TIDMMERI
RNS Number : 0017O
Merian Chrysalis Investment Co. Ltd
27 May 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is not for publication, release or distribution in the United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.
27 May 2020
Merian Chrysalis Investment Company Limited (the "Company")
Quarterly NAV Announcement and COVID-19 Portfolio Update
Net Asset Value
The Company announces that as at 31 March 2020 the unaudited net
asset value ("NAV") per ordinary share was 108.65 pence.
The above NAV calculation is based on the Company's issued share
capital as at 31 March 2020 of 336,742,424 ordinary shares of no
par value.
The changes in valuation of the Company's portfolio that are
included in the NAV are principally a function of three inputs:
-- The trading performances of underlying assets - Across the
wider stock market, Merian Global Investors (UK) Limited (the
"Investment Advisor") believes there has been an observable trend
that digitally-enabled businesses have typically experienced less
of an impact on trading performances than "offline" peers over the
period affected by COVID-19. For the portfolio generally, trading
has been robust and is discussed in more detail below;
-- Comparable valuations - The Investment Advisor notes the
significant impact that COVID-19 had on global equity markets and
listed comparable companies over the period. While it is hard to be
certain of the medium and long-term effects of the pandemic, the
Investment Advisor further notes the generally strong rebound in
equity markets since period end;
-- The type of instrument being valued - A number of the
Company's shareholdings contain downside protection, often in the
form of preference structures, which can help to mitigate the
impact of a decline in assessed valuations
Portfolio Update
The Investment Advisor is pleased with the performance of the
portfolio. While certain companies have seen growth moderate versus
expectations, a number have seen enhanced trading as a result of
COVID-19. Among the aims of the Company, as set out at IPO, are to
invest in companies that have both the ability to deliver growth
rates substantially higher than the average UK plc and that can
protect the duration of those rates via competitive advantage, e.g.
via scale or technology. This led the Investment Advisor towards a
group of businesses it labelled "tech-enabled disrupters".
In the Investment Adviser's experience, significant
macroeconomic events typically accelerate already established
trends. We believe COVID-19 will be one such event. Given the
shutdown of many "traditional" areas of the economy, businesses and
consumers have had to rely much more heavily on technology and
online channels. These were sectors already growing faster than the
wider economy, but have now been given added impetus. Not only can
this lead to higher growth rates in the short term, it can also
drive new user adoption at significantly lower cost than previously
experienced.
With this in mind, we believe the Company is well positioned at
this particular time from a thematic perspective and the strategy
of the Company therefore remains unchanged.
Given the impact of COVID-19, the Investment Advisor felt it
appropriate to collate recent, pertinent news on the investee
companies, to give investors a better understanding of current
trends.
TransferWise Limited ("TransferWise")
TransferWise has continued its journey to build the fastest,
cheapest, easiest way to move money around the world. The company
now has over seven million customers, moving more than GBP4bn per
month.
In the period, TransferWise continued its high cadence of new
service introductions with the launch of its 'Pay with
TransferWise' partnership with accountancy software provider Xero ,
plus adding Apple Pay, GBP and EUR direct debits to its
multi-currency account. The company further expanded its banking
partnerships with ActivoBank in Portugal through its API.
TransferWise for Banks is an API that directly integrates with a
financial institution's existing infrastructure, which enables it
to offer customers cheaper, faster, transparent payments to 80+
countries and in 54 currencies.
The company has reacted well to lockdown - with a business model
well suited to remote working - and monthly transfer volumes remain
healthy.
Graphcore Limited ("Graphcore")
The key news from Graphcore over the period was the successful
capital raise of US$150m from a variety of new and existing
investors, of which the Company was one. This left Graphcore with
cash reserves of over US$300m as of January 2020. A number of tests
showing strong intelligence processing unit (IPU) performance were
also announced. Of particular note was one undertaken by Microsoft,
where it used IPUs to assess intracranial images for haemorrhages;
the test showed a doubling in speed for half the power. This
follows more substantial performance data released over the back
end of last year, which unveiled cutting edge results on some of
the most complicated AI applications, such as natural language
processing. The company also announced IPUs would be available on
Microsoft Azure, as well as a bare-metal IPU cloud service with
Cirrascale.
The business has adapted well to lockdown, following COVID-19,
and continues to see strong engagement from sales leads.
Starling Bank Limited ("Starling")
During the quarter Starling launched new functionality,
particularly a business toolkit aimed at SMEs that assists with
invoice and cash flow tracking and helps submit VAT returns to
HMRC. In February, it raised a further GBP60m from existing
investors, including the Company, to continue its rapid expansion
and also gave shares in the bank to all of its 800 employees. At
this time, it announced it had passed 1.25m customers and GBP1.25bn
of deposits. March saw the launch of a nationwide advertising
campaign, establishment of a Cardiff office (with the creation of
400 jobs) and winning Best British Bank for a third year in a row
at the British Bank Awards.
The bank adapted well to lockdown, helped by the fact it was
created as an online offering. Post period end major steps were
taken, with the bank being accredited for both the Coronavirus
Business Interruption Loan Scheme, where a GBP300m financing
agreement with Funding Circle was announced, and the Bounce Back
Loan Scheme. A connected card, linked to a master account, was also
unveiled to help carers continue to support people
self-isolating.
Significant progress has been made over the last few months.
Starling has now opened more than 1.4 million current accounts,
including 155,000 business accounts, since launching its banking
app in May 2017. Its deposit base has more than doubled in six
months and it now stands at more than GBP2.4 billion. Starling is
one of the fastest growing SME banks in Europe - holding a 2.6%
share of the UK SME market - and has almost GBP500m of SME lending
on its balance sheet.
Klarna Holding AB ("Klarna")
Klarna announced its FY19 annual results during the period,
showing sustained growth both in the UK and globally. Year-on-year
global volumes and revenue increased by 32% and 31% respectively,
while the volume processed now amounts to over $35bn per annum.
Since launch, over 7m customers have now used Klarna in the UK, an
increase of two times compared to last year. Klarna now has more
than 5,000 live merchants in the UK and 500 of these brands have
also launched in-store offerings.
The company also announced that Ant Financial Services Group,
owner and operator of the world's leading payments and lifestyle
platform Alipay, has taken a minority stake in Klarna. This
investment supports the further developments of its strategic
cooperation, bringing more of Klarna's innovative solutions to
consumers and merchants within the broader Alibaba ecosystem. In an
announcement made in early March, Klarna stated "During 2020, the
company will continue to gain strong momentum on current markets as
well as enter new markets, with an already strong start to the year
with the recent successful launch of the Klarna app in
Australia."
Embark Group Limited ("Embark")
Embark completed its acquisition of Zurich's Investment and
Retail Platform post period end. This transferred cGBP11bn assets
under administration ("AUA") of platform assets, and cGBP0.6bn of
multi-asset assets under management to Embark, along with an
advised client book of more than 130,000, largely dominated by SIPP
clients. This takes Embark's AuA to over GBP33bn, serving more than
365,000 consumer clients across all its channels and brands, up
from cGBP16bn at the time of the Company's initial investment.
These transactions position Embark as the seventh largest player in
the advised platform market in the UK.
Embark has been recognised in the WealthTech 100 as one of the
most innovative Wealth Tech companies in 2019 and 2020.
The Hut Group Limited ("THG")
In March, THG reported a surge in demand for its health, beauty
and nutrition products across its world-leading brands, including
MyProtein.com and Lookfantastic.com. This led the group to bring
forward its recruitment plans from later this year, with the
creation of 500 permanent positions across manufacturing,
fulfilment and logistics. The majority of roles (c350) will be
created at THG's 1m sq. ft. manufacturing and fulfilment centre in
Warrington, Cheshire.
Ingenuity, THG's end-to-end ecommerce platform, is also gaining
significant traction. Post period end, the company announced the
signing of a GBP100m, ten-year contract with Nestle Health Science.
THG will deliver a fully serviced, global ecommerce platform, to
internationally scale a number of Nestle's brands. THG has now
partnered with a number of international retailers, including
Procter & Gamble, Walgreens Boots Alliance, Johnson &
Johnson, Groupe L'OCCITANE and Nintendo, and this enables the group
to dispatch over 68 million items to customers globally.
THG is currently trading at elevated levels, driven by the
performance of non-discretionary nutrition and personal care
categories, and is ahead of its 2020 budget.
FinanceAPP AG ("wefox")
wefox has had a successful start to the year and now generates
more than EUR100m in sales, which represents a growth rate of four
times over 2018. The company raised over EUR200m in 2019, more than
any other European InsureTech asset, and the proceeds will be used
to expand across Europe, as well as building out a new platform
that will be launched later this year to sit alongside its existing
insurance products.
The company's group owns ONE, an insurance company, and wefox, a
digital marketplace for insurance that employs 330 people and
serves 350,000 customers across six markets. The company operates
in Switzerland, Germany, Spain and Austria and launched in Italy at
the beginning of the quarter.
Sorted Holdings Limited ("Sorted")
Sorted has had a very strong start to the year, generating
annual recurring revenue growth in excess of 100% year-on-year and
winning a number of material clients.
During the period, Sorted signed JD Sports with two distinct
projects covering UK and Europe; Insight, a Fortune 500 business IT
reseller with $7bn turnover; George at ASDA; and a global contract
with a British multi-brand enterprise retailer. The company also
went live in Australia and will launch in Japan and South Korea
later this year. It is now live in over 14 countries across Europe
and the US.
Sorted's carrier library, which represents a material barrier to
entry for new entrants to the market, continues to expand with new
carriers in Europe, US and Australia recently added.
Generally, the impact of COVID-19 has seen retailers
increasingly relying on their digital capabilities and this has led
to increased focus and spending on their online propositions,
including with Sorted.
Secret Escapes Limited ("Secret Escapes")
As an online travel business, the company has seen a significant
impact from the pandemic and related restrictions to travel. As
previously announced, the Company recently made a GBP2.6m follow-on
investment, as part of a wider funding round, in order to support
Secret Escapes navigate through a variety of COVID-19 stressed
trading scenarios, as well as allowing it to benefit from
accelerated channel shift and less competition post-lockdown.
Growth Street Holdings Limited ("Growth Street")
As previously reported, two significant loans that the company
had originated fell into default over the final quarter of 2019,
which was very disappointing. Given the nature of this investment,
this was a relatively small unit within the portfolio at outset.
The combination of the defaults, exacerbated by COVID-19, led
Growth Street to initiate a 'liquidity event' in the first quarter
of 2020 and close investor access to its platform. This has enabled
the company to maintain stability within its loan book and will
help to protect both borrowers and investors from any further
disruption as a result of COVID-19.
Portfolio Activity
During the three-month period ending 31 March 2020 the Company
made a US$25m follow-on investment in Graphcore in January, to
assist in the on-going commercialisation of its technology. The
Company also continued to support Starling Bank's development, by
contributing to the GBP60m it raised in February. Post period end,
the Company completed follow-ons in both Secret Escapes - to help
it navigate the disruption to the travel industry caused by
COVID-19 - and in Embark, as previously announced. It also made a
new investment in Featurespace Limited, thus bringing the total
number of holdings in the portfolio to 11.
Portfolio Composition
Following a number of recent transactions, the Company is now
approximately 88% per cent fully invested.
As at 26 May 2020, the portfolio composition is as follows:
Portfolio Company % of Investment Portfolio
TransferWise 18.5%
--------------------------
Graphcore 14.0%
--------------------------
Starling 13.9%
--------------------------
Klarna 9.2%
--------------------------
Embark Group 9.0%
--------------------------
THG 8.8%
--------------------------
Featurespace Limited 5.4%
--------------------------
wefox 3.5%
--------------------------
Sorted 2.7%
--------------------------
Secret Escapes 2.3%
--------------------------
Growth Street 0.8%
--------------------------
Cash and Cash Equivalents 12.1%
--------------------------
Source: Merian Global Investors, as at 26/05/2020 based on
current valuations. Due to rounding the figures may not add up to
100%.
Portfolio Liquidity
The Investment Advisor recognises that the full ramifications of
COVID-19 may take some time to emerge and is continuously assessing
its capital requirements. Based on a range of reasonable
COVID-19-related trading scenarios and regular contact with its
investee companies, the Investment Advisor continues to believe the
Company has adequate liquidity to support its portfolio. As of the
date of this announcement, available cash and equivalents were
approximately GBP45m; the Company remains ungeared.
Factsheet
An updated Company factsheet will shortly be available on the
Company's website: https://www.merian.com/chrysalis/
Corporate Update
The Board has noted the acquisition of the Company's Investment
Adviser's parent company, Merian Global Investors Limited by
Jupiter Fund Management plc, subject to regulatory approval. The
Board will be updating shareholders shortly on the implications of
the acquisition for the Company, but it remains its understanding
that the investment advisory team will remain in place post the
acquisition by Jupiter Fund Management plc.
-ENDS-
For further information, please
contact:
Merian Global Investors:
Amelie Shepherd +44 (0) 20 7332 7500
Liberum:
Gillian Martin / Owen Matthews +44 (0) 20 3100 2000
Maitland Administration (Guernsey)
Limited:
Elaine Smeja / Hannah Le Page +44 (0) 1481 749364
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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END
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