REG - Chrysalis Invs Ltd - Quarterly NAV Announcement and Trading Update

Chrysalis InvestmentsAnnouncement

01/02/2023 07:00

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RNS Number : 4995O  Chrysalis Investments Limited  01 February 2023

The information contained in this announcement is restricted and is not for
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The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 which forms part of domestic law in the United Kingdom
pursuant to The European Union Withdrawal Act 2018, as amended by The Market
Abuse (Amendment) (EU Exit) Regulations 2019.

 

1 February 2023

 

 

Chrysalis Investments Limited ("Chrysalis" or the "Company")

 

Quarterly NAV Announcement and Trading Update

 

Net Asset Value

 

The Company announces that as at 31 December 2022 the unaudited net asset
value ("NAV") per ordinary share was 128.26 pence.

 

The above NAV calculation is based on the Company's issued share capital as at
31 December 2022 of 595,150,414 ordinary shares of no par value.

 

December's NAV represents a 19.53 pence per share (13.2%) decrease since 30
September 2022.

 

The movement in fair value of the four holdings which declined the most (on a
constant currency basis) during the period represented 11.40 pence per share
of the decrease. Much of this was driven by the external valuer and the
independent Valuation Committee's transition towards a more "market-based
approach", and away from a "price of recent investment" approach, given the
general market changes and time elapsed since the last funding round for these
assets.

 

Foreign exchange was the second largest detractor to the NAV over the period
overall, with foreign exchange impacting the NAV per ordinary share by 3.30
pence per share.

 

The Board believes that the portfolio valuations as at 31 December 2022
reflect fair value at a time when public markets were closed, investment into
private companies was muted and exit opportunities were limited (conditions
which still prevail today).  The Board remains confident of enhanced
valuations when market conditions are more favourable, particularly in the
light of the positive portfolio developments described below.

 

Investment Adviser Comments

 

Richard Watts and Nick Williamson (co-portfolio managers) comment:

 

"Over the last twelve months, we have worked hard with our portfolio companies
to get them into the best possible financial shape, with strengthened balance
sheets and lower cash burn forecasts. While we expect there are still some
final investments to be made, we believe that we are coming to the end of this
process and are confident that our companies are generally in a strong
position to continue growing robustly.

 

We believe the portfolio is attractively valued versus listed peers,
particularly given its rate of growth. We continue to be pleased by the
overall trading performance of the portfolio and of the major holdings in
particular.''

 

Portfolio Activity

 

There was limited portfolio activity over the quarter given several portfolio
assets raised primary capital through H1 2022.

 

The Company sold approximately £5.9 million of Wise shares in October and
announced in November that it had sold its entire stake in Revolution Beauty
for approximately £5 million in an off-market transaction (as the shares were
suspended at that point).

 

As announced at the Company's last quarterly update, the Investment Adviser
estimated that there was a likely further funding requirement in the portfolio
of approximately £20 million. This position remains unchanged.

 

Portfolio News

 

Wefox

wefox has had a very strong last twelve months. The company generated
approximately €600m of revenue in FY22 and should be profitable within the
next twelve months; this would make wefox one of the largest and most
profitable Insurtech assets globally. The company has also matured from a
governance perspective and recently announced the appointment of Helen Heslop
to the board as Chair of the Audit Committee, and Laura Eschricht as Chief
Marketing Officer; this follows several other senior hires across the group
over the course of 2022.

 

In October, wefox also announced it would continue its investment in AI and
innovation with a new technology hub opening in Milan, Italy. Wefox already
has technology hubs in Paris, France and Barcelona, Spain and utilises AI to
increase broker productivity and reduce fraud. In Milan, wefox will invent and
build new technology to accelerate its embedded insurance products through its
affinity partnerships.

 

Brandtech

Brandtech continues to grow strongly driven by best-in-class organic growth
and selective M&A. The company recently disclosed that it has entered into
exclusive negotiations with Fimalac to potentially acquire global digital
marketing company, Jellyfish. Jellyfish is headquartered in the UK but has 40
global offices with 2,250 employees. Jellyfish describes itself as a digital
partner for some of the world's leading brands such as Aviva, Duracell, Google
and Toyota and has generated a compound annual growth rate of 45% since 2013.

 

Starling

In January 2023, Anne Boden - Starling CEO - noted that for the month of
December 2022 the company generated annualised revenue of nearly £600 million
and PBT of over £250 million, with a deposit book of £10.7 billion. This
compares with annualised figures of £331.2 million in revenues and PBT of
£92 million, both as of June 2022.

 

Klarna

In November, Klarna announced its 3Q 2022 results. Gross Merchandise Volume
("GMV") grew +22% organically over the first nine months of 2022 to $60.2m,
with the US growing at +92%. The Investment Adviser views this as a strong
result given a decline in global e-commerce sales and is despite the company
adopting a more cautious underwriting approach earlier in the year. Impairment
rates fell as a percentage of GMV to 0.7% in 3Q22 from the prior quarter,
which drove a material improvement in operating losses, which fell $169
million in 3Q22 on a sequential basis.

 

As a result of these encouraging trends, Klarna stated that it expects to hit
run rate profitability during 2H23.

 

Klarna also unveiled significant improvements in its mobile app which will
provide an even better shopping experience for its 150 million customers
globally. Klarna has launched an intelligent, unbiased in-app search tool in
the US, UK, and the Nordics that saves consumers time and money by comparing
prices across thousands of retailers, offering a credible alternative to the
established tech giants. Klarna now also automatically adds available coupons
at checkout in the US and UK with further markets to follow, making
money-saving effortless while allowing consumers to collect rewards through
its in-app digital wallet for loyalty cards.

 

Featurespace

Over the quarter, Featurespace continued to win awards for its innovative
product, including its partnership with TSYS winning the "Best Use of Payments
Data or AI in Financial Services" at the PAY360 awards.

 

Cash Update

 

As of 30 January 2023, the Company had net cash of approximately £66 million
and a position in Wise of £12 million, to give a total liquidity position of
approximately £78 million.

 

As a result, the Company remains in a strong liquidity position.

 

Portfolio composition

 

As of 31 December 2022, and 30 January 2023, the portfolio composition was as
follows:

 

                      31-Dec                                     30-Jan
 Portfolio Company     £millions               % of portfolio     £millions    % of portfolio
 wefox                129                      17%               128           17%
 Brandtech            98                       13%               96            13%
 Starling             93                       12%               93            12%
 Smart Pension        90                       12%               90            12%
 Deep Instinct        65                       9%                64            8%
 Klarna                          47            6%                46            6%
 Featurespace         42                       5%                42            6%
 Tactus               37                       5%                37            5%
 Graphcore                       33            4%                33            4%
 InfoSum              28                       4%                27            4%
 Secret Escapes                  13            2%                13            2%
 Wise                            12            2%                12            2%
 Sorted                          9             1%                9             1%
 Gross cash                      72            9%                69            9%

 

Source: Jupiter Investment Management Limited. Holding sizes, as of 30 January
2023, are calculated using 31 December 2022 valuations, adjusted for FX as of
30 January 2023 and capturing transactions concluded post the NAV calculation
period, settlement of outstanding management fees and thus using cash as of 30
January 2023. For listed shares, the holding values are based on closing share
prices as of 30 January 2023, namely:  Wise at 544.20p. Due to rounding, the
figures may not add up to 100%. The above percentages are based on an
aggregate portfolio value (including cash) of approximately £0.77 billion and
£0.76 billion for 31 December 2022 and 30 January 2023 respectively.

 

Outlook

 

As detailed at the recent Capital Markets Day, the portfolio is well
capitalised, with approximately 80% of companies either profitable, funded to
profitability, or with a two-year cash runway. As detailed above, the
Investment Adviser believes that the Company remains in a strong liquidity
position to enable it to fund likely capital calls, while retaining an
adequate buffer with which to deal with any unforeseen events.

 

The Investment Adviser notes that medium-term US bond yields have fallen over
the last three months, despite the US yield curve remaining inverted,
suggesting expectations of a recession. While a recession is typically not a
helpful backdrop, the Investment Adviser believes the growth dynamics of the
Company's holdings are less likely to see an impact, relative to the wider
market. In addition, lower yields are typically supportive of growth
valuations.

 

With this in mind, the Investment Adviser notes that certain stock markets,
including "tech-heavy" ones such as the NASDAQ 100, are beginning to show some
signs of stability.

 

The Investment Adviser believes a recovery in market sentiment and market
price levels is likely to have two main effects:

 

·    It would support portfolio company valuations; and

·    It could lead to the IPO market reopening.

 

The IPO market has endured four quarters of low issuance over 2022, on the
back of a reasonably strong year - relative to recent history - in 2021. While
there is no guarantee that any of the Company's portfolio companies would look
to IPO if there was an opportunity in 2023, it does potentially open this
possibility for some of the later stage assets.

 

An IPO - which the Investment Adviser views as an important "exit" route for
the Company - in the portfolio would materially boost the Company's liquidity
position and provide a clear underpin to valuation for the pertinent company.

 

Factsheet

 

An updated Company factsheet will shortly be available on the Company's
website:  https://www. (https://www.) chrysalisinvestments.co.uk

 

-ENDS-

 

 

 

 

 

 For further information, please contact

 Media

 Montfort Communications

 Charlotte McMullen / Toto Reissland / Lesley Kezhu Wang   44 (0) 7976 098 139

                                                           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
(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
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