TIDMCHRY
RNS Number : 6194R
Chrysalis Investments Limited
30 October 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is not for publication, release or distribution in the United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.
30 October 2023
Chrysalis Investments Limited ("Chrysalis" or the "Company")
Quarterly NAV Announcement and Trading Update
Net Asset Value
The Company announces that as at 30 September 2023 the unaudited
net asset value ("NAV") per ordinary share was 134.65 pence.
The NAV calculation is based on the Company's issued share
capital as at 30 September 2023 of 595,150,414 ordinary shares of
no par value.
September's NAV represents a 2.21 pence per share (1.6%)
decrease since 30 June 2023.
Movement in the fair value of the portfolio accounted for
approximately 3.99 pence per share, with foreign exchange
generating a favourable movement of approximately 2.01 pence per
share. Fees and expenses make up the balance.
Investment Adviser Comments
Richard Watts and Nick Williamson (co-portfolio managers)
comment:
"The NAV was broadly flat over the period, largely mirroring the
performance of key equity markets. Notwithstanding this, the IPO
market continued to show signs of life, with ARM listing in the US
towards the back end of the quarter. We also note that Instacart
and Klaviyo listed over the period and while their post-IPO
performances have been mixed, we believe that this represents a
step in the right direction. Private equity markets have also seen
signs of recovery as the interest rate and macro-economic picture
becomes clearer. Deal volumes are increasing from a low point in Q1
2023, and the tech sector remains key for PE.
We consider both public and private exit routes as viable
options. The portfolio contains a number of later-stage assets,
either profitable or funded to profitability, that we believe will
make very attractive targets in due course, with some considered
"IPO ready". With this in mind, Klarna's comments in the period
that the 'requirements have been met' to consider an IPO were
encouraging to us.
Our key assets are continuing to perform well from both an
operational and financial perspective; this gives us confidence in
the potential of the portfolio to drive NAV progression."
Portfolio Activity
Investment activity during the quarter was limited.
In July the Company invested a further GBP6.5 million in Secret
Escapes as part of a wider GBP31.7 million fundraise, supporting
the refinancing of existing debt facilities. This capital will
enable the company to accelerate marketing spend with a view to
driving customer acquisition and ultimately growth. The company is
already profitable, but it is hoped that the additional capital
raised will result in a faster rate of growth and an even more
profitable business in the near to medium term.
Portfolio Update
The portfolio in aggregate continues to make solid progress
against its financial and operating targets; this is particularly
true across the core portfolio which consists of our later-stage
assets:
wefox
wefox continues to grow strongly and has demonstrated a clear
roadmap to profitability. The Investment Adviser believes that
wefox will be profitable towards the end of 2023, a target the
company set itself at the beginning of the period and is well
positioned to post its first full year of profitability in
2024.
In the previous quarter, wefox announced that it had launched
its global affinity business, which will connect insurance
companies with partners that can distribute their insurance
products. In recent weeks, wefox has announced that WINDTRE,
Italy's leading telecommunications business, has signed a 10-year
deal to launch the sale of home and travel insurance products
in-store.
On 1 October, wefox appointed Jonathan Wismer as its new Group
Chief Financial Officer. Jonathan brings more than 25 years of
experience in the insurance industry, having held senior finance
roles at Zurich, AIG and Resolution Life. The appointment
represents the company's continued strengthening of its C-suite as
it steps up its plans for profitable growth and global
expansion.
On 24 October, wefox also appointed Mark Hartigan as Chairman.
Mark was previously Chief Executive at LV and Head of Operations
for Europe, Middle East and Africa at Zurich Insurance Group. He
was Chief Executive Officer for Zurich Global Life in the Asia
Pacific and Middle East region and led its regional business in
Europe.
Starling
Starling continues to benefit from an increase in yields on cash
and debt securities, as a result of increases in the Bank of
England's Base Rate, and this continues to drive interest income
and profitability. Starling generates a post-tax return on equity
of over 40%, making it, the Investment Adviser believes, one of the
most profitable digital banks globally. Engine, the tech platform
that powers Starling, offers the potential to license Starling's
award-winning technology to financial organisations around the
world.
Starling announced that from 1 October, it will share the
benefit of increased interest rates with its customers, by paying
3.25% AER interest on accounts balances of up to GBP5,000. Starling
also offers a One Year Fixed Saver paying 5.53% interest on
deposits between GBP2,000 and GBP1,000,000 that are held for a
year. These represent extremely competitive rates of interest
versus high-street banks.
The Investment Adviser views these moves as consistent with
Starling's brand values, as well as likely providing an incremental
boost to deposit growth. Sharing the benefits of technology and
scale with customers is a key enabler of growth, as has been seen
in other portfolio companies.
Brandtech
Brandtech has made two acquisitions in the year: Jellyfish and
Pencil AI. Although the acquisition of Pencil AI is smaller than
Jellyfish, the Investment Adviser is excited about its potential.
Pencil AI was founded in 2018 and is currently the leading AI
creative and distribution SaaS platform. The company utilises Open
AI's GPT family of large language models (LLMs) to generate content
that is 10x lower in cost to produce but with a 2x uplift in
performance.
During the quarter, Brandtech launched Pencil Pro, an
enterprise-level generative AI product, specifically created to
meet the needs of global brands. This proposition could be
significantly disruptive, and it is encouraging that Unilever and
Bayer have decided to be launch partners.
Smart Pension
Following the announcement of its $95 million Series E funding
round in the previous quarter, led by Aquiline Capital Partners,
Smart has continued to execute its M&A strategy.
During the quarter, Smart acquired Evolve Pensions, a leading
provider of workplace pension services through its master trust,
the Crystal Trust. Evolve has over 128,000 members and GBP750
million in assets. The acquisition of Evolve Pensions represents
one of the largest master trust acquisitions of the year and makes
the Smart Pension Master Trust (SPMT) the country's third biggest
master trust operator. SPMT now has 1.1m members and GBP4bn under
management while the group has a total of over GBP11bn under
management.
Klarna
Klarna released its first half results during the quarter which
demonstrate sustained revenue growth and a return to profitability
through the second quarter of the year.
Gross Merchandise Volume (GMV) increased by +14% year-on-year
(to SEK239 billion) while revenues grew by +17% year-on-year (to
SEK5.5 billion). The Investment Adviser is encouraged by revenues
continuing to grow ahead of GMV as it demonstrates Klarna's ability
to monetise its existing customer base. Fundamental to the improved
operating performance was the increase in gross profit for the
period, which rose 83% year-on-year to SEK2.7 billion, driven by a
49% reduction in credit losses as a percentage of GMV.
In the second quarter, Klarna generated an adjusted operating
profit of SEK10 million which represents a material improvement in
profitability year-on-year and the first full quarter of
profitability since the Company's investment. To give a sense of
how much progress Klarna has made, in the second quarter of 2022,
Klarna's adjusted operating loss was in excess of USD280 million,
which implies the company has moved from an annualised operating
loss of over USD1 billion, into an annualised profit in the space
of 12 months.
Deep Instinct
Deep Instinct continues to innovate and in recent weeks has
launched 'Deep Instinct Prevention for Storage' (DPS). This new
product applies a prevention-first approach to storage protection,
wherever data is stored - Network Attached Storage (NAS), hybrid,
or public cloud environments - and seamlessly integrates into
existing environments to deliver unparalleled efficacy and accuracy
along with enterprise-grade scalability.
This is an exciting development in the industry given that the
amount of data being stored in public and hybrid cloud environments
continues to grow exponentially and a single infected file can put
an enterprise at risk. As part of the Deep Instinct Prevention
Platform, DPS fills gaps in data protection by applying a unique
deep learning framework dedicated to cybersecurity. Whenever a file
is added or changed in a storage environment, it is scanned
immediately, and malicious files are either quarantined or deleted
to prevent execution.
Featurespace
Featurespace is a world leader in enterprise grade technology
preventing fraud and financial crime. This is evidenced by a number
of recent awards and product releases.
As highlighted earlier in the year, Featurespace has developed a
bespoke fraud transaction monitoring framework for NatWest that led
to a +135% improvement in Natwest's financial scam detection rate
and a 75% reduction in false positives. During the quarter, NatWest
and Featurespace won 'Best Innovation by a Financial Institution'
at the Datos Insights 2023 Fraud and AML Impact Awards for that
specific initiative.
More recently, the company has launched TallierLTM, the world's
first Large Transaction Model (LTM). TallierLTM, a foundation AI
technology for the payment and financial services industry, is a
large-scale, self-supervised, pre-trained model designed to power
the next generation of AI applications. The model has shown
improvements of up to 71% in fraud value detection when compared to
industry standard models.
Cash Update
As of 30 September, the Company had net cash of approximately
GBP23 million, subsequent to the follow-on investment in Secret
Escapes, and a position in Wise of GBP10 million, to give a total
liquidity position of approximately GBP33 million.
The majority of follow-on investments have now been completed
and most of the portfolio is now either profitable or funded
through to profitability. While there may be additional funding
requirements across the portfolio in the short to medium term, the
Investment Adviser considers the Company has sufficient available
liquidity to address these.
Portfolio composition
As of 30 September 2023, the portfolio composition was as
follows:
30-Sep
Carrying Value
Portfolio Company (GBP millions) % of portfolio
---------------- -----------------
wefox 188.6 23.5%
---------------- -----------------
Starling 141.7 17.6%
---------------- -----------------
Brandtech 103.9 12.9%
---------------- -----------------
Smart Pension 79.7 9.9%
---------------- -----------------
Klarna 56.9 7.1%
---------------- -----------------
Deep Instinct 51.5 6.4%
---------------- -----------------
Featurespace 49.6 6.2%
---------------- -----------------
Tactus 29.0 3.6%
---------------- -----------------
InfoSum 27.2 3.4%
---------------- -----------------
Secret Escapes 25.0 3.1%
---------------- -----------------
Graphcore 16.5 2.1%
---------------- -----------------
Wise 10.3 1.3%
---------------- -----------------
Sorted 0.3 0.0%
---------------- -----------------
Gross cash 22.6 2.8%
---------------- -----------------
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
GBP803 million for 30 September 2023.
Outlook
The Investment Adviser remains optimistic about the prospects
for the Company. As noted in the last NAV update, IPO and private
markets have shown some signs of life, which is an indication that
investor risk appetite is recovering to some degree.
The Investment Adviser remains focused on helping the portfolio
companies get to a position where they can "exit" and considers a
number of assets "IPO ready". It is intended that any future
realisations flow through the proposed Capital Allocation Policy
that was outlined to shareholders on 13 October 2023. The
Investment Adviser believes this policy would be an essential
mechanism to help unwind the current share price discount to
NAV.
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 +44 (0) 7976 098 139
Montfort Communications: chrysalis@montfort.london
Charlotte McMullen / Toto Reissland
/
Lesley Kezhu Wang
Jupiter Asset Management:
James Simpson +44 (0) 20 3817 1696
Liberum:
Chris Clarke / Darren Vickers
/ Owen Matthews +44 (0) 20 3100 2000
Numis:
Nathan Brown / Matt Goss +44 (0) 20 7260 1000
Maitland 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
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