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

Chrysalis InvestmentsAnnouncement

04/05/2023 10:00

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RNS Number : 4353Y  Chrysalis Investments Limited  04 May 2023

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(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.

 

4 May 2023

 

 

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

 

Quarterly NAV Announcement and Trading Update

 

Net Asset Value

 

The Company announces that as at 31 March 2023 the unaudited net asset value
("NAV") per ordinary share was 130.02 pence.

 

The NAV calculation is based on the Company's issued share capital as at 31
March 2023 of 595,150,414 ordinary shares of no par value.

 

March's NAV represents a 1.76 pence per share (1.4%) increase since 31
December 2022.

 

Movements in fair values of the portfolio accounted for approximately 3.1
pence per share, with foreign exchange generating an adverse movement of
approximately 1.2 pence per share.

 

 

Investment Adviser Comments

 

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

 

"We remain fully confident in our diverse portfolio of well-funded,
attractively valued and fast-growing assets, and in the significant
opportunity that they represent for our shareholders.

 

"It is encouraging to see a modest increase in the Company's NAV over the
recent quarter. Many listed peers have fared favourably since the turn of the
year, and this is reflected in the valuation uplifts within the Chrysalis
portfolio.

 

"We have worked hard alongside our portfolio companies to address their
ability to navigate the retrenchment in growth valuations seen over the last
15 months, and the subsequent decrease in investor appetite to consider growth
stocks. Major progress has been made in this regard, with companies such as
Klarna altering investment plans, raising capital and setting out a path to
profitability. As a result, we have seen a significant improvement in the
funding profile of Chrysalis, with 74% of the portfolio either profitable or
funded to profitability as of March 2023, up from 42% a year earlier (and
versus 67% as of the Capital Markets Day in November 2022).

 

"Despite the focus on profitability the weighted average revenue growth rate
of the portfolio to 31 March 2023 remained robust at approximately 50%.''

 

 

Portfolio Activity

 

As previously articulated, the Investment Adviser remains focused on the
current portfolio and has not been actively pursuing new investment
opportunities, albeit the origination process continues to generate leads.
Over the period, the following transactions occurred:

 

·    In February 2023, the Company invested €4 million in wefox in an
extension of its US$400 million Series D funding round, which had valued wefox
at US$4.5 billion post money.

 

·    As announced in February 2023, the Company purchased £20 million of
equity in Starling via a secondary market transaction led by an existing,
third-party shareholder.

 

In November 2022, the Investment Adviser set out an expected primary portfolio
funding requirement of approximately £20 million. Being secondary, the
Starling transaction did not form part of this capital requirement.

 

Portfolio Update

 

Revenue growth and the move towards profitability are key priorities, but the
portfolio continues to mature in other ways, with a focus on strengthening
governance.

 

wefox

wefox generated approximately €600m of revenue in FY22, making it one of the
largest Insurtech assets globally. The company's strong momentum has continued
through Q1, and we believe that the company is on track to reach profitability
by the end of FY23, a milestone that few listed peers have been able to
achieve.

 

Featurespace

Featurespace has announced the appointment of John Shipsey as Chief Financial
Officer (CFO). John was CFO at Smiths Group from 2017 to 2022 and the CFO of
Dyson, the global technology group, from 2005 to 2017.

 

Starling

In March, Starling announced the location of its new northern base in St.
Peter's Square, Manchester, creating up to 1,000 roles in the north of England
across its operations, engineering, data science and cybersecurity functions.
Starling already employs 2,500 across its London, Cardiff, Southampton, and
Dublin locations.

 

Smart

Smart continues to grow strongly, both in the UK through Smart Pension, and
globally through its Keystone technology platform. Smart Pension has become a
signatory to the Stewardship Code, highlighting its commitment to high
standards of stewardship, engagement, and responsible investing. To become a
signatory to the Code, organisations must submit to the FRC a Stewardship
Report demonstrating how they have applied the Code's 12 Principles in the
previous 12 months. The Smart Pension Master Trust has grown AUM by more than
2,000% over four years, and now serves one million members and 70,000
employers.

 

Deep Instinct

Deep Instinct has announced its inclusion in the 2022 Gartner Magic Quadrant
for Endpoint Protection Platforms (EPP); the only new vendor to be recognised
for EPP. Magic Quadrants compare vendors based on Gartner's standard criteria
and methodology, influencing the buying decisions of companies of all sizes
globally.

 

Klarna

February saw the release of Klarna's FY22 results, with Gross Merchandise
Value ("GMV") up 22% year-on-year. Adjusted operating losses improved 44% in
H2 vs H1, demonstrating Klarna's continued progress towards profitability;
reducing credit losses and costs, whilst continuing to drive growth. The
credit loss rate improved by 30% versus the same quarter last year to 0.58%.

 

In April Klarna was assigned an investment grade credit rating by S&P
Global, reflecting its 'ability to defend its robust e-commerce position in
its key markets', 'rebuild profitability' and 'maintain a strong capital
buffer'.

 

Cash Update

 

As of 31 March, the Company had net cash of approximately £43 million and a
position in Wise of £12 million, to give a total liquidity position of
approximately £55 million.

 

The Investment Adviser believes that its guidance of likely primary follow-on
capital of approximately £20 million is still appropriate, of which circa
€4 million has been invested into wefox. As a result, the Investment Adviser
believes the Company remains in a strong liquidity position.

 

Portfolio composition

 

As of 31 March 2023 the portfolio composition was as follows:

 

                       31-Mar
                       Carrying Value (£ millions)

 Portfolio Company                                   % of portfolio
 wefox                 166.5                         21.5%
 Starling              124.0                         16.0%
 Brandtech             95.0                          12.2%
 Smart Pension         76.6                          9.9%
 Deep Instinct         70.8                          9.1%
 Klarna                52.0                          6.7%
 Featurespace          42.2                          5.4%
 Tactus                34.8                          4.5%
 InfoSum               28.2                          3.6%
 Graphcore             16.3                          2.1%
 Secret Escapes        13.3                          1.7%
 Wise                  12.0                          1.5%
 Sorted                1.3                           0.2%
 Gross cash            43.3                          5.6%

 

Source: Jupiter Investment Management Limited. 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 £776 million for 31 March
2023.

 

Outlook

 

The Investment Advisor has spent a considerable amount of time over the past
twelve months working with portfolio companies to enhance their profitability,
and where necessary, to raise capital. As a result of this, the Investment
Adviser believes the "funding risk" in the portfolio has been substantially
reduced.

 

As of 31 March 2022, approximately 42% of the portfolio was profitable, with
none of the remaining 58% funded to profitability. As of 31 March 2023, 38% of
the portfolio was profitable (the composition of this cohort being affected by
changes in asset weightings, as well as the realisation of certain profitable
positions, such as THG), but of the remainder, 36% was funded to
profitability.

 

This has increased the total portfolio weighting of those companies that were
either profitable or funded to profitability from 42% to 74% over the course
of the last twelve months. The Investment Adviser continues to work with the
remaining portfolio companies that fall outside this group and has good
visibility over funding options and cash runways for a number of these
holdings.

 

As a result of this work, the Investment Adviser believes the Company has a
portfolio of assets that are growing strongly, are well-funded and
attractively valued versus listed peers.

 

The IPO market, at least in the UK, remains very subdued: over the year to
March 2023, only 27 IPOs have occurred on the LSE Main Market and AIM, and the
market is now entering its sixth successive quarter of low issuance. It is
easy to extrapolate past events into the future, but this lack of activity is
now almost on a par with the hiatus post the Great Financial Crisis, when
economic conditions were much less certain. The Company has a number of
later-stage assets that the Investment Adviser believes are capable of
floating, and a successful exit, whether an IPO or trade sale, could
materially enhance the liquidity profile of the Company and provide a
mark-to-market underpin for that holding, and by implication, the Company's
wider valuation approach.

 

Factsheet

 

An updated Company factsheet will shortly be available on the Company's
website:  https://www.chrysalisinvestments.co.uk
(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) 20 3530 3109

 Chris Bougourd

 

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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decision. The value of investments may fluctuate. Results achieved in the past
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