Quarterly NAV Announcement and Trading Update

Chrysalis Investments Limited

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The information contained in this announcement is restricted and is not for publication, release or distribution in the United States of America, any member state of the European Economic Area (other than to professional investors in Belgium,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

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
Portfolio Company	Carrying Value (£ millions)	% 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  

-ENDS-

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

 

END