TIDMMERI
RNS Number : 1533R
Merian Chrysalis Investment Co. Ltd
26 June 2020
Merian Chrysalis Investment Company Limited
26 June 2020
Merian Chrysalis Investment Company Limited (the "Company")
Interim Results
The Company today announces its results for the period 1 October
2019 to 31 March 2020. The Company's unaudited interim results are
copied below. The results will be available on the Company's
website in due course .
Financial summary
31 March 2020 30 September 2019 % Decrease
NAV per share 108.65 113.3p -4.2%
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Share price 88p 124p -29.0%
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Total net assets GBP366 million GBP382 million -4.2%
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Highlights
- Robust NAV performance, given the impact of COVID-19 on valuation metrics
- Majority of portfolio is trading well through the pandemic
affected period, including post period end
- Significant follow-on and scale-up investments were made in
the period, as well as a new position added
via a EUR14.4m investment in FinanceApp AG ( wefox group), a digital insurtech asset
- Portfolio has been stressed to ensure it is capable of
providing funding if required to investee companies across most
reasonable COVID-19 related trading scenarios
- Post period end, a GBP20m investment was made in Featurespace
Limited, a leader in AI-based fraud detection, the Company's
eleventh asset
- The Company is currently 90% invested
- The Company remains well capitalised , with current available cash of over GBP36m
Richard Watts and Nick Williamson, co-portfolio managers,
commented:
"Despite considerable disruptions to equity markets and
valuations, the Company's portfolio of assets generally traded well
throughout the period, and continues to do so. This, combined with
downside protection structures we look to use where possible, has
limited the impact of COVID-19 related disruption on the Company's
NAV over the first half of the year. We are encouraged with the
strength of trading at a number of our key assets, helped by their
tech-enabled business models. While the full ramifications of
COVID-19 have yet to materialise , this bodes well for future
performance.
"The first 18 months of Chrysalis's life have been about
establishing a strong portfolio and beginning to scale the
proposition. We feel this has been achieved. Our hope is that the
coming periods will allow the benefits of the robust portfolio
trading to manifest in the NAV, and we are optimistic about future
prospects."
-S-
For further information, please
contact:
Merian Global Investors:
Amelie Shepherd +44 (0) 20 7332 7500
Liberum:
Gillian Martin / Owen Matthews +44 (0) 20 3100 2000
Maitland Administration (Guernsey)
Limited:
Elaine Smeja +44 (0) 1481 749364
LEI: 213800F9SQ753JQHSW24
A copy of this announcement will be available on the Company's
website at https://www.merian.com/chrysalis/ . 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
The board of Merian Chrysalis Investment Company Limited
("Merian Chrysalis" or "the Company") is pleased to present these
interim accounts together with a portfolio update from our
Investment Advisor.
The Company continues to build on its strategy of investing in
high growth, later-stage, technology-enabled businesses. The
Company has now built a portfolio of eleven investments (ten at the
period end) covering a number of sectors and geographic footprints
in line with this strategy. Whilst the portfolio is not immune from
effects of the pandemic, which has hit all economies to a greater
or lesser extent since the beginning of 2020, it does seem that the
focus on building stakes in scalable businesses of the future has
also demonstrated the defensive qualities of the strategy during
this period. As a number of commentators have highlighted, the
tragic and awful impact of the pandemic has focused businesses,
consumers and governments on changes in the delivery of goods and
services, and of lifestyles and working practices, towards areas
where technology can play an accelerating and increasing role.
Evidence of the defensiveness of the portfolio can be seen by
the reported NAV over the period, which only fell by 4% despite the
significant impact of COVID-19 on valuation multiples.
Sep-19 Mar-20 % chg
NAV per share 113.3p 108.65p -4.2%
Share price 124p 88p -29.0%
Total net assets GBP382m GBP366m -4.2%
Since formation in October 2018, the Investment Advisor has
enabled the Company to raise GBP375m to capitalise on this
strategy. The Company added an investment in FinanceApp AG
("Wefox") during the period and, post period end, one in
Featurespace Limited ("Featurespace") to take the portfolio to
eleven investments. The diagram on the next page encapsulates the
progress the Company has made and where we and the Investment
Advisor believe we are in its lifecycle. Currently, I believe the
Company is on the cusp of entering the "Growth Phase": where the
maturity of our holding period, and the growth achieved by the
investee companies over this time, begins to become apparent on a
portfolio basis. This is encouraging news, as the rapid addition of
a number of new holdings - coming in at cost - can mask the overall
progress being made by assets on an individual basis.
In our view there is significant growth potential within the
existing portfolio. As you will see in the Investment Advisor's
report below, the lifecycle of each of the companies is at
different phases and we would expect to see some of the more
developed business models yielding realisation opportunities in
line with our original objectives for those investments over the
coming periods. With realisations will come the opportunity to
redeploy capital in new investments and increase flexibility around
funding. During 2020 in particular, the Company has been prudent in
its cash management. This has enabled it to retain sufficient
liquidity to fund the most likely COVID-19 related trading
outcomes, as well to invest throughout the pandemic-affected
period, both in new positions, and in helping existing investee
companies to build scale.
At the full year report I said that the Company would look to
develop an ESG framework. I am pleased to say that work has started
on this, and I look forward to updating shareholders on progress at
the 2020 results.
At the time of signing these interim accounts, Merian Global
Investors (MGI) has announced that it has been acquired by Jupiter
Asset Management ("Jupiter"), subject to regulatory approval. The
Company has a change of control provision in its investment
advisory agreement with MGI. We held discussions with the senior
management of Jupiter prior to Jupiter's shareholders agreeing to
the acquisition as to how the status quo would be maintained post
completion of the acquisition. All the Merian Chrysalis investment
team are moving to Jupiter and will continue to provide the same
services going forward. The Company's negotiating position is being
established by the Management Engagement Committee of the Board,
and in due course, the Board will consider the proposed contractual
arrangements. It is the Board's firm intention to work
constructively with Jupiter and to achieve an outcome that ensures
your Company's long term interests are best served by this change
of control in the Investment advisor.
I believe the investment team led by Richard Watts and Nick
Williamson has built a very impressive portfolio in a relatively
short period of time. The reputation the team is generating through
its investment approach is clearly providing the Company with
access to high quality deal flow where we are investing alongside
well established and successful venture investors from Europe and
North America. Access to that deal flow is a rare commodity from
which our shareholders, I believe, are benefitting.
In conclusion, I believe your Company is well positioned to reap
the rewards of the considerable amount of work undertaken during
the past 18 months. The Investment Advisor has built a portfolio of
strong assets with significant growth potential, and has been
working hard on scaling a number of them. I believe the benefits of
this investment should begin to become apparent as the Company
moves into the Growth Phase, and subsequently onwards into Phase 3:
Realisations. In addition, the Investment Advisor continues to
receive numerous inbound requests for investment, which bodes well
for further deployment of capital in due course.
Finally, we would like to thank all of our shareholders and
advisors for their continued support.
Andrew Haining
Chairman
25 June 2020
Portfolio Statement
As at 31 March 2020 Date of Cost (GBP'000) Value (GBP'000) % of net
acquisition assets
Company
TransferWise Limited 07/11/2018 55,557 67,766 18
Starling Bank Limited 10/04/2019 48,248 51,743 14
Graphcore Limited 17/12/2018 50,395 51,336 14
The Hut Group Limited 20/12/2018 29,648 32,762 9
Klarna Holding AB 09/08/2019 41,236 32,741 9
Embark Group Limited 14/08/2019 14,900 18,402 5
FinanceApp AG (Wefox) Loan Note 18/12/2019 12,059 12,790 3
Sorted Holdings Limited 15/08/2019 10,000 10,000 3
Secret Escapes Limited 07/11/2018 13,065 5,809 2
Growth Street Holdings Limited 22/01/2019 12,612 2,813 1
Total investments 287,720 286,162 78
Cash and cash equivalents 80,794 22
Other net current liabilities (1,083) (0)
----------------
Total net assets 365,873 100
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Overview
Merian Chrysalis entered the first half of the financial year
well capitalised. Following a successful placing in September 2019,
which raised gross proceeds of GBP175m, the Company began the
period with GBP213m of cash and cash equivalents. The portfolio was
45% fully invested at this point and comprised nine assets.
As announced at the time of the placing, our intention was to
use approximately 50% of the proceeds of the capital raise to scale
up exposure to a number of existing portfolio holdings. This was
achieved via the acquisition of additional interests in those
investments from the open-ended UK small- and mid-cap equity funds
managed by Merian Global Investors. This strategy enabled us to
scale up our unit positions in some of the Company's core holdings,
namely TransferWise Limited ("Transferwise"), Graphcore Limited
("Graphcore") and The Hut Group Limited ("The Hut Group" or "THG").
It is difficult to source and execute top-tier deal flow so it was
an efficient use of time and our proceeds to acquire assets, which
we knew had performed well through 2019. As anticipated, these
acquisitions were modestly accretive to NAV as they occurred at a
small discount to the latest valuation, to reflect an estimation of
the normal price of liquidity.
Our first follow-on investment of the period was a GBP20m
investment in Starling Bank Limited ("Starling") in October 2019
and we soon followed this up with a GBP12.2m investment in Embark
Group Limited ("Embark") in November 2019, which enabled it to
acquire the Zurich Platform ("Zurich"). In December, we added our
second asset outside of the United Kingdom via a EUR14.4m
investment in Wefox, a Berlin-based technology business operating
in the insurance sector. This took the total number of portfolio
assets to ten.
At the beginning of 2020, we decided to participate in
Graphcore's Series D-2 funding round (Merian Chrysalis made a $25m
follow-on), encouraged by the announcement of its high-profile
collaboration with Microsoft. Starling also raised a further GBP60m
in February and Merian Chrysalis participated in this funding
round. As of 31 March 2020, the Company had deployed approximately
78% of its available capital.
The Company assessed 45 opportunities over the period and
progressed several assets to the latter stages of due diligence. We
were working on one particularly large investment through Q4 2019,
which we had been tracking for some time. However, we decided to
walk away from that deal at a late stage of due diligence. This was
disappointing given the considerable amount of time we had spent
working on it, however, we will never compromise the quality and
trading performance of the existing portfolio simply in order to
deploy capital.
Merian Chrysalis entered the volatile end to the period, which
was negatively impacted by the COVID-19 global pandemic, well
capitalised. The Investment Advisor continuously assesses the
balance between maintaining flexibility and efficient use of
capital within the Company; periods such as Q1 2020 remind us of
the importance of retaining sufficient capital to support existing
assets through a range of potential trading scenarios.
While we reported our first reduction in NAV through Q1 2020, a
circa ("ca") 4% mark-down could be considered resilient, given the
sharp decline in equity markets over the period and the derating of
comparable listed companies. Limiting the reduction in NAV was
possible due to the robust trading performances of a number of the
portfolio assets and the downside protection mechanisms we look to
utilise where we can, typically in the form of preference and/or
convertible structures. This is discussed at more length in the
"Pipeline and Outlook" section.
Given the exposure of the Company to tech-enabled investment
theses, and the relatively better trading performances demonstrated
by this grouping, versus more traditional, "offline" business
models during the pandemic, we believe the Company is well
positioned at this particular time from a thematic perspective.
Risk was managed over the final COVID-19-affected quarter by
monitoring the situation closely and offering support to portfolio
assets where needed. The Investment Advisor believes it has
retained enough capital to assist its investee companies through a
reasonable range of COVID-19-related trading scenarios should any
potential issues arise.
Market
Equity markets performed strongly across most of the period,
with the NASDAQ reaching an all-time high in February 2020, and the
UK market benefiting from the Conservative party's comprehensive
victory in the general election in December 2019. However, the
focus of the equity markets quickly turned to the spread of
COVID-19 through Q1 and the human and economic ramifications of the
virus. This profoundly affected global markets and equities
suffered steep declines as countries went into lockdown to contain
the outbreak. Oil prices also plunged as the virus weakened the
outlook for demand, at the same time as there was a breakdown of an
agreement between producers to constrain supply.
Across the private markets, COVID-19 negatively impacted deal
flow and the ability of companies to raise external capital. We saw
a marked decrease in the number of deals we were shown by advisors
through Q1 2020 as investors turned their attention to the demands
of their existing portfolio and its capital requirements. During
the period, we assessed 45 deals, of which 27 fell in the quarter
to December 2019. Notwithstanding the decrease in deals, we
successfully closed a new investment in Wefox which we consider to
be a highly attractive investment.
COVID-19 has amplified and demonstrated the importance of
focusing on businesses with strong fundamentals. Much of our
investment effort is dedicated towards identifying those companies
with structural growth opportunities, proven revenue generating
ability, and robust underlying economic drivers. This decreases the
reliance on the state of the general economic environment to drive
returns, and we believe this provides downside protection from a
trading and valuation perspective, and ultimately improves our
chances of successful realisations in due course.
There were a number of notable deals(1) over the period, and it
is encouraging that Merian Chrysalis continues to access some of
Europe's largest and most exciting deals, as evidenced below:
-- Revolut, US$500m Series D (FinTech)
-- Lilium, US$240m Series C (Mobility)
-- Graphcore Limited, US$150m Series D (Semi conductors)
-- Snyk, US$150m Series C (Cyber Security)
-- Wefox, US$110m Series B (InsureTech)
-- Starling Bank Limited, GBP90m Series C (FinTech)
(1.) (The source of the deals referred to above is PitchBook)
(.)
Portfolio
As at 31 March 2020, the Company had net assets of approximately
GBP366m, with caGBP286m invested in private companies and caGBP81m
in cash and cash equivalents. This implies that 78% of assets were
invested.
The Company entered the period with a total of nine portfolio
assets but the majority of the Company's assets consisted of cash
(ca55%), following a successful capital raise in September 2019
that raised gross proceeds of GBP175m. The strategy over the course
of the interim period was to increase the Company's exposure to its
best performing assets while retaining sufficient capital to
initiate two or three further investment positions. This enabled
Merian Chrysalis to maintain the shape and balance of the portfolio
at scale, balance the weighting of the portfolio assets and improve
the diversity and thematic positioning of the overall
portfolio.
As of 31 March 2020, the top three holdings in the Company were
TransferWise (18%), Graphcore (14%) and Starling (14%), three
highly disruptive businesses that have built truly innovative
technologies. The Company is most exposed to the financials sector
(36%), followed by technology (17%), banks (14%), consumer
discretionary (11%) and insurance (3%).
It should be noted that sectors are becoming increasingly
blurred and portfolio assets can often be categorised in various
ways. The Hut Group is a great example of this: it is a leading
e-commerce business across the beauty and nutrition sectors
(consumer discretionary), but it has developed a proprietary
e-commerce platform and has licensed its technology to other brands
and companies (technology).
We also find that in certain sectors, our portfolio companies
trade in completely different sub-sectors, which may imply lower
correlation between the assets than our reporting implies. For
example, within "financials", Klarna Holding AB ("Klarna") provides
online payments, while TransferWise provides a digital money
transfer service and Embark offers a digital retirement
platform.
We will continue to add positions to the portfolio with sector
diversification in mind and we will rarely add competing assets to
the portfolio. We are increasingly interested in adding portfolio
assets that complement each other and that could mutually benefit
from collaboration; this is one of the ways in which we try to
deliver value creation for our portfolio companies and management
teams.
We also look to screen for assets and add units to our portfolio
that follow a broad range of prevailing themes; again, portfolio
assets can sit within one or many of these themes. An example of
these themes would be:
-- The application of machine intelligence in delivering goods and services
-- The ability to provide a product suite efficiently via cloud computing
-- A revenue model that is delivered as a service (aaS) on a subscription basis
-- A business model that satisfies the needs of an organisation rather than individual user
-- A willingness and desire to deliver products and services in a socially responsible way
There were no disposals of investments during the reporting
period. Many of our assets are later-stage, however, and could be
described as 'IPO ready', given that they generate material revenue
streams and in some cases robust profits.
TransferWise Limited
TransferWise is a global technology company that was founded
with the aim of reducing fees associated with sending money across
borders. With a simple money transfer platform and borderless
accounts, TransferWise makes it quick and easy for individuals who
travel, live and work internationally to manage their money.
Businesses can use TransferWise to pay suppliers or employees
overseas, request payments from customers and transfer funds
between their own accounts in different countries. The company now
has over 7m customers that move more than GBP4bn per month.
In the period, TransferWise continued its high cadence of new
service introductions with the launch of its 'Pay with
TransferWise' partnership with accountancy software provider Xero
and API integration with GoCardless, plus adding Apple Pay, GBP and
EUR direct debits to its multi-currency account. The company added
1,100 staff through FY19, which more than doubled total headcount
to over 2,000.
TransferWise is looking to modernise international banking via
"TransferWise for Bank". This is an API which directly integrates
with a financial institution's existing infrastructure, enabling
them to offer customers cheaper, faster, transparent payments to
85+ countries and 40+ currencies. In Q1 2020, TransferWise
announced a partnership with ActivoBank, its first Portuguese
banking customer. TransferWise now works with partners across three
continents, including Monzo in the UK, Bunq in the Netherlands, N26
in Germany, LVH in Estonia, Novo and Stanford Federal Credit Union
in the US and EQ in Canada. Partnerships with BPCE, France's second
largest bank, and Up! in Australia have also been announced.
The company reacted well to lockdown, with a business model well
suited to remote working. Following the outbreak of COVID-19,
TransferWise has seen minimal impact on its growth aspirations,
with some evidence that new customer acquisition has become
easier.
Total Investment:
US $71.8m
Date of Initial and Subsequent Investments:
November 2018, October 2019 and November 2019
Last Reported Financials:
(Y/E: March 19): GBP179m Revenue (+53% YoY); GBP18.3m EBITDA
Graphcore Limited
Graphcore is a leading machine intelligence semiconductor
business, which has developed the Intelligence Processing Unit
("IPU"). The IPU is completely different from today's 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 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.
During the period, Graphcore shared details of its collaboration
with Microsoft, announcing a preview of its IPUs on Microsoft
Azure. Microsoft and Graphcore have been collaborating closely for
over two years and their developers have achieved state of the art
performance and accuracy across a number of complex AI models such
as BERT and ResNeXt . This announcement was a landmark moment for
Graphcore and validates the maturity of the IPU hardware and Poplar
software stack.
A number of other performance tests showing strong IPU
performance were also announced. Of particular note was one
undertaken by Microsoft using IPUs to assess intracranial images
for haemorrhage that showed a 2x improvement in speed for half the
power, and a 26x speed up for financial services customers looking
at probabilistic modelling.
Graphcore also raised US$150m through Q1 2020 from a variety of
new and existing investors, of which Merian Chrysalis was one. This
left the company with cash reserves of over US$300m as of January
2020.
The business adapted well to lockdown, and as of mid-May
continued to see strong engagement from sales leads.
Total Investment:
US$65.2m
Date of Initial and Subsequent Investments:
December 2018, December 2019 and January 2020
Last Reported Financials:
(Y/E: December 18): US$1.2m Revenue (FY17: n/a); (GBP57.8m)
EBITDA
Starling Bank Limited
Founded by banking expert Anne Boden in 2014, Starling has built
a scalable platform that delivers a 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.
During the period Starling launched new functionality,
particularly a business toolkit aimed at SMEs that assists with
invoice and cash flow tracking and helps submit VAT returns to
HMRC. In February it raised a further GBP60m from existing
investors, including Merian Chrysalis, to continue its rapid
expansion and also gave shares to all employees. At this time it
announced it had passed 1.25m customers and GBP1.25bn of deposits.
March saw the launch of a nationwide advertising campaign,
establishment of a Cardiff office (with the creation of 400 jobs)
and winning Best British Bank for a third year in a row at the
British Bank Awards.
The bank adapted well to lockdown, helped by the fact it was
created as an online offering. Post period end there was
significant progress, with the bank being accredited for both the
Coronavirus Business Interruption Loan Scheme (CBILS), where a
GBP300m financing agreement with Funding Circle was announced, and
the Bounce Back Loan Scheme (BBLS). A connected card, linked to a
master account, was also unveiled to help carers continue to
support people self-isolating.
As of mid-May, Starling had opened more than 1.4 million current
accounts, including 155,000 business accounts, since launching its
banking app in May 2017. Its deposit base had more than doubled in
six months and it stood at more than GBP2.4 billion. It was one of
the fastest growing SME banks in Europe - holding a 2.6% market
share of the UK SME market - and had almost GBP500m of SME lending
on its balance sheet.
Total Investment:
GBP48.2m
Date of Initial and Subsequent Investments:
April 2019 and October 2019
Last Reported Financials:
( Y/E: November 18): GBP0.7m Total Income; (GBP25.1m) Loss after
tax
Embark Group Limited
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 additional capital will
enable it to take full advantage of its disruptive position in the
UK savings sector through continued technological innovation and
selective expansion opportunities.
Embark completed its acquisition of Zurich's Investment and
Retail Platform post period end. This transferred caGBP11bn assets
under administration ("AUA") of platform assets, and caGBP0.6bn of
multi-asset assets under management to Embark, along with an
advised client book of more than 130,000, largely dominated by SIPP
clients. This takes Embark's AuA to over GBP33bn, serving more than
365,000 consumer clients across all its channels and brands, up
from caGBP16bn at the time of the Company's initial investment.
These transactions position Embark as the seventh largest player in
the advised platform market in the UK.
Embark has been recognised in the WealthTech 100 as one of the
most innovative Wealth Tech companies in 2019 and 2020.
Total Investment:
GBP14.9m (as part of a GBP39.4m funding round)
Date of Investment:
August 2019
Last Reported Financials:
(Y/E: December 19): GBP33.5m Revenue (+10% YoY); GBP0.9m Net
Profit
The Hut Group Limited
The Hut Group is an eCommerce business that operates a highly
scalable, end-to-end proprietary technology platform powering sales
of its own brands and third-party brands 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.
In March, THG reported a surge in demand for its health, beauty
and nutrition products across its world-leading brands, including
MyProtein.com and Lookfantastic.com. This led the group to bring
forward its recruitment plans from later this year, with the
creation of 500 permanent positions across manufacturing,
fulfilment and logistics. The majority of roles (c350) will be
created at THG's 1m sq. ft. manufacturing and fulfilment centre in
Warrington, Cheshire.
Ingenuity, THG's end-to-end ecommerce platform, is also gaining
significant traction. Post period end, the company announced the
signing of a GBP100m, 10-year contract with Nestle Health Science.
THG will deliver a fully serviced, global ecommerce platform, to
internationally scale a number of Nestle's brands. THG has now
partnered with a number of international retailers, including
Procter & Gamble, Walgreens Boots Alliance, Johnson &
Johnson, Groupe L'Occitane and Nintendo, and this enables the group
to dispatch over 68 million items to customers globally.
As of mid-May 2020, THG was trading at elevated levels, driven
by the performance of non-discretionary nutrition and personal care
categories, and was ahead of its 2020 budget.
Total Investment:
GBP29.6m (secondary transaction)
Date of Initial and Subsequent Investments:
December 2018 and October 2019
Last Reported Financials:
(Y/E: December 19): GBP1.14bn Revenue (+24% YoY); EBITDA
GBP111m
Klarna Holding AB
Klarna is a leading global payments provider that is
revolutionising the online payment experience. Founded in Stockholm
in 2005, Klarna is one of Europe's most innovative and disruptive
technology companies. 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 pay how and when they prefer. Klarna currently operates
in 14 countries and added 28m more users over 2018. The latest
funding round valued Klarna at US$5.5bn, making it Europe's most
valuable fintech company.
Klarna announced its FY19 annual results during the period,
showing sustained growth both in the UK and globally. Year-on-year
global volumes and revenue increased by 32% and 31% respectively,
while the volume processed now amounts to over US$35bn per annum.
Since launch, over 7m customers have now used Klarna in the UK, a
doubling in the last year. Klarna now has more than 5,000 live
merchants in the UK and 500 of these brands have also launched
in-store offerings.
The company also announced that Ant Financial Services Group,
owner and operator of the world's leading payments and lifestyle
platform Alipay, has taken a minority stake in Klarna. This
investment supports the further developments of its strategic
cooperation, bringing more of Klarna's innovative solutions to
consumers and merchants within the broader Alibaba ecosystem. In an
announcement made in early March, Klarna stated "During 2020, the
company will continue to gain strong momentum on current markets as
well as enter new markets, with an already strong start to the year
with the recent successful launch of the Klarna app in
Australia."
Total Investment:
US$50m (as part of a US$460m growth round)
Date of Investment:
August 2019
Last Reported Financials:
(Y/E: December 19): SEK7.2bn Net Revenue (+31% YoY); (SEK1.1bn)
Net Income
FinanceAPP AG ("Wefox")
Wefox was founded in Berlin in 2015 and has already established
itself as one of Europe's largest and fastest growing insuretech
assets. The Wefox Group consists of two subsidiaries: Wefox and
ONE.
Wefox is Europe's largest digital insurance platform with
significant existing scale in Germany, Austria and Switzerland. The
Wefox platform enables over 350,000 customers, 1,500 insurance
broker agents and 300 insurance providers to transact and manage
insurance products digitally. The Wefox app and website acts as a
digital wallet, where consumers can store details of their
insurance policies, and also allows third-party insurance companies
and brokers to achieve efficiencies through a high degree of
automation.
ONE was launched in February 2018 and is a fully digital
insurance company distributing private liability and household
policies in Germany. ONE is fully integrated with Wefox and
leverages the platform's distribution capability and data sets to
deliver best-in-class loss ratios and customer acquisition
cost.
The company had a successful start to the year and now generates
more than EUR100m in sales, which represents a growth rate of four
times over 2018. The company raised over EUR200m in 2019, more than
any other European insuretech asset, and the proceeds will be used
to expand across Europe, as well as building out a new platform
that will be launched later this year to sit alongside its existing
insurance products.
Total Investment:
EUR14.4m (via a convertible loan note)
Date of Investment:
December 2019
Last Reported Financials: Y/E:
(December 18): EUR22.9m Net Revenue (+31% YoY); (EUR43.2m) Net
Income
Sorted Holdings Limited
Sorted Holdings Limited ("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. Sorted has
developed three highly innovative products:
-- SortedHERO, an application programming interface solution,
allowing retailers to display real-time delivery options at
checkout;
-- SortedPRO, a ground-breaking delivery management platform for
carrier and shipping management; and
-- SortedREACT, a powerful AI driven tracking platform that
aggregates carrier and delivery communications post purchase.
Sorted is one of the UK's fastest growing and most disruptive
SaaS companies. It has invested over GBP30 million to date in its
technology and provides global retailers with a best-in-class
solution. Sorted now operates in 14 countries across Europe and the
US and works with a number of leading companies, including: ASOS,
Farfetch, JD Sports, N Brown, Wincanton and Clipper Logistics.
Sorted had a very strong start to the year. As of mid-May 2020
it was generating annual recurring revenue growth in excess of 100%
year-on-year and winning a number of material clients. During the
period, Sorted signed JD Sports with two distinct projects covering
UK and Europe; Insight, a Fortune 500 business IT reseller with
US$7bn turnover; George at ASDA; and a global contract with a
British multi-brand enterprise retailer. The company also went live
in Australia and will launch in Japan and South Korea later this
year.
Sorted's carrier library, which represents a material barrier to
entry for new entrants to the market, continues to expand with new
carriers in Europe, US and Australia recently added.
Generally, the impact of COVID-19 has seen retailers
increasingly relying on their digital capabilities and this has led
to increased focus and spending on their online propositions,
including with Sorted.
Total Investment:
GBP10m (as part of a GBP14.5m Series B)
Date of Investment:
August 2019
Last Reported Financials:
N/A
Secret Escapes Limited
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.
As an online travel business, the company has seen a significant
impact from the pandemic and related restrictions to travel. As
previously announced, the company recently made a GBP2.6m follow-on
investment, as part of a wider funding round, in order to support
Secret Escapes navigate through a variety of COVID-19 stressed
trading scenarios, as well as allowing it to benefit from
accelerated channel shift and less competition post-lockdown.
Total Investment:
GBP13.1m (Secondary Transaction)
Date of Investment:
November 2018
Last Reported Financials
(Y/E: December 18): GBP121m Revenue (+66% YoY); GBP2.3m
EBITDA
Growth Street Holdings Limited
Growth Street Holdings Limited ("Growth Street") has developed
an innovative peer-to-peer ("P2P") lending product specifically
targeted at UK SMEs. The firm's proprietary technology platform
integrates with a number of data sources to provide unmatched
speed, flexibility and credit monitoring for SMEs. Growth Street
reconciles accounting, bank and credit data on a daily basis which
enables it to streamline the credit decision process and provide
ongoing credit monitoring and credit line adjustment. Its flagship
business finance facility, GrowthLine, is a highly flexible
revolving line of credit designed to replace and extend bank
overdrafts and invoice financing. Growth Street has facilitated
more than GBP80m of borrowing since launching in 2014.
As previously reported, two significant loans that the company
had originated fell into default over the final quarter of 2019,
which was very disappointing. Given the nature of this investment,
this was a relatively small unit within the portfolio at outset.
The combination of the defaults, exacerbated by COVID-19, led
Growth Street to initiate a 'liquidity event' in the first quarter
of 2020 and close investor access to its platform. This has enabled
the company to maintain stability within its loan book and will
help to protect both borrowers and investors from any further
disruption as a result of COVID-19.
Total Investment:
GBP12.6m
Date of Investment:
January 2019
Last Reported Financials:
N/A (subject to small companies' regime)
Pipeline and outlook
The outlook for Merian Chrysalis continues to be positive.
The portfolio has performed extremely well against a challenging
backdrop, as demonstrated by the resilience of most of our assets
on an individual basis and also by the performance of the net asset
value (NAV) of the Company. Despite a very sharp decline in equity
markets through Q1 2020 and a derating of relevant listed peers,
NAV on a per share basis fell by around 4% over the period.
There are three main drivers for this solid NAV performance:
-- Trading performances of the underlying assets - generally the
portfolio companies have seen robust trading across the period;
-- Comparable valuations - despite the significant declines in
global equity markets as a result of COVID-19 over the period, the
Investment Advisor, while recognising the medium and long-term
ramifications of the pandemic are not yet fully clear, notes the
generally strong rebound in valuations since period end (as of
mid-May); and
-- Downside protection - a number of the investments have
structures designed to limit downside risk, such as preference
stacks, which protect shareholders from the full extent of
valuation declines.
While the outlook for equity markets remains uncertain to some
degree, the trading performances of the investee companies has
generally been encouraging over the period, and this bodes well for
the remainder of the year.
Merian Chrysalis was set up to seek out attractive, unlisted
companies. We defined some of the characteristics we were targeting
in the IPO prospectus, which included :
-- The ability to deliver growth rates substantially higher than the average UK plc; and
-- The ability to protect the duration of these growth rates via
competitive advantage, e.g. via scale or technology.
This led us towards a group of businesses we labelled
"tech-enabled disrupters".
Our belief is that significant events, typically macroeconomic
in nature, can accelerate established trends. The Investment
Advisor has been cognisant of society's shift towards new,
typically tech-enabled, business models for some years, and this
trait was one of the reasons for the launch of Merian Chrysalis -
these businesses often stay private for longer. COVID-19 and its
societal impact is likely to accelerate the rise of the
tech-enabled disrupters, as consumers' and businesses' usual routes
to access goods and services have been disrupted.
Given the stock market is beginning to differentiate between the
structural winners and the structurally challenged, the Investment
Advisor believes Merian Chrysalis is thematically well positioned
and we have built a portfolio of assets that comprise of
digitally-enabled businesses that are highly disruptive, fast
growing and resilient. These assets have proven customer
acquisition and unit economics and have typically already
demonstrated that their business models are sustainable and have
the potential to generate positive earnings and cash flow.
While our assets are digitally enabled, several also play into
the hands of other prevailing growth themes, such as the emergence
of artificial intelligence, machine learning and cloud
computing.
The Investment Advisor is working hard to generate proprietary
deal flow as it firmly believes that this is the best way to access
the best deals at the most attractive terms. As a result of this,
the Investment Advisor spends considerable amounts of time
assessing companies across the United Kingdom, but also
increasingly Northern and Western Europe, which could fit the
Merian Chrysalis blue print. The crossover proposition and
expertise in listed equities is compelling to founders and
management teams, and a truly differentiated proposition usually
enables access to some of Europe's most exciting assets.
We have been tracking some assets for a considerable time now,
while we wait for an opportunity to invest. During these periods we
continue to strengthen our relationships with management teams to
increase our understanding of the investment case. This approach
yielded dividends post period end when the investment in
Featurespace was announced, a company that had been on our
watchlist for over a year.
As of mid-May 2020, the market was still affected by COVID-19
and there was little apparent appetite from most capital providers
to look outside of their current portfolios. With cash still on the
balance sheet, this will hopefully create new opportunities for
investment for the Company. Our quality threshold is as high as it
has ever been and we will only add additional units if they improve
the financial performance and quality of the overall portfolio,
while providing further sector and thematic exposure. We have a
stringent due diligence process and we have demonstrated discipline
by walking away from a large investment in the latter stages of due
diligence when our investment criteria were not met.
COVID-19 notwithstanding, the new financial year has started
well. Post period end the number of assets in the portfolio was
increased to eleven and the level of invested capital to 90%. Our
goals for the remainder of the year are to:
-- Continue to look for compelling new investment ideas,
recognising the current market may generate opportunities;
-- Monitor and assess the trading performance of each portfolio
asset against a tough backdrop, and ensure that sufficient capital
is retained to support these assets through a range of probable
trading scenarios;
-- Work closely with our portfolio assets to help them
successfully maximise their potential and thus valuation; and
-- Generate strong NAV growth for our shareholders.
Over the course of the first 18 months of Merian Chrysalis'
life, we have had a strong focus on scaling the Company, reaching
critical mass and increasing the number of assets within the
portfolio. We have successfully done this and we are increasingly
confident that our portfolio assets will now demonstrate their
growth credentials by driving meaningful NAV progression. As a
result, we look forward to the future with confidence.
Finally, we would like to thank all of our shareholders and
advisors for their continued support.
Merian Global Investors (UK) Limited
25 June 2020
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
companies.
Investment policy
The Company will invest in a diversified portfolio consisting
primarily of equity and equity-related securities issued by
unquoted companies.
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.
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 Company's aggregate equity investments in publicly traded
companies that it has not previously held an investment in prior to
that Company'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 Directors are responsible for managing the business affairs
of the Company in accordance with the Articles of Incorporation and
the investment policy, and have overall responsibility for the
Company's activities including its investment activities and
reviewing the performance of the Company's portfolio.
The Directors have delegated certain functions to other parties
such as the Alternative Investment Fund Manager ("AIFM"), the
Investment Advisor, the Administrator, the Company Secretary, the
Depositary and the Registrar. In particular, responsibility for day
to day management of the investments comprising the Company's
portfolio has been delegated to the Investment Advisor. The
Directors have responsibility for exercising supervision of the
AIFM and the Investment Advisor.
Andrew Haining (Chairperson) (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
US$1bn.
Andrew holds several Guernsey and UK board positions, including
Chairman of Praxis IFM Group Limited and Chairman of Aurigny, the
state-owned Channel Islands airline.
Stephen Coe (senior independent)
Stephen is currently a director and Chairman of the Audit
Committee of Leaf Clean Energy Company Limited and Weiss Korean
Opportunities Fund 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, a Guernsey resident, brings Board experience from both
private equity and portfolio company operation roles at Candover
Investments then Terra Firma Capital Partners. Since 2015, Simon
has become an active independent director to listed alternative
investment companies (HICL Infrastructure Plc., Hipgnosis Songs
Fund Limited, Trian Investors 1 Limited and JPMorgan Global Core
Real Assets Limited), private equity funds and trading company
Boards, including trading assets owned by the States of
Guernsey.
Simon holds the DipIoD in Company Direction from the Institute
of Directors, graduated from the University of Cambridge with an
MEng and MA in Manufacturing Engineering and is an active member of
Guernsey's GIFA, NED Forum and IP Commercial Group
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 a
fiduciary licensee. Anne is self-employed and has a number of
non-executive directorships and chairman roles in investment
companies, banks and trust companies in the Channel Islands and in
London. Anne is currently a Senior Independent Director on the LSE
listed Alcentra Floating Rate Income Fund Limited.
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 2020
Risks and Uncertainties
There are a number of 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 and stress testing, which helps position the Company to ensure
compliance with the Association of Investment Companies Code of
Corporate Governance (the "AIC Code").
The principal and emerging risks, with the exception of COVID-19
addressed below, to which the Company will be exposed are given in
note 17 to the Audited Financial Statements for the period 3
September 2018 to 30 September 2019.
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 as a result 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;
- 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 into with the Company; and
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.
In order 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 seek 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.
Other risks
COVID-19
In considering this risk, the Board's thinking 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 Manager's compliance with the investment
objective and policy, asset allocation, the portfolio risk profile,
counterparty exposure, liquidity risk and financial controls. At
the period end the Company had cash and cash equivalents of
GBP80.79m, including short-dated treasury bills of GBP59.99m, and
net current assets of GBP79.71m. As a result, the Company is highly
liquid and 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 Advisor towards a
group of businesses it labelled "tech-enabled disrupters"
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 (as
set out in more detail on the previous page). 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.
Important events and financial performance
The important events that have occurred since incorporation
are:
Ordinary Shares
Highlights 31 March 2020
Net Asset Value per share 108.65p
Share Price 88.00p
% of capital deployed 78%
The table below provides quarterly performance information:
NAV % change in
Date p price
30.09.19 113.33 0.0%
31.12.19 113.45 0.1%
31.03.20 108.65 -4.2%
The net loss for the period amounted to GBP15,758,000.
Further details of the Company's performance for the period are
included in the Investment Advisor's Report on pages 5 to 19, which
includes a review of investment activity and adherence to
investment restrictions.
Discount
As at 31 March 2020, the share price is trading at a discount
from the last published NAV per share.
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 Advisor'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 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
25 June 2020
Independent Review Report to Merian Chrysalis Investment Company
Limited
Conclusion
We have been engaged by Merian Chysalis Investment Company
Limited (the "Company") to review the condensed set of financial
statements in the half-yearly financial report for the six months
ended 31 March 2020 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 2020 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 the half-yearly financial report in accordance with
IAS 34 as adopted by the EU.
Our responsibility
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
25 June 2020
Unaudited Condensed Statement of Comprehensive Income
For the 6 month period ended 31 March 2020
Period from Period from
1 Oct 2019 to 3 Sept 2018 to
31 March 2020 31 March 2019 (unaudited) (unaudited)
Notes Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments
Net (losses) / gains on investments
held at fair value
through profit or loss 9 - (14,007) (14,007) - 11,463 11,463
Losses on currency movements - (147) (147) - (15) (15)
________ ________ ________ ________ ________ ______
Net investment (losses) / gains - (14,154) (14,154) -
11,448 11,448
________ ________ ________ ________ ________ ______
Interest income 127 258 385 - 114 114
________ ________ ________ ________ ________ ______
Total income 127 258 385 - 114 114
________ ________ ________ ________ ________ ______
Investment management fees 5 (950) - (950) (110) (1,617)
(1,727)
Other expenses 6 (1,039) - (1,039) (280) - (280)
________ ________ ________ ________ ________ ______
(Losses)/gains before finance
costs and taxation (1,862) (13,896) (15,758) (390) 9,945
9,555
Finance costs - - - (1) - (1)
________ ________ ________ ________ _ ________ ______
(Losses)/gains before taxation (1,862) (13,896) (15,758) (391)
9,945
9,554
Withholding tax expense - - - - - -
________ ________ ________ ________ ________ ______
Total (losses)/gains and
comprehensive income
for the period (1,862) (13,896) (15,758) (391) 9,945 9,554
________ ________ ________ ________ _________ ______
(Losses)/gains per
Ordinary Share (pence) 7 (0.55) (4.13) (4.68) (0.39) 9.95
9.56
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 34 to 48 form an integral part of these
unaudited condensed interim financial statements.
Unaudited Condensed Statement of Financial Position
As at 31 March 2020
31 March 30 September
2020 2019
Notes GBP'000 GBP'000
(unaudited) (audited)
Non-current assets
Investments held at fair value through profit or loss 9 286,162 170,040
___________ ___________
Current assets
Cash and cash equivalents 80,794 212,665
Other receivables 137 82
___________ ___________
80,931 212,747
___________ ___________
Total assets 367,093 382,787
___________ ___________
Current liabilities
Other payables (1,220) (1,157)
___________ ___________
Total liabilities (1,220) (1,157)
___________ ___________
Net assets 365,873 381,630
___________ ___________
Equity
Share Capital 10 370,367 370,366
Capital reserve (1,192) 12,704
Revenue reserve (3,302) (1,440)
___________ ___________
Total equity 365,873 381,630
___________ ___________
Net Asset Value per Ordinary Share (pence) 11 108.65 113.33
Number of Ordinary Shares in issue 336,742,424 336,742,424
Approved by the Board of Directors and authorised for issue on
24 June 2020 and signed on their behalf:
Stephen Coe
Director
The notes on pages 34 to 48 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 2020
Share Capital Revenue
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 12,704 (1,440) 381,630
Total losses and comprehensive
income for the period - (13,896) (1,862) (15,758)
Expenses of share issue 1 - - 1
___________ ___________ ___________ ___________
At 31 March 2020 370,367 (1,192) (3,302) 365,873
___________ ___________ ___________ ___________
Share Capital Revenue
capital reserve reserve Total
2019 2019 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
For the period 3 September 2018
to 31 March 2019 (unaudited)
At 3 September 2018 - - - -
Total gains/(losses) and comprehensive
income for the period - 9,945 (391) 9,554
Issue of Management Shares 1 - - 1
Redemption of Management Shares (1) - - (1)
Issue of Ordinary Shares 100,000 - - 100,000
Expenses of share issue (1,144) - - (1,144)
___________ ___________ ___________ ___________
At 31 March 2019 98,856 9,945 (391) 108,410
___________ ___________ ___________ ___________
The notes on pages 34 to 48 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 2020
Period from Period from
1 Oct 2019 to 3 Sept 2018 to
31 March 31 March
2020 2019
Notes GBP'000 GBP'000
(unaudited) (unaudited)
Cash flows from operating activities
Bank interest paid - (1)
Other expense payments (1,980) (147)
Interest income 385 114
Purchases of investments 9 (130,129) (64,509)
___________ ___________
Net cash outflow from operating activities (131,724)
(64,543)
___________ ___________
Cash flows from financing activities
Issue of Ordinary Shares 10 - 100,000
Expenses of Ordinary Share issuance 10 - (1,144)
___________ ___________
Net cash inflow from financing activities - 98,856
___________ ___________
Net (decrease) / increase in cash and cash equivalents (131,724) 34,313
Cash and cash equivalents at beginning of period 212,665 -
Effect of foreign exchange (147) (15)
___________ ___________
Cash and cash equivalents at end of period 80,794 34,298
___________ ___________
Cash and cash equivalents comprise of the following:
Cash at bank 20,802 1,315
Cash equivalents - UK treasury bills 59,992 32,983
___________ ___________
80,794 34,298
___________ ___________
The notes on pages 34 to 48 form an integral part of these
unaudited condensed interim financial statements.
Notes to the Unaudited Condensed Interim Financial
Statements
For the 6 month period ended 31 March 2020
1. Reporting Entity
Merian Chrysalis Investment Company 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 336,742,424 shares in issue under ticker MERI,
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 2020.
The Company invests in a diversified portfolio consisting
primarily of equity and equity-related securities issued by
unquoted companies.
The Company and its Alternative Investment Fund Manager received
investment advice from Merian Global Investors (UK) Limited ("MGI")
during the 6 month period ended 31 March 2020. 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 and for the period from 3 September 2018 (date of
incorporation) to 30 September 2019, 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.
(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 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 the 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 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 investments which are all
unquoted.
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 year end. The Directors have considered their impact and
have concluded that they will not have a significant impact on the
Financial Statements.
-- Amendments to IAS 1 and IAS 8 - effective 1 January 2020
5. Investment management fees
2020 2019
GBP'000 GBP'000
Investment management fee 950 110
Investment Advisor's performance fee - charged to capital -
1,617
___________ ___________
Total investment management fees 950 1,727
___________ ___________
Under the terms of the portfolio management agreement, MGI is
entitled to a management fee and a performance fee together with
reimbursement of reasonable expenses incurred in the performance of
its duties.
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. (1)
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 MGI 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 2020, an amount of GBP949,915 was outstanding and
due to MGI in respect of management fees.
1. For the period from first admission until the date on which
90% of the net proceeds were invested, directly or indirectly, the
value attributable to any investments other than equity or
equity-related investments in quoted or unquoted portfolio
companies held for investment purposes (including cash, near cash
investments or highly liquid investments immediately convertible
into cash) was excluded from the calculation of Net Asset Value
("NAV") for the purposes of determining the management fee. This
period expired on 1 October 2019.
Performance fee
MGI 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 2019 and ending on 30
September 2020 (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: (a) excluding any changes made pursuant to
paragraphs (x) and (y) below in that preceding Calculation Period;
and (b) 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 period (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.
Under the terms of the portfolio management agreement, any
accrued and unpaid performance fees will crystallise and become
payable to MGI 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 2020, the Company had not exceeded the High Water
Mark and Performance Hurdle and no accrual for performance fees has
been reflected within these Financial Statements.
An amount of GBP102,859 was outstanding and due to MGI in
respect of performance fee due as at 30 September 2019.
6. Other expenses
31 March 31 March
2020 2019
GBP'000 GBP'000
Directors' fees 104 94
Directors expenses 1 -
Administration fee 57 30
AIFM fee 64 16
Auditor's remuneration for:
- audit fees 35 33
- non-audit fees 35 23
Secretarial fees 18 14
Printing fees 27 6
Registrars' fees 11 7
Listing fees 5 7
FCA fees 3 3
Legal fees 282 9
Professional fees 326 -
Depositary fees 15 32
Directors' liability insurance 15 4
Sundry 41 2
___________ ___________
1,039 280
___________ ___________
7. (Losses)/gains per Ordinary Share
31 March 2020 31 March 2019
Net return Per share Net return Per share
GBP'000 pence GBP'000 pence
Revenue return (1,862) (0.55) (391) (0.39)
Capital return (13,896) (4.13) 9,945 9.95
___________ ___________ ___________ ___________
At 31 March (15,758) (4.68) 9,554 9.56
___________ ___________ ___________ ___________
Weighted average number of Ordinary Shares 336,742,424 100,000,000
8. Dividends
The Board has not declared an interim dividend.
9. Investments held at fair value through profit or loss
31 March 30 September
2020 2019
GBP'000 GBP'000
Opening book cost 157,591 -
Opening investment holding gains 12,449 -
___________ ___________
Opening valuation 170,040 -
Movements in the period:
Purchases at cost 130,129 157,591
Movement in unrealised (losses) / gains during the period (14,007) 12,449
___________ ___________
Closing valuation 286,162 170,040
___________ ___________
31 March 30 September
2020 2019
GBP'000 GBP'000
Closing book cost 287,720 157,591
Closing investment holding (losses) / gains (1,558) 12,449
___________ ___________
Closing valuation 286,162 170,040
___________ ___________
Movement in unrealised gains during the period 3,426
20,566
Movement in unrealised losses during the period 17,433)
(8,117)
___________ ___________
(14,007) 12,449
___________ ___________
10. Share capital
No of
shares GBP'000
Ordinary Shares at no par value
At 1 3 September 2018 - -
Issue of Management Shares 1 -
Issue of shares 100,000,000 100,000
Issue costs - (1,144)
Issue of shares 90,909,091 100,000
Issue costs - (1,152)
Issue of shares 145,833,333 175,000
Issue costs - (2,338)
Redemption of Management Shares (1) -
___________ ___________
At 30 September 2019 336,742,424 3 70,366
Issue costs - 1
___________ ___________
At 31 March 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 2020 30 September 2019
NAV NAV NAV NAV
per share attributable per share attributable
pence GBP'000 pence GBP'000
Ordinary Shares: basic and diluted 108.65 365,873 113.33 381,630
The Net Asset Value per Ordinary Share is based on 336,742,424
Ordinary Shares, being the number of Ordinary Shares in issue at
the period end.
12. 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 2019.
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 2020 Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Unquoted equity - - 286,162 286,162
___________ ___________ ___________ ___________
- - 286,162 286,162
_ __________ ___________ ___________ ___________
At 30 September 2019 Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Unquoted equity - - 170,040 170,040
___________ ___________ ___________ ___________
- - 170,040 170,040
___________ ___________ ___________ ___________
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:
Fair value as Holding Valuation Unobservable Range Sensitivity Sensitivity to
at 31 March technique inputs (%) changes in
2020 significant
(GBP'000) unobservable inputs
67,766 TransferWise Trading EV/LTM Revenue 5.30x - 10% -- If input
Limited multiples multiple 8.66x multiples change by
+/- 10%, the value
of Transferwise
would change by an
increase
of GBP6,227,000 or
decrease of
GBP6,241,000
-------------- ------------- ----------------- -------------- -------------- ---------------------
32,762 The Hut Group Trading EV/LTM Revenue 2.52x - 10% -- If input
Limited multiples multiple 20.68x multiples change by
EV/EBITDA +/- 10%,
the value of The
Hut Group would
change by
+/-1,863,000
-------------- ------------- ----------------- -------------- -------------- ---------------------
32,741 Klarna Trading EV/LTM Revenue 4.12 - 5.49x 10% -- If input
Holding AB multiples / multiple multiples change by
Benchmark +/- 10%,
performance the value of Klarna
would change by
+/-GBP2,613,000
-------------- ------------- ----------------- -------------- -------------- ---------------------
18,402 Embark Group Trading EV/LTM Revenue 2.21x 10% -- If input
Limited multiples multiple multiples change by
+/-10%,
the value of Embark
would change by
+/-GBP1,105,000
-------------- ------------- ----------------- -------------- -------------- ---------------------
51,336 Graphcore Benchmark * Not applicable for this valuation method
Limited performance
-------------- --------------- ----------------------------------------------------------------------
10,000 Sorted Benchmark
Holdings performance * Not applicable for this valuation method due to
Limited capital protection
-------------- --------------- ----------------------------------------------------------------------
51,743 Starling Bank Benchmark
Limited performance * Not applicable for this valuation method due to
capital protection
-------------- --------------- ----------------------------------------------------------------------
2,813 Growth Street Wind-down * Not applicable for this valuation method
Holdings
Limited
-------------- --------------- ----------------------------------------------------------------------
5,809 Secret Price of * Not applicable for this valuation method
Escapes recent
Limited investment
-------------- --------------- ----------------------------------------------------------------------
The company has an established control framework with respect to
the measurement of fair values. This include 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 3 fair values:
31 March 30 September
2020 2019
GBP'000 GBP'000
Opening balance 170,040 -
Purchases 130,129 157,591
Total (losses) / gains included in net
(losses) / gains on investments in the
statement of comprehensive income
- on assets held at period end (14,007) 12,449
___________ ___________
Closing balance 286,162 170,040
___________ ___________
There have been no transfers between levels during the
period.
Other than the impact of COVID-19 as noted in both the
Investment Advisor's Report and Interim Management Report, 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.
13. Related parties
MGI has been appointed as the Investment Advisor to the Company.
The relationship is governed by an agreement dated 11 October
2018.
T he following balances were outstanding at the end of the year
and transactions were entered into during the year:
31 March 30 September 31 March
2020 2019 2019
GBP'000 GBP'000 GBP'000
Management fee charged by MGI:
Total management fee charged 950 414 110
Management fee outstanding 950 182 110
Performance fee charged by MGI:
Total performance fee charged - 103 1,617
Performance fee outstanding 103 103 1,617
Directors' fees
Total d irectors' fees charged 104 208 94
Directors' fees outstanding - 52 -
As at 31 March 2020 the following Directors have holdings in the
Company:
Number of % Ordinary Shares
Director Ordinary Shares issue as at 31 March 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 MGI'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 MGI's risk and
compliance report. Number of
Shares Value
holdings purchased Share of holdings
during during sold during 31 March
the period the period the period 2020 GBP'000
Related party
Merian UK Smaller Companies
Focus Fund 5,520,882 - - 4,858
Merian UK Specialist Equity Fund 8,112,820 - - 7,342
Merian UK Mid-Cap Fund 51,451,305 - - 46,563
Merian UK Smaller Companies Fund 14,601,552 - - 13,214
___________ ___________ ___________ ___________
Total 79,686,559 - - 71,977
___________ ___________ ___________ ___________
As announced at the time of the placing, our intention was to
use approximately 50% of the proceeds of the capital raise to scale
up exposure to a number of existing portfolio holdings. This was
achieved via the acquisition of additional interests in those
investments from the open-ended UK small and mid-cap equity funds
managed by Merian Global Investors.
The Company acquired an additional follow-on investment, of
GBP38.3m (GBP35m in October 2019 and GBP3.3m in November 2019) in
Transferwise. In October 2019, the Company acquired an additional
follow-on investment, of GBP20m, in The Hut Group and in December
2019, the Company acquired an additional follow-on investment, of
GBP11.6m, in Graphcore.
14. Post balance sheet events
On 17 February 2020, Jupiter Fund Management plc announced its
proposed acquisition of Merian Global Investors Limited ("Merian"),
the ultimate parent company to Merian Global Investors (UK) Limited
who is the Investment Advisor to Merian Chrysalis Investment
Company Limited. The acquisition, which secured Jupiter shareholder
approval on 21 May 2020 after the period end is, as of the date of
this report, still subject to regulatory consents but that is
expected to be received in the second half of 2020.
On 29 April 2020, the Company's follow on investment in Embark
Group Limited (GBP12.2 million, as announced 27 November 2019)
completed following regulatory approval.
On 11 May 2020 and 28 May 2020 respectively, the Company
acquired additional shares in each of Secret Escapes Limited and
Starling Bank Limited at a total cost of GBP7.6 million.
On 13 May 2020, the Company announced a GBP20.0 million
investment as a part of a GBP30.0 million funding round conducted
by Featurespace Limited, a machine intelligence based fraud
detection software company.
On 29 May 2020, the Company acquired additional convertible loan
notes in FinanceApp AG (Wefox) at a total cost of EUR5million.
The result of the above transactions means the Company is
approximately 90% fully invested.
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
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
Investment Advisor
Merian Global Investors (UK) Limited
Millennium Bridge House
2 Lambeth Hill
London, EC4P 4WR
Financial Advisor and Corporate Broker
Liberum Capital Limited
Ropemaker Place Level 12
25 Ropemaker Street
London, EC2Y 9LY
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
Guernsey, GY1 1DB
* Appointed SID on 14 January 2020
Depositary
Citibank Europe plc, UK Branch
Citigroup Centre
Canada Square
Canary Wharf
London, E14 5LB
English Legal Advisor to the Company
Travers Smith LLP
10 Snow Hill
London, EC1A 2AL
Guernsey Legal Advisor 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, GY1 1WR
Definitions
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.
NAV PER SHARE
Net Asset Value expressed as an amount per share.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FFFEFRFIEFII
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June 26, 2020 02:00 ET (06:00 GMT)
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