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information contained in this announcement is restricted and is not
for publication, release or distribution in the United States of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.
29 July 2024
Chrysalis Investments Limited
("Chrysalis" or the "Company")
Quarterly NAV Announcement
and Trading Update
Net Asset
Value
The Company announces that as at 30
June 2024 the unaudited net asset value ("NAV") per ordinary share
was 145.25 pence.
The NAV calculation is based on the
Company's issued share capital as at 30
June 2024 of 595,150,414
ordinary shares of no par value.
June's NAV represents a 2.21 pence
per share (1.5%) decrease since 31 March 2024.
Movement in the fair value of the
portfolio accounted for approximately 1.72 pence per share, with
foreign exchange generating an adverse movement of approximately
0.18 pence per share. Fees and expenses make up the
balance.
Richard Watts and Nick
Williamson, Managing Partners of Chrysalis Investment Partners LLP
comment:
"The Company's NAV saw a small decline over the period, with
improvements in the valuations of a number of positions offset by
the material write down in wefox. Following further recent
investment into wefox, the Company's position is now substantially
underpinned by downside protection mechanisms, significantly
reducing the downside materiality to the Company's NAV from this
asset.
Liquidity has improved substantially post period end, with the
announcement of the sale of Graphcore to SoftBank Group Corp
("SoftBank"), and currently stands at approximately £49 million,
putting the Company in a strong capital position having met the
"cash reserve" element of the Capital Allocation
Policy.
Market interest in the later-stage, private assets space
remains encouraging. In May, Forge's Private Markets Update showed
a big drop in the level of investor intention to sell, which it
notes "may be due to growing confidence in their equity
holdings".
We
continue to advise on maximising the value of the Company's
portfolio holdings while exploring opportunities, at the
appropriate price, to increase liquidity, including the option of
raising debt. The potential outcomes we are advising on
are at different stages of maturity and certainty and we look
forward to updating the market once we have more clarity.
Considering the improved liquidity backdrop the Board is now
reviewing how to best implement the second phase of the Capital
Allocation Policy."
Portfolio
Activity
Chrysalis invested €5.5 million into
wefox in the period as part of a funding solution it has been
discussing with both the company and other shareholders. A portion
of the Wise position, amounting to £6.2 million, was sold in the
period thus more than funding this investment.
Post period end, a further €15
million was invested into wefox, which was more than covered by the
proceeds from selling the entire position in Graphcore, which
raised approximately £45 million, of which £44 million has been
received to date. The Investment Adviser does not envisage wefox
requiring further investment by the Company.
Portfolio
Update
The portfolio in aggregate continues
to perform robustly:
Starling
Starling's valuation rose in the
period driven by multiple expansion of the listed peer group and
removal of the calibration discount to the last secondary
transaction (albeit an illiquidity discount is still applied). The
progress of Engine has also begun to drive valuation upside for
Starling.
Following significant news flow in
the prior quarter, namely the appointment of Raman Bhatia as CEO
and the success of Engine, this quarter saw less news flow;
however, the Investment Adviser believes the company continues to
perform in-line with its expectations.
wefox
The valuation of wefox fell
materially in the period, reflecting both an increase in weighting
towards valuation multiples in the lower quartile of the relevant
group of listed peers, as well as the addition of a significant
discount at group level, to reflect recent funding uncertainty. The
underlying revenues that the above multiples were applied to were
broadly consistent versus the last quarter.
The Company has supported wefox with
additional capital and the Investment Adviser has been working
closely with other stakeholders to create a viable solution to
wefox's funding requirements that it believes will allow the
business to continue its journey towards profitability.
Klarna
Klarna announced the sale of Klarna
Checkout, which has a 40% market share in Sweden and 20% across the
Nordics, in June. Klarna has been building functionality with
multiple payment service providers ("PSPs") over recent years, and
the Investment Adviser believes this disposal could allow Klarna to
form closer relationships with global PSPs.
Elsewhere, Klarna Plus - Klarna's
first subscription service for US customers - reached 100,000
subscribers. Klarna Plus allows members to waive certain service
fees and get access to special deals and offers. Costing $7.99 per
month, this suggests Klarna Plus is generating approximately $10
million annually, contributing towards Klarna's 1Q24 revenue growth
in the US of 38% year-on-year.
Klarna's drive towards AI continues.
Approximately 87% of Klarna's employees are now using AI, with the
internal Kiki assistant dealing with 2,000 enquiries per day.
Externally, AI has helped Klarna reduce its sales and marketing
expenses by $10 million on an annualised basis, contributing to
S&M expenses falling 11% in 1Q24.
Speculation concerning an IPO
continues to swirl. The CEO has given a number of interviews in the
quarter indicating that an IPO is likely to happen "quite soon" and
intimating it would occur in the US.
The Company has already considered
the ramification of such a move; at the Company's carrying value,
this could imply a liquidity injection of £100 million if a full
exit is made, equivalent to approximately 21% of the Company's
current market capitalisation.
Smart Pension
In March 2024, Smart announced that
Assets under Management ("AuM") hit £5 billion in the UK Smart
Pension Master Trust ("SPMT"), with regular contributions now
running at £1 billion per annum. This growth has been driven
organically as well as through acquisitions, such as that of Evolve
in June 2023, which added £750 million in AuM.
In June 2024, STM - the owner of the
Options Master Trust ("Options") - announced it had signed an
agreement with Smart to propose to Option's trustees that they
consider transferring its assets to Smart; the Investment Adviser
believes Options has AuM of over £500 million.
Earlier in the year, Jamie Fiveash -
the CEO of SPMT - gave an interview in which he stated that he
anticipates reaching £10 billion of AuM within three years,
demonstrating significant growth prospects.
The valuation increase in the period
reflects the progress that Smart is making.
Brandtech
A key focus for Brandtech in recent
quarters has been the integration of Jellyfish, which completed in
July 2023 and represented the largest acquisition in the company's
history. Significant progress has been made here in recent months
and management is beginning to prioritise driving customer wins and
organic growth across the Media division.
Momentum is building for PencilAI,
the Group's generative AI marketing solution, and this has led to a
number of leading brands such as Unilever and Bayer utilising the
technology. We are excited about the level of engagement we are
seeing between Global brands and Brandtech with regards to the
application of generative AI and we are hopeful that this
translates into contract wins and revenue over the remainder of the
year.
The valuation decrease of Brandtech
reflects market multiple contraction during the period.
Featurespace
Featurespace has continued to grow
well against a backdrop of ongoing, significant fraud in
society.
Featurespace reports that three in
ten UK adults have been a victim of financial fraud and 55% of them
have seen an increase in scam attempts in the last 12 months. Data
from the National Crime Agency shows fraud is now the most common
crime in the UK, accounting for 40% of all offences recorded in
England and Wales.
In the period Featurespace released
its annual report and accounts for the year to December 2023, which
showed 47% revenue growth to £50.4 million, with recurring revenues
accounting for 79% of revenues, up from 70% in 2022. Due to this
strong topline growth, the loss for the year decreased from -£20.9
million in 2022, to -£8.1 million. Despite these losses, cash flow
was strong - cash rose to £28.7 million from £25.7 million - and
the Group expects to maintain a "strong financial position, without
the need for additional equity or debt capital".
Featurespace's valuation rose
slightly in the period driven by market multiple
expansion.
Cash Update
As of 30 June, the Company had net
cash of approximately £16 million and a position in Wise of
approximately £2 million, to give a total liquidity position of
approximately £18 million. As announced on 12 July 2024, Graphcore
was sold to SoftBank; the Company can confirm it has received
initial proceeds of £44 million, which has significantly bolstered
its current liquidity position.
The majority of the portfolio
remains well funded. Having committed further capital to wefox post
period end, amounting to approximately €15 million, the Investment
Adviser does not expect this asset to require further material
funding. Elsewhere, there are expected to be additional, modest
funding requirements across the portfolio in the short to medium
term - some of which are to accelerate growth - but the Company is
considered to have sufficient available liquidity over that period
to address these.
Portfolio
Composition
As of 30 June 2024, the portfolio
composition was as follows:
|
30-Jun
|
Portfolio Company
|
Carrying
Value
(£
millions)
|
% of
portfolio
|
Starling
Smart Pension
Klarna
Brandtech
Featurespace
wefox
Graphcore
Deep Instinct
Secret Escapes
InfoSum
Wise
Sorted
Growth Street
|
258.9
125.4
100.3
82.2
74.2
60.5
45.4
45.2
26.2
28.3
2.0
0.3
0.1
|
29.9%
14.5%
11.6%
9.5%
8.6%
7.0%
5.2%
5.2%
3.0%
3.3%
0.2%
0.0%
0.0%
|
Gross cash
|
16.3
|
1.9%
|
Source: Chrysalis Investment
Partners LLP. 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 £865 million for 30 June
2024.
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 / Imogen
Saunders
|
+44
(0) 7921 881 800
chrysalis@montfort.london
|
|
|
Chrysalis Investment Partners LLP:
James Simpson
|
+44
(0) 20 7871 5343
|
G10
Capital Limited (AIFM):
|
+44
(0) 20 7397 5450
|
Maria Baldwin
|
|
|
|
Panmure Liberum:
Chris Clarke / Darren
Vickers
|
+44
(0) 20 3100 2000
|
Deutsche Numis:
Nathan Brown / Matt Goss
|
+44
(0) 20 7260 1000
|
Apex Administration (Guernsey) Limited:
Chris Bougourd
|
+44
(0) 20 3530 3109
|
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.
The Company is an alternative
investment fund ("AIF") for the purposes of the AIFM Directive and
as such is required to have an investment manager who is duly
authorised to undertake the role of an alternative investment fund
manager ("AIFM"). The AIFM appointed is G10 Capital Limited (part
of the IQEQ Group).