TIDMPRIM
RNS Number : 0026F
Primorus Investments PLC
24 October 2018
Primorus Investments plc
("Primorus" or the "Company")
Quarterly Investor Update
Primorus Investments plc (AIM: PRIM, NEX: PRIM) is pleased to
provide the Quarter ending September 30 2018 ("Q3") periodic
portfolio update regarding its current holdings and activities
acquired and managed as per its investment mandate.
Executive Director's Quarterly Comment - Alastair Clayton
We find ourselves at the end of the Quarter debt free and a
large amount of cash and tradeable shares relative to our overall
quoted market value. Despite the traditional summer slowdown, we
have made some good progress in the Quarter. In terms of portfolio
management, we have managed to exit our last our remaining 5% stake
in HHDL, in exchange for cash and UK Oil and Gas plc ("UKOG")
shares.
The current total value of the cash and shares received for the
two sale transactions exceeds our total outlay for the investment
over the last few years by circa GBP1m and we still retain upside
from these levels to the recently declared commercial HHDL-1 well
via shares in UKOG.
This I believe is an excellent result for shareholders and
furthermore, we no longer have any cash calls to fund as we no
longer hold any assets at project level. As a result, we expect the
overall cash costs on the Company to drop dramatically compared to
previous years.
As I hope we can demonstrate below, our investment portfolio
continues to grow and mature and we are eagerly awaiting numerous
events including impending IPOs and potential significant
institutional financings of businesses in which we have been
early-stage investors.
The share price performance over the past two Quarters has been
very poor, however, I believe we have all the elements in place to
reverse this. A simple sum of the parts of cash and shares, added
to the in-cost of the investments we have made, exceeds our current
market capitalisation, let alone the potentially significant but as
yet unrealised gains we believe we have made within the portfolio
already. As we begin to exit investments we believe the scale of
these potential gains will become evident and pleasingly we are
starting to see the first candidates lining up for IPO and many of
those that are a little further back in the process are
demonstrating significant growth within their respective
businesses, as we demonstrate below.
Whilst exits are foremost in our minds, the underlying strength
of progress of the businesses we invest in is the foundation upon
which value is created. We are working to have this more accurately
reflected in the share price.
Below I list the highlights of the Quarter and at the time of
compiling this document I am also pleased to report that Sport80
has advised it will, subject to any unforeseen delays, in the
coming weeks, commence the IPO capital raise process. Subject to
securing the requisite funds, we would expect them to gain
admission to AIM a few weeks after confirmation of funding. We wish
the Board of Sport80 every success in this endeavour.
Highlights for the period were as follows:
-- Sold the remaining 5% stake in HHDL to UKOG for GBP375,000 in
cash and 63,644,030 UKOG shares. Currently valued GBP1m unaudited
gain for the entire investment and retain significant UKOG share
exposure to the HHDL-1 Oil Discovery.
-- Engage Technology platform continues outstanding growth rates
in terms of customer contract wins and appoints City broker to
raise additional pre-IPO funds in 2018/19 with a view to a 2019 UK
IPO.
-- Invested a further tranche of GBP250,000 in Engage Technology
to take our total investment in the company to GBP1.4m comprising
GBP400,000 at GBP15/share and GBP1.0m at GBP22/share.
-- Regulatory approvals are now in place for the SOA Energy
farm-in with a large regional oil firm covering both SOA's on-shore
and offshore assets. Both parties are now completing final
technical and legal process. Upon successful completion, drilling
activities will be fully funded and are expected to commence late
2018 or early in the new year. UK IPO planned for H1 2019.
-- StreamTV executes full Beijing Optical & Electrical
("BOE") agreement now providing a credible supply chain path to
mass production of its glassless 3D TV technology. Press conference
and global launch event expected towards mid-November in Beijing.
We expect further updates from StreamTV to coincide with this
event.
-- Fresho business thriving with strong product and platform
growth in Australia and New Zealand and further international
expansion being contemplated. No new capital raisings being
contemplated at this point in time. Given commercial sensitivities
we are now limited in terms of hard data we can publish.
-- WeShop makes significant Board appointments and progressing
next funding round. Detailed update spelling out detail expected in
early November.
-- Simon Stephens, CEO of TruSpine in which we have invested
GBP500,000, reports that they are on the cusp of a securing a
long-awaited commercial funding arrangement to take their product
range forward. Updates expected upon successful conclusion.
-- Invested A$500,000 (circa GBP275,000) into a 12 month loan
note to Zuuse Pty Ltd yielding a 12% coupon and free attaching
options.
-- Company finishes the Quarter debt-free with significant cash
and tradable AIM shares. Board foresees no short term need or
intention to raise capital.
As described above we exited the last of our direct,
project-level investments namely our remaining 5% of HHDL for
GBP375,000 in cash and 63,644,030 shares in UKOG. We note
subsequent to this transaction completing, news from HHDL and its
shareholders regarding early-stage performance of the Kimmeridge
portion of the extended well test programme was highly encouraging
with initial observed short-term flow rates exceeding expectations.
This is on top of the excellent flow-rates from the Portland
announced in the summer upon which a declaration of commerciality
has already been made.
We are pleased to now be in a position to leverage off the
activities at the HHDL-1 oil discovery without being a direct
contributor to the overall development budget. We view UKOG, as the
largest shareholder of HHDL, as the best exposure to the project,
so we have now sold our shares we held in the other previous and
current members of the HHDL consortium.
We believe Engage is a rare opportunity as pure, mass market
SaaS is often a chimera. The homogenisation of thought (group
think) amongst very large investors means sometimes opportunities
like Engage can come our way. We don't apply cookie-cutter
evaluation techniques and, to be frank we don't have hundreds of
millions of pounds to invest across scores of companies.
Engage Technology is now our largest investment in term of
committed funds with GBP400,000 invested at GBP15 per share and a
further GBP1,000,000 invested at GBP22 per share. Our enthusiasm
for this company, the team and the business model is considerable.
We believe this investment has the potential to yield a step-change
investment return for our shareholders.
Shareholders will recall that Engage has developed a cloud-based
vendor management through to pay, bill, tax and compliance platform
that focusses on managing the complexities and inefficiencies of
the contingent workforce sector. Since we first invested some 18
months ago it has been especially pleasing to watch the targets be
met and exceeded in terms of product delivery, contract wins.
Aside from huge growth in corporate users, from 55 at the end of
last Quarter to 75 at the end of this Quarter and a further 17
contracted but yet to go live, what is new and highly significant
is the recent number of strategic partnerships developing for the
cross selling of Engage products, particularly VMS (Vendor
Management System), by several global recruitment providers. This
is astonishing as, whilst we are restricted in revealing their
names, these global companies have recognised the strengths of
Engage as a tool to win their own client contracts at the expense
of some of their own legacy product offering. To put it simply,
Engage is now being actively sold by its competitors.
Given the above we firmly believe that Engage has already gone
through a fundamental inflection point. One of the only limiting
factors on revenue growth now is the need to onboard customers for
some product streams manually. Current product development is
focussed on moving these processes to a "fully self-serve" status.
As this occurs between now and the end of Q1 2019 we expect revenue
to lift off exponentially through the end of 2018 and into
2019.
On the corporate front Engage is now formally working with a
well-known City Broker ahead of the pre-IPO process of bringing
some larger institutional shareholders onto the register in advance
of a planned IPO in 2019. Engage is due to share its Q3 Report in
the coming weeks so we will come back with further news once we
receive it however we are already aware through discussions with
management, that in many other areas other than those mentioned
above it has been a fruitful one.
Fresho has had another strong quarter with the key take-aways
being that platform growth in Australia and New Zealand continues
to grow at excellent rates and annualised order volumes will soon
exceed A$300m. What is also very exciting is the potential for
expansion into other markets with several proposals being explored.
Beyond that I am unfortunately limited in what I am now allowed to
say. This is fully understandable as disruptive technologies often
need to fly under the radar at times to protect their IP.
StreamTV's Ultra-D product now has a credible path to mass
market with the final execution of the development agreement with
Beijing Optical and Electrical "BOE". BOE is the world's largest
flat panel manufacturer and provides the supply chain to mass
manufacture panels containing StreamTV's unique glassless 3D
technology (Ultra-D) in its final chip and bonded screen form for
televisions, tablets, Smartphones and outdoor advertising.
To this end we met with management recently and they are in the
final stages of completing a circa US$70m capital raising to
support some final product refinements prior to full commercial
production in 2019. Having had the opportunity to view the latest
8K Ultra-D enabled 65-inch pre-production model I can attest that
despite my scepticism regarding 3D as a concept, the Ultra-D
product is quite remarkable.
We expect global interest in the product and management inform
us that numerous household technology groups are already in
discussions regarding branding and or investment opportunities. We
expect this will only increase following the global launch event in
Beijing in mid-November. We will return with news from this event
next month and hopefully a PR link for investors to
investigate.
In chatting recently with Simon Stephens of TruSpine, where we
have GBP500,000 invested, he made it clear that the company
continues to progress multiple funding opportunities, and while an
inevitable slowdown during the summer months has delayed completion
of some very significant potential inbound investments, he firmly
believes TruSpine is on the brink of securing additional
substantial funding in the near future.
Simon also attended the North American Spine Society annual
meeting (keep the date in your diary for next year!) and he was
pleased to report that the TruSpine Faci-LOK proposition remains in
a class of its own and represents significant disruption in the
marketplace.
Clearly the securing of an adequate funding package has taken
longer than we had hoped for initially. Boards stacked with medical
experts are not always the best commercial closers, however with
Simon at the helm now, we are comfortable that the Board has the
requisite skills to close funding in the near term and drive the
product commercialisation forward. As soon as we have tangible news
on TruSpine funding we will report back to shareholders.
With regard to our other energy investments we are particularly
excited about the potential for a breakthrough at SOA Energy. We
have been waiting for them to secure a funding/farm-out partner for
their onshore and offshore Israeli oil and gas assets. We can now
report that the proposed deal with a large regional energy company
has now received the required regulatory approvals and has now
moved to final legal documentation. We are of the understanding
that the proposed deal covers both the onshore and offshore assets
and should conclude before Christmas.
With successful completion SOA, management inform us they will
move quickly to IPO on the AIM market in 2019.
NOMAD Energy appears a little gridlocked. We have been informed
that commercial negotiations for the gas off-take agreement with
the Ivorian Government are still stalled with a fundamental
disagreement on price. The majority partner (70%) in the gas
project, VITOL, carries significant influence in the industry and
region and we understand they are now leading negotiations with a
view to breaking this impasse.
As we make mention in our opening remarks, Sport80 is, subject
to no unforeseen delays, ready to hit the road to for its IPO
funding round. With success we would expect their shares to be
admitted to AIM a few weeks after the funds are received.
Whilst we only have GBP100,000 invested in Sport80, we are
particularly keen to have this first of our investments made under
the Primorus name, to go through from private financing round,
pre-IPO to IPO. The Sport80 business has grown at an impressive
rate since we first invested and now services 24 UK Sporting
Associations representing over 700,000 members records adopted to
the platform. We see an exciting future for the business as a
listed entity going forward and we certainly won't be in any hurry
to sell our shares given our overall strong liquidity position.
As evidenced above, our portfolio is moving forward well, and
despite being sometimes limited in what we can say, we are firmly
of the belief the potential value of our investments is not being
reflected in the current share price.
Whilst we are frustrated at the poor share price performance
over the last few Quarters and will work harder to get the message
out, we are however realistic that we need to demonstrate tangible
results before we can expect our portfolio to trade at a premium to
our initial investment in-costs. Pleasingly these results are
beginning to drop with a significant unaudited gain on our HHDL
investment in the past Quarter and Sport80 looming this coming
Quarter. Furthermore, as described above, we have a large number of
significant events backing up for Q1 2019.
The Board believe we have all the elements in place now to
achieve share price appreciation in the near-term. Our goal of
growing the balance sheet substantially, we believe, can be
achieved largely via the investments we already have in the
portfolio, We have a strong liquidity position with adequate cash
and shares to preclude us from the need to issue any shares to
raise funds in the foreseeable future. We have no more
project-level investments and therefore no more cash calls to
finance out of existing cash reserves. All this means we can allow
the time required to demonstrate the value within the existing
portfolio in terms of trade sales and IPO without having to
necessarily suffer dilution at unpalatable share prices. The Board
is totally aligned to share price-based outcomes via large share
purchases over the past year and looks forward to demonstrating
more tangible results in the coming Quarter and into 2019.
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 3137 1902
Optiva Securities Limited
Christian Dennis / Jeremy King
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END
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