Another strong year for Chrysalis as it doubles in size – Chrysalis Investments (CHRY) has posted its annual results for the year ended 30 September 2021, during which time its share price increased by 84% and its NAV per share increased by 57%. Total net assets rose by 154% from £542m to £1.4m over the 12 months under review. As at 25 January 2022, the trust’s market cap stands at £1.06bn.
Over the year, a number of the company’s biggest investments undertook material funding rounds supported by new investors. In particular, Klarna added approximately £294m to the gross portfolio value over the year, following its two successful funding rounds. The most recent was in June 2021, valuing the business at $45.6bn. Chrysalis initially invested at a post new-money valuation of $5.5bn in August 2019.
Similarly, Wise, which listed on the London Stock Exchange during the year under review, and Starling Bank, which continued its rapid expansion, enabled by follow-on capital committed by Chrysalis over 2020, both saw gross portfolio valuation gains of over £100m, again underpinned by the provision of capital from new shareholders.
Statement from the chair:
Last year’s objective was to continue to grow the size of the Company, based on the hypothesis that adding scale to Chrysalis’ crossover proposition would enhance access to deal flow and further boost origination capabilities. The pace of new investments, to which the Company committed over £380 million, would suggest this capital has achieved its aim.
Total investible assets grew by approximately £853 million, meaning nearly 54% of growth was driven by gains on the revaluation of investments. Since inception to September 2021, gains on the revaluation of investments accounted for roughly 35% of total asset growth, indicating less dependence on capital raises in the year to scale the Company.
Despite the excellent revenue growth performance achieved by the portfolio in aggregate, the Investment Adviser’s Report details why it thinks prospects continue to be positive, based on the substantial aggregate Total Addressable Market (“TAM”) the portfolio accesses, combined with low current revenue penetration rates.
The Investment Adviser typically sees a strong correlation between its supply of follow-on capital and the subsequent performance of the investee asset. The ability and willingness of Chrysalis to back its assets is one of its attractions to potential investee companies and demonstrates the Investment Adviser’s belief in the “Power of Primary Capital”. Both Starling and wefox are examples of this investment process and have seen considerable valuation gains in the year from the accelerated growth that our follow-on capital helped to fund.
Fundamentally, this is what Chrysalis was set up to do: identify excellent businesses and then back them to succeed, regardless of whether they choose to stay private or go public. This flexibility provides a highly differentiated offering in Europe, and is a key underpin of the strength in the Company’s deal origination function, backed up by its increased scale.
The Company’s share price rose 84% over the year to 267p, and, notwithstanding the post year end correction in technology stocks, it is still showing a substantial gain over the period from its opening level of 145p. While at the time of writing growth stocks appear to be out-of-favour with investors, experience shows how quickly market sentiment can swing. Fundamentally, the aim of Chrysalis is to invest in companies which can generate significantly faster growth rates in the medium-term than those typically available in listed markets. This should ultimately provide the Company the ability to outperform stock markets in share price terms.
Finally, I would like to thank the investment team at the Investment Adviser, which the Board believes has developed an impressive origination function. The majority of our deals have come from non-advised channels, and so are typically outside of formal funding rounds. This has allowed the team access to deals outside of competitive funding processes, at hopefully more attractive prices and better terms.
Having established a strong brand and origination channel, and with what I believe to be substantial embedded revenue growth within the portfolio, I believe the outlook for your Company remains very exciting.
CHRY : Another strong year for Chrysalis as it doubles in size