Primorus Investments plc
("Primorus" or the "Company")
Final Results
Primorus Investments plc (AIM: PRIM) is pleased to report its final results for the year ended 31 December 2021. The Annual Report & Accounts for the year ended 31 December 2021 ("Annual Report") are being posted to shareholders and are available on the Company's website, www.primorusinvestments.com.
Caution regarding forward looking statements
Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identified by their use of terms and phrases such as ''believe'', ''could'', "should" ''envisage'', ''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', "expect", ''will'' or the negative of those, variations or comparable expressions, including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting the Company will be those that it anticipates.
This announcement contains inside information for the purposes of the UK Market Abuse Regulation and the Directors of the Company are responsible for the release of this announcement.
For further information please contact:
| Primorus Investments plc Matthew Beardmore, Chief Executive Officer |
+44 (0) 20 8154 7907
|
| Nominated Adviser Cairn Financial Advisers LLP Sandy Jamieson/James Caithie |
+44 (0) 20 7213 0880 |
Chairman's Statement
Overview
I am pleased to present the Chairman's Statement and Strategic Report for the financial results of Primorus Investments plc ("Primorus" or the "Company") for the year ended 31 December 2021.
Introduction
The period under review was one again of significant change. The COVID-19 pandemic continued to have an impact with macroeconomic changes and inflation coming to the forefront. During the period, COP26 was especially important, with countries signing up to various net zero charters which was both much needed and should also present many opportunities for Primorus to make investments in this sector.
It has again been pleasing to see the progress made by several of our investee companies, in the face of some exceptional challenges brought on by the COVID-19 pandemic. Some of the investee companies have continued to struggle in the economic environment and will need to raise capital.
Concurrent with reviewing the Company's existing investments, the management team was also presented with many new opportunities during the period. The management team carefully reviewed each opportunity and decided that it was in the best interests of the Company and its shareholders as a whole to put in place a new, more robust strategy, that underpins all future investments. This includes a focus on quoted investments as well as those where there is the expectation of a liquidity event in the short to medium term. Post-financial period, the Company has made investments in three publicly quoted issuers.
Primorus completed a capital reduction, as announced by the Company on 7 October 2021. The result of the capital reduction changed the retained deficit that was then on the Company's balance sheet of £41 million into a surplus of £8.6 million. Together with strengthening the Company's balance sheet, this will allow the Company to complete share buybacks or pay dividends if the Board feels such actions are in the best interests of the Company and its shareholders as a whole.
An additional post-financial period event to highlight is the cancellation of certain share options which had previously been granted to members of the Company's management team. I strongly believe that remuneration should be based on success and that a more appropriate incentive will be included on a non-dilutive basis.
Investment highlights
• Fresho Pty Ltd ("Fresho") successfully raised AUD$12m of new equity capital at $0.90 per share in April 2022. In March 2021, Primorus made a further investment for 2,000,000 in new shares at a price of AUD$0.575 for a total consideration of AUD$1.15 million (approximately £637k), bringing its total shareholding in Fresho to 3,415,723 shares. Over 21,000 + businesses are now using Fresho. Fresho also expanded into the UK in 2021.
• The Company exercised 1 million options in Zuuse Limited ("Zuuse") at a price per option (on the basis of one option being exercisable over one share in the capital of Zuuse) of AUD$0.50 in September 2021. Zuuse rebranded to "Payapps" to align it more with its strategic direction and growth opportunities.
Both UK and US businesses have exceeded a 50 % growth rate over the second half of 2021 and have invested strongly in headcount with an increase of 85% over 2020 which is expected to generate revenue growth throughout 2022 and beyond.
• Engage Technology Partners Limited ("Engage"), the end-to end workforce management platform provider, completed an equity fundraise, resulting in the conversion of certain loan notes held by investors, including the Company, at a 20% discount to the price per share subscribed for by investors who participated in the equity fundraise. Engage continues to build momentum through the development of Managed Service Providers and Back Office Systems ("BOS") as products essential for growth.
• In April 2021, the Company invested US$2.5m into convertible loan notes ("CLNs") issued by Mustang Energy PLC ("Mustang"), a special purpose acquisition company listed on the Standard segment of the London Stock Exchange Main
Market. Due to Mustang not being in a position to complete its reverse takeover and readmission by the applicable maturity date, Primorus exercised its right to acquire shares in AIM-quoted Bushveld Minerals Ltd (see post period end comments), which were provided as a backstop mechanism under the CLNs.
• In October 2021, the Company invested £350k in Alteration Earth PLC, a special purpose acquisition company established to make acquisitions in the clean technology and renewable energy sectors. The Board believes there will be many opportunities within these sectors.
• SOA Energy ("SOA") successfully completed the re-entry of the Ofek-2ST well without the need for a side track. The well moved directly for testing operations.
• SOA is working on acquiring new off-shore assets and creating a new partnership with a European oil major company after which SOA intends to seek a listing on the London Stock Exchange.
Primorus holds several legacy investments which do not form part of its long-term strategy.
The legacy investments include Nomad Energy, Sport 80, TruSpine, Weshop, Stream TV, Supernatural Foods, MEVIE and Rogue Baron.
These investments will now be classified on the website under non-core holdings.
Primorus will continue to actively manage its investments and liquidity which may involve holding certain
Market tradeable investments. Where active management involves non-material transactions, these will not be reported via an RNS, but instead the Company's website shall be updated on a regular basis to reflect any changes to the investments held by the Company. These changes may include the purchase of additional shares or the disposal in part or in whole of any individual investment.
Financial highlights
The operating loss for the year was £0.041 million (2020: profit of £4.616 million). The net profit after tax was £0.109 million (2020: profit of £4.169 million). Total assets including cash at 31 December 2021 amounted to £8.990 million (2020: £9.401 million).
The cash balance was £0.941 million as at 31 December 2021.
Board Changes
I was pleased to announce in June 2021 that Matthew Beardmore accepted the role of Chief Executive Officer of the Company. Matthew has and I am sure will continue to make an outstanding contribution to the success of the Company. I am very grateful for Matthew's efforts as I am to all my fellow Directors for their effort and enthusiasm.
Investee companies
The majority of the Company's investments in underlying investee companies are minority investments. Whilst we may offer advice to management of the investee companies, specifically pertaining to their business objectives and goals, they can and sometimes do ignore such advice. Similarly, those investee companies which are privately held do not have similar disclosure obligations to publicly quoted companies and therefore any updates they provide in relation to their businesses can be piecemeal and, in certain cases, non-existent save where the Board specifically requests an update.
Primorus has no operational capacity insofar as it pertains to any of its investee companies, and whilst the Board will in future look to structure investments in a format where Primorus can have a high degree of oversight, other than with Alteration Earth PLC, this has not been done with the Company's investments to date, and, as such, there are inherent risks in that investee companies are not as accountable to the Company as the Board would prefer them to be.
In relation to its investment in Alteration Earth PLC, the Company has nominated a director onto the board to ensure there is oversight on behalf of Primorus. This is a significant step for the Company because it is the first investment where the Company will get an insight into the operation of the investee company and be able to actively voice its opinions, concerns and constructive advice instead of being informed of decisions after the event.
Summary and Outlook
During 2021, the Board spent a significant amount of time reviewing many potential investment opportunities. Although there have been several headwinds for Primorus and the markets in general, the Board feels the Company is in a strong position to take advantage of opportunities as they present themselves. The drive to net zero carbon is clearly necessary for the benefit of the wider community and the Board feels that it can position Primorus in this investment space for the benefit of the Company and its shareholders as a whole.
The Company did not need to raise any capital in 2021 and the Board sees no immediate need to do so due to the Company's holdings of liquid instruments and cash. The Board is not ruling out the possibility of raising capital if the right opportunity presents itself, but at the time of writing the Company is not considering any potential investments which would necessitate a capital raising to be undertaken.
The management team of the Company was awarded share options to incentivise the future growth of the Company. These options have since been cancelled, at the unanimous decision of the management team members, to better align the interests of the management team with the interests of the Company's shareholders. I anticipate that all shareholders would prefer that the management team be awarded a non-dilutive means of remuneration if their performance merits such award. This also aligns with our decision to complete a capital reduction, which provided a further means of potentially rewarding shareholders, either by means of a share buyback or by the payment of dividends.
The Board will continue to look at innovative ways to enhance the Company's value which may involve looking at various alternative company structures.
It is also important to enhance clarity on those investments which the Company holds. In the past, it has been hard to get an accurate valuation of some of our investments but as we move towards investments with greater liquidity this should enable the Company to be valued at a more realistic value to its net asset value ("NAV"). Whilst it is usual for investment companies to trade at a discount to their NAV, the Board believes the Company to be significantly undervalued given its current share price and resultant market capitalisation. The Company's positioning into holding more liquid investments should hopefully ensure it trades closer to its NAV.
We remain highly focused on costs, especially in these inflationary times and will always focus on efficiency whilst working to achieve shareholder value.
The Board would like to thank all shareholders for their continued support and understanding in this period of unsettling and exceptional circumstances and wish them well during this time.
2022
The Board remains committed to its strategic criteria for each new investment and has reiterated the core requirements below:
• It must enable Primorus the opportunity to acquire a meaningful stake in the investee company.
• A clear and realistic exit route must be in place.
• There should be an opportunity for the Board to play an active role in the investee company's development.
• The Board and the investee company's management team must share a common vision and strategic alignment.
• The investment committed by the Company will be proportionate to the risk/reward opportunity.
Our operational targets for the remainder of 2022, in line with our investing policy, are:
• To continue to focus on applying financial resources diligently, with controlled corporate costs and focused investment.
• To continue to build working capital, preferably through organic means, by exiting investments which have generated significant returns on investment.
• To continue to review new opportunities.
• To retain sufficient capital resources through cash or liquid investments to enable the Company to have access to immediate capital for the purposes of deploying into investment opportunities.
• To consider divesting the non-core investments when suitable liquidity events arise or fair value can be achieved by alternative means.
Statement in accordance with section 172 of the Companies Act 2006
As required by section 172 of the Companies Act 2006, a director of a company must act in a way they consider, in good faith, would most likely promote the success of the company for the benefit of its shareholders. In doing this, the director must have regard, amongst other matters, to the:
• likely consequences of any decision in the long term;
• need to foster the Company's business relationships with suppliers, and others;
• impact of the Company's operations on the community as well as the environment;
• company's reputation for high standards of business conduct; and
• need to act fairly as between members of the Company.
As a Board our aim is always to uphold the highest standards of governance and business conduct. Our decisions are made in the interests of the long-term sustainable success of the Company, generating value for our shareholders. We recognise that our business can only grow and prosper over the long term by understanding the views and needs of our stakeholders. As a board we believe it is important to engage with stakeholders to ensure the Board has informed discussions and factors stakeholder interests into decision-making.
As always, I am available for any shareholder to contact me directly about any concerns or suggestions they may have. Details of the Board's decisions for the year ending 31 December 2021 to promote long-term success, and how it engaged with stakeholders and considered their interests when making those decisions, can be found throughout the Chairman's Statement, Directors' Report and Corporate Governance Statements.
Rupert Labrum Chairman
Date 10 June 2022
| Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December 2021 | | ||
| | |
2021 |
2020 |
| | Note | £000 | £000 |
| Income | | | |
| Investment income | | 141 | 14 |
| Realised gain on financial investments | | 323 | 6,033 |
| Unrealised (loss)/gain on financial investments | | 19 | (323) |
| | | 483 | 5,724 |
| Operating expenses | | | |
| Administrative expenses | | (418) | (475) |
| Impairment of financial investments | 2 | (106) | (633) |
| (Loss)/profit before tax | | (41) | 4,616 |
| Tax credit/(expense) | | 150 | (447) |
| Profit for the year | | 109 | 4,169 |
| Total comprehensive income | | 109 | 4,169 |
|
Earnings per share attributable to the ordinary equity holders of the parent | |
2021 Pence |
2020 Pence |
| Basic | 3 | 0.078 | 2.981 |
| Diluted | 3 | 0.072 | 2.981 |
|
| | | |
| Statement of Financial Position As at 31 December 2021 | | |||
| | |
2021 | |
2020 |
| | Note | £000 | | £000 |
| Assets | | | | |
| Non-current assets | | | | |
| Financial investments | 2 | 7,533 | | 4,612 |
| | | 7,533 | | 4,612 |
| Current assets | | | | |
| Financial investments | 2 | 511 | | 113 |
| Trade and other receivables | | 5 | | 3 |
| Cash and cash equivalents | | 941 | | 4,673 |
| | | 1,457 | | 4,789 |
| Total assets | | 8,990 | | 9,401 |
| Liabilities | | | | |
| Current liabilities | | | | |
| Bank overdraft | | - | | 113 |
| Trade and other liabilities | | 44 | | 55 |
| Corporation tax | | 37 | | 447 |
| | | 81 | | 615 |
| Net assets | | 8,909 | | 8,786 |
|
Issued capital and reserves | | | | |
| Share capital | | 280 | | 15,391 |
| Share premium reserve | | - | | 35,296 |
| Share based payment reserve | | 13 | | - |
| Retained earnings | | 8,616 | | (41,901) |
| TOTAL EQUITY | | 8,909 | | 8,786 |
| Statement of changes in equity | | |||||||||
| For the year ended 31 December 2021 | | | | | | |||||
| | | |
Share based | | Total attributable | |||||
| |
Share capital | Share premium | payment reserve | Retained earnings | to owners of the company | |||||
| | £000 | £000 | £000 | £000 | £000 | |||||
| At 1 January 2020 | 15,391 | 35,296 | 683 | (46,613) | 4,757 | |||||
| Profit for the year | - | - | - | 4,169 | 4,169 | |||||
| Total comprehensive income for the year |
- - | | - | 4,169 | | 4,169 | ||||
| Cancellation of share options |
- - | | (543) | 543 | | - | ||||
| Termination and settlement of share options |
- - | |
(140) |
- | |
(140) | ||||
| Total contributions by and distributions | | | | |||||||
| to owners | - | | - | | (683) | 543 | (140) | |||
| At 31 December 2020 | 15,391 | | 35,296 | | - | (41,901) | 8,786 | |||
| At 1 January 2021 | 15,391 | | 35,296 | | - | (41,901) | 8,786 | |||
| Profit for the year | - | | - | | - | 109 | 109 | |||
| Total comprehensive income for the year | - | - | - 109 | | 109 | |||||
| Issuance of share options | - | - | 13 - | | 13 | |||||
| Shares cancelled during the year | (15,111) | (35,296) | - | | 50,408 | | - | | ||
| Total contributions by and distributions to owners |
(15,111) |
(35,296) |
13 | |
50,408 | |
14 | | ||
| At 31 December 2021 | 280 | - | 13 | | 8,616 | | 8,909 | | ||
.
| Statement of Cash Flows For the year ended 31 December 2021 | | |
| |
2021 |
2020 |
| | £000 | £000 |
| Cash flows from operating activities | | |
| Profit for the year | 109 | 4,169 |
| Adjustments for | | |
| (Loss) on disposal of financial investments | (323) | (6,033) |
| Fair value movements on financial investments | (19) | 323 |
| Impairment provision on unlisted investments | 106 | 633 |
| Share based payment | 13 | (140) |
| Interest income on investments | (142) | (14) |
| Net foreign exchange loss/(gain) | 55 | (65) |
| Income tax (credit) | (150) | - |
| |
(351) | (1,127) |
| Movements in working capital: | | |
| (Increase)/decrease in trade and other receivables | (3) | 12 |
| Decrease in trade and other payables | (11) | (53) |
| Cash generated from operations |
(365) | (1,168) |
| Income taxes paid | (260) | 447 |
| Net cash used in operating activities |
(625) | (721) |
| Cash flows from investing activities | | |
| Proceeds on sale of financial investments | 3,474 | 6,939 |
| Purchase of financial investments | (6,468) | (1,703) |
| Net cash (decrease)/increase in cash and cash equivalents |
(3,619) | 4,515 |
| Cash and cash equivalents at the beginning of year | 4,560 | 45 |
| Cash and cash equivalents at the end of the year |
941 | 4,560 |
|
| | |
1. Accounting policies
1.1 Basis of preparation
Primorus Investments plc is a public company incorporated and domiciled in the United Kingdom. The Company's registered office is 48 Chancery Lane, London, WC2A 1JF. The Company's shares are listed on the AIM market of the London Stock Exchange.
The Financial Statements are for the year ended 31 December 2021 and have been prepared under the historical cost convention, except for debt and equity that have been measured at fair value.
The financial statements have been prepared in accordance with the Companies Act 2006 and UK-adopted international accounting standards (UK-adopted IAS) and related interpretations.
These financial statements have been prepared and approved by the Directors on 10 June 2022 and signed on their behalf by Rupert Labrum and Hedley Clark.
The accounting policies have been applied consistently throughout the preparation of these financial statements and the financial report is presented in Pound Sterling (£) and all values are rounded to the nearest thousand pounds (£000) unless otherwise stated.
1.2 Going concern
The Directors noted the operating losses that the Company has made for the year ended 31 December 2021. The Directors have prepared cash flow forecasts for a period of at least twelve months from the date of the approval of these financial statements, i.e. up to 30 June 2023 which take account of the current cost and operational structure of the Company.
The cost structure of the Company comprises a high proportion of discretionary spend and therefore in the event that cash flows become constrained, costs can be quickly reduced to enable the Company to operate within its available funding.
These forecasts demonstrate that the Company has sufficient cash funds available to allow it to continue in business for a period of at least twelve months from the date of the approval of these financial statements. Accordingly, the financial statements have been prepared on a going concern basis.
It is the prime responsibility of the Board to ensure the Company remains a going concern. At 31 December 2021, the Company had cash and cash equivalents of £941,000. The Company has minimal contractual expenditure commitments and the Board considers the present funds together with future disposals of its listed financial investments sufficient to maintain the working capital of the Company for a period of at least 12 months from the date of signing the Annual Report and Financial Statements. For these reasons the Directors adopt the going concern basis in preparation of the Financial Statements.
2. Financial Investments
|
| | | ||
| | |
£000 £000 £000 |
£000 | |
| | | Level 1 Level 2 Level 3 | Total | |
| | Fair value at 31 December 2020 | 339 - 4,386 | 4,725 | |
| | Additions | 3,402 - 3,207 | 6,609 | |
| | Transfer | 23 - (23) | - | |
| | Fair value changes | 19 - - | 19 | |
| | Gains on disposals | 323 - - | 323 | |
| | Disposal | (3,473) - - | (3,473) | |
| | Impairment provision | - (106) | (106) | |
| | Foreign exchange | - - (55) | (55) | |
| | Fair value at 31 December 2021 | 633 7,409 | 8,042 | |
| |
The financial assets are split as follows: |
£000 £000 £000 |
£000 | |
| | | Level 1 Level 2 Level 3 | Total | |
| | Current assets - listed | 511 - - | 511 | |
| | Non-current assets - listed | 122 - - | 122 | |
| | Non-current assets - unlisted | - - 5,434 | 5,434 | |
| | Non-current assets - unlisted convertible loans | - - 1,975 | 1,975 | |
| | Total | 633 - 7,409 | 8,042 | |
| |
|
|
| |
| |
Profits on investments held at fair value through profit or loss |
£000 £000 £000 Level 1 Level 2 Level 3 |
£000 Total |
|
| | Fair value gain on investments Realised gain on disposal of investments | 19 - - 323 - - | 19 323 | |
| | Net profit on investments held at fair value through profit or loss |
342 - - |
342 | |
Level 1 represent those assets, which are measured using unadjusted quoted prices for identical assets
Level 2 applies inputs other than quoted prices that are observable for the assets either directly (as prices) or indirectly (derived from prices).
Level 3 applies inputs, which are not based on observable market data
Investments are held at fair value through profit and loss using a three-level hierarchy for estimating fair value.
The Directors have reviewed the carrying value of the unlisted investments, and have determined an impairment is required of £105,693 (2020: £633,000).
Investments comprise both listed and unlisted investments. The listed investments are traded on stock markets throughout the world and are held by the Company as a mix of strategic and short term investments.
3. Earnings per share
|
|
(i) Basic earnings per share | | |
| | | 2021 Pence | 2020 Pence |
| | From continuing operations attributable to the ordinary equity holders of the Company |
0.078 |
2.981 |
| |
(ii) Diluted earnings per share | | |
| | | 2021 Pence | 2020 Pence |
| | From continuing operations attributable to the ordinary equity holders of the Company |
0.072 |
2.981 |
| |
(iii) Weighted average number of shares used as the denominator | | |
| | | 2021 No. | 2020 No. |
| | Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share |
139,830,968 |
139,830,968 |
| | Options | 12,000,000 | - |
| | Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 151,830,968 |
139,830,968 | |
4. Events after the reporting date
In February 2022, the Company has made an investment in Clean Power Hydrogen PLC by way of subscription of 2,222,222 shares at £0.45p per share.
In March 2022, the Company re-negotiated its investment in Mustang Energy PLC, whereby the Company was issued Convertible Loan Notes ("CLNs") in Bushveld Minerals Limited ("BNM"). These CLNs are convertible into ordinary shares of BMN. The conversion mechanism for the CLNs is as follows:
• The principal amount is US$1,500,000 plus accrued and unpaid interest (as at 25 March 2022) of US$136,849 (total $1,636,849).
• The above amount has been converted into £GBP at an agreed exchange rate of 1.3589 USD/GBP which means the CLNs are worth £1,208,988.
• At the agreed BMN share price of £0.098987 the CLNs (as at 25 March 2022) would equate to 12,213,607 BMN Shares if they were all converted.
• If Primorus issues a conversion notice, the loan notes will convert into shares in the capital of BMN. To date the Company has issued two conversion notices for 4,157,637 ordinary shares of BMN.
On 16th March 2022 it was announced that the holders of the Share Options agreed to terminate all of the 12,000,000 share options exercisable at £0.041p per ordinary share.
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