Merian Chrysalis Investment Co. Ltd Net Asset Value(s) (2988I)

TIDMMERI

RNS Number : 2988I

Merian Chrysalis Investment Co. Ltd

11 December 2020

The information contained in this announcement is restricted and is not for publication, release or distribution in the United States of America, any member state of the European Economic Area (other than the Republic of Ireland), Canada, Australia, Japan or the Republic of South Africa.

This announcement contains inside information.

11 December 2020

Merian Chrysalis Investment Company Limited ("Merian Chrysalis" or the "Company")

Quarterly NAV Announcement

Net Asset Value

The Company announces that as at 30 September 2020 the unaudited net asset value ("NAV") per ordinary share was 160.97 pence.

The above NAV calculation is based on the Company's issued share capital as at 30 September 2020 of 336,742,424 ordinary shares of no par value.

September's NAV represents a 17.3% uplift since 30 June 2020, driven by the strong operational and financial progress of a number of assets, and the re-rating of listed comparable companies. The following investee companies were the most significant drivers of the NAV increase:

-- The Hut Group ("THG") - following its flotation on the London Stock Exchange at a higher valuation than the carrying value of the asset as of 30 June 2020, its subsequent strong performance in the aftermarket and the follow-on investment made by the Company at the point of THG's Initial Public Offering ("IPO");

-- FinanceApp AG ("wefox") - which saw a substantial rerating of its closest listed comparators and continues to grow extremely strongly;

-- Featurespace Limited ("Featurespace") - assisted by the signing of a major contract with Fiserv over the summer;

-- Klarna Holding AB ("Klarna") - which undertook a major funding round in the period at a materially higher price than its carrying value, and;

-- Graphcore Limited ("Graphcore") - that launched its second generation IPU on 7 nanometre architecture in July, which offers significant improvements in performance.

Elsewhere, Starling Bank Limited ("Starling") continues to grow exceptionally strongly.

Overview

The trading performance of the portfolio over the period was generally robust, with many investee companies continuing to benefit from accelerated channel shift, from offline to online, caused by COVID-19. In the few instances where companies saw a negative impact from the pandemic, activity levels improved as the initial shock passed and lockdown restrictions were eased.

Portfolio activity

Over the period the Company had two realisation events.

In July, the Company participated in a significant secondary round undertaken by TransferWise Ltd ("TransferWise"), selling approximately $25 million of stock, at a valuation level materially higher than the position held as at 31 March 2020. Given the timing of this transaction, this new valuation level was reflected in the 30 June 2020 NAV. This transaction was undertaken to control position size and the Company's Investment Adviser remains optimistic about the potential for TransferWise to continue to deliver strong growth.

In mid-September, THG completed its successful IPO on the London Stock Exchange at an issue price of 500p per share and performed well in the aftermarket to close the period at 598p per share. This was a major milestone for Merian Chrysalis, representing its first investment to have listed, thus completing a full crossover "lifecycle".

The Company made three investments in the period, all during September.

The Company invested approximately GBP23 million in a major funding round by Klarna, which raised $650 million at a pre new money valuation of $10 billion. This additional capital will support its strong growth in the US and UK markets which could be a significant value driver in future periods. Over the nine months to September 2020, Klarna generated 160% year-on-year growth in global app downloads and acquired 21 million new consumers, while net credit losses were 28% lower year-on-year in 3Q 2020.

The Company invested approximately GBP14.4 million of follow-on capital into THG's IPO, utilising its own ability to crossover. Given its relationship with THG, the Company's Investment Adviser, Merian Global Investors (UK) Limited, was named as one of only five global cornerstone investors in the IPO.

At period end, the Company also invested $60 million in You & Mr Jones LLC ("You & Mr Jones"), a world leading global marketing technology group. The Company's Investment Adviser believes You & Mr Jones fits well with its investment criteria, offering a scalable technology solution into a very large addressable market that is ripe for disruption. This transaction was financed by the GBP95 million fund raise conducted by the Company, that closed shortly after period end.

Portfolio Composition

As of 10 December 2020 the portfolio composition was as follows:

 
 Portfolio Company    % of investment portfolio 
 Klarna                         14.4% 
                     -------------------------- 
 THG                            14.1% 
                     -------------------------- 
 TransferWise                   11.6% 
                     -------------------------- 
 Starling                       10.4% 
                     -------------------------- 
 Graphcore                      9.8% 
                     -------------------------- 
 Embark                         9.0% 
                     -------------------------- 
 wefox                          7.3% 
                     -------------------------- 
 You & Mr Jones                 6.8% 
                     -------------------------- 
 Featurespace                   5.5% 
                     -------------------------- 
 Secret Escapes                 2.5% 
                     -------------------------- 
 Sorted                         2.5% 
                     -------------------------- 
 Growth Street                  0.2% 
                     -------------------------- 
 Cash                           5.7% 
                     -------------------------- 
 

Source: Merian Global Investors (UK) Limited. Holding sizes, as of 10 December 2020, are calculated using 30 September 2020 valuations, adjusted for FX as of 10 December 2020 and capturing transactions concluded post the NAV calculation period, including the equity raise in October. The holding value of THG is based on the closing share price of 598p, as at period end. Due to rounding the figures may not add up to 100%.

Investment Adviser Outlook

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

"We remain optimistic over the outlook for the portfolio, driven by a continuation in the robust aggregate financial and operational performance of our underlying investee companies. Realisation events and funding rounds over the period, with strong third-party participation - particularly by new investors - demonstrate the inherent value within the portfolio and validates our valuation framework.

While in aggregate the portfolio has seen a benefit over recent months from accelerating channel shift as a result of COVID-19, we believe a significant number of the new users gained by our portfolio businesses over this time will prove to be permanent, as COVID-19 has amplified already well established trends. Our portfolio businesses are typically using technology to deliver solutions that customers want to use and, as such, we believe these new customers place many of our companies in a strong position to continue to deliver robust growth over the coming year.

As of 10 December 2020, the Company had cash of approximately GBP38 million. This reflects the GBP95 million of gross proceeds raised post period end, less the $60 million You & Mr Jones investment, as well as some small follow-ons in Sorted Holdings Limited, wefox and Secret Escapes Limited. As of 10 December 2020, total liquidity, which adds our liquid holdings - currently just THG - to the cash position, was approximately GBP142 million.

We continue to see numerous new opportunities fed into our origination pipeline to consider, as well as follow-on prospects. As such, we are confident of deploying the recent proceeds of our raise in an accretive and timely manner."

Factsheet

An updated Company factsheet will shortly be available on the Company's website: https://www.merian.com/chrysalis/

-S-

 
 For further information, please 
  contact: 
                                         [e-mail] 
  Media: 
 Merian Global Investors / Jupiter 
  Asset Management: 
  Magnus Spence                        [phone] 
 Liberum: 
  Gillian Martin / Owen Matthews       [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.merian.com/chrysalis/ .

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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December 11, 2020 02:00 ET (07:00 GMT)