Chrysalis Investment Limited - Quarterly NAV Announcement and Trading Update

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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.

31 July 2023

Chrysalis Investments Limited ("Chrysalis" or the "Company")

Quarterly NAV Announcement and Trading Update

Net Asset Value

The Company announces that as at 30 June 2023 the unaudited net asset value ("NAV") per ordinary share was 136.86 pence.

The NAV calculation is based on the Company's issued share capital as at 30 June 2023 of 595,150,414 ordinary shares of no par value.

June's NAV represents a 6.84 pence per share (5.3%) increase since 31 March 2023.

Movement in the fair value of the portfolio accounted for approximately 9.28 pence per share, with foreign exchange generating an adverse movement of approximately 2.20 pence per share. Fees and expenses make up the balance.

Investment Adviser Comments

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

"It is pleasing to see the NAV increase for a second consecutive quarter. Many listed peers have materially rerated year to date, and this is beginning to be reflected in our portfolio valuations. The independent valuation committee is also gradually moving away from price of recent investment in some instances.

We have continued to support and work alongside our portfolio companies, and we exit the period with a portfolio that is generally trading robustly against a challenging economic backdrop, and which is largely well-funded.

The investment team remains focussed on maximising shareholder value - working with our portfolio companies towards an IPO or trade sale - and building an exciting pipeline of investment opportunities, particularly given the disruption we are witnessing through emerging themes such as generative AI.

We are encouraged by the slightly more active IPO market over the last quarter, particularly as we have several later stage assets that are either profitable or funded to anticipated profitability and should make excellent IPO candidates in due course.''

Portfolio Activity

Investment activity continues to be focussed on the existing portfolio and the following transactions took place over the period:

·    Early in the quarter, the Company invested £12.5 million in Smart Pension in a $95 million Series E fundraise led by Aquiline Capital Partners.

·    In June 2023, a further £2 million was invested in Tactus to strengthen its balance sheet, support the refinancing of its bank facilities and ultimately enable the company to accelerate trading.

·    Over the course of June 2023, the company trimmed its position in Wise following a positive results announcement. The shares were sold at an average price of 623.24 pence per share. Chrysalis' total cash-on-cash return on Wise currently stands at 2.9x.

Portfolio Update

Portfolio growth momentum continues to be strong, particularly in the Company's larger positions. Focus remains on reaching profitability and further progress has been made across the portfolio in the quarter, with 85% of the portfolio either profitable or funded to anticipated profitability.

wefox

wefox had a strong first half of the year and is trading ahead of plan. Progress towards achieving run rate profitability in 2023 remains on track.

In May 2023, wefox announced it had secured a $55 million credit facility with JP Morgan and Barclays, following the second close of its Series D fundraise, with the funding earmarked to further strengthen the company's insurance and distribution capabilities and to further develop its technology platform.

Following the launch of its global affinity business in early May, wefox has announced a new partnership with PROPUP, an Austrian proptech start-up. By partnering with wefox, PROPUP is now able to offer customers access to a wide range of insurance solutions and advice via its own platform. The affinity business serves to increase wefox's existing distribution channel, delivering insurance through partner products.

Starling

In May, Starling released its annual financial results for the year to 31 March 2023. Progress has been impressive, with very strong growth in revenue and profits, assisted by 'Buy to Let' mortgage origination via Fleet Mortgages and by an increase in yields on cash and debt securities, following increases in the Bank of England base rate and its impact on wider market yields. Total revenue for the year was £452.8 million, up 109%, with profit before tax of £194.6 million, a 6x increase on the prior year.

At the same time, after a decade at the helm, Anne Boden announced her intention to step aside as CEO of Starling. At the end of June, Anne handed over her responsibilities to John Mountain, who was appointed Interim CEO. John has been at Starling for seven years as a pivotal member of its executive team, previously acting as COO.

Brandtech

In early June, the company completed the acquisition of Jellyfish, the digital media and marketing group. The combined group is expected to generate more than $1 billion in annual revenues, with over 7,000 employees, working for eight out of ten of the world's largest advertisers, and 49 of the top 100.

The company also acquired 100% of Pencil, which operates in the generative AI marketing space. Built on Open AI's GPT large language models, Pencil generates channel-ready ads and copy at a significantly lower cost. Pencil complements Brandtech's existing capability in the AI space.

Smart

The filing of Smart's Consolidated Financial Statements in June showed that revenue in 2022 rose by 32%. Following its recent fundraise, Smart Pension announced the acquisition of Evolve Pensions in June, paving the way for one of the largest master trust consolidations of 2023. The merger of Evolve's master trust, the Crystal Trust, will bring AUM of the Smart Pension Master Trust to over £4 billion.

Following the launch of The Chancellor of the Exchequer's Mansion House Reforms in July, Smart Pension became a signatory to the Mansion House Compact, an expression of intent to increase investment in unlisted equities. The reforms also encourage a merging of smaller pension schemes to allow them to develop the scale and expertise needed to invest in private equity. Smart Pension is expected to be a direct beneficiary of the reforms.

Klarna

Klarna continues its drive towards profitability, with its 1Q23 results showing adjusted operating losses falling by over 78% since the same quarter last year. Lower operating costs, driven by Klarna's cost cutting programme and improving credit losses, imply that run rate profitability should be achievable in the second half of the year. The company also continues to grow strongly with retailer revenues increasing by 17% year-on-year and outperforming GMV growth of 13% year-on-year.

Despite the valuation of the underlying asset being written up in the period, foreign exchange movements meant the carrying value was slightly marked down.

Cash Update

As of 30 June, the Company had net cash of approximately £30 million and a position in Wise of £10 million, to give a total liquidity position of approximately £40 million.

Since the period end the Company has invested a further £6.5 million in Secret Escapes as part of a wider £31.7 million fundraise to support the refinancing of existing debt facilities and investment for the next phase of its growth strategy.

Portfolio composition

As of 30 June 2023, the portfolio composition was as follows:

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 £816 million for 30 June 2023.

Outlook

With equity markets faring better than most people had anticipated year to date, an improved backdrop for companies looking to IPO is emerging, with a slight tick-up in IPO activity over the quarter, and with increased speculation around assets such as ARM listing in New York. The company has several later-stage assets that are either profitable, or funded to anticipated profitability, and should make excellent IPO candidates in due course. The Investment Adviser continues to assess the most appropriate exit strategy for these assets to optimise investor returns over the medium term.

The portfolio companies are largely well positioned, having proactively managed their cost base and raised the funds necessary to ensure that they can continue growing strongly and/or achieve profitability. The Investment Adviser has worked closely with the portfolio companies to achieve this, while carefully managing the Company's own liquidity position, to enable it to respond to unforeseen eventualities if they arise.

Factsheet

An updated Company factsheet will shortly be available on the Company's website:  https://www.chrysalisinvestments.co.uk

-ENDS-

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.