DJ Primorus Investments PLC Quarterly Update
RNS Number : 4369P
Primorus Investments PLC
08 February 2019
Primorus Investments plc
("Primorus" or the "Company")
Quarterly Investor Update
Primorus Investments plc (AIM: PRIM, NEX: PRIM) is pleased to provide the quarter ending December 31 2018 ("Q4" or the "Quarter") periodic portfolio update regarding its current holdings and activities acquired and managed as per its investment mandate.
Executive Director's Quarterly Comment - Alastair Clayton
I probably don't need to point out to shareholders that Q4 was a pretty wild ride on global markets. Whilst our share price was probably collateral damage in the lead up to Christmas, I am pleased that we have, at very least, managed to recover some of our value. However, we still are frustrated that the Company, in the Board's opinion, remains so undervalued.
The Quarter was one dominated by realising certain profits on holdings while ensuring we retain the right mix of investments that not only seek to create value in the medium-term, as per our investment mandate, but also increase the visibility of our publicly tradable investments in order to achieve some concrete look-through value on our share price.
As outlined below, I believe we have achieved many of the goals set for the Quarter. We now have a more balanced portfolio of pre-IPO and private company investments, publicly tradable shareholdings and also some interest-earning corporate debt with attached warrants.
I should mention that over the Quarter I have had a lot of interaction with both existing and potential Primorus shareholders. Throughout these discussions, which were predominantly positive, two themes seemed to recur that I would like to briefly address.
The first one is regarding the possibility of, at the appropriate time, using excess funds to potentially buy back some of our outstanding issued capital. Given our share price relative to the Board's view of value this argument clearly has merit. We are having a look at the ability and mechanisms to determine if this is feasible. If the results of this are positive it will certainly be one tool available to the Company to invest in itself should the value proposition of its portfolio be as compelling as we believe it is today.
Secondly a number of shareholders expressed the desire to see a corporate marketing presence on social media and other such platforms. Whilst I acknowledge this may be useful, we also see significant challenges in ensuring a presence on social media doesn't infringe upon our AIM and directors' duties, not to mention MiFID and MAR requirements. Thus, we will continue to scope a presence that is both appropriate and responsible and report back to shareholders with our solution.
Now, onto some highlights for the period:
Over the Quarter, realised a circa GBP1m unaudited cash profit on investment by selling most of our holdings in UKOG PLC at an average weighted price of circa 1.77p.
Built a stake in Greatland Gold (GGP.L) totalling 35m shares or just under 1.1% of the issued capital in GGP.L at an average price of 1.71p based on outstanding drill results. Further drilling released in February confirm exceptional potential of Haiveron Project.
Former British Olympic Association chief executive Simon Clegg has been appointed the Non-Executive Chairman of Sport:80. IPO has been delayed as the company seeks to clean up its share register in advance of its IPO. Expecting movement on IPO this Quarter.
Engage Technology platform continues outstanding growth rates in terms of customer contracts with over 110 active corporate clients (versus 75 end Q3) now using the platform at the end of 2018. Strongly backed GBP1m (still at GBP22/share) targeted capital raise secured nearly GBP2.6m in subscriptions. Now is the important Quarter for scalable product releases.
SOA Energy ("SOA") farm-in with a large regional oil firm covering both SOA's on-shore and offshore assets. We have been advised that a lengthy final technical and legal process is now due to close imminently. SOA management may then allow us to expand on the farm-in partner and more detail on the deal, subject to any confidentiality clauses. IPO and drilling programme still on track for 2019.
StreamTV, in conjunction with Beijing Optical & Electrical ("BOE") release two new products at the CES (Consumer Electronics Show) in Las Vegas in January. The latest version of the 65" "8K Lite" 16M pixel panel and the gaming focussed 27" "8K Lite" PC monitor. Outstanding industry interest
Fresho ticks through the A$1m per day gross order value demonstrating further excellent platform growth. New payments platform launched and international growth opportunities present themselves. We are still eyeing a 2019 liquidity event.
Company finishes the Quarter debt-free and the Board still foresees no short-term need or intention to raise capital.
Update on Investments
As described above we exited the most of our direct holding in UKOG for gross proceeds above investment of over GBP1m returned to treasury. The fact that we have sold most of our holding is not a reflection on the HHDL-1 project and its potential but is firmly based upon applying portfolio management principles. As I have mentioned in previous Investor updates, we should be judged on our ability to deliver tangible value and this, I am pleased to report, represents tangible value to all shareholders.
Shareholders will no doubt be aware that in the Quarter we began to build a share position in Greatland Gold PLC. At the time of writing we have 35m shares representing just under 1.1% of the issued capital, purchased at an average price of 1.71p per share. This investment decision was predicated on the outstanding exploration results released in December 2018 for the Haiveron Gold Project near Telfer in Western Australia. We have been looking for a quality gold-related investment for a while as we believe gold exposure would be a good balancing influence in our portfolio. Shareholders may not be aware I researched my thesis on intrusive-related gold deposits in these relatively obscure regions of WA and the Northern Territory and studied the nearby Telfer Mine geology and geochemistry. I am of the belief that Haiveron may prove to be one of the most significant gold discoveries globally in recent times and I am pleased that we have been able to build a meaningful stake. We note that on 5 February Greatland announced a host of what we consider to be outstanding results for the second half of the discovery drill programme at Haiveron, comprising holes HAD006 - HAD009.
These excellent results only further compound our view that Haiveron has the hallmarks of a globally significant gold-copper deposit in a world class mining jurisdiction. Furthermore, we believe the recent drop in the Greatland share price to be completely unrelated to the quality of the results published. We will be investigating expanding our stake in Greatland should funds be available to do so as we believe they will be firmly on the radar of industry players looking for potential Tier 1 projects.
Elsewhere within our portfolio of oil and gas investments it is pleasing to note that both Nomad Energy ("Nomad") and SOA Energy are both moving forwards following the breakthrough of an impasse in the Ivorian Government and the expected finalisation of a major farm-in deal respectively.
Clearly we are not privy to, and regardless nor could we disclose, any commercially sensitive information about the gas supply negotiations between Nomad, its partner VITOL and the Ivorian Government. However we have been informed that whilst no agreement is yet in place, the negotiations are now moving in the right direction having being stalled for some considerable time. There is a sense of confidence at Nomad that a deal may be done in the near term and clearly this would help unlock the value of our US$300,000 investment we made back in 2017.
We expect to hear from SOA very soon that the final farm-in deal has reached commercial close. We should then, subject to any prevailing confidentiality clauses, be able to talk in much more breadth about the farm-in partner and the exciting drill and test programme for 2019. SOA has reaffirmed that it will be seeking a listing on the AIM market in 2019.
Both of these investments highlight a recurring theme that as the more our investments mature and grow, sometimes the less Primorus is able to say about them. This is because commercial confidence and IP demands from our investee companies weigh on our ability to transmit news.
With this in mind I move on to Fresho where the management team have rightly requested that some sections of its own Quarterly Shareholder Report remain confidential. What we can say is that metric we have been following for some time, Gross Order Volume (GOV) went through A$1m per day mark during the December Quarter. Furthermore, several opportunities to potentially launch internationally on the back of large local customers have presented themselves. New to Fresho has been the launch of the Fresho Payment Platform which seeks to monetise more of the GOV by providing an innovative trade finance offering as part of the general use of the platform.
We expect the reported solid growth in the Fresho business to continue through 2019 and despite a cash balance undiminished since the last Quarter the company is contemplating further external investment to accelerate international growth opportunities.
Importantly the price at which this is done should allow us to better benchmark the potential value of our investment to date and also provide a look-through to when we might exit this investment. Ideally, we will seek crystallise some gains on this investment in 2019.
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February 08, 2019 02:00 ET (07:00 GMT)
DJ Primorus Investments PLC Quarterly Update -2-
Last week we had a very productive meeting with Engage management at their Paddington HQ to discuss what really is a critical upcoming quarter or so for the company as a myriad of long-awaited product releases begin to become available for customer release. The exciting news is that these are on track and their effects will hopefully begin to be felt this quarter. As Engage aims to be a totally viral and self-service product with unlimited scalability, it potentially represents a very lucrative financial performance opportunity.
It appears we are not the only ones who feel this way either. A small GBP1m planned capital raise in December attracted nearly GBP2.6m in investment, which the Company feels is encouraging given the global market turmoil experienced at the time. We did not participate this time as we already have a large holding. This was the last of the GBP22/share investment level available. We invested at both GBP15 and GBP22 per share in previous investor rounds, and have an average buy-in price of GBP20.13 per share.
In terms of a few metrics Engage reported 110 signed corporate contracts live or onboarding as of Christmas 2018 and have picked up another 10 or so in 2019 already. This compares to 75 at the end of Q3. This will take the number of workers paid through Engage to over 20,000 between now and April. As mentioned above, the quarter was heavily focussed on re-tooling for scale, including formalising the Customer Success function - hiring the ex-Bullhorn Customer Success Director - and releasing the first elements of a new scalable and automated V3 Payroll.
Engage is load testing successfully to deal with 100,000 paid workers with multiple transactions per week, and 10,000+ customer service tickets per week with current product and resources to stay ahead of demand. In the coming quarters, Engage aims to develop the automation to lift all limitations.
The key challenge for management as they grow rapidly is to ensure that large corporate client contracts with high customer service demands and specific functionality requirements don't pull product development too out of shape and don't become burdensome on short-term financial performance as Engage strives to meet break-even in Q3 2019. We are very pleased that management highlighted this challenge to us and in our opinion are balancing the demands of the very large clients with the need for a fully self-service product to mass market to small and medium enterprises as this where the true eventual sales volume lies.
We believe all of this means that the 2019 plan to commence IPO documentation in the summer is still very much on track and I believe Engage has the potential to be a step-change investment for Primorus in terms of meeting our stated aim of growing the balance sheet to at least GBP25m.
Progress is picking up pace at StreamTV, who, in conjunction with Beijing Optical & Electrical ("BOE") released two new products at the CES (Consumer Electronics Show) in Las Vegas in January. The latest version of the 65" "8K Lite" 16M pixel panel and the gaming focussed 27" "8K Lite" PC monitor. We have received several reports from the company that the response to the products from a myriad of household names in the TV, gaming, technology and content industries was outstanding. With commercially available products making their way to market in 2019 I very much look forward to shareholders seeing the products for themselves and being satisfied that the Company was an early stage investor in this amazing technology.
We are expecting more significant news soon on industry participation into StreamTV and perhaps then we can quantify what that may mean for our potential return on investment then.
Sport:80 was, subject to no unforeseen delays, ready to hit the road to for its IPO funding round in December. However, an issue around tightening up the shareholder register prior to the IPO subsequently delayed the process. In reality however, avoiding the tumultuous markets of December was probably in everyone's best interests regardless. The good news is Sport:80 assure me the matter is moving towards resolution and more importantly the business continues to add users in the UK and overseas and is expected to be EBITDA positive for FY 2019. We do see the appointment of Former British Olympic Association chief executive Simon Clegg as the Non-Executive Chairman of Sport:80 effective 30 January as a huge positive. As evidenced by his CV, Mr Clegg is a highly experienced sports businessman who has held numerous board positions, including his role with the BOA, and Ipswich Town FC, where he was chief executive between 2009 and 2013. He was also the Chief Operating Officer of the $1-billion inaugural 2015 European Games in Baku, Azerbaijan, and holds the same position with Expo 2020 in Dubai. He was awarded an OBE in 2001, upgraded to CBE four years later. So, whilst the delay to the IPO is a little frustrating because I am personally keen to demonstrate a full investment exit, the important point is the quality of the business and its leadership underpins the eventual value of our reward and we are prepared to be patient when investing.
TruSpine has been a slow-burn for us and there is no doubt that the new management team has, largely through events outside their control, taken longer to put the company on a sustainable funding path than we had hoped. This impacted their product development goals for 2018. This is a real shame because the core product offering remains one that generates a significant amount of interest from industry. We recently received an update from Simon Stephens and his team and we walked away very satisfied that whilst been very frank about the difficulty in securing the funding they wanted in a more timely fashion and also concluding any joint ventures being discussed the core proposition has not changed and they have been able to secure enough funding to avoid any compromise to existing share structure and value proposition. We look forward to a more fruitful 2019 for TruSpine as we haven't changed our view on the company itself, but we have had to adjust or estimates of timing to exit accordingly.
We have yet to receive our WeShop investor update and will have to return to this in the near future. We have been told however that it is in the process of taking its product inventory from 5m to over 150m products in the UK. There has also been significant progress on the direct integration platform and WeShop is in negotiations with a number of global brands and retailers. There is a marketing plan in place to drive volumes of users in Q2 of 2019. The company continues to evaluate a potential IPO in 2019.
We ended 2018 with a successful exit from most of the HHDL investment that yielded us an unaudited cash profit on investment of over GBP1m. This compares favourably to our market capitalisation on percentage-terms. It has been pleasing to be able to take some money off the table and into treasury where we have been able to deploy some of it into building a meaningful stake in Greatland Gold amongst other things. We are debt free and the board foresees no reason to raise additional capital in the short to medium-term. With the delay in the Sport:80 IPO we have still not gone through the full pre-IPO to IPO investment cycle but as our sale of HHDL has proven there are several ways to achieve the objective of generating solid returns above investment. We now have a good balance of private and public investments and we are hopeful that the implied increase in look-through value can better assist our share price to reflect underlying portfolio value.
Most importantly our core holdings are preforming well. We hope for a seminal year ahead for Engage and expect its true potential to become evident to industry and the broader investment community. StreamTV products should begin to hit the market and the growth achieved since investment at Fresho should begin to be quantified as the company finally raises more capital. Our other oil investments in SOA and Nomad are, after some time, making real progress towards commercialisation and WeShop we shall return to once we receive our final update from them. We also have managed to begin to accrue some income through the coupon on the Zuuse debt instrument we purchased and also have the added benefit of some attaching warrants.
So despite the turmoil that swept global markets at the end of 2018, the Board believes Primorus is very good shape to keep delivering returns on investment such as the one we delivered this quarter via HHDL. We look forward to 2019 with considerable excitement and we thank our shareholders for their patience and support.
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
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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February 08, 2019 02:00 ET (07:00 GMT)