Chrysalis Investments Limited Quarterly NAV Announcement and Trading Update (4995O)

TIDMCHRY

RNS Number : 4995O

Chrysalis Investments Limited

01 February 2023

The information contained in this announcement is restricted and is not for publication, release or distribution in the United States of America, any member state of the European Economic Area (other than to professional investors in Belgium,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.

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 GBP5.9 million of Wise shares in October and announced in November that it had sold its entire stake in Revolution Beauty for approximately GBP5 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 GBP20 million. This position remains unchanged.

Portfolio News

Wefox

wefox has had a very strong last twelve months. The company generated approximately EUR600m 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 GBP600 million and PBT of over GBP250 million, with a deposit book of GBP10.7 billion. This compares with annualised figures of GBP331.2 million in revenues and PBT of GBP92 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 GBP66 million and a position in Wise of GBP12 million, to give a total liquidity position of approximately GBP78 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     GBPmillions   % of portfolio    GBPmillions   % 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 GBP0.77 billion and GBP0.76 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. chrysalisinvestments.co.uk

-ENDS-

 
 For further information, please 
  contact 
 
  Media 
  Montfort Communications                  44 (0) 7976 098 139 
  Charlotte McMullen / Toto Reissland      [e-mail] 
  / Lesley Kezhu Wang 
 
 Jupiter Asset Management: 
  James Simpson                          [phone] 
 Liberum: 
  Chris Clarke / Darren Vickers 
  / Owen Matthews                        [phone] 
 Numis: 
  Nathan Brown / Matt Goss               [phone] 
 Maitland Administration (Guernsey) 
  Limited: 
  Elaine Smeja / Aimee Gontier           [phone] 
 

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.

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February 01, 2023 02:00 ET (07:00 GMT)