Primorus Investments - Quarterly Investor Update
RNS Number : 9439A
Primorus Investments PLC
04 January 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 December 31, 2017 ("Q4") periodic portfolio update regarding its current holdings and activities acquired and managed as per its investment mandate.

 

Executive Director's Quarterly Comment - Alastair Clayton

 

Once again, I am pleased to be able to provide shareholders and stakeholders with a review of our activities in Q4 and make comment on certain underlying themes that are driving the investment decisions and lastly to provide, where appropriate, some signposts to the potential outlook for the coming Quarter and beyond.

 

 

Highlights for the period were as follows:

 

 

·      HHDL received planning permission for the Extended Flow Test of the HH-1 oil discovery;

 

·      Engage Technology platform expands exponentially and appoints Microsoft UK Cloud Services Director as non-executive Director;

 

·      Sale of entire stake in Gold Mines of Wales for 83,333,333 shares in Alba Mineral Resources;

 

·      Participation in a successful A$4m second round investment in Fresho Pty at a 40% premium to first round;

 

·      Successfully raised GBP£1m at 0.20p per share, a slight premium to the prevailing mid-market share price;

 

·      Second round investment in WeShop at a 20% premium to first round. Platform usage grows markedly since second-round investment;

 

·      Appointment of TPI Limited as exclusive Company Broker; and

 

·      Directors purchasing 30m ordinary shares in the Company via on-market purchases, in addition to the 67m purchased over the previous two quarters.

 

 

 

 

As evidenced by the above, Primorus has had a busy Q4. We successfully completed the first two second-round investments and are confident a number of our investments are making material progress towards either IPO or trade sale. Furthermore, I am pleased that two Directors have made significant on-market purchases of Company stock. Whilst this has been done in my case for purely investment reasons it should also demonstrate to investors that the Board are committed and aligned to shareholders and to generating share price-based outcomes in the future for the benefit of all.

 

In December, we were able to sell our stake in Gold Mines of Wales ("GMOW") for circa 83m shares in Alba Mineral Resources PLC ("Alba"). We see this as an attractive outcome for shareholders as we retain some exposure to the project via this 3.6% shareholding in Alba and by definition increase our exposure to HHDL in which Alba are an 18.1% shareholder. Furthermore, the Alba share price has appreciated in value since we became a significant shareholder and this stake is inherently more liquid than our previous direct stake in GMOW.

 

We continued to be impressed by the team at Fresho. We met management in Melbourne in October 2017 and were not only pleased with the business performance to date but also by the financial interest generated in Fresho which enabled them to raise A$4m in what we understand to have been a keenly sought-after funding round. We will be seeking an update from the Company in January 2018 to see how the important Christmas/New Year period went in terms of platform metrics both in Australia and now in New Zealand as well as more news on the international expansion underway elsewhere in Asia.

 

Engage Technology Partners ("Engage") has developed and is now selling a unique, fully integrated SaaS platform servicing the HR industry surrounding the contingent workforce in the UK. In recent shareholder updates we have been informed that the platform is on target to reach £1m of Annual Recurring Revenue ("ARR") by the end of the coming Quarter.

 

This is significant because from this ARR figure we believe that top-line revenues and underlying EBITDA for the Engage platform may grow exponentially as customers are on-boarded and the product becomes fully self-serve from a customer point of view. The underlying attraction of SaaS platforms is their ability to scale rapidly as a result of a low cost of service base to generate very high EBITDA margins as a result.

 

We believe testimony to this potential is the appointment of Mr Paul Bolt as a non-executive director at Engage. Paul is UK Cloud Services Director at Microsoft. Microsoft have allowed Paul to take on the non-executive role at Engage whilst retaining his current post as UK Cloud Services Director allowing him  to foster and mentor potentially globally scalable SaaS platforms.

 

We have been informed that Engage continues to be courted by a large number VC funds in the UK and US but is considering maintaining its independence via a further capital raise sometime in Q1 2018. Subject to its own funding, Primorus may well consider further participation in funding Engage.

 

Our second-round investment in WeShop may well have been well timed. Ahead of a larger fundraising WeShop has planned for completion in Q1 2018, we have been informed by management that in just the few weeks between our second-round investment in late November 2017 and mid-December 2017 the key metric of Registered Users have grown to circa 85,000 (+21%) and unique users have grown to circa 750,000 (+25%). It is important to note that the PR and marketing campaign for WeShop was only launched after this period so we very much look forward to receiving updated numbers post the busy Christmas/New Year trading period.

 

Significant progress has also been made elsewhere in our portfolio and we look forward to providing updates as key news comes to light at TruSpine, Sport80, FOMO Money, Nomad Energy, SOA, Farina and StreamTV. We expect significant news from these companies to become available in the coming Quarter.

 

On the corporate front, Primorus are delighted to have appointed TPI Limited as the Company's new exclusive Broker and retain Cairn Financial as the long-standing Nomad to the Company.

 

Importantly we have also been able to attract further investment capital in the form of issuing new shares in the Company at a slight premium to the prevailing share price. This compares favourably to many companies on AIM which routinely offer large discounts to their prevailing share price to attract capital. We believe this is at least in part validation of the Board's view of the existing and potential underlying value within the Company's portfolio as it stands today.

 

We regularly meet the CEOs and management of companies which are seeking funds to further their businesses. It is notable the comments we receive on the perceived difficulty in securing funding outside of the VC/VCT and private equity universe. Several companies pointed out to us that there is simply a dearth of investors able to participate directly in pre-IPO and private funding rounds and that VC/VCT funding terms are onerous to the point of being unattractive.

 

In summary, Q4 was dominated by portfolio consolidation and rationalisation through the participation in our first secondary funding rounds and the sale of our legacy stake in GMOW and the exceptional growth seen at Engage Technology and Fresho.

 

The Board remains confident that the private and pre-IPO markets remain significantly under-served and as such significant opportunities exist for the Company going forward. We look forward to 2018 being one in which we can demonstrate our business model by exiting some more of our investment positions, thereby realising tangible value for all shareholders.

 

 

 

Current Holdings:

 

Horse Hill Developments

 

The Company currently owns a 10% direct interest in Horse Hill Developments Limited, which is a special purpose company that owns a 65% participating interest and operatorship of Licence PEDL137 and the adjacent Licence PEDL246 in the UK Weald Basin.

 

As reported in March 2016, the final total aggregate stable dry oil flow rate from two Kimmeridge limestones plus the overlying Portland sandstone in HH-1 stands at 1,688 barrels of oil per day ("bopd"), a UK record for an onshore discovery well. Over the 30 to 90 hour flow periods from each of the 3 zones in HH-1, no clear indication of any reservoir pressure depletion was observed. 

 

The carrying value of this investment remains unchanged since our most recently published audits accounts, however the Board looks forward with considerable interest to the upcoming long-term extended flow test programme and its likely potential impact on our investment value going forward.

 

SOA Energy

 

SOA Energy is an oil exploration and development company with prospects in the Dead Sea region of Israel. Primorus participated in a private funding round by purchasing 14,977 shares at £6.67 per share. SOA is currently seeking a significant funding package to further their development plans. We expect significant news on this funding package in the coming Quarter.

 

 

Fresho

 

Fresho, a company in which Primorus holds an investment of approximately £250,000, representing approximately 3.1% of Fresho's issued share capital, is positioning itself as a leading Australian B2B company servicing the restaurant and food service industries. By aggregating and streamlining the food order process via Fresho's unique cloud-based platform, both customers and suppliers are able to make savings in time, money and wastage and also generate powerful reporting and business data analytics. Given the higher priced second round investment participated in we expect to review the value of this investment at the next scheduled audit.

 

Nomad Energy

 

Nomad Energy is a private oil and gas exploration and development company primarily focussed on commercialising existing gas reserves in shallow offshore waters of the Ivory Coast. The Company is currently attempting to negotiate a gas sales agreement with local utilities for the supply of gas to existing and proposed power stations in the country. Primorus owns 40,000 shares at the last investor round price of US$7.50 per share. Upon any successful further funding levels by Nomad Energy we may review the value of this investment.

 

TruSpine Technologies

 

Recently Primorus invested £500,000 in TruSpine Technologies Limited on a pre-new money valuation of £15m.  Founded in December 2014, TruSpine secured intellectual property and subsequently developed the Faci-LOK and Cervi-FAS minimally invasive spine stabilisation devices, and the VOSC Catheter atherosclerosis treatment product 'VOSC Catheter'. This development is on-going and TruSpine is targeting FDA clearance and commercialisation of its first product, the Faci-LOK with a view to an AIM IPO.  

 

Sport:80

 

Primorus invested £100,000 in Sport:80 plc on a pre-new money valuation of £10m as part of a fundraising of up to £1m.  Sport:80 is a technology and management company with a proprietary cloud-based platform focused on transforming the business operations and management of sports organisations. The Sport:80 platform is used by 20 prominent sports organisations. Sport:80 is revenue-generating with four-fold revenue growth per annum since 2014.  In the 12 months to 31 December 2016 it had total turnover of approximately £458,000 and made a loss before tax of approximately £269,000. It is the intention of Sport:80 to pursue an AIM IPO.

 

Farina Investments

 

Primorus invested £100,000 in Farina Investments (UK) Limited on a pre-new money valuation of £4m.  Farina is a boutique corporate finance and asset management company which specialises in leveraging profit opportunity in the post-crisis financial landscape.  Farina has been carefully structured and strategically placed to fully capitalise on these opportunities, thereby optimising capital growth, profitability and returns for both the company and investors. Farina is currently exploring various UK listing opportunities either via IPO or reverse takeover. 

 

Engage

 

The Company invested £400,000 in Engage Technology Partners Limited ("Engage") on a pre-new money valuation of £15m as part of a fully subscribed £5.25m funding round.  Founded in 2013, Engage builds software to assist with finding, hiring, compliance and paying of the rapidly growing contingent workforce in the UK.  Engage has rapidly gone from a minimally viable product to a fully saleable and scalable SaaS platform which has built up an impressive and rapidly growing customer base including many household names. An AIM IPO is planned to take place in 2018.  

 

FOMO Money

 

Primorus invested A$400,000 (approximately £240,000) in FOMO Money Pty Ltd ("FOMO Money") on a pre-new money valuation of circa A$6m.  FOMO Money is a new entrant into the Australian Fintech sector based in Melbourne which has been in development for the past 18 months. FOMO Money is an online lending business which will offer personal loans and, in time, brokered home loans that will target the millennial market. As a new corporate entity, FOMO Money does not have any historic financial information. 

 

WeShop

 

Primorus invested £200,000 in WeShop Limited ("WeShop") on a pre-new money valuation of £25m in September 2017.  It invested a further £675,000 at a £30m valuation in November 2017. WeShop is a new way to shop online and earn rewards. Users can browse millions of products from many top brands, discover which have been recommended by people known to them and earn rewards to withdraw as cash or donate to charity.  WeShop allows the user to shop with friends to share ideas and gain inspiration, with everyone earning rewards. An AIM IPO is planned to take place during 2018. Given the higher priced second round investment participated in we expect to review the value of this investment at the next scheduled audit.

 

Stream TV

 

Primorus invested US$200,000 on a fully-diluted valuation of US$336m. Stream TV is a Philadelphia-based new media company created to serve a consumer market seeking enhanced entertainment and communications experiences through devices with unlimited accessibility and superior quality.  Through its wholly-owned research subsidiary, SeeCubic B.V., Stream TV has developed breakthrough glasses-free 3D display technology launched under the trade name Ultra-D. Stream TV is on the cusp of commercially launching, via license, a range of TV, tablet and smartphone glasses-less 3D screens in 2018. Recently Stream TV has added to their product plan 8K displays which produce effects approaching hologram-like quality as new prototypes used by prospective customers. Further licensed products will follow including laptops, PCs, gaming, medical, and automotive. Stream TV desires to IPO in the near future.

 

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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