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Merian Chrysalis well-placed thematically through tech-enabled disrupter focus

In a quarterly update, the growth capital trust, Merian Chrysalis (MERI), noted the 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.

MERI also said that a number of its shareholdings contain downside protection, often in the form of preference structures, which can help to mitigate the impact of a decline in assessed valuations.

Tech-enabled disrupters” focus in tune with the current environment 

While certain companies have seen growth moderate, a number have seen enhanced trading as a result of covid-19. MERI set out 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 manager towards a group of businesses it labelled “tech-enabled disrupters”.

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. MERI says that 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.

Portfolio update – MERI is about 88% invested

MERI is approximately 88% invested. As at 26 May 2020, MERI’s portfolio was composed as follows:

We have included commentary on the individual holdings: some


“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 £4bn 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.”


“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 

“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 £60m 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 £1.25bn 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 £300m 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 £2.4 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 £500m of SME lending on its balance sheet.”

Klarna Holding AB 

“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

“Embark completed its acquisition of Zurich’s Investment and Retail Platform post period end. This transferred c£11bn assets under administration (“AUA”) of platform assets, and c£0.6bn 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 £33bn, serving more than 365,000 consumer clients across all its channels and brands, up from c£16bn 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 

“In March, THG reported a surge in demand for its health, beauty and nutrition products across its world-leading brands, including and 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 £100m, 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 (wefox)

“Wefox has had a successful start to the year and now generates more than €100m in sales, which represents a growth rate of four times over 2018. The company raised over €200m 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 

“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 

“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 £2.6m 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

“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.”

MERI: Merian Chrysalis well-placed thematically through tech-enabled disrupter focus

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