Chrysalis Investments says that as at 30 June 2023, its unaudited NAV was 136.86 pence. That represents a 6.84p per share or 5.3% increase since 31 March 2023.
Movement in the fair value of the portfolio accounted for an uplift of approximately 9.28p, offset by an adverse foreign exchange movement of approximately 2.20p – as the pound strengthened – plus the usual fees and expenses.
Richard Watts and Nick Williamson (co-portfolio managers) said: “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.”
[It is good to see things at Chrysalis improving. As we have been saying for a while, the major catalyst for a rerating would likely be an IPO or trade sale of one or more of its ‘oven-ready’ investments, but the longer things move in the right direction, the more likely it is that the discount will narrow further from here.]
Portfolio activity
Early in the quarter, the company invested £12.5m in Smart Pension in a $95m Series E fundraise led by Aquiline Capital Partners.
In June 2023, a further £2m 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 623.24p. Chrysalis’ total cash-on-cash return on Wise currently stands at 2.9x.
Portfolio Update
85% of the portfolio is now 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 $55m 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 £452.8m, 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 $1bn 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 £4bn.
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/liquidity
As of 30 June, the company had net cash of approximately £30m and a position in Wise of £10m, to give a total liquidity position of approximately £40m.
Since the period end the company has invested a further £6.5m in Secret Escapes as part of a wider £31.7m fundraise to support the refinancing of existing debt facilities and investment for the next phase of its growth strategy.
CHRY : Chrysalis quarterly update extends NAV recovery