TIDMPRIM
RNS Number : 1085K
Primorus Investments PLC
20 April 2020
Primorus Investments plc
("Primorus" or the "Company")
Quarterly Investor Update
Primorus Investments plc (AIM: PRIM, AQSE: PRIM) is pleased to
provide the quarter ending 31 March 2020 ("Q1" 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
It seems prudent, in the current environment, to publish our
Quarterly Investor Update much sooner than is typical. We, like all
companies, are of course affected by the current situation caused
by the COVID-19 pandemic. The ability for us to make comments on
the timings and pricings of investment exits is always tricky and
currently near impossible. We do, however, see a significant amount
of resilience and dare we say it, opportunity within the portfolio
as events play out around us. Many of our investments are expected
to take short-term hits to revenue lines (where applicable) but we
actually hope to see many of them emerging from this crisis in a
position of strength that may well actually improve our investment
outlook in the medium term. Some of our investments are powering
ahead regardless. We will explain in more detail below.
For a moment, I'd like to reflect on the crisis as we see it, as
it is important in understanding how we intend to move forward from
this and what upside and downside influences may come to bear on
our portfolio.
We now find the broader economy (high street Britain) almost
totally shut down and whilst we are in no doubt that global
stimulus through Quantitative Easing and M3 monetary expansion will
reflate global stock markets and thereby reinvigorate larger
corporates, it's the lives and livelihoods of ordinary people we
worry about. Generations of business owners and workers risk having
their life's work destroyed and yet little thought has been given
to ramifications of this dangerous precedent. Being honest about
the cost trade-offs made every day in public health may have been a
better place to start the public policy response to this particular
emergency as we now look for a medical and political way out of
hibernation.
In a way, we also view the current predicament as the bookend of
the 2008 financial crisis. Many unworthy businesses propped up by
lose monetary policy for the last decade or so will finally hit the
wall and those that don't will only accelerate their business
process transformation. In this light we hope to see the likes of
Engage, Fresho and Zuuse flourishing even more once the short-term
disruption is over. Furthermore, our exposure to the gold sector
has proven its worth and continues to underpin virtually our entire
portfolio valuation. We have always avoided massively capital
consumptive growth companies as we saw flaws in this model. We
believe higher costs of scarcer capital will finish many of these
unworthy ventures off. Probably not before time. Sadly, many good
businesses will also disappear because they are small enough to
fail and not big enough to bail. We predict the large banks will
once again prove to be tone deaf and default on their promise to
assist small business. Plus ca change.
In this investment environment, Primorus sees both resilience
and opportunity in its portfolio but cautions that despite the
rhetoric, we fear it is once again the everyday people of Britain
who will pick up the tab.
Highlights
-- Greatland Gold Plc share price up over 261% for the Quarter
and 355% year to date. further spectacular drill results from
Havieron. Newcrest Mining ("Newcrest") completes Stage two of the
Farm-in process and moves immediately to Stage 3, many years in
advance of what is contractually required.
-- Fresho Gross Order Volume over A$2 million per day through
the platform before wholesale food trade impacted by venue
closures. At request of suppliers, launches "Fresho for home
delivery" and signs up over 25,000 customers in first weeks.
Exciting new high-margin B2C business evolving to complement
current B2B business.
-- TruSpine Technologies ("TruSpine") moving toward IPO with
investment from and proposed appointment of Annabel Schild (GBP409m
Huntleigh Technology takeover) as a non-executive director .
-- SOA Energy advises that drill plans for the Ofek oil
discovery remain on time with expected spud date expected to be in
May.
-- The 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
Fresho is a business that we first invested in back in 2017. It
has since then developed a business to business ('B2B") platform
for wholesale suppliers to seamlessly fulfil many thousands of
fresh food orders a week across Australia, New Zealand and now the
UK. The key point of Fresho is it allows many large and highly
sophisticated businesses and less sophisticated ones in the supply
chain to interact and trade via a single source and neutral
platform. This platform generates huge efficiencies for all
participants by reducing manual inputs, integrating with accounting
and stock management systems and invoicing and generating sales tax
reconciliations. Since we invested, the upward trajectory of gross
order volumes has been impressive and the company finds itself in a
strong financial position having reached a position where it could
be EBITDA positive if it chose to spend less on growth.
Clearly the current crisis has and will significantly impact the
volume of B2B business with restaurants and venues closed and or
heavily restricted. As a result, several key suppliers asked if
Fresho could be spun around to allow sales direct to customers like
you and me, business to customer ("B2C").
Out of crisis often comes real opportunity. In the week or so
since Fresho began turning B2B suppliers into B2C vendors, demand
has exploded. At the time of writing and solely by word of mouth
over 25,000 households in Australia and New Zealand have signed up
to Fresho order-for-your-home.
Whilst B2C was always on the roadmap for Fresho, the strategy
had been to continue to focus on the extraordinary growth in the
B2B business. Since the world changed overnight, Fresho now finds
itself on a potentially game-changing path with both business
streams growing in parallel.
Significantly, Fresho has continued to add a number of large
food wholesalers for its B2B business as well. It is likely that
many of these have been spurred to make real business process
change in light of the current crisis to ensure they are
competitive when the world returns to normal.
Fresho has significant cash reserves to weather the current dip
in B2B business and so, despite an inevitable short-term hit to
gross order volume and revenue, we believe Fresho will emerge as a
significantly stronger and more financially diverse business. Given
sectoral valuations of B2C businesses are often higher than those
of B2B (owing to higher margins in the former compared to the
later) we also believe the potential exit for us as shareholders
may be much higher should the B2C business continue to grab
customers.
Greatland Gold Plc ("Greatland") began the Quarter at 1.80p and
closed on March 31 at 4.70p representing an increase of some 261%.
At the time of writing the share price was 6.40p representing a
year to date gain to date of over 355%.
By any measure this is an outstanding performance and in the
current environment even more so. Remarkably our Greatland holdings
represent over 65% of our entire market capitalisation at the time
of writing. This implies virtually no value is being attributed to
cash and other investments.
Since our last Quarterly update, the Havieron Joint Venture (now
standing at Greatland Gold 60%, Newcrest Mining Ltd 40%) has
reported further outstanding drill results. Furthermore, Newcrest
have highlighted the significance of a new type of high-grade
breccia mineralisation.
Newcrest recently completed Stage 2 of it's farm-in agreement
with Greatland and in so doing moved to a 40% ownership. The pace
at which this has been done is years in advance of the minimum
Farm-in contractual requirements. We believe this speaks volume
about the size and potential of Havieron and the surrounding
region.
Having reviewed in some detail many sources of publicly
available data it is clear the drilling footprint has expanded
dramatically in the WSW and SW, SE and N of the existing Havieron
drilling grid. Why that should be we can only speculate, however
there is the possible conclusion that Newcrest have discovered
significantly more mineralisation outside the previously defined
limits. This could have a huge impact for the valuation of
Greatland.
Our view on the end-game (exit) for our investment in Greatland
is very simple. In our opinion Newcrest Mining will seek to acquire
the entire share capital in Greatland in the near future, possibly
just post a maiden resource estimate for a small part of the
overall mineralised system. We expect this maiden resource in late
Q2 to early Q3 of this year.
The reasons for these convictions are again simple. Telfer is
100% owned by Newcrest, as are all their Australian operations. We
can't see any reason for Newcrest to maintain a minority partner at
production level and the market capitalisation of Newcrest at some
circa A$24 billion and with billions in cash and at call liquidity,
it is easily capable of swallowing Greatland. The only question
left in our mind is what price will they pay?
Therefore, we will continue to hold our shares for that
possibility and believe the best share price appreciation for our
investment is still in front of us. Perhaps large UK institutions
will take notifiable interests in Greatland soon, but they have
been conspicuously and inexplicably absent to date. In our opinion
Havieron is shaping up as a once in a generation discovery in a
gold bull market. What is not to like?
The news at TruSpine Technologies ("TruSpine") is also
encouraging. Shareholders may recall that despite significant
interest over the past few years, a natural strategic investor had
not materialised, until recently. following her investment, Ms
Annabel Schild has agreed to be appointed to the board as a
non-executive director as part of the TruSpine IPO on the Aquis
Stock Exchange.
Ms Schild and her family have a strong and well publicised
history in Med-Tech investments, the Schild family listed on the
AIM in 1999 and then sold Huntleigh Technology PLC in 2006 for a
total consideration of over GBP409 million. The addition of Ms
Schild to the board of TruSpine will be a huge endorsement of the
potential of TruSpine's suite of products, and given her and her
family's history of listing, operating and selling medical
technology companies, it is clearly a coup to have her imprimatur
as the IPO approaches.
We understand TruSpine is advancing its listing documents and we
await our copy of the final document when considering any follow-on
investment. Clearly current events may or may not change the
current timetable (we must remain realistic) however, it is very
encouraging to have the Schild family's support and as long-time
investors we welcome them to the register.
Engage Technology Partners ("Engage") is a key investment for us
and in an effort to expedite this document we have not waited for
our formal update to all Engage shareholders. We have, however,
been in regular contact and will provide a more detailed update
when we receive it in the coming weeks.
SOA Energy have already advised shareholders that drill plans at
the Ofek oil discovery remain on time with expected spud date
expected to be in May 2020. This is great news and we await
notification of formal Spudding of the well.
Elsewhere across the portfolio our investee companies have yet
to report so we may consider a further update to wrap up these
outstanding matters as we receive information.
Summary
The message to shareholders is that, despite the tumultuous
events of recent weeks, our principal listed investment has had a
stellar performance and this has continued into the current period.
Many of our core investments in the technology space, whilst taking
some short, sharp pain are designed to thrive in a post-crisis
world. These companies are at the vanguard of business process
change and require little or no additional capital. We feel this is
an enviable position for Primorus Investments to find itself in and
we look forward to another successful Quarter ahead. The Board
still sees no requirement to raise any capital in the short to
medium term and would like to thank shareholders for their
continued support.
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 3657 0050
Turner Pope Investments
Andy Thacker
Zoe Alexander
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END
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