DJ Primorus Investments PLC Quarterly Update
RNS Number : 5546C
Primorus Investments PLC
11 February 2020
Primorus Investments plc
("Primorus" or the "Company")
Quarterly Investor Update
Primorus Investments plc (AIM: PRIM, NEX: PRIM) is pleased to provide the quarter ending 31 December 2019 ("Q4" or the "Quarter") investor update regarding its current holdings and activities acquired and managed as per its investing policy.
Executive Director's Quarterly Comment - Alastair Clayton
Whilst the fourth Quarter of 2019 was again another period of solid growth across our diverse portfolio, it is fair to say that post-period (early 2020) has got off to an excellent start. We will return to these headline-grabbing matters later on but given the long-overdue but underwhelming increase in share price at the time or writing, it is worth remembering that Primorus is not a one trick pony.
We find ourselves in early 2020 with a diverse and growing portfolio, primarily in unlisted technology and energy companies. Our 5 largest investments by deployed capital are Engage Technology Partners (GBP1.5m), WeShop (GBP875,000), Greatland Gold PLC (GBP625,000), TruSpine (GBP500,000) and Fresho (circa GBP260,000).
On top of our direct equity investments we sometimes add to our balance sheet through a use of debt investing that generates interest and picking up equity options. A good example of this was the Zuuse Series B investment where the outlay was returned to treasury and interest in fully paid shares and a significant number of in-the-money options (compared to last raise) being sent to the balance sheet.
We do also have shares in publicly listed companies in an effort to increase the liquidity and look through value of the portfolio. Sometimes these are very small investments made to effectively manage cash and add incrementally to the balance sheet through opportunistic means.
We may also sometimes identify something special that we believe represents an opportunity in a listed company that has the potential to make an outsized contribution to our shareholders. Clearly our investment in Greatland Gold PLC is an example of this.
So, the question really is what should our share price be if the core portfolio of unlisted investments is better recognised? I believe many of our investments have the potential to, or already have, eclipsed even the Greatland Gold investment in terms of performance and as demonstrated in 2019, many of our investments can be exited in the absence of a public quotation.
-- Total Greatland Gold PLC ("Greatland") investment appreciates significantly to over GBP1,850,000 (over 40% of our total market cap.) on further outstanding drilling results at Havieron. Current potential profit on investment now over GBP1,250,000. We are expecting further appreciation in the Greatland share price.
-- TruSpine ("TruSpine") secures 2 tranches totalling GBP1m of development funding from a successful medical devices family office. IPO expected to now occur during 2020 as a result of securing this strategic investor.
-- Fresho Gross Order Volume up to nearly A$2m per day now through the platform at 31 December 2019. Invoice finance feature Freshopay begins revenue generation. Now scheduled to launch Q1 in the UK.
-- Engage Technology Partners ("Engage") continues to grab market share and attract industry attention. Outstanding growth in Self-Serve truly scalable SaaS products as transition of business model gathers pace. Breakeven poised for Q3/4 with expected high growth and profitability thereafter.
-- Zuuse formally confirms successful completion of A$16m capital raise at (equity) A$1 per share. Primorus retains 57,205 shares and 1m options at $0.50 exercise price.
-- Company finishes the quarter debt-free and the Board still foresees no short to medium term need or intention to raise capital.
Update on Investments
TruSpine is a medical devices company with a suite of IP in the burgeoning MedTech space. The Company has three core spine stabilisation devices currently under development:-
1) Cervi-LOK(TM) - for the cervical and upper thoracic spine; 2) Faci-LOK(TM)- for the lumbar and lower thoracic spine; and 3) GRASP Laminoplasty - a treatment for cervicothoracic stenosis.
These products represent disruptive technologies which address and mitigate short comings of the current standard technology. These products provide solutions for some of the most significant issues affecting healthcare delivery and payer systems.
We invested GBP500,000 in TruSpine in back in 2017 on the basis we love the MedTech sector but dislike the part of the industry that brushes strongly up against lengthy, expensive and sometimes opaque regulatory approvals. TruSpine products avoid this regulatory marathon.
Despite significant interest over the past few years a natural strategic investor had not materialised on terms acceptable to the company. This had stymied the commercialisation of the TruSpine product offering. Pleasingly we have recently been informed that this impasse has now been removed with the injection of two GBP500,000 investment tranches from a high-profile, long established medical devices investor whom we will refrain from naming for now for commercial confidentiality reasons.
This investment has been made at a premium to our investment level and more importantly it provides TruSpine with a cornerstone investor with many decades' experience in the development, marketing and sales of medical devices. The investor and family previously listed their company on the London Stock Exchange in the 1990's and subsequently sold it for many hundreds of millions of pounds some years later.
We understand TruSpine is now moving fast towards a London IPO and will look forward to updating shareholders as timings become more apparent
Greatland Gold has been nothing short of a spectacular investment for us. We invested on the basis that we saw Havieron as a potential Tier 1 Gold/Copper discovery. It seems the market and the management of Newcrest Mining ("Newcrest") are beginning to agree with us. From an outlay of circa GBP625,000 our investment at the time of writing stands at approximately GBP1,850,000, an implied return on investment of circa 300% should we choose to sell.
Whilst clearly at some stage we will take some profits we believe that the Greatland story has a long way to go from here. There is still a large amount of important drilling to be released to the market and judging by the comments of the CEO of Newcrest in their recent reporting they like what they see so far.
While we hope Havieron on its own may well prove to be a +20Moz Au deposit (which would imply the Greatland share price has a long way to go), we also see a huge amount of potential nearby in areas not subject to the Newcrest Joint Venture. Interestingly, Newcrest published the first iteration of a geological model recently for Havieron that in our opinion opens up the whole sub-region to similar prospectivity. Should drilling at Scallywag or elsewhere nearby turn up similar mineralisation to that at Havieron we can easily see Greatland's share price appreciating significantly.
It is our contention that the Havieron sub-region is possibly a whole new Gold/Copper province of industrywide significance. Work by various companies over the next 3-6 months should go a long way to proving or disproving this theory.
Fresho is soon to launch in the UK with a long-established wholesaling company as its first customer. Every time we consider the possibility of selling our stake in Fresho we inevitably draw the conclusion that it is too soon. We believe that 2020 may be a breakout year for the Company. Well-funded and ambitious, we believe Fresho can sweep the UK market in the same way it is sweeping the Australian and New Zealand markets.
Gross Order Volume ("GOV") has now grown to nearly A$2m per day in sales through the platform at the end of December. FreshoPay, an invoice financing product, has launched and is already contributing its first revenues.
So despite the temptation to take a good profit on investment and demonstrate another exit in one of our technology investments, we believe it is in our best interests to maintain our investment for the time being.
Engage Technology Partners is our largest investment, now with a total of GBP1.5m invested across four funding rounds. The company has emerged from a 2019 transition as a much leaner business. Whilst the required structural changes were being implemented, they could not fully focus on new business, but still delivered a very creditable circa 70% FY revenue growth for the year. They enter 2020 very well poised to grow the business rapidly. Management remains very conservative in its forecasts, however we would not be surprised to see the breakeven date move forwards to Q3 2020.
Engage is our largest investment because we saw the potential for it to sweep the small and mid-market for UK recruitment through to pay and billing and in doing so completely re-writing the way SME's grow and manage their businesses.
The performance to date and the outlook for the short to medium term give us great confidence that this investment has been well positioned. As with Fresho we see 2020 as the year for Engage.
Zuuse formally notified that it had completed a capital raise of A$16m with equity issued at A$1/share. This puts our 1m options exercisable at A$0.5 firmly in the money, albeit Zuuse is not quoted so there is no liquid market for its shares. We expect to exit this position in 2020 but at a higher realised price than A$1.
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DJ Primorus Investments PLC Quarterly Update -2-
StreamTV has been focussing on a management restructuring to better capitalise on the opportunity before it. We had been concerned recently by a lack of clarity on the strategic funding activities which, despite large amounts of money being raised, have failed to land the full investment to commercialise the unique technology offering. Whilst much of the new structure is confidential and in part incomplete, we can say that we welcome this change and fully support the major shareholder in this endeavour. We look forward to reporting back with more detail as and when it comes available.
Elsewhere WeShop is due to report to shareholders soon, SOA is expected to report on commencement of its drilling programme, NOMAD Energy is working hard to resolve its seemingly never-ending issues with the Ivorian Government and we await with some interest an update from Sport80 who continue to grow the business.
It has been a great Quarter, and post-period, and it is with some pleasure we articulate this to shareholders today. The key message is that whilst our investment in Greatland Gold has led us to potentially outsized profits we really remain frustrated that our core portfolio of technology and energy investments is not gaining the recognition the Board believes it deserves.
We demonstrated an ability in 2019 to exit unlisted investments in a very successful manner. We now enter 2020 expecting to provide further exits, grow the portfolio and most importantly grow the share price based on meaningful results.
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
Forward Looking Statements
This announcement contains forward-looking statements relating to expected or anticipated future events and anticipated results that are forward-looking in nature and, as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, competition for qualified staff, the regulatory process and actions, technical issues, new legislation, uncertainties resulting from potential delays or changes in plans, uncertainties resulting from working in a new political jurisdiction, uncertainties regarding the results of exploration, uncertainties regarding the timing and granting of prospecting rights, uncertainties regarding the Company's ability to execute and implement future plans, and the occurrence of unexpected events. Actual results achieved may vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors.
For further information, please contact:
Primorus Investments plc: +44 (0) 20 7440 0640 Alastair Clayton Nominated Adviser: +44 (0) 20 7213 0880 Cairn Financial Advisers LLP James Caithie / Sandy Jamieson Broker: +44 (0) 20 3621 4120 Turner Pope Investments Andy Thacker
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