TIDMPRIM
RNS Number : 4055K
Primorus Investments PLC
28 August 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 30 June 2019 ("Q2" 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
Compared to previous Quarters there is no doubt that Q2 has been
a relatively quiet one with news focussed around several key
investments such as Fresho, WeShop and Greatland Gold.
As we discussed in our Q1 Report, the IPO market for growth
companies in London is still very weak. This however does not mean
we cannot generate profitable investment exits. As such I am
pleased to report that we have recently agreed pricing regarding
the potential sale of our A$500,000 Series B Zuuse loan note that,
subject to final agreement and execution, would result in a
significant gain above investment price. We look forward to
advancing this sale process and will keep shareholders updated as
to pricing and timing.
Fresho grabbed a lot of the headlines during this quarter. The
participation of several high-profile investors in an equity
investment round at a significant premium to our investment cost
was fantastic news. This brings a wealth of global technology
scaling and banking experience to Fresho as it embarks upon its
global expansion in 2019/2020.
Those who follow our @priminvestments twitter page will have
seen the extensive national press this generated in Australia.
Given the long period in which we have been subject to commercial
in confidence it was personally pleasing for our shareholders to be
able to read about Fresho for themselves from external sources.
Elsewhere WeShop reported significant progress and Greatland
Gold ("GGP.L") reported significant news from its Havieron JV with
Newcrest Mining ("NCM.AX"). In the last few days we have received
updates from Engage Technology Partners ("Engage") and SOA Energy
("SOA") that we shall discuss in detail below.
So once again (share price aside) it has been another successful
quarter for the Company and we hope to sustain any future share
price rises as further exits and portfolio growth become more
compelling to existing and new investors.
We currently see no short to medium term requirement to raise
capital thereby reducing the risk of any potential dilution to
existing shareholders.
Highlights
-- As announced on 17 June 2019, Fresho attracts high-profile
technology and senior banking investors and undertakes widespread
external press that "lifts the veil" on the business to industry
for the first time. Pressing ahead on global expansion plans
including the UK.
-- First assays since the Greatland Gold (GGP.L) Farm-in
Agreement with Newcrest Mining (NCZ.AX) ('Newcrest") over the
Havieron Project released. Excellent Gold and Copper results
reported from first batch of holes. Newcrest add a third and fourth
drill rig to the Havieron project.
-- Post-period Primorus agrees pricing on a sale of its
A$500,000 in Series B loan notes by a known third party. Expecting
final execution of sale documents to occur in next 8 weeks. If
completed as contemplated this sale would result in a significant
return above investment earlier than previously contemplated.
-- Post-period we topped up our investment in Engage Technology
Partners ("Engage") by GBP50,000 to GBP1.45m. Recently received
Engage update highlights outstanding growth in monthly recurring
revenues and billable transactions on the back of the first
Self-Serve truly scalable SaaS products.
-- WeShop completes Amazon license agreement to pay WeShop for
user purchases facilitated by WeShop, and to enable Amazon
inventory to be available on the WeShop platform. Instagram
integration license: functionality to enable WeShop users to import
existing content from Instagram to post on WeShop. Apple iTunes
(Apple Services) partner agreement to pay WeShop for user purchases
facilitated by WeShop, and to enable iTunes inventory of all music,
video, books and other media to be available on the WeShop
platform.
-- SOA Energy ("SOA") expect drilling and appraisal work on the
farm-in with Delek Drilling ("Delek"), one of Israel's largest Oil
& Gas companies, to commence at the Ofek and Yahel licences in
Q3/Q4, later than previously anticipated.
-- 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
It truly was an enlightening quarter for Fresho and what the
future may hold for our investment. The Australian Financial Review
("AFR") ran an exclusive interview with Fresho management in which
Mr Leigh Jasper, Mr Robert Philpott and Mr Geoffrey Tarrant were
revealed as new, significant investors in Fresho. In late 2017 Mr
Jasper and Mr Phillpot sold Aconex, a global cloud-based
construction software business, to Oracle for US$1.2B. Mr Tarrant
is an investment banker and the Chairman of Zuuse Ltd, in which the
Company owns A$500,000 in high yielding notes as well as some stock
options.
The news in the AFR, as well as numerous follow up press items,
for the first time revealed to Primorus shareholders and the
broader investment community details about the growth and strategy
of Fresho which we were hitherto unable to report due to commercial
sensitivities so this was a particularly pleasing moment as Fresho
is one of our longest standing investments.
With Fresho pressing the button on a rapid expansion of growth,
sales and product development, we took time to meet company
executives in London to discuss the future. We introduced Fresho to
two large UK food suppliers and sat in on those discussions. We
were extremely pleased to hear their feedback from these large
suppliers on the Fresho offering and how it may be applicable to
the UK market.
This direct intervention may seem a little unorthodox to many
large funds however given Primorus's small size we do sometimes
take a slightly more hands-on approach to understanding the
trajectory of our investments. Clearly it will be very satisfying
to see Fresho begin to roll out in the UK and make our investment
all the more tangible for our UK shareholder-base.
Following this additional fund-raising, Fresho is now very
well-funded and we look forward to reporting back with more news
over the rest of the year. We understand that sales at Fresho have
jumped dramatically since the national press articles and we expect
to see this flow through to the bottom line over the remainder of
2019.
In terms of exiting this position, recent events have
significantly raised our expectations on value and as such any
secondary exit price would have to be very compelling indeed.
Engage Technology Partners is our largest investment, now with a
total of GBP1.45m invested across three funding rounds. We invested
in Engage because we believe it has great potential in the SME
market for temporary and also permanent recruitment, agency back
office and pay and bill if it is able to develop and release a pure
SaaS, mass-market scalable platform.
Following on from last quarter's report the recently received
update from Engage makes excellent reading. Key metrics since the
beginning of the year including Revenue (+69% for the year), live
Corporate Customers (+410% to >250) and importantly Cash Burn
(-60%) are all going very much in the right direction.
What is really important, and I am pleased to report we believe
Engage are well on the path to delivering, is the transition from
software start-up to a pure SaaS platform with significant
potential. Selling great business solutions is all well and good
however if Engage can truly become a zero-customer-touch, pure SaaS
company then we feel our GBP1.45m investment to date has the
potential to become an investment capable of achieving our stated
balance sheet growth target on its own.
To achieve this Engage has to continue to execute its business
transition strategy that has involved several key tenants;
automating the product suite from take on to user support,
delivering a SaaS sales model and shrinking the size of the
headcount of the business to reflect the SaaS model, thereby
driving the business to break-even and profitability on SaaS
(>90%) margins.
I am delighted that this journey to a pure SaaS play, sometimes
referred to in industry as "The Valley of Death", is well underway
and as evidenced by the key data points on revenue, sales and cash
burn are, in our view, well past the point of maximum danger and
moving towards a break-even position by the end of 2019/2020. This
is no mean feat and has in part been achieved by the introduction
of several SaaS experts to the company and we welcome the
incredible focus and discipline this has injected into what was
already great team.
As flagged in our last report Engage recently undertook a modest
fund-raising of circa GBP1m in equity (and debt) at GBP24 per
share. We took a small amount of the equity, GBP50,000, and may
look to take another small amount in the coming months. Engage has
estimated that it will not need significant further funding until
it hits breakeven which is very pleasing and the GBP24 per share
paid compares well to our previous investments at GBP15 and GBP22
respectively.
As investors we want Engage to drive towards breakeven and
profitability because upon achieving this, the world of exits
available to us will open up substantially. With the IPO market
still so soft we do consider a trade sale the likeliest of outcomes
or perhaps an early secondary exit should price be compelling.
In the quarter Greatland Gold PLC ("Greatland") and Farm-in
partner Newcrest Mining (NCZ.AX) ('Newcrest") announced several
excellent drilling results at the Havieron Project in Western
Australia. Newcrest has the right to acquire up to a 70% interest
in 12 blocks within E45/4701 that cover the Havieron target by
spending up to US$65m (circa GBP50m or AUD$90m) and completing a
series of exploration and development milestones in a four-stage
Farm-in over six years.
With the release of the first joint venture drilling at Havieron
that yielded outstanding results and exploration results due
imminently across several other high-alpha gold projects, our
investment in Greatland is beginning what we believe will be a very
interesting phase.
Reiterating what we said last quarter, we believe recent share
price softness in Greatland was simply a function of market
impatience and short-sightedness. Whilst at the time of writing we
are ahead on our investment, we consider the current share price to
not be in any way a reflection of the value we see in the company.
With the recent appointment of Numis Securities as joint broker we
are hopeful the company may reach a more patient, institutional
investor class.
We spoke to the CEO of SOA Energy recently as he prepares his
company to commence activities with their farm-in partner Delek
towards the end of 2019. This will comprise the Ofek
re-entry/appraisal well drilling programme and associated test
works. This is probably running a little behind our earlier
estimates in terms of timing however this is relatively unimportant
in the scheme of things. Upon successful conclusion this will then
allow long-held plans to list the company in London to
commence.
Zuuse is an international construction payments and lifecycle
software vendor with significant operations in the UK, United
States and Australia.
We hold A$500,000 in loan notes due December 2019 at an
attractive rolled up coupon of 12% as well as some options.
Post-period we have been approached by a credible investor to
purchase these notes of us for face value plus rolled up interest.
We have also been asked to consider selling the 1m options we hold
however the Board are still considering this approach.
We have agreed pricing on both scenarios and have begun
documentation of the proposed deal on agreed terms. Whilst there is
no guarantee any deal will be completed, we are confident that this
proposal will represent the next, profitable investment exit for
Primorus.
In the quarter under review StreamTV bolstered its board with
the appointment of two new directors to assist with the financial
and capital management side of the business. Whilst chip
manufacture and product commercialisation activities are moving
ahead and many millions of dollars of investment have been secured
over the quarter, the large cornerstone investor it has been
seeking has still not closed. Clearly it is in the interests of all
shareholders for this matter to be finalised so we eagerly await
news on this front.
WeShop had a very significant update to all shareholders during
the quarter. Primorus has invested a total of GBP875,000 in WeShop
representing approximately 3.5 per cent. of the issued share
capital of WeShop.
WeShop gained considerable momentum in finalising the product
and proposition for user acquisition later this summer. Some
significant commercial and product agreements, and integration,
have also been achieved. These included:
1. the Amazon license agreement to pay WeShop for user purchases
facilitated by WeShop, and to enable Amazon inventory to be
available on the WeShop platform.
2. An Instagram integration license: functionality to enable
WeShop users to import existing content from Instagram to post on
WeShop.
3. Apple iTunes (Apple Services) partner agreement to pay WeShop
for user purchases facilitated by WeShop, and to enable iTunes
inventory of all music, video, books and other media to be
available on the WeShop platform.
Additionally, WeShop has completed the implementation of
functionality that strengthens its user proposition through an
enhanced product and merchant inventory. This is a key milestone in
delivering the best possible experience and proposition to its
users. The commercial agreement with Apple Services ensures that
users can share and recommend products and media across the full
range of their interests and lifestyle, and not just fashion, like
most social commerce platforms. WeShop will look to expand its
product offering even further with hotel and travel inventory later
this year.
Elsewhere in the portfolio we had little material news from
TruSpine where a commercial funding route is in train however not
yet complete as far as we are aware.
We are awaiting the sign off of Sport:80's financial performance
before we make further comment save to say that the business is
growing nicely and we are happy for now to let the company get on
with business and not be distracted by external matters such as an
IPO in a very unreceptive market.
NOMAD and its partner VITOL are still in discussions finalising
the commercialisation of its gas assets in the Ivory Coast and we
await the outcome of those discussions.
Summary
Share price aside, we are pleased with the Quarter as
demonstrating solid growth within the portfolio whilst embarking
upon our next potential investment exit. As evidenced at Fresho and
WeShop, Primorus shareholders can now, in many cases, read about
our investee companies from a range of external media sources and
shareholder groups. I am hopeful that in reading other peoples'
opinions of our investee companies, shareholders might conclude
that the Primorus actually takes a relatively conservative approach
to assessing progress and valuing its investments. It has always
been the aim of Primorus to be judged on its ability to invest
wisely and successfully exit for cash or other tradable
instruments. We see terminal value recognition as the arbiter of
business progress and believe, over time, this goes hand in glove
with shareholder wealth creation.
We would reiterate that estimating timings for exists can be
tricky and in the current global macro environment probably even
more so. The guidance we give changes often and is usually a
reflection of many factors, many or all of which are outside our
direct influence. Indeed, the purpose of these Quarterly Reports is
to provide a running commentary of our views on the investee
companies and what the route to exit is at any given time. These
can change as the facts change.
That being said we believe that many of our core investments
have matured to where, in the absence of IPO demand, secondary
market sales are very possible outcomes. We thank our shareholders
once again for their support and look forward to the second half of
2019 with some optimism.
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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END
UPDGMGZRLRLGLZG
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