TIDMCHRY
RNS Number : 5622D
Chrysalis Investments Limited
30 June 2021
Chrysalis Investments Limited
30 June 2021
Chrysalis Investments Limited (the "Company")
Interim Results
The Company today announces its unaudited interim results for
the period 1 October 2020 to 31 March 2021, which are set out
below. The results and interim report will also be available on the
Company's website .
Financial summary
31 March 2021 30 September 2020 % increase
NAV per share 206.15p 160.97p 28.1%
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Share price 195.5p 145p 34.8%
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Total net assets GBP1.128 billion GBP542 million 108.1%
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Highlights
- NAV per share of 206.15p, representing 28.1% growth over the
first half of the financial year, driven by GBP249.9m of net
investment gains.
- Continued strong performance from the key portfolio companies,
driving over 70% blended revenue growth year-on-year.
- This performance has led to several significant funding rounds
in the portfolio, particularly Klarna and Starling Bank, which have
driven NAV performance.
- Post period end, follow-ons made in wefox (EUR30m) and
Starling Bank (GBP35m), as well as a new investment in Smart
Pension (GBP75m). In addition, a cornerstone agreement was signed
between the Investment Adviser and Revolution Beauty that would
allow Chrysalis to invest approximately GBP45m as part of
Revolution Beauty's upcoming IPO.
- Current cash position of approximately GBP150m and strong
total liquidity of over GBP270m, both adjusting for the investment
in Smart Pension but prior to the possible Revolution Beauty
investment.
- The Company has another potential new investment proceeding
through latter stages of due diligence, with further assets in
earlier stages.
- Chrysalis is exceptionally well-placed to capitalise on the
significant opportunities that it is increasingly seeing in the
late-stage private market, as the proposition is bolstered by its
growing scale and reputation for empowering entrepreneurs with
crossover capital.
Andrew Haining, Chair, commented:
"Chrysalis has achieved another period of strong growth and in
March completed a further successful fund raise, once again
demonstrating the attractiveness of its investment proposition to
investors, based on its proven ability to identify and deliver on
exciting late-stage disruptive opportunities. Shareholders have
more than doubled their money since Chrysalis launched in November
2018 and, with the value of its existing portfolio being
substantially underpinned by recent portfolio company funding
rounds and a strong pipeline of new investments identified, we
believe the company is well placed to continue to generate material
growth."
Nick Williamson and Richard Watts, co-portfolio managers,
commented:
"The portfolio has continued to perform strongly, with several
companies seeing exceptional growth. In certain cases, this has led
to funding rounds at significant uplifts to our prevailing carrying
values, including post period end. We believe the trends
underpinning many of these performances are well entrenched.
More widely, we believe Chrysalis is only scratching the surface
of the opportunity available in the late-stage private market. Our
original hypothesis of a "blurring of the lines" between private
and public markets appears to be playing out and our crossover
proposition, backed by significant scale, is resonating strongly
with entrepreneurs. This has allowed us to access some fabulous
companies.
Our early-mover advantage is substantial, but we are continually
looking for ways to develop the Chrysalis offering. Our origination
network is generating a significant cadence of leads, and the
current pipeline of new investments is very exciting, with a
further potential investment in the final stages of DD and others
in earlier stages. With substantial cash and liquidity available,
we are well on track to continue our drive to diversify the
portfolio, selectively targeting exceptional investment
opportunities".
-S-
For further information, please
contact:
Jupiter Asset Management:
Magnus Spence +44 (0) 20 3817 1325
Liberum:
Chris Clarke / Darren Vickers
/ Owen Matthews +44 (0) 20 3100 2000
Numis Securities Limited
Nathan Brown/ Matt Goss +44 (0) 20 7260 1000
Maitland Administration (Guernsey)
Limited:
Elaine Smeja / Aimee Gontier +44 (0) 1481 749364
Media Enquiries:
Montfort Communications +44 (0) 20 3770 7920
Charlotte McMullen / Toto Reissland-Burghart chrysalis@montfort.london
/ Miles McKechnie
LEI: 213800F9SQ753JQHSW24
A copy of this announcement will be available on the Company's
website at http://chrysalisinvestments.co.uk . 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.
This announcement may include "forward-looking statements". All
statements other than statements of historical facts included in
this announcement, including, without limitation, those regarding
the Company's financial position, business strategy, plans and
objectives of management for future operations (including
development plans and objectives relating to the Company's products
and services) are forward-looking statements.
Forward-looking statements are subject to risks and
uncertainties and accordingly the Company's actual future financial
results and operational performance may differ materially from the
results and performance expressed in, or implied by, the
statements. These factors include but are not limited to those
described in the formal Prospectus. These forward-looking
statements speak only as at the date of this announcement. The
Company expressly disclaims any obligation or undertaking to update
or revise any forward-looking statements contained herein to
reflect actual results or any change in the assumptions, conditions
or circumstances on which any such statements are based unless
required to do so by the Financial Services and Markets Act 2000,
the Listing Rules or Prospectus Rules of the Financial Conduct
Authority or other applicable laws, regulations or rules.
Chairman's Statement
I am pleased to present the interim accounts for the six months
ended 31st March 2021 together with a portfolio update from our
Investment Adviser.
Your company has enjoyed another period of strong growth. The
Net Asset Value per share increased by 28.1% in the period under
review while the share price increased 34.8% over the same period.
Since inception of the Company in November 2018, the Net Asset
Value per share has increased 109% and shareholders have seen a 96%
increase in the value of their shares. This compares with a -1%
fall in the FTSE All-Share index.
The Company continues to implement its strategy of investing in
late stage, pre-IPO growth companies. The investment in You &
Mr Jones was completed during the period, and small follow-on
investments were made in Graphcore, a position which we initiated
shortly after Chrysalis was established, and Featurespace. The
investment portfolio now comprises twelve positions in companies
which range in valuation from over GBP20 billion to less than
GBP100 million and operate across a range of economic sectors and
geographies. The holdings typically share common characteristics:
tech-enablement; founder-led disruptors; huge addressable
markets.
As growth companies choose to stay private for longer, the
demand for capital to finance their growth increases. Accordingly,
the Company raised a further GBP300 million in March 2021,
following on from the GBP95 million raised in October 2020. This
capital is allowing the Investment Adviser to invest in new
investment opportunities, as well as to make follow-on investments
in existing portfolio positions. As a result of this fresh capital,
as well as the gains made from strong investment returns, the
Company now has a market capitalisation of approximately GBP1.1
billion and, as of 23 March 2021 has been a constituent of the
FTSE-250 index. Our scale is important. It attracts some of the
best, and largest, investment opportunities in our target market
and allows us to take meaningful positions in some of the largest
tech-enabled private companies in the world.
Klarna, which accounts for 21.5% of our portfolio at year end,
is an excellent example of how private capital markets are
providing liquidity at much higher valuations and on a much
"deeper" basis than had previously been thought possible, Post year
end Klarna announced a further funding round at $45.6 billion. On
an adjusted basis for this transaction, the holding would represent
21.4% of the portfolio.
In November, we changed the name of the Company from Merian
Chrysalis Investment Company Limited to Chrysalis Investments
Limited and refreshed the Company's brand and supporting
communications materials. This change reflects the sale of Merian
to Jupiter as well as the growing reputation and recognition that
Chrysalis has in the market.
In order to maintain a pre-eminent position in financing growth
companies, the UK needs a modern and efficient mechanism for
companies to list as publicly owned entities. In this regard, we
welcome the proposals put forward by Lord Hill in his Listing
Review Report which was published in March 2021. I am also pleased
to report that the Investment Adviser made important contributions
to the Review. In particular, we support the thrust to maintain the
UK as an attractive place to list for companies based both in the
UK and overseas. We also agree with the proposals to permit dual
class share structures, to simplify the prospectus regime and to
reduce the minimum free float requirements. These measures, if
adopted, will continue to place the UK at the top of the list of
venues for listings, particularly among the growing number of
founder-managed, tech companies, as evidenced by Wise's decision to
seek a listing in London.
Environmental, social and governance considerations, or ESG, as
it is known within the corporate world, has been a growing
investment consideration for a number of years.
The Board and the Investment Adviser have established and are
currently implementing an ESG policy which ensures that we are
aligning ourselves with best practice in this important area. I am
pleased to note that Jupiter, the Investment Adviser, has also
aligned its strategy, purpose and principles with the UN Global
Compact ("UNGC") such that all investment decision-making and
engagement is guided by the principles of the UNGC. The means
investee companies are expected to abide by the Compact's Ten
Principles, committing to meeting fundamental responsibilities in
the areas of human rights, labour, environment, and
anti-corruption. These commitments apply to the investment
management of Chrysalis and are welcomed by the Board.
Jupiter has also committed to achieving net zero emissions by
2050 across its full range of investments and operations, including
the holdings within Chrysalis, reflecting the urgent need to limit
global warming to less than 1.5 degrees Celsius in line with the
Paris Agreement.
The investment team, led by Richard Watts and Nick Williamson,
is working hard to source and due diligence the next wave of
investments in tech-enabled, growth companies. This will increase
the number of portfolio holdings and lead to a broadening of
economic sectors and geographies in which we are invested. At the
same time, the team continues to work to maximise the returns on
the Company's existing investments and to support management teams
on their growth journeys.
In terms of resourcing, the Investment Adviser has been looking
to grow its available resources to match the growing size of
Chrysalis. To that end, Nick Williamson recently stepped back from
managing his successful smaller companies listed fund to dedicate
himself fully to Chrysalis, which the Board believes will be to the
benefit of shareholders. In addition, the Investment Adviser is
currently looking to add additional employees to ensure sufficient
staffing for the next phases of growth.
Finally, I should also like to record my thanks to our
shareholders for their continued support.
Andrew Haining
Chairman
29 June 2021
Portfolio Statement
As at 31 March 2021
Company Location Date of Value % of
acquisition Cost (GBP'000) (GBP'000) net assets
Klarna Holding AB Sweden 09/08/2019 64,381 241,277 21.4
Starling Bank Limited UK 10/04/2019 53,248 106,948 9.5
TransferWise Limited UK 07/11/2018 43,992 102,919 9.1
THG Holdings PLC UK 16/09/2020 39,579 88,152 7.8
FinanceApp (wefox) Loan
Note Switzerland 18/12/2019 39,129 81,974 7.3
Embark Group Limited UK 14/08/2019 27,100 67,153 6.0
Graphcore Limited UK 17/12/2018 57,589 64,776 5.7
You & Mr Jones LLC USA 30/09/2020 46,440 48,013 4.3
Featurespace UK 13/05/2020 24,449 39,850 3.5
Secret Escapes Limited UK 07/11/2018 21,509 28,529 2.5
Sorted Holdings Limited UK 15/08/2019 15,000 18,084 1.6
Growth Street Holdings UK 22/01/2019 12,612 1,333 0.1
Total investments 445,028 889,008 78.8
Cash and cash equivalents 304,966 27.0
Other net current liabilities (65,764) (5.8)
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Total net assets 1,128,210 100
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Investment Adviser's Report
Overview
Over the first six months of its financial year, the Company
continued to make good progress in relation to its objective of
generating long term capital growth through investing in a
portfolio of predominantly unlisted, late-stage growth companies.
The Net Asset Value per share rose by 28.1% to 206.15 pence as at
31st March 2021 as a result of the completion of further funding
rounds at higher valuations by two of our larger portfolio holdings
- Klarna and Starling Bank - strong underlying trading from a
number of portfolio holdings, and continued upward momentum in
valuations of listed companies which have adapted to a new,
post-COVID-19, economic environment through the application of
technology. As our Chairman noted in the last Annual Report, we
believe the Company has entered the 'Growth phase' of its
development, in which the excellent growth in revenues from the
majority of the portfolio holdings are now driving our independent
valuer's assessment of portfolio valuation.
While the valuer uses a variety of well-recognised methodologies
to determine the fair value, it is important to note that a number
of our holdings have seen external validation of their valuations
via their own funding rounds. In addition to Klarna and Starling
Bank, Graphcore conducted a round in the period with wefox
undertaking one post period end that valued the company in excess
of $3 billion. In combination with The Hut Group ("THG") that is
listed, this implies that over 50% of the portfolio has had recent
or live valuation marks.
In many cases, revenue growth for our companies has been
accelerated by the global COVID-19 pandemic. In the UK, the spread
of the virus in the Autumn of 2020 forced the Government into
imposing a second lockdown on the country and a return to the 'stay
at home' conditions which had prevailed in the spring and early
summer of last year. This second lockdown, which remained in place
until April 2021, provided a supportive environment for many of our
tech-enabled companies to continue to take market share from
traditional operators. Importantly, the strong growth achieved by
these companies is unlikely to be a one-off event; instead, we
observe the ongoing digital revolution is bringing about structural
changes in society which is likely to alter the economic landscape
forever. Against this backdrop, we see enormous potential growth
for tech-enabled companies in the years ahead.
We also continue to observe the trend for companies to stay
private for longer. This means that a larger proportion of this
growth will be achieved by private companies which are in no hurry
to IPO. By investing in late-stage, pre-IPO companies, as well as
listed companies, we believe that Chrysalis is uniquely well-placed
to capture this growth opportunity for shareholders.
Activity in the period under review
Over the six months, we raised a further GBP300 million in March
2021, following a GBP95 million raise that was closed at the end of
September 2020, but completed in October 2020, bringing total
capital raised since launch to GBP770 million. This capital is
required to provide follow-on financing, increasingly at scale, to
our existing portfolio of holdings so that they can continue to
capture the growth potential in their chosen markets. In addition,
it will allow us to initiate new positions in exciting,
tech-enabled companies, thereby continuing to diversify the
portfolio, both by number of stocks, and across a wider range of
economic sectors. We also established a Revolving Credit Facility
for GBP32 million in March 2021 to provide working capital to the
Company and some short-term, flexible financing. As of March 2021,
GBP15 million of the facility had been drawn down.
In October, we completed our investment in You & Mr Jones, a
US business headquartered in New York, thereby adding one of the
leading companies in digital marketing, or 'Brandtech', to the
portfolio.
This deal was the first by Chrysalis outside Europe and reflects
our extensive interest in, and understanding of, this opportunity,
partly due to our substantial shareholding via our open-ended fund
range in listed peer, S4 Capital. You & Mr Jones employs 3,000
people across 40 countries and has made seven acquisitions and 20
strategic investments to build out its product offering. Clients
include Unilever, Adidas, Microsoft, Danone, Reebok, Paypal and
Google.
In March 2021, we added a further $10 million to our position in
Graphcore as part of a larger funding round which took place in
December 2020. This investment, together with our initial
investment in December 2018, brings our total capital investment in
the company to approximately $75 million over four fund-raising
rounds. This ability and willingness to add to our initial
investments is increasingly seen as attractive by many private
companies, affording them the opportunity to continue to grow at
supernormal rates via our provision of adequate financing in the
late-stage, pre-IPO phase.
Markets and market developments
Equity markets performed well over the six months to 31st March
2021, continuing the recovery from the short-lived sell off in
early 2020. The FTSE 100 rose 14.4%, buoyed by an effective
vaccination programme and the prospect of a re-opening of the UK
economy. The tech-heavy NASDAQ index also performed well, gaining
18.6% over the same period. We believe that markets will continue
to look beyond COVID-19 and assess the impact of an economic
recovery which has been fuelled by unprecedented levels of
Government borrowing.
The private equity markets also continued to strengthen from the
COVID-19 induced lows and we have seen a rising number of deals
from advisers. During the period, we assessed 74 deals, some of
which were introduced to us, and some of which we initiated
ourselves through direct contact with the management teams and
founders.
Portfolio
As at 31st March 2021, the Company had net assets of
approximately GBP1.13 billion, with circa GBP889 million invested
in a portfolio of investments and circa GBP305 million held in
cash. The portfolio comprises 12 holdings - eleven of which are in
private companies and one listed company, THG plc.
Our aim is to invest in companies which display a number of
characteristics which we call the "Chrysalis blueprint". Typically,
each company should have a huge addressable market with structural
tailwinds, be highly innovative and disruptive in nature and should
have developed best-in-class technology enabling it to compete on
price, service and convenience. Usually, they will be founder-led
businesses. Companies should also have demonstrated proof of
concept, have a clear roadmap to profitability, and the ability to
achieve and sustain exceptional rates of growth.
The portfolio is comprised of late-stage, growth companies. By
way of example, the portfolio includes 7 positions, representing
approximately 83% of the investment portfolio value, which have
market capitalisations of greater than $1billion and are therefore
termed 'unicorns'. Starling was the latest company to join this
group, having successfully completed a major funding round at a
GBP1.3billion post new-money valuation in March 2021, following a
year of exceptional growth over 2020 and a move into
profitability.
Split of investment portfolio by market cap ($ million)
This investment focus on late-stage growth companies is an
important feature of our proposition. It provides a level of
comfort that the business models and strategies employed by the
investee companies are sound; it provides assurance that the
management teams are proven; and it gives confidence that the
businesses are financially robust. Currently, approximately 47% of
the investee companies are operating profitability. This is
marginally down on the figure as of September 2020, broadly
reflecting two counteracting elements. The first is the significant
valuation uplift of Klarna, which is currently loss-making as it
scales new markets, which reduced the ratio; the second is the
shift into profitability by Starling Bank, which had a positive
impact on the ratio.
Split of portfolio by EBITDA profitability
Source: Chrysalis Investments
Nearly all areas of society are seeing an impact from
technology, and this is reflected in the wide range of sectors the
Company has invested in, including areas that are only just
beginning to see technological change, such as insurance. While the
portfolio has a significant weighting to financials, in reality,
the companies represented in this sector - such as Klarna,
TransferWise (trading as Wise) and Embark - are all targeting
different sub-sectors in a wide market; we do not view them as a
homogenous grouping.
Split of portfolio by sector
We want to continue to diversify into a wider range of sectors,
albeit while retaining the focus on tech-enabled companies.
The portfolio is also becoming more international, as we begin
to take advantage of our origination network's ability to source
strong deal flow from other markets. Our expansion internationally
is likely to continue, but at a measured pace, recognising that the
UK still offers many attractive companies. While the domicile of
our investee companies' headquarters points to a majority of the
portfolio being UK based, on a revenue basis, the portfolio is much
more international in nature.
Split of portfolio by HQ location Split of portfolio by revenue
origination
Portfolio holdings
Company commentary
Klarna Holding AB
Online shopping is not always frictionless for consumers.
Examples range from having to fill in multiple personal detail
fields, particularly when using a new website, and also around
returns. Having paid immediately, consumers can often wait several
weeks for returned goods to be checked and the cost credited back
to their account, leaving them out of pocket. This friction results
in abandoned baskets and slower purchase velocity, which lowers
retailers' revenues.
Founded in Stockholm in 2005, Klarna is a leading global
payments provider that is revolutionising the online payment
experience by removing friction from customers' website journeys
and allowing them to control how they pay for goods. To that end,
Klarna offers direct payment, payment after delivery options and
instalment plans in a smooth one-click purchase experience that
allows users across Europe and North America to phase their
spending. Its technology also allows returned goods to be credited
back to customers' accounts as soon as it is accepted by the
logistics company.
Over recent years, Klarna has typically generated a 30%+ rate of
sales growth per annum, but this accelerated over 2020 to reach
$1.2 billion, partly due to the effect of COVID-19 accelerating the
online shift, but also due to the increasing importance of the US
market, where Klarna's more recent entry is delivering exceptional
growth. The progression of gross merchandise volume, a key driver
of revenue, is shown below.
Klarna - Gross Merchandise Volume growth (in SEK rolling 12
million year-on-year)
Achieving market leadership in the US and UK is a key part of
our investment thesis and we were particularly encouraged by growth
in the US, which saw customers using the Klarna app more than
double year-on-year to 17 million in April 2021, driving record
GMV.
The attractiveness of this growth profile to investors was
demonstrated by Klarna's successful $1 billion funding round in
March 2021 at a valuation of $30 billion pre new money and
subsequent $0.6bn funding round in June 2021 which valued the
business at $45.6bn post new money. This most recent valuation is
not reflected in the net asset value of the portfolio as at 31st
March 2021.
This compares very favourably with the post new money valuation
of $10.65 billion achieved over the summer of 2020, in which
Chrysalis participated to its maximum allowable level.
Given the runway for growth and our confidence in Klarna's unit
economics, we continue to be very excited about the potential of
this position. Post period end, Klarna announced another
substantial funding round, led by Softbank, at a post new-money
valuation of $45.6 billion.
Date of Initial Investment: 5th August 2019
Total Investment: GBP64.4m
Carrying Value: GBP241.3m
Last Reported Financials: 1Q 2021 trading update
Starling Bank Limited
Banking has traditionally been dominated by the branch model,
with technology added on an ad hoc basis. Branches add cost,
particularly as consumers' demands shift more towards online
access, which is an issue for banks facing ever growing regulatory
and shareholder pressure. In addition, the application of
technology a piecemeal fashion typically results in lower
functionality, a poor customer experience, and an inability to
scale the bank's architecture.
Founded by banking expert Anne Boden in 2014, Starling has built
a cloud-native, mobile first, scalable platform that delivers a
wide range of financial services to customers. Core products
include bank accounts for both retail and SME customers, which
allow users to bank via a mobile app, offering digital sign-up;
instant notification of transactions; insights into spending
habits; and 24/7 support. Starling has also been successful in
providing its technology to other financial services businesses and
users via its "Banking-as-a-Service" offering, which allows
customers to access its state-of-the-art payments systems and
infrastructure.
Starling ended its financial year to November 2019 with 926,000
retail accounts, 82,000 business accounts and just over GBP1
billion held on deposit. 2020 was a transformational year for the
company with COVID-19 driving an accelerating take up by new
customers, as many branch-based models struggled to cope with
lockdown, which prompted a shift to online solutions.
Starling - Customer deposit growth GBPm
Starling saw rapid growth over 2020 and, by March 2021, the bank
had opened more than 2 million accounts - of which 300,000 were
business accounts - and had seen deposits balloon to GBP5.4
billion, reflecting over 250% Compound Annual Growth ("CAGR") since
November 2019.
In addition, Starling generated approximately 400% revenue
growth in the year to January 2021, as it began to lend to Small to
Medium-sized Enterprises ("SMEs"), generating an annualised revenue
run rate of cGBP145 million. Given operating costs remained broadly
flat over the year - testimony to its platform efficiency - the
bank turned profitable over 4Q 2020 and as of January 2021, was
generating annualised operating profit of GBP18 million.
This performance culminated in a substantial funding round in
March 2021, led by Fidelity, alongside the Qatar Investment
Authority, RPMI Railpen and Goldman Sachs, which raised
approximately GBP322 million in total and valued the bank at GBP1.3
billion post new-money.
Given the momentum in the business and the current on-going
re-opening of the UK economy following lockdown, we are optimistic
of further growth in the year ahead.
Date of Initial Investment: 12th February 2019
Total Investment: GBP53.2m
Carrying Value: GBP106.9m
Last Reported Financials: Limited financial information released
in January 2021
TransferWise Limited (trading as Wise)
Every year, more than $10 trillion is transferred
internationally. However, traditional bank networks are local,
making international money transfers slow, expensive and
inconvenient. The cost of transfers to both individuals and
businesses continues to be far too high across the industry and
transactions are typically advertised with zero or low fees despite
hidden charges in the exchange rate mark-up. As of March 2020, the
World Bank estimated the global average total cost of remittance to
be 6.8% of the transfer value.
Wise is a global technology company that was founded with the
aim of reducing the fees associated with sending money across
borders. With a simple money transfer platform and borderless
accounts, Wise makes it quick and easy for individuals who travel,
live and work internationally to manage their money. Businesses can
also use Wise to pay suppliers or employees overseas, request
payments from customers, and transfer funds between their own
accounts in different countries.
Wise's pricing is always transparent, with the full cost of the
transaction shown upfront. On average it costs 0.69% of the
transfer value to move money across borders and for some
established currency routes like GBP-EUR, the fee is less than
0.4%.
In the quarter to March 2021, Wise had 10 million customers,
moving over GBP5 billion per month. Currently 38% of all
transactions happen instantly (up from 34% in the prior quarter)
with about 75% happening within an hour. Wise releases limited
financial information, so the most recent results remain those for
the year ended March 2020 when GBP67 billion in customer payments
were processed by Wise - an uplift of c86% from the previous year -
and it was the fourth consecutive year that the company has been
profitable whilst continuing to scale rapidly. Revenues during the
year increased approximately 70% to GBP302.6 million and EBITDA
increased from approximately GBP18 million to approximately GBP42
million with the implied EBITDA margin increasing by about 3.7
percentage points to 14.0%. Over 100,000 new business customers
were acquired in the financial year and total customer numbers
increased from five million to seven million.
Despite Wise's strong valuation returns for us over recent
years, we continue to be optimistic regarding the outlook for this
position. With a small share in a massive market and a compelling
offering, the outlook for ongoing growth looks favourable.
Date of Initial Investment: 7th November 2018
Total Investment: GBP44.0m
Carrying Value: GBP 102.9m
Last Reported Financials: Annual report to March 2021
THG plc
E-commerce has been a feature of modern life for many years now,
albeit it is still capturing a growing proportion of customers'
wallets versus the offline equivalent. However, the complexities of
integrating a full e-commerce proposition can be daunting, even for
multinationals. Considerations include warehouse management; parcel
sortation optimisation; global logistics capability; website
creation, translation and near-customer hosting; returns
capability; and data capture.
THG is an e-commerce business that operates a highly scalable,
end-to-end proprietary technology platform (Ingenuity) powering the
sale of both its own brands and third-party brands. Accessing
Ingenuity provides a cost-effective solution for companies to begin
distributing their products online. The firm has invested
significantly in its infrastructure, technology platform and brands
and is one of the world's largest online beauty and well-being
businesses.
The key event last year was THG's IPO in September 2020. Since
that time, its shares have performed well, rising from 500p at
flotation, to close the period at 623.5p, having touched 800p in
January. Operationally, the company has performed very strongly,
executing on a number of pieces of M&A, including Perricone
(for an apparently highly attractive multiple of one times sales);
and Dermstore (a $350 million acquisition of the US number one
pure-play online retailer of specialty beauty and skincare brands).
We believe these acquisitions will drive substantial value
generation for shareholders over the coming years.
The recent financial performance of the business has been
impressive, with the quarter to March 2021 seeing 58% growth,
compared with 42% over 2020 as a whole, with Ingenuity seeing
exceptional growth of 188% over 1Q 2021.
On the ESG front, THG also launched THG Eco, which forms the
backbone of THG's sustainability plans; the company recently
achieved Carbon Neutral status.
Date of Initial Investment: 17th December 2018
Total Investment: GBP39.6m
Carrying Value: GBP88.2m
Last Reported Financials: 1Q 2021 trading update
FinanceAPP AG ("wefox")
The vast majority of insurance policies across Europe are still
sold via brokers. These brokers typically operate from a
high-street store and do not enjoy the benefits of scale or
technology. Customers are also often dissatisfied with their
current insurance experience as customer service is poor and
insurance products are not tailored to fit their particular
needs.
wefox is looking to solve these problems by aggregating
insurance brokers onto a digital platform and then enabling them to
distribute fully digital and customised insurance products to their
customers, resulting in market leading prices and service.
The company performed extremely well over the period. wefox hit
EUR10 million of Gross Revenue in September 2020, the first EUR20
million revenue month in December 2020 and the first EUR30 million
revenue month in January 2021. This extraordinary rate of growth
has been driven by the company's ability to launch new digital
insurance products and enter new territories throughout Europe such
as Switzerland, Austria and Poland.
What sets wefox apart from many of its peers is its ability to
combine high rates of growth with very profitable unit economics.
The company has publicly stated that is expects to achieve revenues
of EUR300 million in 2021 and be profitable at an operating level.
This was a core part of our investment thesis, and we believe that
this dynamic will eventually make wefox a very strong candidate to
IPO.
Date of Initial Investment: 5th December 2019
Total Investment: GBP39.1m
Carrying Value: GBP82.0m
Last Reported Financials: Not available
Embark Group Limited
In recent years, the Wrap Platform Market has continued to
invest in technology while the traditional Self-Invested Personal
Pension ("SIPP") and Small Self Administrated Schemes ("SSAS")
players have relied on product knowledge. Embark was formed to
combine the technology strengths of the Wrap Platforms with the
extensive pensions expertise of the typical SIPP and SSAS providers
in order to deliver specialist and tech-enabled solutions to both
retail and corporate customers.
Embark is a full-scale retirement solutions provider, with
platform, investment wrap, e-SIPP, SIPP, SSAS, fund research and
employee benefits consulting capabilities. The Group trades under
the subsidiary brands Embark, Vested, Rowanmoor, EBS, The Adviser
Centre, DISCUS and Hornbuckle.
It also operates a wide portfolio of white-label technology
solutions for businesses such as RBS Coutts, Standard Life, Nutmeg,
BestInvest, Charles Stanley, Moneyfarm and Wealthsimple.
Embark is one of the fastest growing digital retirement and
savings businesses in the UK market. The Group is experiencing
strong demand for its digital services and the capital it has
previously raised will enable it to take full advantage of its
disruptive position in the UK savings sector, through continued
technological innovation and selective expansion opportunities.
Since our initial investment, Embark has completed two material
transactions which significantly enhanced its market position. The
company acquired the advised and partnership client books of
Alliance Trust Savings ("ATS") in October 2019 and then completed
its acquisition of Zurich's Investment and Retail Platform through
April 2020.
A significant milestone was achieved during the current
financial period with the migration of over GBP7 billion of advised
assets onto the Embark platform from the client books of ATS. The
migration of assets is a complex process that carries inherent
risk, but the company successfully delivered on its migration plans
set out at the time of acquisition.
Successfully migrating these assets eliminates significant
operational and regulatory risk from the business and will lead to
material cost savings and enhanced profitability over the course of
2021.
Date of Initial Investment: 3rd July 2019
Total Investment: GBP27.1m
Carrying Value: GBP67.2m
Last Reported Financials: Report & accounts to December
2019
Graphcore Limited
The application of machine learning ("ML") and artificial
intelligence ("AI") continues to gain traction across society, from
seemingly mundane tasks like directing call centre chat bots, to
understanding voice commands and autonomous driving. Work we
commissioned in late 2019 predicted the ML/AI chip market would
grow to nearly $9 billion by 2023, from approximately $2.6 billion
in 2019, illustrating the market's substantial growth
potential.
ML/AI programmes have traditionally been run on graphics
processing units ("GPUs") being the best architecture available to
accelerate the huge workloads these models require. However, GPUs
require algorithms to be optimised to suit their modus operandi to
gain maximum efficiency. This means data scientists can be
restricted in their model choice: the model is chosen to fit the
hardware, rather than the problem it is trying to address.
Graphcore is a leading machine intelligence semiconductor
business, which has developed the Intelligence Processing Unit
("IPU"). The IPU is completely different from today's Central
Processing Unit ("CPU") and GPU processors. It is a highly
flexible, easy to use, parallel processor that has been designed
from the ground up to deliver state of the art performance on
today's machine intelligence models for both training and
inference. The IPU has been designed to allow new and emerging
machine intelligence workloads to be realised. As well as designing
one of the world's most sophisticated silicon processor, Graphcore
has also built the world's very first graph tool chain specifically
designed for machine intelligence - the Poplar software stack.
Graphcore achieved a significant milestone last year when it
introduced its second-generation IPU platform ("MK2") in July 2020.
This has greater processing power, more memory, and built-in
scalability for handling extremely large MI workloads. The initial
performance benchmarks that Graphcore publicly released were
impressive and demonstrated state of the art performance and
accuracy across several complex AI models such as BERT and ResNeXt.
The company remains focused on building out its commercial
opportunities based on this new technology.
To that end, Graphcore secured an additional $222 million of
primary capital in December 2020 as part of a Series E funding
round. This funding round was completed at a pre-money valuation of
$2.5 billion and saw participation from new and existing investors.
The business is now extremely well capitalised, with cash of $440
million, which will support its continuing, major R&D
investment and global expansion.
Customer engagement is growing rapidly across a range of
corporations, organisations and research institutions, with users
of Graphcore systems including Microsoft, Oxford Nanopore, Citadel
and Qwant. The past twelve months have been transformational for
Graphcore as the business has transitioned from development to
prepare for volume production. Demand for IPU products is
increasing among new and existing customers, and we look forward
with optimism.
Date of Initial Investment: 17th December 2018
Total Investment: GBP57.6m
Carrying Value: GBP64.8m
Last Reported Financials: Report and accounts to December
2019
You & Mr Jones LLC
Along with other industries, the world of marketing is adjusting
to the impact of technology on its
consumers. In particular, the rise of the mobile phone has meant
digital marketing now accounts for nearly half of the $640 billion
total annual media spend.
While marketeers have perfected the television marketing
playbook, the digital marketing toolkit is still relatively
immature. Consumers create their own content and discuss brands
online, requiring companies to have a much more responsive
marketing product. In addition to this speed, they need to create,
curate, and disseminate product across multiple platforms and deal
with the resulting huge quantities of data. All of this causes
efficiency problems.
You & Mr Jones is at the forefront of digital marketing or
"Brandtech". Its offering is based around the OMG technology
platform, which allows marketers to plan, create and distribute
digital campaigns seamlessly. This operating system offers a
significant productivity boost to clients and has enabled some to
make material cost savings. The company is headquartered in New
York (US), employs approximately 3,000 people across 40 countries
and has made seven acquisitions and 20 strategic investments to
date to build out its product offering. Clients include Unilever,
Adidas, Microsoft, Danone, Diageo, Reebok, Reckitt Benckiser,
PayPal and Google.
You & Mr Jones is a recent addition to our portfolio; our
investment was made at the end of September 2020. The last public
data released by the company was for 3Q 2020, when net revenue
organic growth for the nine months to September 2020 was 27%
year-on-year.
You & Mr Jones has a close comparator in the listed market -
S4 Capital - which is exposed to the same growth drivers. As of 1Q
2021, S4 Capital reported organic gross profit (net revenue) growth
of 33% year-on-year, which compares favourably to 19.4% growth
reported over 2020.
With a compelling offering in a market ripe for disruption, we
are very excited about the prospects for You & Mr Jones.
Date of Initial Investment: 6th October 2020
Total Investment: GBP46.4m
Carrying Value: GBP48.0m
Last Reported Financials: Not available
Featurespace Limited
Fraud is an occupational hazard for banks and other financial
institutions. In areas such as card fraud, models are deployed that
look for suspicious activity and block it before illegal
transactions can occur. Fraudulent behaviour can change very
quickly, particularly in an online world, and rules-based models
are non-adaptive. This means that the rulebook goes out of date
rapidly, resulting in rising fraud unless more rules are written.
If the rules are too tight, then the financial institution receives
too many false positives, resulting in lost revenue through lower
lending or transaction volumes. Typically, this also increases the
number of in-bound calls to customer service agents in the form of
complaints, requiring higher levels of staffing. If too many rules
are written, the rulebook becomes unwieldy and time consuming to
manage.
Featurespace has invented Adaptive Behavioural Analytics and
created the ARIC Risk Hub, which utilises real-time machine
learning software to risk-score events in more than 180 countries
to prevent fraud and financial crime. By analysing anomalies in
individuals' transactions, ARIC Risk Hub can automatically identify
emerging fraud attacks and suspicious activity in real-time,
without requiring constant retraining. Over 30 major global
financial institutions use ARIC Risk Hub to protect their
businesses and customers, including four of the five largest banks
in the UK.
Featurespace responded extremely well to lock-down and its risk
models adapted automatically to the pandemic related shift in
spending patterns - most notably a move from "card present"
transactions to "card not present" - as publicly endorsed by their
largest customer. One of the company's revenue streams is
transaction based, and this did see a temporary drop off over the
initial parts of lockdown. However, this has recovered meaningfully
since, and the new business pipeline looks exceptionally robust.
The company has also enjoyed significant industry recognition,
winning The Queen's Award for Enterprise and seeing NatWest
recognized at The Card and Payments Awards for "Best Security and
Anti-Fraud Development" following its enterprise-wide deployment of
Featurespace's solutions.
This, combined with on-going innovations such as the February
2021 launch of Automated Deep Behavioral Networks that uses deep
learning to provide enhanced defence against card fraud, gives us
confidence of further progress in the year ahead.
Date of Initial Investment: 13th May 2019
Total Investment: GBP24.4m
Carrying Value: GBP39.8m
Last Reported Financials: Annual report & accounts to
December 2019
Secret Escapes Limited
Every year hotels struggle to manage their capacity and are
often left with unoccupied rooms that impact yield. They are often
unwilling to market these rooms at discounted prices in case this
affects their brand and ability to price in the future.
Secret Escapes Limited ("Secret Escapes") is a members-only
online travel company. Its digital marketplace uses innovative
technology to connect travellers with discounts on luxury hotels
and travel experiences. It helps hotels minimise unsold inventory
by allowing them to discreetly market to its members who are
seeking luxury travel at affordable prices. The firm operates in
many countries around the world and is the market-leading
membership-based travel company in Germany, UK, Czech Republic,
Poland, Slovakia and the Nordics.
The rolling lockdowns of the last 15 months have created a tough
backdrop for an online travel business, and we supported the
company with additional capital over 2020 to allow it to continue
to invest in the offering and bolster its balance sheet in time of
stress.
Early signs from the wider travel market appear to indicate a
substantial backlog of demand for holiday travel, and, while recent
trading has been correlated with local lockdown laws, we are
optimistic that the company will recover strongly as the travel
market reopens.
Date of Initial Investment: 7th November 2018
Total Investment: GBP21.5m
Carrying Value: GBP28.5m
Last Reported Financials: Annual report and accounts to December
2019
Sorted Holdings Limited
Integration with a logistics carrier and its services is one of
the most complex and difficult connections for an e-commerce site
to develop, especially on a global basis. Providing an easy-to-use
API connection requires specialist knowledge to build and continual
maintenance. This can be time consuming and expensive. Retail is
also becoming increasingly global and building APIs to carriers
worldwide and managing different commercial terms and pricing
models is an increasingly complex problem.
Sorted is a Manchester-based, global Software as a Service
(SaaS) company that has developed a delivery management platform
that allows retailers (both digital and physical) to effectively
manage their delivery and returns proposition. This enables
retailers to increase conversion rates, reduce abandoned baskets,
and maintain customer loyalty.
Throughout 2020, retailers increasingly relied on their digital
capabilities and this has led to increased focus and investment on
their online propositions. Sorted has benefitted from this trend
and the company has won a number of enterprise clients that will go
live over the course of 2021. Shipment volumes continue to grow
rapidly and, in January 2021 alone, Sorted saw a 243% increase in
volume through its SaaS platform in comparison to the same period
in 2020.
Date of Initial Investment: 15th August 2019
Total Investment: GBP15.0m
Carrying Value: GBP18.1m
Last Reported Financials: Exempt from publishing accounts
Growth Street Holding Limited
Growth Street was set up to provide innovative and flexible
revolving credit lines to SMEs. As previously reported, two large
loans defaulted early in the 2020 financial year. In combination
with changes to the peer-to-peer funding market and accentuated by
the pandemic, a decision was taken in 2020 to wind down the
company. The Investment Adviser worked with other shareholders to
support the business through this difficult time and, in later
2020, a decision was taken to accelerate returns to investors that
funded the Growth Street platform, such that they received full
recoveries. While this decision modestly increased the risk of a
lower wind-down value for Chrysalis Investments, the Investment
Adviser believed ensuring no losses for retail customers was the
responsible course of action.
In April 2021, Growth Street concluded its solvent wind down and
commenced its liquidation process.
Given it was relatively early stage at the time of investment,
compared with other portfolio companies, Growth Street was a small
position in the portfolio. It is currently held at a nominal
amount, reflecting a reasonable estimation of its wind-down
value.
Date of Initial Investment: 24th January 2019
Total Investment: GBP12.6m
Carrying Value: GBP1.3m
Last Reported Financials: Small companies' exemption
Environmental, Social & Governance ('ESG')
The board has established an ESG policy for the Company in
respect of its investments which focuses on four key areas:
-- Corporate governance - which considers the quality of the
management team, succession, shareholder alignment and
incentivisation.
-- Human Capital - given the competitive and evolving nature of
tech-enabled companies, consideration is given to how businesses
attract, remunerate and retain talented individuals. The focus
extends to training, diversity and inclusion.
-- Cyber and data security - assessing policies on data security
and the use of customer information.
-- Business ethics - assessing sales practices, regulatory affairs and supply chains.
This policy is applied when considering new positions as part of
due diligence work and the Investment Adviser also engages on an
ongoing basis with management teams of the portfolio holdings to
ensure that it understands each respective company's own ESG
policies, goals and reporting.
The Chrysalis approach is to be an active and engaged
shareholder, challenging and supporting management teams in
developing their business, while remaining considerate of the
opportunities and risks that ESG factors might prevail upon them.
While the Company's fundamental ability to set the ESG agenda is
only based upon its percentage ownership of an investee company -
which can vary significantly across the portfolio - the Investment
Adviser typically finds that by adopting this approach it can
influence the agenda for each of the Board of Directors .
Pipeline and Outlook
As at 31st March 2021, the Company has approximately GBP305
million of cash to invest. As part of the equity raise in early
2021, we detailed a pipeline of new investment opportunities
representing in excess of GBP1 billion and the potential to make
follow on investments of up to GBP250 million. As a team, we are
focused on investing this capital as well as supporting growth of
the existing portfolio and harvesting returns from earlier
investments.
We continue to work hard to generate proprietary deal flow, as
we believe this is the best way to access the best deals on the
most attractive terms. Our larger scale and growing reputation
enable us to engage with founders of outstanding businesses in the
UK and, increasingly, in Europe and the US.
Over the first part of the calendar year, concerns about a rise
in the yield of the 10 year US Treasury prompted some volatility in
the valuations of technology stocks, particularly where valuations
are elevated and unsupported by positive cash flows. As the world
begins to emerge from the enforced lockdowns of the last fifteen
months, it is likely that economic activity will bounce back in the
short term, perhaps keeping yields higher for a period of time,
which may lead to further uncertainty and volatility in tech
valuations.
Our approach to investing is to find companies whose growth
rates are so compelling, whose addressable markets are so vast, and
whose technological edges are so profound, that we believe they
will continue to appreciate in value regardless of higher discount
rates. We continue to see a strong pipeline of companies that meet
these criteria and as of mid-June are currently in later-stage due
diligence on two new potential investments, and have line-of-sight
on a follow-on opportunity, having recently participated in wefox's
funding round, where we committed EUR30 million to the process.
When we launched Chrysalis it was based on a hypothesis of a
"blurring of the lines" between private and public investing. The
last few years have convinced us this was a correct supposition.
Late-stage investing in Europe has grown rapidly since our IPO and
our proposition of crossover has resonated very strongly with
entrepreneurs. As Chrysalis has managed to grow into a meaningfully
sized vehicle, this scale is enhancing our proposition's
credentials and we are seeing roughly twice as many deals via our
origination channel as this time last year.
This market growth, combined with our early-mover advantage,
differentiated proposition and now scale means we believe that
Chrysalis has only begun to scratch the surface of its potential.
We look forward to the rest of the year with optimism.
Investment Objective and Policy
Investment objective
The investment objective of the Company is to generate long term
capital growth through investing in a portfolio consisting
primarily of equity or equity-related investments in unquoted and
listed companies.
Investment policy
Investments will be primarily in equity and equity-related
instruments (which shall include, without limitation, preference
shares, convertible debt instruments, equity-related and
equity-linked notes and warrants) issued by portfolio companies.
The Company will also be permitted to invest in partnerships,
limited liability partnerships and other legal forms of entity
where the investment has equity like return characteristics.
For the purposes of this investment policy, unquoted companies
shall include companies with a technical listing on a stock
exchange but where there is no liquid trading market in the
relevant securities on that market (for example, companies with
listings on The International Stock Exchange and the Cayman Stock
Exchange). Further, the Company shall be permitted to invest in
unquoted subsidiaries of companies whose parent or group entities
have listed equity or debt securities.
The Company may invest in publicly traded companies (including
participating in the IPO of an existing unquoted company
investment), subject to the investment restrictions below. In
particular, unquoted portfolio companies may seek IPOs from time to
time following an investment by the Company, in which case the
Company may continue to hold its investment without
restriction.
The Company is not expected to take majority shareholder
positions in portfolio companies but shall not be restricted from
doing so. Further, there may be circumstances where the ownership
of a portfolio company exceeds 50% of voting and/or economic
interests in that portfolio company notwithstanding an initial
investment in a minority position. While the Company does not
intend to focus its investments on a particular sector, there is no
limit on the Company's ability to make investments in portfolio
companies within the same sector if it chooses to do so.
The Company will seek to ensure that it has suitable investor
protection rights through its investment in portfolio companies
where appropriate.
The Company may acquire investments directly or by way of
holdings in special purpose vehicles, intermediate holding vehicles
or other fund or similar structures.
Investment restrictions
The Company will invest and manage its assets with the objective
of spreading risk, as far as reasonably practicable.
No single investment (including related investments in group
entities) will represent more than 20% of Gross Assets, calculated
as at the time of that investment. The market value of individual
investments may exceed 20% of gross assets following
investment.
The Company's aggregate equity investments in publicly traded
companies that it has not previously held an investment in prior to
that investment's IPO will represent no more than 20% of the Gross
Assets, calculated as at the time of investment.
Subject in all cases to the Company's cash management policy,
the Company's aggregate investment in notes, bonds, debentures and
other debt instruments (which shall exclude for the avoidance of
doubt convertible debt, equity-related and equity-linked notes,
warrants or equivalent instruments) will represent no more than 20%
of the Gross Assets, calculated as at the time of investment.
The Company will not be required to dispose of any investment or
rebalance its portfolio as a result of a change in the respective
value of any of its investments.
Board Members
The Board comprises five independent non-executive Directors who
meet at least quarterly, in addition to ad hoc meetings convened in
accordance with the needs of the business, to consider the
Company's affairs in a prescribed and structured manner. All
Directors are considered independent of the Investment Adviser for
the purposes of the AIC Code and Listing Rule 15.2.12A.
The Board is responsible for the Company's long term
sustainability success and the generation of value for
shareholders. In doing so, the Board oversees the business affairs
of the Company in accordance with the Articles of Incorporation,
the investment policy and with due regard to the wider interests of
stakeholders as a whole. Additionally, the Board has overall
responsibility for the Company's activities including its
investment activities and reviewing the performance of the
Company's portfolio. The Board is confident that the combination of
its members is appropriate and is such that no one individual or
small group of individuals dominates the Board's decision
making.
The Directors, in the furtherance of their duties, may take
independent professional advice at the Company's expense, which is
in accordance with provision 19 of the AIC Code. The Directors also
have access to the advice and services of the Company Secretary
through its appointed representatives who are responsible to the
Board for ensuring that the Board's procedures are followed, and
that applicable rules and regulations are complied with.
To enable the Board to function effectively and allow the
Directors to discharge their responsibilities, full and timely
access is given to all relevant information.
Comprehensive board papers are circulated to the Board in
advance of meetings by the Company Secretary, allowing time for
full review and comment by the attending parties. In the event that
Directors are unable to attend a particular meeting, they are
invited to express their views on the matters being discussed to
the Chairman in advance of the meeting for these to be raised
accordingly on their behalf. Full and thorough minutes of all
meetings are kept by the Company Secretary.
The Directors are requested to confirm their continuing
professional development is up to date and any necessary training
is identified during the annual performance reviews carried out and
recorded by the Remuneration and Nomination Committee.
The current Board has served since the Company's inception in
October 2018 and has been carefully selected against a set of
objective criteria. The Board considers that the combination of its
members brings a wealth of skills, experience and knowledge to the
Company, as illustrated in their biographies below. As part of the
on-going review of Board composition, skills analysis and
succession planning, an independent consultant has been engaged and
is currently working to source a sixth non-executive director:
Director Biographies
Andrew Haining (Chairman) (independent)
Andrew has had a 30-year career in banking and private equity
with Bank of America, CDC (now Bridgepoint) and Botts &
Company. During his career, Andrew has been responsible for over 20
private equity investments with transactional values in excess of
$1bn.
Andrew holds several Guernsey and UK board positions.
Stephen Coe (senior independent)
Stephen serves as Chairman of the Audit Committee. He is
currently a Director and Chairman of the Audit Committee of Weiss
Korean Opportunities Fund Limited, and a Non-Executive Director of
River and Mercantile UK Micro Cap Investment Company Limited.
Stephen has been involved with offshore investment funds and
managers since 1990, with significant exposure to property, debt,
emerging markets and private equity investments. Stephen qualified
as a Chartered Accountant with Price Waterhouse Bristol in 1990 and
remained in audit practice, specialising in financial services,
until 1997. From 1997 to 2003 Stephen was a director of the
Bachmann Group of fiduciary companies and Managing Director of
Bachmann Fund Administration Limited, a specialist third party fund
administration company. From 2003 to 2006 Stephen was a director
with Investec in Guernsey and Managing Director of Investec Trust
(Guernsey) Limited and Investec Administration Services Limited.
Stephen became self-employed in August 2006, providing services to
financial services clients.
Simon Holden (independent)
Simon Holden (British, Guernsey Resident) is a Chartered
Director (CDir) and Fellow of the Institute of Directors and adds
extensive private equity investing and corporate operations
experience to the Company's board. Previously an investment
director at Terra Firma Capital Partners, Candover Investments
prior to that, Simon has been an active independent director to
listed investment trusts, private equity funds and trading company
boards since 2015. In addition, Simon acts as the pro-bono Business
Adviser to the States of Guernsey's Trading Assets that operate all
of the Bailiwick's critical airports, harbours and maritime fuel
supply infrastructure.
Simon graduated from the University of Cambridge with an MEng
and MA (Cantab) in Manufacturing Engineering. He is a member of the
Association of Investment Companies ('AIC'), Institute of Directors
('IoD'), Guernsey Investment Funds Association ('GIFA') and several
other financial services and intellectual property interest
groups.
Anne Ewing (independent)
Anne has over 35 years of financial services experience in
banking, asset and fund management, corporate treasury, life
insurance and the fiduciary sector. Anne has an MSc in Corporate
Governance and is a Chartered Fellow of the Securities Institute
and a Fellow of ICSA. Anne has held senior roles in Citibank,
Rothschilds, Old Mutual International and KPMG and latterly has
been instrumental in the start-ups of a Guernsey fund manager and
two fiduciary licensees.
Anne has several non-executive Directorships and chairman roles
in investment companies and a banking and trust company group in
the Channel Islands and in London.
Tim Cruttenden (independent)
Tim is Chief Executive Officer of VenCap International plc, a
UK-based asset management firm focused on investing in venture
capital funds. He joined VenCap in 1994 and is responsible for
leading the strategy and development of the firm. Prior to joining
VenCap, Tim was an economist and statistician at the Association of
British Insurers in London. He received his Bachelor of Science
degree (with honours) in Combined Science (Economics and
Statistics) from Coventry University and is an Associate of the CFA
Society of the UK. Tim is a non-executive director of Polar Capital
Technology Trust.
Interim Management Report
For the 6 month period ended 31 March 2021
Risks and Uncertainties
There are several potential risks and uncertainties which could
have a material impact on the Company's performance and could cause
actual results to differ materially from expected and historical
results.
The AIFM has overall responsibility for risk management and
control within the context of achieving the Company's objectives.
The Board agrees the strategy for the Company, approves the
Company's risk appetite and the AIFM monitors the risk profile of
the Company. The AIFM also maintains a risk management process to
identify, monitor and control risk concentration.
The Board's responsibility for conducting a robust assessment of
the principal and emerging risks is embedded in the Company's risk
map, which helps position the Company to ensure compliance with the
Association of Investment Companies Code of Corporate Governance
(the "AIC Code").
The main risks that the Company faces arising from its financial
instruments are:
(i) market risk, including:Price risk, being the risk that the
value of investments will fluctuate because of
changes in market prices;
- interest rate risk, being the risk, that the future cash flows
of a financial instrument will fluctuate because of changes in
interest rates; and
- foreign currency risk, being the risk that the value of
financial assets and liabilities will fluctuate because of
movements in currency rates.
(ii) credit risk, being the risk that a counterparty to a
financial instrument will fail to discharge an obligation or
commitment that it has entered with the Company.
(iii) liquidity risk, being the risk that the Company will not
be able to meet its liabilities when they fall due. This may arise
should the Company not be able to liquidate its investments.
(iv) company failure, being the risk that companies invested in
may fail and result in loss of capital invested.
To manage such risks the Company shall comply with the
investment restrictions and diversification limits provided for in
the Prospectus.
The Company will invest and manage its assets with the objective
of spreading risk. Further to the investment restrictions
discussed, the Company also seeks to manage risk by:
-- not incurring debt over 20% of its NAV, calculated at time of
drawdown. The Company will target repayment of such debt within
twelve months of drawdown; and
-- entering from time to time into hedging or other derivative
arrangements for the purposes of efficient portfolio management,
managing where appropriate, any exposure through its investments to
currencies other than Sterling.
Emerging risks
Whilst vaccination programmes are being rolled out and, at the
interim period end, the outlook for the economy is improving,
COVID-19 remains an on-going risk and remains a source of
uncertainty.
In considering this risk, the Board's thought process has been
as follows:
The Directors have carried out a robust assessment of the
Company's processes for monitoring operating costs, share price
discount, the Investment Adviser's compliance with the investment
objective and policy, asset allocation, the portfolio risk profile,
counterparty exposure, liquidity risk and financial controls. At 31
March 2021, the Company had cash and cash equivalents of
GBP304,966,000 and current liabilities of GBP66,588,000. Therefore,
the Company is able to settle its debts and continue its business
with no interruptions.
Among the aims of the Company, as set out at IPO, are 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 Investment Adviser 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. Not only can this lead to higher growth rates in the short
term, but it can also drive new user adoption at significantly
lower cost than previously experienced.
The Directors monitor the performance of the portfolio
investments on a quarterly basis and receive monthly data in some
instances which enables them to track the development of the
Investment Adviser's investment theses.
The Board have considered the operations of the services
providers as they relate to the Company. With this in mind, the
Board believe the Company is well-positioned at this particular
time from a thematic perspective and the strategy of the Company
therefore remains unchanged.
The Board will of course continue to assess the position as more
information about the impact of the virus becomes available.
Going Concern
In assessing the going concern basis of accounting, the
Directors have assessed the guidance issued by the Financial
Reporting Council and considered recent market volatility and the
potential impact of COVID-19 virus on the Company's investments.
After making enquiries and bearing in mind the nature of the
Company's business and assets, the Directors consider that the
Company has adequate resources to continue in operational existence
for at least twelve months from the date of approval of the
Unaudited Condensed Interim Financial Statements. For this reason,
they continue to adopt the going concern basis in preparing the
Unaudited Condensed Interim Financial Statements.
At period end, the Company has a current cash position of
GBP304,966,000 and current liabilities amounting to GBP66,588,000.
Therefore, the Company has sufficient liquidity to meet its
obligations. For this reason, the Directors continue to adopt the
going concern basis in preparing the Interim Report and Unaudited
Condensed Interim Financial Statements.
Important events and financial performance
Highlights from financial year to date are as follows;
Ordinary Shares
Highlights 31 March 2021
Net Asset Value per share 206.15p
Share Price 195.50p
% of capital deployed 77%
The table below provides quarterly performance information:
NAV % change in
Date per share price
30.09.20 160.97 17.3% increase on 30.06.2020 NAV
31.12.20 180.75 12.3%
31.03.21 206.15 14.1%
The net profit for the period amounted to GBP197,355,000.
Further details of the Company's performance for the period are
included in the Investment Adviser's Report on pages 4 to 18, which
includes a review of investment activity and adherence to
investment restrictions.
Discount
As at 31 March 2021, the share price was trading at a premium to
the last published NAV per share at that point.
Related party transactions
Details of related party transactions are given in note 13 to
the Unaudited Condensed Interim Financial Statements.
Statement of Directors' Responsibilities
The Directors confirm that to the best of their knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting;
-- the interim management report (which includes the Chairman's
Statement, Interim Management Report and the Investment Adviser's
Report) includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of financial statements, and a description of
the principal or emerging risks and uncertainties for the remaining
six months of the financial year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the financial year and that have materially
affected the financial position or the performance of the entity
during that period and any changes in the related party
transactions described in the last annual report that could do
so.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website, and for the preparation and dissemination of
financial statements. Legislation in Guernsey governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Stephen Coe
Director
29 June 2021
Independent Review Report
Conclusion
We have been engaged by Chrysalis Investments Limited (the
"Company") to review the condensed set of financial statements in
the half-yearly financial report for the six months ended 31 March
2021 of the Company which comprises the unaudited condensed
statement of comprehensive income, the unaudited condensed
statement of financial position, the unaudited condensed statement
of changes in equity, the unaudited condensed statement of cash
flows and the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
March 2021 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The Directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU.
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement letter to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Barry Ryan
for and on behalf of KPMG Channel Islands Limited
Chartered Accountants, Guernsey
29 June 2021
Unaudited Condensed Statement of Comprehensive Income
For the 6 month period ended 31 March 2021
Period from Period from
1 Oct 2020 to 1 Oct 2019 to
31 March 2021 31 March 2020
(unaudited) (unaudited)
Notes Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments
Net gains / (losses) on investments
held at fair value
through profit or loss 9 - 249,691 249,691 - (14,007)
(14,007)
Gains / (Losses) on currency
movements - 216 216 - (147) (147)
________ ________ ________ ________ ________ ________
Net investment gains / (losses) - 249,907 249,907 -
(14,154) (14,154)
________ ________ ________ ________ ________ ________
Interest income 508 - 508 127 258 385
________ ________ ________ ________ ________ ________
Total income 508 - 508 127 258 385
________ ________ ________ ________ ________ ________
Investment management and
performance fees 5 (1,820) (49,339) (51,159) (950) - (950)
Other expenses 6 (1,856) - (1,856) (1,039) - (1,039)
________ ________ ________ ________ ________ ________
(Losses)/gains before finance
costs and taxation (3,168) 200,568 197,400 (1,862)
(13,896) (15,758)
Finance costs (45) - (45) - - -
________ ________ ________ ________ ________ ________
(Losses)/gains before taxation (3,213) 200,568 197,355 (1,862)
(13,896) (15,758)
Withholding tax expense - - - - - -
________ ________ ________ ________ ________ ________
Total (losses)/gains and
comprehensive income
for the period (3,213) 200,568 197,355 (1,862) (13,896)
(15,758)
________ ________ ________ ________ ________ ________
(Losses)/gains per
Ordinary Share (pence) 7 (0.81) 50.32 49.51 (0.55) (4.13)
(4.68)
The total column of this statement represents the Statement of
Comprehensive Income of the Company prepared under IAS 34.
The supplementary revenue and capital return columns are
prepared under guidance published by the Association of Investment
Companies ("AIC").
All items in the above statement derive from continuing
operations.
The notes on pages 33 to 49 form an integral part of these
unaudited condensed interim financial statements.
Unaudited Condensed Statement of Financial Position
As at 31 March 2021
31 March 30 September
2021 2020
Notes GBP'000 GBP'000
(unaudited) (audited)
Non-current assets
Investments held at fair value through profit or loss 9 889,008 606,287
___________ ___________
Current assets
Cash and cash equivalents 304,966 15,559
Other receivables 824 267
___________ ___________
305,790 15,826
___________ ___________
Total assets 1,194,798 622,113
___________ ___________
Current liabilities
Performance fee payable 5 (49,339) (32,710)
Management fee payable (1,820) (631)
Unsettled trades - (46,440)
Other payables (429) (289)
Loan payable (15,000) -
___________ ___________
Total liabilities (66,588) (80,070 )
___________ ___________
Net assets 1,128,210 542,043
___________ ___________
Equity
Share Capital 10 759,179 370,367
Capital reserve 377,378 176,810
Revenue reserve (8,347) (5,134)
___________ ___________
Total equity 1,128,210 542,043
___________ ___________
Net Asset Value per Ordinary Share (pence) 11 206.15 160.97
Number of Ordinary Shares in issue 10 547,273,076
336,742,424
Approved by the Board of Directors and authorised for issue on
29 June 2021 and signed on their behalf:
Stephen Coe
Director
The notes on pages 33 to 49 form an integral part of these
unaudited condensed interim financial statements.
Unaudited Condensed Statement of Changes in Equity
For the 6 month period ended 31 March 2021
Share Revenue Capital
capital reserve reserve Total
2021 2021 2021 2021
GBP'000 GBP'000 GBP'000 GBP'000
For the period 1 October 2020
to 31 March 2021 (unaudited)
At 1 October 2020 370,367 (5,134) 176,810 542,043
Share issue 395,000 - - 395,000
Share issue costs (6,188) - - (6,188)
Total gains / (losses) and comprehensive
income for the period - (3,213) 200,568 197,355
___________ ___________ ___________ ___________
At 31 March 2021 759,179 (8,347) 377,378 1,128,210
___________ ___________ ___________ ___________
Share Revenue Capital
capital reserve reserve Total
2020 2020 2020 2020
GBP'000 GBP'000 GBP'000 GBP'000
For the period 1 October 2019
to 31 March 2020 (unaudited)
At 1 October 2019 370,366 (1,440) 12,704 381,630
Total losses and comprehensive
income for the period - (1,862) (13,896) (15,758)
Expenses of share issue 1 - - 1
___________ ___________ ___________ ___________
At 31 March 2020 370,367 (3,302) (1,192) 365,873
___________ ___________ ___________ ___________
The notes on pages 33 to 49 form an integral part of these
unaudited condensed interim financial statements.
Unaudited Condensed Statement of Cash Flows
For the 6 month period ended 31 March 2021
Period from Period from
1 Oct 2020 to 1 Oct 2019 to
31 March 31 March
2021 2020
Notes GBP'000 GBP'000
(unaudited) (unaudited)
Cash flows from operating activities
Interest paid (45) -
Other expense payments 12 (82,054) (1,980)
Interest income 508 385
Purchases of investments 9 (45,058) (130,129)
Sale of investments 9 12,028 -
___________ ___________
Net cash outflow from operating activities (114,621)
(131,724)
___________ ___________
Cash flows from financing activities
Issue of Ordinary Shares 10 395,000 -
Expenses of Ordinary Share issuance 10 (6,188) -
Acquisition of loan payable 15,000 -
___________ ___________
Net cash inflow from financing activities 403,812 -
___________ ___________
Net increase / (decrease) in cash and cash equivalents 289,191
(131,724)
Cash and cash equivalents at beginning of period 15,559 212,665
Effect of foreign exchange 216 (147)
___________ ___________
Cash and cash equivalents at end of period 304,966 80,794
__________ ___________
Cash and cash equivalents comprise of the following:
Cash at bank 304,966 20,802
Cash equivalents - UK treasury bills - 59,992
___________ ___________
304,966 80,794
___________ ___________
The notes on pages 33 to 49 form an integral part of these
unaudited condensed interim financial statements.
Selected Explanatory Notes to the Unaudited Condensed Interim
Financial Statements
For the 6 month period ended 31 March 2021
1. Reporting Entity
Chrysalis Investments Limited (the "Company") is a closed-ended
investment company, registered in Guernsey on 3 September 2018,
with registered number 65432. The Company's registered office is
3rd Floor, 1 Le Truchot, St Peter Port, Guernsey GY1 1WD.
The Company is a Registered Closed-ended Collective Investment
Scheme regulated by the Guernsey Financial Services Commission
("GFSC"), with reference number 2404263, pursuant to the Protection
of Investors (Bailiwick of Guernsey) Law 1987, as amended and the
Registered Closed-ended Investment Scheme Rules 2015.
The Company's 547,273,076 shares in issue under ticker CHRY,
SEDOL BGJYPP4 and ISIN GG00BGJYPP46 have a premium listing and are
admitted to trading on the London Stock Exchange's Main Market for
listed securities. The Unaudited Condensed Interim Financial
Statements of the Company are presented for the 6 month period
ended 31 March 2021. The Company invests in a diversified portfolio
consisting primarily of equity and equity-related securities issued
by unquoted companies. The Company became a FTSE 250 company on 23
March 2021.
The Company and its Alternative Investment Fund Manager received
investment advice from Jupiter Investment Management Limited
("JIML") during the 6 month period ended 31 March 2021. The
administration of the Company is delegated to Maitland
Administration (Guernsey) Limited ("MAGL") (the
"administrator").
2. Significant accounting policies
(a) Basis of accounting
The Unaudited Condensed Interim Financial Statements have been
prepared on a going concern basis in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU, and applicable Guernsey
law. These Unaudited Condensed Interim Financial Statements do not
comprise statutory Financial Statements within the meaning of the
Companies (Guernsey) Law, 2008, they do not include all of the
information required for full annual financial statements and
should be read in conjunction with the financial statements of the
Company as at 30 September 2020, which were prepared in accordance
with International Financial Reporting Standards as adopted by the
EU. The accounting policies adopted in these Unaudited Condensed
Interim Financial Statements are consistent with those of the
previous financial period and the corresponding interim reporting
period, except for the adoption of new and amended standards as set
out below.
Where presentational guidance set out in the Statement of
Recommended Practice ("SORP") for investment companies issued by
the Association of Investment Companies ("AIC") updated in February
2019 is consistent with the requirements of IFRS, the directors
have sought to prepare the Unaudited Condensed Interim Financial
Statements on a basis compliant with the recommendations of the
SORP.
(b) Going concern
The Directors have adopted the going concern basis in preparing
the Unaudited Condensed Interim Financial Statements.
In assessing the going concern basis of accounting, the
Directors have assessed the guidance issued by the Financial
Reporting Council and considered recent market volatility and the
potential impact of COVID-19 virus on the Company's investments.
After making enquiries and bearing in mind the nature of the
Company's business and assets, the Directors consider that the
Company has adequate resources to continue in operational existence
for at least twelve months from the date of approval of the
Unaudited Condensed Interim Financial Statements. For this reason,
they continue to adopt the going concern basis in preparing the
Unaudited Condensed Interim Financial Statements.
At period end, the Company has a current cash position of
GBP304,966,000 and current liabilities amounting to GBP66,588,000.
Therefore, the Company has sufficient liquidity to meet its
obligations. For this reason, the Directors continue to adopt the
going concern basis in preparing the Interim Report and Unaudited
Condensed Interim Financial Statements.
(c) Segmental reporting
The chief operating decision maker is the Board of Directors.
The Directors are of the opinion that the Company is engaged in a
single segment of business with the primary objective of investing
in securities to generate capital growth for shareholders.
Consequently, no business segmental analysis is provided.
The key measure of performance used by the Board is the Net
Asset Value of the Company (which is calculated under IFRS as
adopted by the European Union). Therefore, no reconciliation is
required between the measure of profit or loss used by the Board
and that contained in these Unaudited Condensed Interim Financial
Statements.
(d) Taxation
The Company has been granted exemption from liability to income
tax in Guernsey under the Income Tax (Exempt Bodies) (Guernsey)
Ordinance, 1989 amended by the Director of Income Tax in Guernsey
for the current period. Exemption is applied and granted annually
and subject to the payment of a fee, currently GBP1,200.
3. Use of estimates and critical judgements
The preparation of Unaudited Condensed Interim Financial
Statements in accordance with IFRS requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the Unaudited Condensed Interim
Financial Statements and the reported amounts of income and
expenses during the period. Actual results could differ from those
estimates and assumptions.
The estimates and underlying assumptions are reviewed on an
ongoing basis. There were no significant accounting estimates or
significant judgements in the current period, except for the use of
estimates in the valuation of the unquoted investments detailed in
note 13.
4. New and revised standards
The following accounting standards and their amendments were in
issue at the period end but will not be in effect until after this
financial period end. The Directors have considered their impact
and have concluded that they will not have a significant impact on
the Unaudited Condensed Interim Financial Statements.
-- Amendments to IFRS 9, IAS 1 and IAS 37 - effective 1 January 2022
-- Amendments to IAS 1, IAS 8 and IAS 12 - effective 1 January 2023
5. Investment management fees
1 October 2020 to 1 October 2019 to
31 March 31 March
2021 2020
GBP'000 GBP'000
Investment management fee 1,820 950
Investment Adviser's performance fee - charged to capital 49,339
-
___________ ___________
Total investment management fees 51,159 950
___________ ___________
Under the terms of the portfolio management agreement, Jupiter
Investment Management Limited ("JIML") is entitled to a management
fee and a performance fee together with reimbursement of reasonable
expenses incurred in the performance of its duties. JIML is a
subsidiary of Jupiter.
Management fee
The monthly management fee is equal to 1/12 of 0.5% of the Net
Asset Value (the "management fee"). The management fee is
calculated and paid monthly in arrears.
If at any time the Company invests in or through any other
investment fund or special purpose vehicle and a management fee or
advisory fee is charged to such investment fund or special purpose
vehicle by JIML or any of its Associates and is not waived, the
value of such investment will be excluded from the calculation of
NAV for the purposes of determining the management fee.
As at 31 March 2021, an amount of GBP1,820,000 (30 September
2020: GBP631,000) was outstanding and due to JIML in respect of
management fees.
Performance fee
JIML will be entitled to receive a performance fee, the sum of
which is equal to 20% of the amount by which the Adjusted Net Asset
Value at the end of a Calculation Period exceeds the higher of: (i)
the Performance Hurdle; and (ii) the High Water Mark ("the
performance fee"). The calculation period for the current period
will be the period commencing on 1 October 2020 and ending on 30
September 2021 (the "Calculation Period").
Adjusted Net Asset Value at the end of a Calculation Period
shall be the audited NAV in Sterling at the end of the relevant
Calculation Period:
(i) plus an amount equal to any accrued or paid performance fee
in respect of that Calculation Period or any prior Calculation
Period;
(ii) plus an amount equal to all dividend or other income
distributions paid to shareholders that have been declared and paid
on or prior to the end of the relevant Calculation Period;
(iii) minus the amount of any distribution declared in respect
of the Calculation Period but which has not already reduced the
audited NAV;
(iv) minus the Net Capital Change where the Net Capital Change
is positive or, correspondingly, plus the Net Capital Change where
such net Capital Change is negative (which for this purpose
includes the Net Capital Change in the relevant Calculation Period
and each preceding Calculation Period; and
(v) minus any increase in the NAV during the Calculation Period
attributable to investments attributable to C shares prior to the
conversion of those C shares.
"Performance Hurdle" means, in relation to the Calculation
Period, ("A" multiplied by "B") + C where:
"A" is 8% (expressed for the purposes of this calculation as
1.08) (calculated as an annual rate and adjusted to the extent the
Calculation Period is greater or shorter than one year).
"B" is:
(i) in respect of the first Calculation Period, the Net Issue
Proceeds; or
(ii) in respect of each subsequent Calculation Period, the sum
of this calculation as at the end of the immediately preceding
Calculation Period: plus (where sum is positive) or minus (where
such sum is negative) the Net Capital Change attributable to shares
issues and repurchases in all preceding Calculation Period (the
amount in this paragraph (b) being the "Aggregate NCC"), in each
case, plus (where such sum is positive) or minus (where such sum is
negative) the sum of:
(x) in respect of each share issue undertaken in the relevant
Calculation Period being assessed, an amount equal to the Net
Capital Change attributable to that share issue multiplied by the
sum of the number of days between admission to trading of the
relevant shares and the end of the relevant Calculation Period
divided by 365 (such amount being the "issue adjustment"),
minus
(y) in respect of each repurchase or redemption of shares
undertaken in the relevant Calculation Period being assessed, an
amount equal to Net Capital Charge attributable to that share
purchase or redemption multiplied by the number of days between the
relevant disbursement of monies to fund such repurchase or
redemption and the end of the relevant Calculation Period divided
by 365 (such amount being the "reduction adjustment"),
"C" is the sum of:
the issue adjustment for the Calculation Period;
the reduction adjustment for the Calculation Period; and
the Aggregate NCC multiplied by -1.
"Net Capital Change" equals I minus R where:
"I" is the aggregate of the net proceeds of any share issue over
the relevant year (other than the first issue of ordinary
shares);
"R" is the aggregate of amounts disbursed by the Company in
respect of the share redemptions or repurchases over the relevant
period.
"High Water Mark" means the Adjusted Net Asset Value as at the
end of the Calculation Period in respect of which a performance fee
was last earned or if no performance fee has yet been earned, an
amount equal to the Net Issue Proceeds (as such term is defined in
the prospectus); and
"Calculation period" means each twelve-month period ending on 30
September, except that the first Calculation Period shall be the
period commencing on Admission and ending on
30 September 2019.
Under the terms of the portfolio management agreement, any
accrued and unpaid performance fees will crystallise and become
payable to JIML upon certain termination events.
The accrued performance fee shall only be payable by the Company
to the extent that the Payment Amount is greater than the sum of
the performance fee (which shall both be calculated as at the end
of each Calculation Period) and, to the extent that the Payment
Amount is less than the sum of the performance fee for that
Calculation Period, an amount equal to the difference shall be
carried forward and included in the performance fee calculated as
at the end of the next Calculation Period (and such amount shall be
paid before any performance fee accrued at a later date).
"Payment amount" is the sum of:
(i) aggregate net realised profits on investments since the
start of the relevant Calculation Period; plus
(ii) an amount equal to each IPO investment unrealised gain
where the initial public offering of the relevant investment takes
place during the relevant Calculation Period; plus or minus (as
applicable)
(iii) an amount equal to the listed investment value change
attributable to that calculation period; plus
(iv) the aggregate amount of all dividends or other income
received from investments of the Company in that Calculation Period
(other than investments made pursuant to the cash management policy
of the Company as stated in the Investment Policy).
No performance fee is payable out of the assets attributable to
any C Shares in issue from time to time.
As at 31 March 2021, the Company had exceeded the High Water
Mark and Performance Hurdle and an accrual of GBP49,338,637 (2020:
GBPnil) for performance fees has been reflected within these
Unaudited Condensed Interim Financial Statements.
6. Other expenses
1 October 2020 to 1 October 2019 to
31 March 31 March
2021 2020
GBP'000 GBP'000
Directors' fees 218 104
Directors' expenses - 1
Administration fee 95 57
Arrangement fees 160 -
AIFM fee 96 64
Auditor's remuneration for:
- audit fees 68 35
- non-audit fees 107 35
Secretarial fees 18 18
Printing fees 34 27
Registrars' fees 21 11
Listing fees 127 5
FCA fees 8 3
Legal fee and professional fees:
- ongoing operations 742 29
- purchases 53 579
Depositary fees 32 15
Directors' liability insurance 24 15
Sundry 53 41
___________ ___________
1,856 1,039
___________ ___________
7. Gains / (losses) per Ordinary Share
31 March 2021 31 March 2020
Net return Per share Net return Per share
GBP'000 pence GBP'000 pence
Revenue return (3,213) (0.81) (1,862) (0.55)
Capital return 200,568 50.32 (13,896) (4.13)
___________ ___________ ___________ ___________
At 31 March 197,355 49.51 (15,758) (4.68)
___________ ___________ ___________ ___________
Weighted average number of Ordinary Shares 398,561,496
336,742,424
8. Dividends
The Board has not declared an interim dividend.
9. Investments held at fair value through profit or loss
31 March 30 September
2021 2020
GBP'000 GBP'000
Opening book cost 404,480 157,591
Opening investment holding gains 201,807 12,449
___________ ___________
Opening valuation 606,287 170,040
Movements in the period / year
Purchases at cost 45,058 258,453
Sales - proceeds (12,028) (19,632)
Net gains on investments held at fair value
through profit or loss 249,691 197,426
Closing valuation 889,008 606,287
___________ ___________
31 March 30 September
2021 2020
GBP'000 GBP'000
Closing book cost 445,028 404,480
Closing investment holding gains 443,980 201,807
___________ ___________
Closing valuation 889,008 606,287
___________ ___________
Movement in unrealised gains during the period / year 237,652 197,199
Movement in unrealised losses during the period / year 4,521 (7,841)
Realised gain on sale of investments 7,518 8,068
___________ ___________
249,691 197,426
___________ ___________
10. Share capital
No of
shares GBP'000
Ordinary Shares at no par value
Opening balance as at 1 October 2020 336,742,424 370,367
Issue of shares 210,530,652 3 95,000
Issue costs - (6,188)
___________ ___________
At 31 March 2021 547,273,076 759,179
___________ ___________
Opening balance as at 1 October 2019 336,742,424 370,366
Issue costs - 1
___________ ___________
At 30 September 2020 336,742,424 370,367
___________ ___________
The holders of Ordinary Shares have the right to receive notice
of and attend, speak and vote in general meetings of the Company.
They are also entitled to participate in any dividends and other
distributions of the Company.
The Company was incorporated on 3 September 2018 with an issued
share capital of GBP1 represented by 1 Management Share with a
nominal value of GBP1. The Management Share was redeemed
immediately following admission of the Ordinary Shares on 6
November 2018.
11. Net Asset Value per Ordinary Share
The Net Asset Value per Ordinary Share and the Net Asset Value
at the period end calculated in accordance with the Articles of
Incorporation were as follows:
31 March 2021 30 September 2020
NAV NAV NAV NAV
per share attributable per share attributable
pence GBP'000 pence GBP'000
Ordinary Shares: basic and diluted 206.15 1,128,210 160.97 542,043
___________ ___________ ___________ ___________
The Net Asset Value per Ordinary Share is based on 547,273,076
Ordinary Shares, being the number of Ordinary Shares in issue at
the period end.
12. Other expenses payments
31 March 30 September
2021 2020
GBP'000 GBP'000
Total gains / (losses) and comprehensive income
for the period 197,355 (15,758)
Net (gains) / losses on investments held at fair value
through profit or loss (249,691) 14,007
Interest income (508) (385)
Finance costs 45 -
Forex (gains) / losses (216) 147
Movement in working capital
Increase in other receivables (557) (55)
(Decrease) / increase in payables (28,482) 64
___________ ___________
At 31 March 2021 ( 82,054) (1,980)
___________ ___________
13. Financial instruments and capital disclosures
The Company's activities expose it to a variety of financial
risks; market risk (including other price risk, foreign currency
risk and interest rate risk), credit risk and liquidity risk.
The unaudited condensed interim financial statements do not
include all financial risk management information and disclosures
required in the annual financial statements; they should be read in
conjunction with the Company's Audited Financial Statements as at
30 September 2020.
The Company measures fair values using the following hierarchy
that reflects the significance of the inputs used in making the
measurements. Categorisation within the hierarchy has been
determined on the basis of the lowest level input that is
significant to the fair value measurement of the relevant assets as
follows:
Level 1 - Quoted prices (unadjusted) in active markets for
identical assets or liabilities.
An active market is a market in which transactions for the asset
or liability occur with sufficient frequency and volume on an
ongoing basis such that quoted prices reflect prices at which an
orderly transaction would take place between market participants at
the measurement date. Quoted prices provided by external pricing
services, brokers and vendors are included in Level 1, if they
reflect actual and regularly occurring market transactions on an
arm's-length basis.
Level 2 - Inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from
prices).
Level 2 inputs include the following:
-- quoted prices for similar (i.e., not identical) assets in
active markets;
-- quoted prices for identical or similar assets or liabilities
in markets that are not active. Characteristics of an inactive
market include a significant decline in the volume and level of
trading activity, the available prices vary significantly over time
or among market participants or the prices are not current;
-- inputs other than quoted prices that are observable for the
asset (for example, interest rates and yield curves observable at
commonly quoted intervals); and
-- inputs that are derived principally from, or corroborated by,
observable market data by correlation or other means
(market-corroborated inputs).
Level 3 - Inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement in its entirety. If a fair value measurement uses
observable inputs that require significant adjustment based on
unobservable inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgement, considering factors
specific to the asset or liability.
At 31 March 2021 Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Quoted equity 88,152 - - 88,152
Unquoted equity / Convertible debt - - 800,856 800,856
___________ ___________ ___________ ___________
88,152 - 800,856 889,008
___________ ___________ ___________ ___________
At 30 September 2020 Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Quoted equity 94,213 - - 94,213
Unquoted equity / Convertible debt - - 512,074 512,074
___________ ___________ ___________ ___________
94,213 - 512,074 606,287
___________ ___________ ___________ ___________
The following table shows the valuation techniques used for
level 3 fair values, as well as the significant unobservable inputs
used for level 3 items:
Unlisted Investments 2021
Fair Value Valuation Significant Range Sensitivity Sensitivity to changes
as at 31 Technique Unobservable % in significant unobservable
March 2021 Inputs inputs
(GBP000s)
------------------ --------------- ------------ -------------- -----------------------------
If input comparable
company performance
changed by +/- 10%,
Comparable Selection the value of the companies
Company of comparable in this group would
64,776 performance companies -10.88% 10% change by +/- 3,425,253
------------------ --------------- ------------ -------------- -----------------------------
Market If EV/LTM multiples
approach changed by +/- 10%,
using comparable the value of the companies
traded EV/LTM revenue in this group would
179,461 multiples multiple 4.88-11.14x 10% change by +/- 14,389,407
------------------ --------------- ------------ -------------- -----------------------------
401,159 Recent N/A N/A N/A N/A
transaction
price
------------------ --------------- ------------ -------------- -----------------------------
149,127 Indicative N/A N/A N/A N/A
offer
------------------ --------------- ------------ -------------- -----------------------------
5,000 Black Scholes N/A N/A N/A N/A
Pricing
Model
------------------ --------------- ------------ -------------- -----------------------------
1,333 Wind Down N/A N/A N/A N/A
------------------ --------------- ------------ -------------- -----------------------------
The following table shows the valuation techniques used for
level 3 fair values, as well as the significant unobservable inputs
used for level 3 items:
Unlisted Investments 2020
Fair Value as at 30 Valuation Significant Range Sensitivity % Sensitivity to
September 2020 Technique Unobservable Inputs changes in
(GBP000s) significant
unobservable inputs
-------------------- --------------------- ------------ -------------- --------------------
115,474 Comparable Company Selection of 15-30% 10% If input comparable
performance comparable companies company performance
changed by +/- 10%,
the fair value
would change by
+/-1,975,506
-------------------- --------------------- ------------ -------------- --------------------
185,809 Market approach EV/LTM revenue 1.8-13.5x 10% If EV/LTM multiples
using comparable multiple changed by +/- 10%,
traded multiples 13.8-15.4x 10% the fair value
EV/EBITDA Multiple would change by +/-
9,548,694
If EV/ EBITDA
multiples changed
by +/- 10%, the
fair value would
change by
+/-5,069,250
-------------------- --------------------- ------------ -------------- --------------------
69,640 Discounted Cash Discount Factor 12% 1% If discount factor
Flow increased by 1%,
the fair value
would reduce by
8,190,000, if the
discount
factor decreased by
1%, the fair value
would increase by
14,691,000
-------------------- --------------------- ------------ -------------- --------------------
139,892 Recent transaction N/A N/A N/A N/A
price
-------------------- --------------------- ------------ -------------- --------------------
1,256 Wind Down N/A N/A N/A N/A
-------------------- --------------------- ------------ -------------- --------------------
The Company has an established control framework with respect to
the measurement of fair values. This includes a valuation team that
has overall responsibility for overseeing all significant fair
value measurement, including Level 3 fair values.
The valuation team regularly reviews significant unobservable
inputs and valuation adjustments If third party information, such
as pricing services, is used to measure fair vales, then the
valuation team assesses the evidence obtained from the third
parties to support the conclusion that these valuations meet the
requirements of the standards, including to the level in the fair
value hierarchy in which the valuation should be classified.
The following table shows a reconciliation of the opening
balance to the closing balance for Level 1 and 3 fair values:
March September March September
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Level 1 Level 1 Level 3 Level 3
Opening balance 94,213 - 512,074 170,040
Transferred to Level 1 - 64,306 - (64,306)
Purchases - 14,442 45,058 244,011
Sales (12,027) - - (19,632)
Total gains included in net
gains on investments in the
statement of comprehensive income
- on assets sold 7,517 - - 8,068
- on assets held at period/year end (1,551) 15,465 243,724 173,893
___________ ___________ ___________ ___________
88,152 94,213 800,856 512,074
___________ ___________ ___________ ___________
The change in unrealized gains or losses (net gain) for the
period included in the Unaudited Condensed Statement of
Comprehensive Income relating to those Level 3 assets held at the
reporting date amount to GBP243,724,133 (30 September 2020:
GBP140,163,879).
The transfer in prior year of GBP64,306,000 relates to THG Plc,
which transferred from being a level 3 asset to a level 1 asset as
a result of its listing in September 2020.
Investments are transferred between levels at the point of the
trigger event.
There have been no significant changes in the management of risk
or in any risk management policies since the last Statement of
Financial Position date.
14. Related parties
JIML continues to be the Investment Adviser to the Company. The
relationship is governed by an agreement dated 11 October 2018.
1 October 2020 1 October 2019 1 October 2019
31 March 30 September 31 March
2021 2020 2020
GBP'000 GBP'000 GBP'000
Management fee charged by JIML:
Total management fee charged 1,820 2,084 950
Management fee outstanding (1,820) 631 950
Performance fee charged by JIML:
Total performance fee charged 49,339 32,608 -
Performance fee outstanding (49,339) 32,710 103
Directors' fees
Total Directors ' fees charged 218 208 104
Directors' fees outstanding - - -
As at 31 March 2021 the following Directors have holdings in the
Company:
Number of % Ordinary Shares
Director Ordinary Shares issue as at 31 March 2021
Andrew Haining 54,000 0.0099
Stephen Coe 50,909 0.0093
Simon Holden 72,500 0.0132
Anne Ewing 32,500 0.0059
Tim Cruttenden 14,968 0.0027
As at 30 September 2020 the following Directors have holdings in
the Company:
Number of % Ordinary Shares
Director Ordinary Shares issue as at 30 September 2020
Andrew Haining 45,000 0.0134
Stephen Coe 45,909 0.0136
Simon Holden 67,500 0.0200
Anne Ewing 7,500 0.0022
Tim Cruttenden 9,090 0.0027
The following JIML's sub-funds hold an investment in the
Company. The Board is notified at the quarterly board meetings
about any transaction in relation to the sub-funds by JIML's risk
and compliance report. JIML is a subsidiary of Jupiter.
Total Shares Shares Total Value
holdings at purchased sold holdings of holdings
30 September during during 31 March 31 March
2020 the period the period 2021 2021
GBP'000
Related party
Jupiter UK Smaller 5,520,882 2,637,000 (1,590,596) 6,567,286
12,839
Companies Focus Fund
Jupiter UK Specialist 8,122,820 364,317 (364,317) 8,122,820
15,880
Equity Fund
Jupiter UK Mid-Cap 51,451,305 26,141,070 - 77,592,375
151,693
Fund
Jupiter UK Smaller 14,601,552 3,219,000 - 17,820,552 34,839
Companies Fund
__________ __________ ___________ ___________ ___________
Total 79,696,559 32,361,387 (1,954,913) 110,103,033 215,251
___________ ___________ ___________ ___________ ___________
Total Shares Shares Total Value
holdings at purchased sold holdings of holdings
30 September during during 30 September 30 September
2019 the period the period 2020 2020
GBP'000
Related party
Jupiter UK Smaller 11,661,602 - (6,140,720) 5,520,882 8,005
Companies Focus Fund
Jupiter UK Specialist 14,531,866 - (6,419,046) 8,122,820
11,764
Equity Fund
Jupiter UK Mid-Cap 51,451,305 - - 51,451,305 74,604
Fund
Jupiter UK Smaller 14,601,552 - - 14,601,552 21,172
Companies Fund
__________ __________ ___________ ___________ ___________
Total 92,246,325 - (12,559,766) 79,696,559 115,545
___________ ___________ ___________
___________ ___________
15. Post balance sheet events
Post period end, the existing AIFM was replaced with Jupiter
Unit Trust Managers Limited with effect from 1 May 2021.
On 1 June, the Company announced a EUR30 million follow-on in
FinanceApp AG (wefox) as part of its EUR650 million Series C
funding round that gave wefox a post new-money valuation of $3
billion.
On 10 June, Klarna announced a significant funding round, led by
SoftBank, which valued the company at $45.6 billion on a post
new-money basis. If this revised valuation were applied to the
Company's investment in Klarna, then it was estimated it would lead
to a gross increase in the NAV per ordinary share of approximately
20 pence (based on Swedish Krona foreign exchange rates as of 31
March 2021) as compared to the Company's NAV per ordinary share as
of 31 March 2021.
On 24 June, the Company announced a further follow-on investment
into Starling Bank of approximately GBP35 million, connected to
Starling's series D funding round.
On 28 June, the Company announced a GBP75 million investment in
Smart Pension Limited. The investment forms part of a GBP165
million Series D funding round and includes GBP110 million of newly
issued primary capital and GBP55 million of secondary equity
acquired from existing shareholders of Smart Pension Limited.
On 29 June, the Company's Investment Adviser signed a
cornerstone investment agreement with Revolution Beauty Group plc
which allows the Company to invest approximately GBP45m as part of
Revolution Beauty's IPO if the IPO proceeds.
There has not been any other matter or circumstance occurring
subsequent to the end of the financial period that has
significantly affected, or may significantly affect, the operations
of the Company, the results of those operations, or the state of
affairs of the Company in future financial period.
Corporate Information
Directors
Andrew Haining, Chairman
Anne Ewing
Simon Holden
Stephen Coe (Senior Independent Director)
Tim Cruttenden
Registered office
3rd Floor
1 Le Truchot
St Peter Port
Guernsey, GY1 1WD
Alternative Investment Fund Manager
Maitland Institutional Services Ltd
Springfield Lodge
Colchester Road
Chelmsford
Essex, CM2 5PW
Notice served March 2021, inactive until end of notice
period.
Jupiter Unit Trust Managers Limited
The Zig Zag Building
70 Victoria Street
London, SE1E 6SQW
Appointed 1 May 2021
Investment Adviser
Merian Global Investors (UK) Limited
The Zig Zag Building
70 Victoria Street
London, SW1E 6SQ
Jupiter Investment Management Limited
The Zig Zag Building
70 Victoria Street
London, SW1E 6SQ
Appointed 15 February 2021
Financial Adviser and Corporate Broker
Liberum Capital Limited
Ropemaker Place Level 12
25 Ropemaker Street
London, EC2Y 9LY
Numis Securities Limited
The London Stock Exchanges Building
10 Paternoster Square
London, EC4M 7LT
Appointed 17 February 2021
Administrator and Company Secretary
Maitland Administration (Guernsey) Limited
3rd Floor
1 Le Truchot
St Peter Port
Guernsey, GY1 1WD
Registrar
Computershare Investor Services (Guernsey) Limited
1st Floor, Tudor House
Le Bordage
St Peter Port
Depositary
Citibank Europe plc, UK Branch
Citigroup Centre
Canada Square
Canary Wharf
London, E14 5LB
English Legal Adviser to the Company
Travers Smith LLP
10 Snow Hill
London, EC1A 2AL
Guernsey Legal Adviser to the Company
Ogier (Guernsey) LLP
Redwood House
St Julian's Avenue
St Peter Port, GY1 1AW
Independent Auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey, GY11WR
Definitions
BENCHMARK PERFORMANCE
With reference to investment valuation, application of the performance
of a benchmark or pool of comparable companies to an unlisted company
to determine a valuation.
NAV PER SHARE
Net Asset Value expressed as an amount per share.
NAV PER SHARE GROWTH
With reference to fund performance, NAV at end of stated year /
NAV at beginning of stated year as a percentage.
IRR
Internal Rate of Return - with reference to investment performance,
calculated using excel XIRR formula.
TRADING MULTIPLE
With reference to investment valuation, enterprise value / annual
revenue of company.
DRAWDOWN
With reference to index performance, the maximum percentage loss
in value over a given time period.
DISCOUNT / PREMIUM
The amount by which the market price per share of an investment
company is lower or higher than its net asset value per share.
The discount or premium is normally expressed as a percentage of
the net asset value per share.
NET ASSET VALUE (NAV)
The Net Asset Value (NAV) is the amount by which total assets exceed
total liabilities, i.e., the difference between what the Company
owns and what it owes.
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June 30, 2021 02:00 ET (06:00 GMT)
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