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Primorus Investments plc
("Primorus" or the "Company")
Quarterly Investor Update
Primorus Investments plc (AIM: PRIM, NEX: PRIM) is pleased to provide the quarter ending 31 March 2019 ("Q1" 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
The first Quarter of 2019 has been another good one for Primorus despite rather negative sentiment in UK markets. The Quarter has been punctuated by really good news in some of our larger oil and technology investments and several of our longer-term investments beginning to hit their straps. We also welcomed several TR1 shareholder notifications and launched our Twitter page (@priminvestments) and I would encourage interested shareholders to follow us to keep up to date with our investee companies first hand
I don't need to tell shareholders the current macro-political situation in the UK is difficult and whilst probably not directly affecting many/most of our investments, it does act as a drag on City confidence. To that end the IPO market in London is, by historical standards, pretty weak at the moment.
The good news for shareholders is, as demonstrated by our highly profitable exit from Horse Hill Developments Limited ("HHDL") in Q4 2018 and the recent offer for our Fresho stake (which we declined), that we are not solely reliant on the IPO market to exit our investments.
There are a whole range of potential acquirers for our investments including; industry players, other pre-IPO investors, venture capitalists, incoming later-stage investors, high net worth individuals and family offices to name a few.
We are regularly talking to many of these types of investors to discuss future exits from our investments so, whilst frustration at face-value with a lack of IPO activity in the timeframes we estimate/provide guidance for may be warranted, it does not necessarily detract from our ability to generate returns from our investments. This is important to consider when evaluating the overall performance of our investee companies.
Highlights for the period:
Our largest investment, £1.4 million in Engage Technology Partners reports that its monthly recurring revenues and billable transactions have increased significantly on the back of the much awaited first Self-Serve truly scalable SaaS products. More to come in Q2.
Greatland Gold (GGP.L) signs a Farm-in Agreement with Newcrest Mining (NCZ.AX) ("Newcrest") over the Havieron Project. 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$65 million (circa £50 million or AUD$90 million) and completing a series of exploration and development milestones in a four-stage farm-in over six years.
SOA Energy ("SOA") execute a farm-in with Delek Drilling ("Delek"), one of Israel's largest Oil and Gas companies with a market capitalisation of circa US$3.5 billion. According to the agreement, Delek will invest up to US$8.3 million, in return Delek will assume a 25%, non-operated stake in each of the Ofek and Yahel licences, leaving SOA with a 45% stake in each permit. The IPO and drilling programme is still on track for 2019.
Fresho press ahead on its accelerated growth programme and completes a heavily backed A$2.55 million capital raise at 47% premium to our initial investment price. Primorus received a bid for its stake but declined the offer.
Zuuse completes its UK institutional roadshow as it contemplates a UK IPO in 2020. Primorus holds A$500,000 in Series B loan notes attracting a (rolled up) coupon of 12% due December 2019 as well as 1,000,000 options in Zuuse exercisable at A$0.50. We expect Zuuse to next raise capital at a price greater than A$1.00.
WeShop strengthens its Board ahead of an anticipated institution funding pitch in Q2.
The Company finishes the Quarter debt-free and the Board still foresees no short-term need or intention to raise capital.
Update on Investments
Engage Technology Partners ("Engage") is our largest investment with a total of £1.4 million invested across two funding rounds. We invested in Engage because we believe it has potential to sweep the SME market for temporary and permanent recruitment, agency back office and pay and bill, would be hugely valuable if they could develop and release a pure SaaS, mass-market, scalable platform.
I am very happy to report that the first Self-Sign-Up "Registration & Compliance" went live on 25 March and this will be joined before the end of Q2 2019 by "Vacancies", "Placements" and "Timesheets" for agencies; "Vendor Management Service" for hirers; and "in-app" invitations between agencies and hirers to drive unassisted "network" sales.
As a result, Engage has already seen monthly recurring revenue and billable transactions increase significantly and we eagerly await further exponential growth and complimentary revenue-generating product releases to join the suite imminently.
What this means for Primorus as investors is that the product derived from the core proposition we invested in some time ago can now be sold and we can observe its progress in the market and map the key metrics.
We expect Engage to undertake further modest fund-raising activities in the near-term as part of its considered capital deployment plan to maintain the momentum of product releases as they drive towards breakeven on a cashflow basis later in 2019. In terms of timing, exiting our investment in Engage is really dependent on the product growth and performance over the next six months. Continued success and confirmation of the power of Engage will clearly give us and Engage the largest number of options to consider. IPO, trade sale or secondary sell-down are all possible outcomes we may need to consider.
We are very pleased to report that Fresho is pressing ahead with its plans for growth of sales and product development. As shareholders will recall in March, we participated in a fully subscribed A$1.5 million capital raise at 47% premium to our initial investment price. In doing this we maintained our circa 3.4% shareholding.
Since the end of the Quarter, Fresho have accepted a further A$1.05 million in subscriptions from several high-profile technology investors. This has diluted our shareholding to circa 3.1%. We are expecting some press soon discussing their participation and believe once known, their investment in Fresho should prove a huge endorsement and open many doors for the company both in Australia and internationally.
Shareholders will recall that in March we were offered a price for our shareholding in Fresho which we decided not to accept and whilst we are well ahead on our investment already, we consider the real growth in value of our investment is only just beginning.
Greatland Gold PLC ("Greatland") has announced they are soon to kick off exploration at their Black Hills prospect in the Paterson Province in Western Australia. This follows on from the exploration commencement at the Firetower Project in Tasmania and very soon the much anticipated Havieron exploration programme recommences.
Of course the huge news during the Quarter was the Farm-in Agreement with Newcrest Mining (NCZ.AX) ('Newcrest") over the Havieron Project. 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$65 million (circa £50 million or AUD$90 million) and completing a series of exploration and development milestones in a four-stage farm-in over six years.
Clearly, the farm-in by Newcrest supports our belief that the results to date make Havieron one of the most outstanding Gold/Copper projects globally. It was pleasing to be able to get our shareholders exposure to Havieron before Newcrest.
We believe recent share price softness in Greatland is simply a function of market impatience and short-sightedness. I was asked recently by a shareholder why Primorus bought its shares in Geatland. The simple answer is because we believe the share price will appreciate substantially and that the market is asleep to the opportunity before it. With exploration kicking off now across multiple projects we hope to soon be proven correct.
As flagged in our Q4 report, SOA Energy were close to concluding a significant farm-in deal over its prospects in Israel. We were therefore very pleased to report in late March that a farm-in with Delek Drilling ("Delek"), one of Israel's largest Oil and Gas companies with a market capitalisation of circa US$3.5 billion had been executed. According to the agreement, Delek will invest up to US$8.3 million, in return Delek will assume a 25% non-operated stake in each of the Ofek and Yahel licences, leaving SOA with a 45% stake in each permit.
This now allows for Ofek's re-entry/appraisal well drilling programme to get underway, most likely in Q2/Q3. Upon successful conclusion this will allow long-held plans to list the company in London to commence. We look forward to the commencement of drilling activities and are pleased that this significant hurdle to "value unlock" for our investment has now finally been cleared.
We are eagerly awaiting news from NOMAD Energy on their sensitive negotiations with VITOL and the Ivorian Government. We will report back as soon as we have any information cleared for release.
Zuuse is an international construction payments and lifecycle software vendor with significant operations in the UK, United States and Australia. With forecast revenues in CY2020 of circa US$30 million and already EBITDA positive, the company is now evaluating the potential for a UK listing in 2020 to support further global growth ambitions. With some US$1.2 billion per month through the platform globally and growing at a compound 5-6% per month we see Zuuse as a strong candidate for a successful IPO in the coming 12-18 months.
Shareholders will recall we also hold A$500,000 in loan notes due December 2019 at an attractive rolled up coupon of 12% as well as some options. Given we expect the next capital raise by Zuuse to be greater than A$1.00 per share and with a total of 1,000,000 options at A$0.50 in Zuuse it is fair to say we are pleased with the performance of this investment already.
We believe this investment is a good example of taking opportunities that arise in niche funding rounds that in a relatively short space of time can be very lucrative.
We are not yet in a position to be able to provide a detailed update from StreamTV, who we understand are in the process of arranging a significant capital injection to expedite their push to commercial sales in 2019. We will report back once we have a full update. As we stated last quarter, once the company locks down a large funding package we can discuss what we feel our valuation relative to initial investment on this investment might be and what the next steps to realising it might look like.
Similarly, we understand TruSpine are in the process of mapping out a route to IPO presently having garnered interest from several investors recently. As such, and once plans have been finalised, we will report back to shareholders with a more detailed update.
On the Sport:80 front we now believe an IPO in the short-term is unlikely. A delay due to a protracted disagreement with a shareholder means that realistically the window for an IPO (given significant softness in the IPO market in the London) has now closed. While disappointing, we also believe it is the right outcome. We would prefer Sport:80 to focus on growing its business rather than spending significant cash on an IPO process that would, in all likelihood, be met with an anaemic market response. We will get a more detailed update from Sport:80 in the coming quarter.
WeShop have yet to give us any further update other than the investment update we released in mid-March.
The message from this Quarterly is that regardless of a weak IPO market, we have a number of other ways of exiting our investments including trade sales and secondary sell downs. This has already been demonstrated not only by our HHDL exit but also the bid for our Fresho stake which in this case we declined.
Several of our longer-standing and larger investments really began to hit their straps with Engage and SOA passing significant commercial milestones that we have been eagerly awaiting and Fresho pushing forward with a rapid expansion of their business, something we have advocated for some time. Our Zuuse debt and options investment package looks very well timed and lucrative and with three concurrent drilling programmes across Australia we believe Greatland Gold/Newcrest will be generating a significant amount of news flow in the coming Quarters.
With no debt and no foreseeable need to raise capital, we are in a position to maximise any potential uplifts and exits in our portfolio as it stands today.
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
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+44 (0) 20 7213 0880
Cairn Financial Advisers LLP
James Caithie / Sandy Jamieson
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+44 (0) 20 3621 4120
Turner Pope Investments
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