frameworks and
the stewardship experience of the investment adviser.
We use the metrics to assess each company's ESG performance relative to its
level of corporate development and maturity. We incorporate insights gained
into our dialogue with company leadership teams in order to assist their
continued development. The data also provides us with a baseline for the
sustainability characteristics of the portfolio, and a set of criteria with
which to assess potential new investments. We will continue to develop the
metrics and will use the data to provide our clients with increased
transparency on the sustainable characteristics of their portfolio. For
example, the majority of our portfolio companies have calculated their
operational (Scope 1 and 2) GHG emissions. We encourage all remaining
portfolio companies to measure and reduce their emissions and we intend to
disclose the weighted average carbon intensity of our portfolio once the
underlying data is available.
Our stewardship approach
Stewardship is an important responsibility and a core aspect of our investor
approach. We aim to partner with companies for the long-term and assist them
on their respective journeys to become the best businesses that they can be.
The structure of Chrysalis suits this approach: the permanence of its capital,
compared with fixed life funds, gives us the ability to continue to fund
growth post initial investment, and as such we remain actively engaged and
well-positioned to influence companies on ESG and other topics.
There is a continuous process of dialogue with the leadership teams of our
investee companies. Our ability to influence companies varies depending on the
size of our shareholding and whether we have board observer status and access
to management information. Where we have a board seat or board observer
status, we attend board meetings of investee companies and provide our input
where we believe we can advise companies on how to meet their strategic
objectives. This includes regular dialogue on ESG related topics. Our dialogue
with companies where we do not have direct access to management information
will typically take place via regular meetings with management.
The leadership teams of our portfolio companies recognise the importance of
ESG to the long-term success of their businesses. A particular focus of our
recent dialogue has been the importance of embedding ESG principles and
creating an open and inclusive culture in order to attract and retain a highly
skilled and diverse workforce, in an environment where the competition for
talent is fierce.
We are encouraged by this alignment with our own perspective and will continue
to report on our activities in this area in future.
Investment Objective and Policy
Investment objective
The investment objective of the Company is to generate long term capital
growth through investing in a portfolio consisting primarily of equity or
equity-related investments in unquoted and listed companies.
Investment policy
Investments will be primarily in equity and equity-related instruments (which
shall include, without limitation, preference shares, convertible debt
instruments, equity-related and equity-linked notes and warrants) issued by
portfolio companies. The Company will also be permitted to invest in
partnerships, limited liability partnerships and other legal forms of entity
where the investment has equity like return characteristics.
For the purposes of this investment policy, unquoted companies shall include
companies with a technical listing on a stock exchange but where there is no
liquid trading market in the relevant securities on that market (for example,
companies with listings on The International Stock Exchange and the Cayman
Stock Exchange). Further, the Company shall be permitted to invest in unquoted
subsidiaries of companies whose parent or group entities have listed equity or
debt securities.
The Company may invest in publicly traded companies (including participating
in the IPO of an existing unquoted company investment), subject to the
investment restrictions below.
In particular, unquoted portfolio companies may seek IPOs from time to time
following an investment by the Company, in which case the Company may continue
to hold its investment without restriction.
The Company is not expected to take majority shareholder positions in
portfolio companies but shall not be restricted from doing so. Further, there
may be circumstances where the ownership of a portfolio company exceeds 50% of
voting and/or economic interests in that portfolio company notwithstanding an
initial investment in a minority position. While the Company does not intend
to focus its investments on a particular sector, there is no limit on the
Company's ability to make investments in portfolio companies within the same
sector if it chooses to do so.
The Company will seek to ensure that it has suitable investor protection
rights through its investment in portfolio companies where appropriate.
The Company may acquire investments directly or by way of holdings in special
purpose vehicles, intermediate holding vehicles or other fund or similar
structures.
Investment restrictions
The Company will invest and manage its assets with the objective of spreading
risk, as far as reasonably practicable. No single investment (including
related investments in group entities) will represent more than 20% of Gross
Assets, calculated as at the time of that investment. The market value of
individual investments may exceed 20% of Gross Assets following investment.
The Company's aggregate equity investments in publicly traded companies that
it has not previously held an investment in prior to that Company's IPO will
represent no more than 20% of the Gross Assets, calculated as at the time of
investment.
Subject in all cases to the Company's cash management policy, the Company's
aggregate investment in notes, bonds, debentures and other debt instruments
(which shall exclude for the avoidance of doubt convertible debt,
equity-related and equity-linked notes, warrants or equivalent instruments)
will represent no more than 20% of the Gross Assets, calculated as at the time
of investment.
The Company will not be required to dispose of any investment or rebalance its
portfolio as a result of a change in the respective value of any of its
investments.
Board Members
The Board comprises six independent non-executive Directors (of whom one third
are female) and meets at least quarterly, in addition to ad hoc meetings
convened in accordance with the needs of the business, to consider the
Company's affairs in a prescribed and structured manner. All Directors are
considered independent of the Investment Adviser for the purposes of the
Association of Investment Companies Code of Corporate Governance (the "AIC
Code") and Listing Rule 15.2.12A.
The Board is responsible for the Company's long term sustainable success and
the generation of value for shareholders and in doing so manages the business
affairs of the Company in accordance with the Articles of Incorporation, the
investment policy and with due regard to the wider interests of stakeholders
as a whole. Additionally, the Board have overall responsibility for the
Company's activities including its investment activities and reviewing the
performance of the Company's portfolio. The Board are confident that the
combination of its members is appropriate and is such that no one individual
or small group of individuals dominates the Board's decision making.
The Directors, in the furtherance of their duties, may take independent
professional advice at the Company's expense, which is in accordance with
provision 19 of the AIC Code. The Directors also have access to the advice and
services of the Company Secretary through its appointed representatives who
are responsible to the Board for ensuring that the Board's procedures are
followed, and that applicable rules and regulations are complied with.
To enable the Board to function effectively and allow the Directors to
discharge their responsibilities, full and timely access is given to all
relevant information.
Comprehensive board papers are circulated to the Board in advance of meetings
by the Company Secretary, allowing time for full review and comment by the
attending parties. In the event that Directors are unable to attend a
particular meeting, they are invited to express their views on the matters
being discussed to the Chairman in advance of the meeting for these to be
raised accordingly on their behalf. Full and thorough minutes of all meetings
are kept by the Company Secretary.
The Directors are requested to confirm their continuing professional
development is up to date and any necessary training is identified during the
annual performance reviews carried out and recorded by the Remuneration and
Nomination Committee.
The current Board have served since the Company's inception in October 2018,
with the exception of Margaret O'Connor who was appointed on 6 September 2021,
and have been carefully selected against a set of objective criteria. The
Board considers that the combination of its members bring a wealth of skills,
experience and knowledge to the Company as illustrated in their biographies
below:
Director Biographies
Andrew Haining (Chairman) (independent)
Andrew has had a 31-year career in banking and private equity with Bank of
America, CDC (now Bridgepoint) and Botts & Company. During his career,
Andrew has been responsible for over 20 private equity investments with
transactional values in excess of $1 billion.
Andrew holds several Guernsey and UK board positions.
Stephen Coe (senior independent)
Stephen serves as Chairman of the Audit Committee. He is currently a
Non-Executive Director of River and Mercantile UK Micro Cap Investment Company
Limited. Stephen has been involved with offshore investment funds and managers
since 1990, with significant exposure to property, debt, emerging markets and
private equity investments. Stephen qualified as a Chartered Accountant with
Price Waterhouse Bristol in 1990 and remained in audit practice, specialising
in financial services, until 1997. From 1997 to 2003 Stephen was a director of
the Bachmann Group of fiduciary companies and Managing Director of Bachmann
Fund Administration Limited, a specialist third party fund administration
company. From 2003 to 2006 Stephen was a director with Investec in Guernsey
and Managing Director of Investec Trust (Guernsey) Limited and Investec
Administration Services Limited. Stephen became self-employed in August 2006,
providing services to financial services clients.
Simon Holden (independent)
Simon, a Guernsey resident, brings board experience from both private equity
investing and portfolio company operations roles at Candover Investments and
then Terra Firma Capital Partners. Since 2015, Simon has been an independent
director to listed alternative investment companies, private equity funds and
trading company boards including pro-bono roles to the States of Guernsey
overseeing infrastructure critical to the Island including the airport,
harbours and two maritime fuel supply vessels.
Simon is a Chartered Director (CDir) accredited by the UK Institute of
Directors, graduated from the University of Cambridge with an MEng and MA in
Manufacturing Engineering and is an active member of UK and Guernsey fund
management interest groups.
Anne Ewing (independent)
Anne has over 35 years of financial services experience in banking, asset and
fund management, corporate treasury, life insurance and the fiduciary sector.
She has an MSc in Corporate Governance, is a Chartered Fellow of the
Securities Institute and has held senior roles in Citibank, Rothschilds, Old
Mutual International and KPMG and latterly has been instrumental in the
start-ups of a Guernsey fund manager and two fiduciary licensees.
Anne has several non-executive directorships roles in investment companies and
a private wealth banking and trust company group in the Channel Islands and in
London.
Tim Cruttenden (independent)
Tim is Chief Executive Officer of VenCap International plc, a UK-based asset
management firm focused on investing in venture capital funds. He joined
VenCap in 1994 and is responsible for leading the strategy and development of
the firm. Prior to joining VenCap, Tim was an economist and statistician at
the Association of British Insurers in London. He received his Bachelor of
Science degree (with honours) in Combined Science (Economics and Statistics)
from Coventry University and is an Associate of the CFA Society of the UK. Tim
is a non-executive director of Polar Capital Technology Trust.
Margaret O'Connor (independent)
Margaret has had a 30-year career building value in technology companies
across the US, Asia, Africa, and Europe as an operator, corporate executive,
and investor. She currently Chairs the Launch Africa Venture Fund, the
Investment Committee of Five35 Ventures and a Fintech. She's an active member
of the Private Equity Women Investor Network (PEWIN.org) and gender lens
investment networks.
Prior to this, she was a Silicon Valley VC-funded MarketingTech entrepreneur
and a founding member of the MasterCard Asia Pacific management team in
Singapore and the MasterCard Global New Technology Communications group in New
York. She earned her BA from Rutgers University and studied International
Relations at Princeton University before moving to Seoul, Korea in 1987 to
work for the Korean Ministry of Finance.
Interim Management Report
For the 6 month period ended 31 March 2022
Risks and Uncertainties
There are several potential risks and uncertainties which could have a
material impact on the Company's performance and could cause actual results to
differ materially from expected and historical results.
The Alternative Investment Fund Manager ("AIFM") has overall responsibility
for risk management and control within the context of achieving the Company's
objectives. The Board agrees the strategy for the Company, approves the
Company's risk appetite and the AIFM monitors the risk profile of the Company.
The AIFM also maintains a risk management process to identify, monitor and
control risk concentration.
The Board's responsibility for conducting a robust assessment of the principal
and emerging risks is embedded in the Company's risk map, which helps position
the Company to ensure compliance with the Association of Investment Companies
Code of Corporate Governance (the "AIC Code").
The main risks that the Company faces arising from its financial instruments
are:
(i) market risk, including:
- Price risk, being the risk that the value of investments will
fluctuate because of changes in market prices;
- interest rate risk, being the risk that the future cash flows of a
financial instrument will fluctuate because of changes in interest rates; and
- foreign currency risk, being the risk that the value of financial
assets and liabilities will fluctuate because of movements in currency rates.
(ii) credit risk, being the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that it has
entered with the Company.
(iii) liquidity risk, being the risk that the Company will not be able to
meet its liabilities when they fall due. This may arise should the Company not
be able to liquidate its investments.
(iv) company failure, being the risk that companies invested in may fail
and result in loss of capital invested.
To manage such risks the Company shall comply with the investment restrictions
and diversification limits provided for in the Prospectus.
The Company will invest and manage its assets with the objective of spreading
risk. Further to the investment restrictions discussed, the Company also seeks
to manage risk by:
· not incurring debt over 20% of its NAV, calculated at time of
drawdown. The Company will target repayment of such debt within twelve months
of drawdown; and
· entering from time to time into hedging or other derivative
arrangements for the purposes of efficient portfolio management, managing
where appropriate, any exposure through its investments to currencies other
than Sterling.
Emerging risks
On 24 February 2022, Russia launched a military invasion of Ukraine. In
response, sanctions have been imposed on key Russian institutions, businesses
and individuals by major world powers including the US, UK and the EU. Russia
is a major exporter of oil, gas, and coal while both Russia and Ukraine are
major exporters of grain.
The Company's portfolio has very limited exposure to the Russian and Ukrainian
markets and so the sanctions imposed, as a result of the Russian invasion, are
not expected to have a material impact. Certain portfolio companies have
withdrawn services from the Russian market, a move which the Investment
Adviser supports. Notwithstanding this, certain investee companies are exposed
to the wider economic headwinds resulting from the invasion, but the
Investment Adviser remains confident about the resilience of the portfolio in
aggregate to continue to grow and has sufficient liquidity to support these
companies to deliver their business plans.
In response to this emerging risk, the Directors have carried out a robust
assessment of the Company's processes for monitoring operating costs, share
price discount, the Investment Adviser's compliance with the investment
objective and policy, asset allocation, the portfolio risk profile,
counterparty exposure, liquidity risk and financial controls. At 31 March
2022, the Company had cash and cash equivalents of £72,503,000 and net
current assets of £66,457,000. Therefore, the Company is able to settle its
liabilities and continue its business with no interruptions.
The Board will of course continue to assess the position as the nature of the
conflict evolves.
The Directors continue to monitor the evolution of the Covid-19 pandemic and
consider the potential impact of new variants as they emerge. Having weathered
the worst of the pandemic the Board still believes the portfolio is well
positioned from a thematic perspective and the strategy of the Company remains
unchanged.
Going Concern
In assessing the going concern basis of accounting, the Directors have
assessed the guidance issued by the Financial Reporting Council and considered
recent market volatility, the potential impact of COVID-19 virus,
uncertainties surrounding Russia's invasion of Ukraine and sanctions that have
been imposed on key Russian institutions, businesses and individuals by major
world powers including the US, UK and the EU, on the Company's investments.
After making enquiries and bearing in mind the nature of the Company's
business and assets, the Directors consider that the Company has adequate
resources to continue in operational existence for at least twelve months from
the date of approval of the Unaudited Condensed Interim Financial Statements.
For this reason, they continue to adopt the going concern basis in preparing
the Unaudited Condensed Interim Financial Statements.
At 31 March 2022, the Company had cash and cash equivalents of £72,503,000
and net current assets of £66,457,000. Therefore, the Company has sufficient
liquidity to meet its obligations. For this reason, the Directors continue to
adopt the going concern basis in preparing the Interim Report and Unaudited
Condensed Interim Financial Statements.
Important events and financial performance
Highlights from financial year to date are as follows:
Ordinary Shares
31 March 2022
Highlights
Net Asset Value per share 211.76p
Share Price 177.00p
% of capital deployed 95%
The table below provides bi-annual performance information:
Date NAV % change in
per share price
30.09.20 160.97 17.3% increase on 30 June 2020 NAV
31.03.21 206.15 28.1%
30.09.21 251.96 22.2%
31.03.22 211.76 (16.0)%
The net loss for the six month period ended 31 March 2022 amounted to
£220,585,000.
Further details of the Company's performance for the period are included in
the Investment Adviser's Report on pages 5 to 21, which includes a review of
investment activity and adherence to investment restrictions.
Discount
As at 31 March 2022, the share price was trading at a discount to the last
published NAV per share at that point of 30 September 2021.
Related party transactions
Details of related party transactions are given in note 15 to the Unaudited
Condensed Interim Financial Statements.
Statement of Directors' Responsibilities
The Directors confirm that to the best of their knowledge:
· the condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by the EU; and
· the interim management report (which includes the Chairman's
Statement, Interim Management Report and the Investment Adviser's Report)
includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being
an indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed set of
financial statements, and a description of the principal or emerging risks and
uncertainties for the remaining six months of the financial year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the financial year and that have materially affected the financial position or
the performance of the entity during that period and any changes in the
related party transactions described in the last annual report that could do
so.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website, and for
the preparation and dissemination of the condensed set of financial
statements. Legislation in Guernsey governing the preparation and
dissemination of the condensed set financial statements may differ from
legislation in other jurisdictions.
Stephen Coe
Director
29 June 2022
Independent Review Report to Chrysalis Investments Limited
Conclusion
We have been engaged by Chrysalis Investments Limited (the "Company") to
review the condensed set of financial statements in the half-yearly financial
report for the six months ended 31 March 2022 of the Company which comprises
the unaudited condensed statement of comprehensive income, the unaudited
condensed statement of financial position, the unaudited condensed statement
of changes in equity, the unaudited condensed statement of cash flows and the
related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 March 2022 is not prepared, in
all material respects, in accordance with IAS 34 Interim Financial Reporting
as adopted by the EU and the Disclosure Guidance and Transparency Rules (the
"DTR") of the UK's Financial Conduct Authority (the "UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures.
We read the other information contained in the half-yearly financial report
and consider whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the Company are
prepared in accordance with International Financial Reporting Standards as
adopted by the EU. The directors are responsible for preparing the condensed
set of financial statements included in the half-yearly financial report in
accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement letter to assist the Company in meeting the requirements of the DTR
of the UK FCA. Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work,
for this report, or for the conclusions we have reached.
Barry Ryan
for and on behalf of KPMG Channel Islands Limited
Chartered Accountants, Guernsey
29 June 2022
Unaudited Condensed Statement of Comprehensive Income
For the 6 month period ended 31 March 2022
Period from Period from
1 October 2021 to 1 October 2020 to
31 March 2022 31 March 2021
(unaudited) (unaudited)
Notes Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investments
Net (losses) / gains on investments held at fair value through profit or loss 10 - (233,515) (233,515) - 249,691 249,691
Gains on currency movements - 5 5 - 216 216
Net investment (losses) / gains - (233,510) (233,510) - 249,907 249,907
Interest income 60 - 60 508 - 508
Gain on settlement of financial liability 5 - 17,907 17,907 - - -
Total income 60 17,907 17,967 508 - 508
Investment management and 5 (3,304) - (3,304) (1,820) (49,339) (51,159)
performance fees
Other expenses 6 (1,726) - (1,726) (1,856) - (1,856)
(Losses) / gains before finance costs and taxation (4,970) (215,603) (220,573) (3,168) 200,568 197,400
Finance costs (12) - (12) (45) - (45)
(Losses) / gains before taxation (4,982) (215,603) (220,585) (3,213) 200,568 197,355
Tax expense - - - - - -
Total (losses) / gains and comprehensive income for the period (4,982) (215,603) (220,585) (3,213) 200,568 197,355
(Losses) / gains per 7 (0.87) (37.85) (38.72) (0.81) 50.32 49.51
Ordinary Share (pence)
The total column of this statement represents the Unaudited Condensed
Statement of Comprehensive Income of the Company prepared under IAS 34.
The supplementary revenue and capital return columns are prepared under
guidance published by the Association of Investment Companies ("AIC").
All items in the above statement derive from continuing operations.
The notes on pages 35 to 57 form an integral part of these Unaudited Condensed
Interim Financial Statement.
Unaudited Condensed Statement of Financial Position
As at 31 March 2022
31 March 30 September
2022 2021
£'000 £'000
Notes (unaudited) (audited)
Non-current assets
Investments held at fair value through profit or loss 10 1,193,832 1,460,198
Current assets
Cash and cash equivalents 72,503 49,794
Other receivables 135 427
72,638 50,221
Total assets 1,266,470 1,510,419
Current liabilities
Performance fee payable 5 - (112,077)
Management fee payable 5 (5,085) (3,333)
Other payables (1,096) (1,075)
Loan payable 9 - (15,000)
Total liabilities (6,181) (131,485)
Net assets 1,260,289 1,378,934
Equity
Share Capital 11 860,890 758,950
Capital reserve 417,817 633,420
Revenue reserve (18,418) (13,436)
Total equity 1,260,289 1,378,934
Net Asset Value per Ordinary Share (pence) 12 211.76 251.96
Number of Ordinary Shares in issue 11 595,150,414 547,273,076
Approved by the Board of Directors and authorised for issue on 29 June 2022
and signed on their behalf:
Stephen Coe
Director
The notes on pages 35 to 57 form an integral part of these Unaudited Condensed
Interim Financial Statements.
Unaudited Condensed Statement of Changes in Equity
For the 6 month period ended 31 March 2022
Share capital Revenue reserve Capital reserve Total
2022 2022 2022 2022
£'000 £'000 £'000 £'000
For the period 1 October 2021
to 31 March 2022 (unaudited)
At 1 October 2021 758,950 (13,436) 633,420 1,378,934
Share issue 102,614 - - 102,614
Share issue costs (674) - - (674)
Total losses and comprehensive loss for the period - (4,982) (215,603) (220,585)
At 31 March 2022 860,890 (18,418) 417,817 1,260,289
Share capital Revenue reserve Capital reserve Total
2021 2021 2021 2021
£'000 £'000 £'000 £'000
For the period 1 October 2020
to 31 March 2021 (unaudited)
At 1 October 2020 370,367 (5,134) 176,810 542,043
Share issue 395,000 - - 395,000
Share issue costs (6,188) - - (6,188)
Total gains / (losses) and comprehensive - (3,213) 200,568 197,355
income for the period
At 31 March 2021 759,179 (8,347) 377,378 1,128,210
The notes on pages 35 to 57 form an integral part of these Unaudited Condensed
Interim Financial Statements.
Unaudited Condensed Statement of Cash Flows
For the 6 month period ended 31 March 2022
Period from Period from
1 October 2021 to 1 October 2020 to
31 March 31 March
2022 2021
Notes £'000 £'000
(unaudited) (unaudited)
Cash flows from operating activities
Interest paid (12) (45)
Other expense payments 13 (54,520) (82,054)
Interest income 60 508
Purchase of investments 10 (42,817) (45,058)
Sale of investments 10 75,668 12,028
Net cash outflow from operating activities (21,621) (114,621)
Cash flows from financing activities
Issue of Ordinary Shares 11 59,999 395,000
Share issue costs 11 (674) (6,188)
(Repayment) / Proceeds of loan payable (15,000) 15,000
Net cash inflow from financing activities 44,325 403,812
Net increase in cash and cash equivalents 22,704 289,191
Cash and cash equivalents at beginning of period 49,794 15,559
Net gains on cash currency movements 5 216
Cash and cash equivalents at end of period 72,503 304,966
Cash and cash equivalents comprise of the following:
Cash at bank 72,503 304,966
72,503 304,966
The notes on pages 35 to 57 form an integral part of these Unaudited Condensed
Interim Financial Statements.
Notes to the Unaudited Condensed Interim Financial Statements
For the 6 month period ended 31 March 2022
1. Reporting Entity
Chrysalis Investments Limited (the "Company") is a closed-ended investment
company, registered in Guernsey on 3 September 2018, with registered number
65432. The Company's registered office is 3rd Floor, 1 Le Truchot, St Peter
Port, Guernsey GY1 1WD.
The Company is a Registered Closed-ended Collective Investment Scheme
regulated by the Guernsey Financial Services Commission ("GFSC"), with
reference number 2404263, pursuant to the Protection of Investors (Bailiwick
of Guernsey) Law 2020, as amended and the Registered Closed-ended Investment
Scheme Rules 2015.
The Company's 595,150,414 shares in issue (of which 47,877,338 shares were
issued during the period raising gross cash proceeds of £59,999,000) under
ticker CHRY, SEDOL BGJYPP4 and ISIN GG00BGJYPP46 have a premium listing and
are admitted to trading on the London Stock Exchange's Main Market for listed
securities. The Unaudited Condensed Interim Financial Statements of the
Company are presented for the 6 month period ended 31 March 2022. The Company
invests in a diversified portfolio consisting primarily of equity and
equity-related securities issued by unquoted companies. The Company became a
FTSE 250 company on 23 March 2021.
The Company and its Alternative Investment Fund Manager received investment
advice from Jupiter Investment Management Limited ("JIML") during the 6 month
period ended 31 March 2022. The administration of the Company is delegated to
Maitland Administration (Guernsey) Limited ("MAGL") (the "Administrator").
2. Significant accounting policies
(a) Basis of accounting
The Unaudited Condensed Interim Financial Statements have been prepared on a
going concern basis in accordance with IAS 34 Interim Financial Reporting as
adopted by the EU, and applicable Guernsey law. These Unaudited Condensed
Interim Financial Statements do not comprise statutory Financial Statements
within the meaning of the Companies (Guernsey) Law, 2008, they do not include
all of the information required for full annual financial statements and
should be read in conjunction with the financial statements of the Company as
at 30 September 2021, which were prepared in accordance with International
Financial Reporting Standards as adopted by the EU ("IFRS"). The accounting
policies adopted in these Unaudited Condensed Interim Financial Statements are
consistent with those of the previous financial period and the corresponding
interim reporting period, except for the adoption of new and amended standards
as set out below.
Where presentational guidance set out in the Statement of Recommended Practice
("SORP") for investment companies issued by the Association of Investment
Companies ("AIC") updated in April 2021 is consistent with the requirements of
IFRS, the Directors have sought to prepare the Unaudited Condensed Interim
Financial Statements on a basis compliant with the recommendations of the
SORP.
(b) Going concern
The Directors have adopted the going concern basis in preparing the Unaudited
Condensed Interim Financial Statements.
In assessing the going concern basis of accounting, the Directors have
assessed the guidance issued by the Financial Reporting Council and considered
recent market volatility, the potential impact of COVID-19 virus,
uncertainties surrounding Russia's invasion of Ukraine and sanctions that have
been imposed on key Russian institutions, businesses and individuals by major
world powers including the US, UK and the EU on the Company's investments.
After making enquiries and bearing in mind the nature of the Company's
business and assets, the Directors consider that the Company has adequate
resources to continue in operational existence for at least twelve months from
the date of approval of the Unaudited Condensed Interim Financial Statements.
For this reason, they continue to adopt the going concern basis in preparing
the Unaudited Condensed Interim Financial Statements.
At period end, the Company has a current cash position of £72,503,000 and net
current assets of £66,457,000. Therefore, the Company has sufficient
liquidity to meet its obligations. For this reason, the Directors continue to
adopt the going concern basis in preparing the Interim Report and Unaudited
Condensed Interim Financial Statements.
(c) Segmental reporting
The chief operating decision maker is the Board of Directors. The Directors
are of the opinion that the Company is engaged in a single segment of business
with the primary objective of investing in securities to generate capital
growth for shareholders. Consequently, no business segmental analysis is
provided.
The key measure of performance used by the Board is the Net Asset Value of the
Company (which is calculated under IFRS). Therefore, no reconciliation is
required between the measure of profit or loss used by the Board and that
contained in these Unaudited Condensed Interim Financial Statements.
(d) Taxation
The Company has been granted exemption from liability to income tax in
Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989
amended by the Director of Income Tax in Guernsey for the current period.
Exemption is applied and granted annually and subject to the payment of a fee,
currently £1,200.
3. Use of estimates and critical judgements
The preparation of Unaudited Condensed Interim Financial Statements in
accordance with IFRS requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the Unaudited Condensed
Interim Financial Statements and the reported amounts of income and expenses
during the period. Actual results could differ from those estimates and
assumptions.
The estimates and underlying assumptions are reviewed on an ongoing basis.
There were no significant accounting estimates or significant judgements in
the current period, except for the use of estimates in the valuation of the
unquoted investments detailed in note 14.
4. New and revised standards
The following accounting standards and their amendments were in issue at the
period end but will not be in effect until after this financial period end.
The Directors have considered their impact and have concluded that they will
not have a significant impact on the Unaudited Condensed Interim Financial
Statements.
Amendments to following standards
· IAS 1 - Presentation of Financial Statements
Classification of Liabilities as Current or Non-current: Narrow-scope
amendments to IAS 1 to clarify how to classify debt and other liabilities as
current or non-current.
Effective date - 1 January 2023
· IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors
Definition of Accounting Estimates: The amendments clarify how companies
should distinguish changes in accounting policies from changes in accounting
estimates, by replacing the definition of a change in accounting estimates
with a new definition of accounting estimates.
Effective date - 1 January 2023
· IAS 12 - Income Taxes
Deferred Tax related to Assets and Liabilities arising from a Single
Transaction: The amendment clarifies how a company accounts for income tax,
including deferred tax, which represents tax payable or recoverable in the
future.
Effective date - 1 January 2023
· IAS 37 - Provisions, Contingent Liabilities and Assets
Onerous Contracts-Cost of Fulfilling a Contract: The amendments specify which
costs should be included in an entity's assessment whether a contract will be
loss-making.
Effective date - 1 January 2022
· IFRS 9 - Financial Instruments
Annual Improvements to IFRS Standards 2018-2020: The amendment clarifies which
fees an entity includes when it applies the '10 per cent' test in assessing
whether to derecognise a financial liability.
Effective date - 1 January 2022
5. Investment management fees
1 October 2021 1 October 2020
to 31 March to 31 March
2022 2021
£'000 £'000
Investment management fee 3,304 1,820
Investment Adviser's performance fee - charged to capital - 49,339
Total investment management fees 3,304 51,159
Jupiter Unit Trust Managers Limited ("JUTM") is the Alternative Investment
Fund Manager ("AIFM"). JUTM has sub delegated portfolio management to Jupiter
Investment Management Limited ("JIML") which is a member of the same group.
From 1 July 2022 the Company will become a self-managed AIF and will procure
portfolio management services directly from JIML.
Management fee
The monthly management fee is equal to 1/12 of 0.5% of the Net Asset Value
(the "Management Fee"). The management fee is calculated and paid monthly in
arrears.
If at any time the Company invests in or through any other investment fund or
special purpose vehicle and a management fee or advisory fee is charged to
such investment fund or special purpose vehicle by JUTM or any of its
Associates and is not waived, the value of such investment will be excluded
from the calculation of NAV for the purposes of determining the management
fee.
As at 31 March 2022, an amount of £5,085,000 (30 September 2021: £3,333,000)
was outstanding and due to JUTM in respect of management fees.
Performance fee
In accordance with an agreement between the Company and JUTM dated 29 November
2021 (the "Agreement"), the Company settled 54% (£60,522,000) of the
performance fee due to JUTM for the year ended 30 September 2021 in ordinary
shares issued by the Company. The remaining 46% (£51,555,000) of the
performance fee amount was settled in cash.
The value of the 22,667,415 ordinary shares issued under the Agreement on 28
January 2022 was £42,615,000. The difference between the value of the
liability settled through the issuance of ordinary shares and the value of the
shares issued on 28 January 2022, being £17,907,000, is recognised within
gains on settlement of financial liability within the Unaudited Condensed
Statement of Comprehensive Income in the period ended 31 March 2022.
For the year ended 31 September 2022, a performance fee may be payable, the
sum of which is equal to 20% of the amount by which the Adjusted Net Asset
Value at the end of a Calculation Period exceeds the higher of: (i) the
Performance Hurdle; and (ii) the High Water Mark (the "Performance Fee"). The
calculation period for the current period will be the period commencing on 1
October 2021 and ending on 30 September 2022 (the "Calculation Period").
Adjusted Net Asset Value at the end of a Calculation Period shall be the
audited NAV in Sterling at the end of the relevant Calculation Period:
(i) plus an amount equal to any accrued or paid performance fee in respect
of that Calculation Period or any prior Calculation Period;
(ii) plus an amount equal to all dividend or other income distributions paid
to shareholders that have been declared and paid on or prior to the end of the
relevant Calculation Period;
(iii) minus the amount of any distribution declared in respect of the
Calculation Period but which has not already reduced the audited NAV;
(iv) minus the Net Capital Change where the Net Capital Change is positive or,
correspondingly, plus the Net Capital Change where such net Capital Change is
negative (which for this purpose includes the Net Capital Change in the
relevant Calculation Period and each preceding Calculation Period); and
(v) minus any increase in the NAV during the Calculation Period attributable
to investments attributable to C shares prior to the conversion of those C
shares.
"Performance Hurdle" means, in relation to the Calculation Period, (A
multiplied by B) + C where:
"A" is 8% (expressed for the purposes of this calculation as 1.08) (calculated
as an annual rate and adjusted to the extent the Calculation Period is greater
or shorter than one year).
"B" is:
(i) in respect of the first Calculation Period, the Net Issue Proceeds;
or
(ii) in respect of each subsequent Calculation Period, the sum of this
calculation as at the end of the immediately preceding Calculation Period:
plus (where sum is positive) or minus (where such sum is negative) the Net
Capital Change attributable to shares issues and repurchases in all preceding
Calculation Period (the amount in this paragraph (b) being the "Aggregate
NCC"), in each case, plus (where such sum is positive) or minus (where such
sum is negative) the sum of:
(x) in respect of each share issue undertaken in the relevant
Calculation Period being assessed, an amount equal to the Net Capital Change
attributable to that share issue multiplied by the sum of the number of days
between admission to trading of the relevant shares and the end of the
relevant Calculation Period divided by 365 (such amount being the "issue
adjustment"); minus
(y) in respect of each repurchase or redemption of shares undertaken in
the relevant Calculation Period being assessed, an amount equal to Net Capital
Charge attributable to that share purchase or redemption multiplied by the
number of days between the relevant disbursement of monies to fund such
repurchase or redemption and the end of the relevant Calculation Period
divided by 365 (such amount being the "reduction adjustment").
"C" is the sum of:
the issue adjustment for the Calculation Period;
the reduction adjustment for the Calculation Period; and
the Aggregate NCC multiplied by -1.
"Net Capital Change" equals I minus R where:
"I" is the aggregate of the net proceeds of any share issue over the relevant
year (other than the first issue of ordinary shares); and
"R" is the aggregate of amounts disbursed by the Company in respect of the
share redemptions or repurchases over the relevant period.
"High Water Mark" means the Adjusted Net Asset Value as at the end of the
Calculation Period in respect of which a performance fee was last earned or if
no performance fee has yet been earned, an amount equal to the Net Issue
Proceeds (as such term is defined in the prospectus); and
"Calculation Period" means each twelve-month period ending on 30 September,
except that the first Calculation Period shall be the period commencing on
Admission and ending on 30 September 2019.
Under the terms of the portfolio management agreement, any accrued and unpaid
performance fees will crystallise and become payable to JUTM upon certain
termination events.
The accrued performance fee shall only be payable by the Company to the extent
that the Payment Amount is greater than the sum of the performance fee (which
shall both be calculated as at the end of each Calculation Period) and, to the
extent that the Payment Amount is less than the sum of the performance fee for
that Calculation Period, an amount equal to the difference shall be carried
forward and included in the performance fee calculated as at the end of the
next Calculation Period (and such amount shall be paid before any performance
fee accrued at a later date).
"Payment amount" is the sum of:
(i) aggregate net realised profits on investments since the start of the
relevant Calculation Period; plus
(ii) an amount equal to each IPO investment unrealised gain where the
initial public offering of the relevant investment takes place during the
relevant Calculation Period; plus or minus (as applicable)
(iii) an amount equal to the listed investment value change attributable to
that calculation period; plus
(iv) the aggregate amount of all dividends or other income received from
investments of the Company in that Calculation Period (other than investments
made pursuant to the cash management policy of the Company as stated in the
Investment Policy).
No performance fee is payable out of the assets attributable to any C Shares
in issue from time to time.
As at 31 March 2022, the Company had not exceeded the High Water Mark and
Performance Hurdle therefore an accrual of £nil (30 September 2021:
£112,077,000) for performance fees has been reflected within these Unaudited
Condensed Interim Financial Statements.
6. Other expenses
1 October 2021 to 31 March 1 October 2020 to 31 March
2022 2021
£'000 £'000
Directors' fees 164 218
Directors' expenses 3 -
Administration fee 141 95
Arrangement fees - 160
AIFM fee 298 96
Auditor's remuneration for:
- audit fees 64 68
- non-audit fees 23 107
Secretarial fees 19 18
Printing fees 11 34
Registrars' fees 21 21
Listing fees 22 127
FCA fees 10 8
Legal fee and professional fees:
- ongoing operations 610 742
- purchases 204 53
Depositary fees 50 32
Directors' liability insurance 33 24
Sundry 53 53
1,726 1,856
7. (Losses) / gains per Ordinary Share
31 March 2022 31 March 2021
Net return Per share Net return Per share
£'000 pence £'000 pence
Revenue return (4,982) (0.87) (3,213) (0.81)
Capital return (215,603) (37.85) 200,568 50.32
At 31 March (220,585) (38.72) 197,355 49.51
Weighted average number of Ordinary Shares 569,677,684 398,561,496
The return per share is calculated using the weighted
average number of ordinary shares.
8. Dividends
The Board has not declared an interim dividend (6 months
ended 31 March 2021: £nil).
9. Loan payable
31 March 30 September
2022 2021
£'000 £'000
Barclays Bank PLC - 15,000
During the prior financial year, the Company entered into a revolving loan
facility with Barclays Bank PLC. The facility had an interest rate of LIBOR
+2.5%. The outstanding loan, of £15,000,000, was repaid in full on 15 October
2021 and the facility has subsequently been terminated.
10. Investments held at fair value through profit or loss
31 March 30 September
2022 2021
£'000 £'000
Opening book cost 758,013 404,480
Opening investment holding unrealised gains 702,185 201,807
Opening valuation 1,460,198 606,287
Movements in the period / year
Purchases at cost 56,620 380,199
Sales - proceeds (89,471) (94,707)
Net (losses) / gains on investments held at fair value
through profit or loss (233,515) 568,419
Closing valuation 1,193,832 1,460,198
Closing book cost 779,742 758,013
Closing investment holding unrealised gains 414,090 702,185
Closing valuation 1,193,832 1,460,198
1 October 2021 1 October 2020 1 October 2020
to 31 March to 30 September to 31 March
2022 2021 2021
£'000 £'000 £'000
Movement in unrealised gains during the period / year 105,232 501,083 237,652
Movement in unrealised (losses) / gains during the period / year (393,327) (705) 4,521
Realised gain on sale of investments 54,580 68,041 7,518
Net (losses) / gains on investments held at fair value through profit or loss (233,515) 568,419 249,691
Included within purchases and sales above is an amount of £13,363k which was
contributed into Rowanmoor. The contribution was deducted from the gross
proceeds of the Embark sale.
11. Share capital
No of
shares £'000
Ordinary Shares at no par value
Opening balance as at 1 October 2020 336,742,424 370,367
Issue of shares 210,530,652 395,000
Issue costs - (6,417)
At 30 September 2021 547,273,076 758,950
Opening balance as at 1 October 2021 547,273,076 758,950
Issue of shares 47,877,338 102,614
Issue costs - (674)
At 31 March 2022 595,150,414 860,890
The holders of Ordinary Shares have the right to receive notice of and attend,
speak and vote in general meetings of the Company. They are also entitled to
participate in any dividends and other distributions of the Company.
Included within the value of the issue of shares is £42,615,000 relating to
the settlement of the performance fee payable at 30 September 2021 (see Note
5).
12. Net Asset Value per Ordinary Share
The Net Asset Value per Ordinary Share and the Net Asset Value at the period
end calculated in accordance with the Articles of Incorporation were as
follows:
31 March 2022 30 September 2021
NAV NAV NAV NAV
per share attributable per share attributable
pence £'000 pence £'000
Ordinary Shares: basic and diluted 211.76 1,260,289 251.96 1,378,934
The Net Asset Value per Ordinary Share is based on 595,150,414 (2021:
547,273,076) Ordinary Shares, being the number of Ordinary Shares in issue at
the period end.
13. Other expenses payments
31 March 30 September
2022 2021
£'000 £'000
Total (losses) / gains and comprehensive income
for the period / year (220,585) 448,308
Net losses / (gains) on investments held at fair value
through profit or loss 233,515 (568,419)
Other income (17,907) -
Interest income (60) (851)
Finance costs 12 238
Forex (gains) / losses (5) 42
Movement in working capital
Decrease / (increase) in other receivables 292 (160)
(Decrease) / increase in payables (49,782) 82,855
At 31 March 2022 (54,520) (37,987)
14. Financial instruments and capital disclosures
The Company's activities expose it to a variety of financial risks; market
risk (including other price risk, foreign currency risk and interest rate
risk), credit risk and liquidity risk.
The Unaudited Condensed Interim Financial Statements do not include all
financial risk management information and disclosures required in the annual
financial statements; they should be read in conjunction with the Company's
Audited Financial Statements as at 30 September 2021.
The Company measures fair values using the following hierarchy that reflects
the significance of the inputs used in making the measurements. Categorisation
within the hierarchy has been determined on the basis of the lowest level
input that is significant to the fair value measurement of the relevant assets
as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or
liabilities.
An active market is a market in which transactions for the asset or liability
occur with sufficient frequency and volume on an ongoing basis such that
quoted prices reflect prices at which an orderly transaction would take place
between market participants at the measurement date. Quoted prices provided by
external pricing services, brokers and vendors are included in Level 1, if
they reflect actual and regularly occurring market transactions on an
arm's-length basis.
Level 2 - Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices).
Level 2 inputs include the following:
· quoted prices for similar (i.e., not identical) assets in active markets;
· quoted prices for identical or similar assets or liabilities in markets
that are not active. Characteristics of an inactive market include a
significant decline in the volume and level of trading activity, the available
prices vary significantly over time or among market participants or the prices
are not current;
· inputs other than quoted prices that are observable for the asset (for
example, interest rates and yield curves observable at commonly quoted
intervals); and
· inputs that are derived principally from, or corroborated by, observable
market data by correlation or other means (market-corroborated inputs).
Level 3 - Inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
The level in the fair value hierarchy within which the fair value measurement
is categorised in its entirety is determined on the basis of the lowest level
input that is significant to the fair value measurement in its entirety. If a
fair value measurement uses observable inputs that require significant
adjustment based on unobservable inputs, that measurement is a Level 3
measurement. Assessing the significance of a particular input to the fair
value measurement in its entirety requires judgement, considering factors
specific to the asset or liability.
At 31 March 2022 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Quoted equity 86,550 - - 86,550
Unquoted equity - - 1,107,282 1,107,282
86,550 - 1,107,282 1,193,832
At 30 September 2021 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Quoted equity 236,756 - - 236,756
Unquoted equity / Convertible debt - - 1,223,442 1,223,442
236,756 - 1,223,442 1,460,198
The following table shows the valuation techniques used for Level 3 fair
values, as well as the significant unobservable inputs used for Level 3 items:
Unlisted Investments 2022
Fair Value as at 31 March 2022 (£000s) Valuation Technique Significant Unobservable Inputs Range Sensitivity % Sensitivity to changes in significant unobservable inputs
259,272 Comparable Company performance Selection of comparable companies 2.68x - 26.90x 10% If input comparable company performance changed by +/- 10%, the value of the
companies in this group would change by +/- 25,927,185
Price/2022E revenue multiples
788,010 Market approach using comparable traded multiples EV/LTM EBITDA multiples and LTM 0.18x - 43.15x 10% If revenue/EBITDA multiples changed by +/- 10%, the value of the companies in
this group would change by + 68,029,599 / - 67,564,213
2022E, 2023E EV/revenue multiples
59,907 Scenario Analysis N/A N/A N/A N/A
93 Wind Down N/A N/A N/A N/A
The following table shows the valuation techniques used for Level 3 fair
values, as well as the significant unobservable inputs used for Level 3 items:
Unlisted Investments 2021
Fair Value as at 30 September 2021 (£000s) Valuation Technique Significant Unobservable Inputs Range Sensitivity % Sensitivity to changes in significant unobservable inputs
840,358 Market approach using comparable traded multiples 10% If revenue multiples changed by +/- 10%, the value of the companies in this
group would change by +/-£76,875,162
EV/2022E revenue multiples
EV/LTM revenue multiples 5.47 - 18.50x
EV/2021E revenue multiples
1,332 Wind Down N/A N/A N/A N/A
307,147 Recent transaction price N/A N/A N/A N/A
74,605 Indicative Offer N/A N/A N/A N/A
The Company has an established control framework with respect to the
measurement of fair values. The Unlisted Asset Valuation Committee ("UAVC") of
the AIFM is responsible for valuation of the Company's investments.
The UAVC regularly reviews significant unobservable inputs and valuation
adjustments. If third party information, such as pricing services, is used to
measure fair vales, then the UAVC assesses the evidence obtained from the
third parties to support the conclusion that these valuations meet the
requirements of the standards, including to the level in the fair value
hierarchy in which the valuation should be classified.
The following table shows a reconciliation of the opening balance to the
closing balance for Level 1 and 3 fair values:
March September March September
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Level 1 Level 1 Level 3 Level 3
Opening balance 236,756 94,213 1,223,442 512,074
Transferred to Level 1 - 161,161 - (161,161)
Purchases at cost 15,219 64,101 46,401 316,098
Sales at cost (17,630) (94,707) (76,841) -
Total gains / (losses) included in net gains on investments in the Statement
of Comprehensive Income
- on assets sold 11,079 68,041 43,501 -
- on assets held at period/year end (158,874) (56,053) (129,221) 556,431
86,550 236,756 1,107,282 1,223,442
The change in unrealised gains or losses (net gain) for the period included in
the Unaudited Condensed Statement of Comprehensive Income relating to those
Level 3 assets held at the reporting date amount to £142,921,927 (30
September 2021: £474,928,000).
The transfer of £161,161,000 during the year ended 30 September 2021 relates
to Wise PLC, which has moved from being a Level 3 asset to a Level 1 asset as
a result of its listing in July 2021.
Investments are transferred between levels at the point of the trigger event.
There have been no significant changes in the management of risk or in any
risk management policies since the last Statement of Financial Position date.
15. Related parties
On 1 May 2021 the Company appointed Jupiter Unit Trust Managers Limited
("JUTM") as its new AIFM, replacing Maitland Institutional Services Limited
whose appointment was terminated at the same time. JUTM subsequently sub
delegated portfolio management to Jupiter Investment Management Limited which
is a member of the same group.
JIML continues to act as Investment Adviser and the change does not impact the
provision of services to the Company by the existing management team at the
Investment Adviser. The management and performance fees previously payable to
JIML are now payable to JUTM. JUTM is also entitled to an AIFM fee.
1 October 2021 1 October 2020 1 October 2020
31 March 30 September 31 March
2022 2021 2021
£'000 £'000 £'000
Management fee charged by JUTM:
Total management fee charged 3,304 2,840 -
Management fee outstanding 5,085 2,840 -
Performance fee charged by JUTM:
Total performance fee charged - 112,077 -
Performance fee outstanding - 112,077 -
AIFM fee charged by JUTM:
Total AIFM fee charged 298 147 -
AIFM fee outstanding 506 147 -
Management fee charged by JIML:
Total management fee charged - 2,313 1,820
Management fee outstanding - 493 1,820
Performance fee charged by JIML:
Total performance fee charged - - 49,339
Performance fee outstanding - - 49,339
AIFM fee charged by Maitland Institutional Services Ltd
Total AIFM fee charged - 248 96
AIFM fee outstanding - 129 44
Directors' fees
Total Directors' fees charged 164 354 218
Directors' fees outstanding - - -
As detailed in note 5, on 28 January 2022 JUTM received 22,667,415 shares in
satisfaction of the performance fee payable at 30 September 2021.
As at 31 March 2022 the following Directors had holdings in the Company:
Number of % Ordinary Shares
Director Ordinary Shares issue as at 31 March 2022
Andrew Haining 79,000 0.0133
Stephen Coe 50,909 0.0086
Simon Holden 72,500 0.0123
Anne Ewing 40,000 0.0067
Tim Cruttenden 21,298 0.0036
Margaret O'Connor - -
On 20 October 2021, Samuel Cruttenden (son of Tim Cruttenden) purchased 3,795
shares in the Company at 236.97p per share.
As at 30 September 2021 the following Directors had holdings in the Company:
Number of % Ordinary Shares
Director Ordinary Shares issue as at
30 September 2021
Andrew Haining 64,000 0.0117
Stephen Coe 50,909 0.0093
Simon Holden 72,500 0.0132
Anne Ewing 32,500 0.0059
Tim Cruttenden 14,968 0.0027
Margaret O'Connor - -
The following funds, which are also managed by Jupiter, hold an investment in
the Company.
Total holdings at Shares purchased Shares sold Total holdings at Value of holdings at
30 September during during 31 March 31 March
2021 the period the period 2022 2022
£'000
Related party
Jupiter UK Smaller Companies Focus Fund 6,567,286 - (1,062,191) 5,505,095 9,744
Jupiter UK Specialist Equity Fund 7,009,168 - (1,233,180) 5,775,988 10,223
Jupiter UK Mid-Cap Fund 77,592,375 7,600,007 - 85,192,382 150,791
Jupiter UK Smaller Companies Fund 17,820,552 - (1,750,000) 16,070,552 28,445
Jupiter Investment Fund - Jupiter Managed European Portfolio 742,325 3,633 - 745,958 1,320
Jupiter Investment Fund -Jupiter Merlin International Balanced 668,092 3,270 - 671,362 1,188
Jupiter Investment Fund - Jupiter Merlin International Equities 946,275 4,724 - 950,999 1,683
Jupiter Investment Fund - Jupiter Merlin Real Return Portfolio 1,559,644 7,268 - 1,566,912 2,773
Jupiter Fund of Investment Trusts 2,000,000 - - 2,000,000 3,540
Jupiter Merlin Real Return Portfolio 103,926 509 - 104,435 185
Jupiter Merlin Worldwide Portfolio 8,532,956 43,605 - 8,576,561 15,181
Jupiter UK Smaller Companies Equity Fund 1,750,000 500,000 - 2,250,000 3,983
Total 125,292,599 8,163,016 (4,045,371) 129,410,244 229,056
Total Shares Total Value
holdings as at purchased Shares sold holdings at holdings at
30 September during the during the 30 September 30 September
2020 period period 2021 2021
£'000
Related party
Jupiter UK Smaller Companies Focus Fund 5,520,882 2,637,000 (1,590,596) 6,567,286 17,535
Jupiter UK Specialist Equity Fund 8,112,820 - (1,103,652) 7,009,168 18,714
Jupiter UK Mid-Cap Fund 51,451,305 26,141,070 - 77,592,375 207,172
Jupiter UK Smaller Companies Fund 14,601,552 3,219,000 - 17,820,552 47,581
Jupiter Investment Fund - Jupiter Managed European Portfolio - 742,325 - 742,325 1,982
Jupiter Investment Fund -Jupiter Merlin International Balanced - 668,092 - 668,092 1,784
Jupiter Investment Fund -Jupiter Merlin International Equities - 946,275 - 946,275 2,527
Jupiter Investment Fund -Jupiter Merlin Real Return Portfolio - 1,559,644 - 1,559,644 4,164
Jupiter Fund of Investment Trusts - 2,000,000 - 2,000,000 5,340
Jupiter Merlin Real Return Portfolio - 103,926 - 103,926 277
Jupiter Merlin Worldwide Portfolio - 8,532,956 - 8,532,956
Jupiter UK Smaller Companies Equity Fund - 1,750,000 - 1,750,000
Total 79,686,559 48,300,288 (2,694,248) 125,292,599
16. Post balance sheet events
On 19 April 2022, the Company invested a further £10 million into Starling
Bank as a part of Starling's Series D funding round.
On 12 May 2022, Simon Holden (Independent Director of the Board) purchased
17,000 shares in the Company at 119.7p per share.
On 27 May 2022, Anne Ewing (Independent Director of the Board) purchased
15,000 shares in the Company at 129.4p per share.
On 7 June 2022, the Board announced the appointment of a new independent
valuation committee in preparation for its previously announced move to a
self-managed structure from 1 July 2022. The Company will assume direct
responsibility for the valuation process. The existing arrangement, under
which it is the responsibility of the external AIFM to provide the Board with
valuations for unlisted holdings, will cease as of 30 June 2022.
There has not been any other matter or circumstance occurring subsequent to
the end of the interim financial period that has significantly affected, or
may significantly affect, the operations of the Company, the results of those
operations, or the state of affairs of the Company in future financial period.
Corporate Information
Directors
Andrew Haining, Chairman
Anne Ewing
Simon Holden
Stephen Coe (Senior Independent Director)
Tim Cruttenden
Margaret O'Connor
Registered office
3rd Floor
1 Le Truchot
St Peter Port
Guernsey, GY1 1WD
Alternative Investment Fund Manager
Jupiter Unit Trust Managers Limited ("JUTM")
The Zig Zag Building
70 Victoria Street
London, SW1E 6SQ
Investment Adviser
Jupiter Investment Management Limited ("JIML")
The Zig Zag Building
70 Victoria Street
London, SW1E 6SQ
Financial Adviser and Corporate Broker
Liberum Capital Limited
Ropemaker Place Level 12
25 Ropemaker Street
London, EC2Y 9LY
Numis Securities Limited
45 Gresham Street
London, EC2V 7BF
Administrator and Company Secretary
Maitland Administration (Guernsey) Limited
3rd Floor
1 Le Truchot
St Peter Port
Guernsey, GY1 1WD
Registrar
Computershare Investor Services (Guernsey) Limited
1st Floor, Tudor House
Le Bordage
St Peter Port
Guernsey, GY1 DB
Depositary
Citibank UK Limited
Citigroup Centre
Canada Square
Canary Wharf
London, E14 5LB
On 9 October 2021 the depositary changed to Citibank UK Limited from Citibank
Europe plc
English Legal Adviser to the Company
Travers Smith LLP
10 Snow Hill
London, EC1A 2AL
Guernsey Legal Adviser to the Company
Ogier (Guernsey) LLP
Redwood House
St Julian's Avenue
St Peter Port, GY1 1WA
Independent Auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey, GY1 1WR
Definitions
BENCHMARK PERFORMANCE
With reference to investment valuation, application of the performance of a
benchmark or pool of comparable companies to an unlisted company to determine
avaluation.
NAV PER SHARE
Net Asset Value expressed as an amount per share.
NAV PER SHARE GROWTH
With reference to fund performance, NAV at end of stated year / NAV at
beginning of stated year as a percentage.
IRR
Internal Rate of Return - with reference to investment performance, calculated
using excel XIRR formula.
TRADING MULTIPLE
With reference to investment valuation, enterprise value / annual revenue of
company.
DRAWDOWN
With reference to index performance, the maximum percentage loss in value over
agiven time period.
DISCOUNT / PREMIUM
The amount by which the market price per share of an investment company is
lower or higher than its net asset value per share. The discount or premium is
normally expressed as a percentage of the net asset value per share.
NET ASSET VALUE (NAV)
The Net Asset Value (NAV) is the amount by which total assets exceed total
liabilities, i.e., the difference between what the Company owns and what it
owes.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR SEMESUEESEFMRecent news on Chrysalis Investments
See all newsREG - Chrysalis Invs Ltd - Quarterly NAV Announcement and Trading Update
AnnouncementREG - Chrysalis Invs Ltd - Update on claim against Revolution Beauty GroupPLC
AnnouncementREG - Chrysalis Invs Ltd - Result of AGM & EGM
AnnouncementREG - Chrysalis Invs Ltd - Holding(s) in Company
AnnouncementREG - Chrysalis Invs Ltd - Holding(s) in Company
Announcement