St Peter Port Capital Limited                                                      

Interim Results for the Six Months Ended 30 September 2019 and Notice of Extraordinary General Meeting ("EGM")

St Peter Port Capital Limited (the "Company" or "St Peter Port" or "SPPC"), the AIM quoted investment company announces its interim results for the six months ended 30 September 2019. 

Highlights

·    Investments in 6 companies* at period end valued at £11.1m

·    NAV of 18.04p per share at 30 September 2019, up 4.8 per cent since 31 March 2019, FX movements having contributed 1.2p

·    £518k in cash at 10 December 2019

·    An EGM will be held on 15 January, 2020 to vote on extending the Company's life for a further year.           

* companies in which the Fund made pre-IPO investments, excluding those entirely written down   

Lynn Bruce, Chairman of St Peter Port, said:

"We do see positive developments in our core companies, however progress remains slow. Although we are working to create opportunities to sell down St Peter Port's positions in the companies, none of them have yet reached an inflexion point which would allow us to conclude a sale at what St Peter Port considers fair value."

This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

For further information:

St Peter Port Capital Limited

Lynn Bruce, Director - 01481 724 222

Grant Thornton UK LLP - Nominated Adviser

Philip Secrett / Jamie Barklem - 020 7383 5100

Shore Capital Stockbrokers Limited - Broker

Dru Danford - 020 7408 4090  

CHAIRMAN'S STATEMENT

Introduction

I report upon the six months ended 30 September 2019. 

Financial Results

The balance sheet shows investments of £11.1 million, consisting of financial assets at fair value through profit or loss of £11.1 million. Net assets were £11.6 million, giving a net asset value of 18.04p per share. Net assets have increased by 4.8 per cent since 1 April 2019. The changes result primarily from currency movements. At the balance sheet date, the Company held £539,000 in cash. As at 10 December 2019, the Company held £518,000 in cash.

Investment Report

Further to the Company's announcement on 2 September 2019, I am pleased to confirm that the Company has now terminated its discretionary investment management agreement with St Peter Port Investment Management Limited and has become a self-managed fund. Its wholly owned subsidiary, St Peter Port Capital Services Limited, is now providing certain investment advisory and monitoring services to the Company. The net effect of these changes will reduce investment management costs by more than half from their previous, already reduced, level.

The Company's portfolio comprises a potash mine development in Brazil, an oil exploration project in the Caspian Sea, a vaccine development company in the UK focused on a universal flu vaccine, a nickel development project in Oregon, USA, a company engaged in the development and manufacture of technology for screens which allows viewers to watch in 3D without glasses and a large farmland owner in Uruguay. As previously reported, the size of each holding as a percentage of each portfolio company's share capital is small (less than 2 per cent), other than in the case of the nickel development project, in which the Company has an indirect controlling interest and the vaccine development company, in which the Company has an interest of approximately 7 per cent. Most of the portfolio companies have their main activity outside of the UK and all the holdings are currently in private companies, its remaining listed positions having been sold down during previous financial years.

The following table shows the breakdown by sector of the portfolio (excluding investments fully written off) as at 30 September 2019:

Investments by Sector as at 30 September 2019

The table below shows the breakdown by region of the portfolio (excluding investments fully written off) as at 30 September 2019:

*This is based on area of company’s principal activities, rather than its place of incorporation. Stream TV has been included in North America as this is where a significant element of its administration and sales activities takes place, but it has R&D in Europe and manufacturing in Asia.

New Investments and Realisations

During the period, the Company neither made nor realised any investments. The reported increase in the value of the investments arose solely as a result of FX movements and may reverse in subsequent periods.

Investment Report

Brazil Potash

Brazil Potash's management reports that during the recent BRICS Summit in Brasília, Brazil, the company signed a binding Engineering, Consulting and Construction ("EPC") contract with CITIC Construction ("CITIC").  This contract includes a commitment from CITIC to arrange a large part of funding required to construct the mining development as a condition for being awarded the EPC contract.  CITIC's parent company, CITIC Ltd., has a market capitalisation of US$290 billion and is one of the largest state-owned enterprises in China.

We understand that CITIC's commitment includes arranging a portion of the equity required and all of the debt.  Further equity will be required from third parties unrelated to CITIC.

The company reports that it has had and continues to have discussions to raise the balance of the equity.  If financing for the project was to be completed, this would significantly advance the possibility for us of an exit by way of an IPO or sale of the company or by a sale of our position in Brazil Potash in the secondary market.

Buried Hill

Buried Hill has a Production Sharing Agreement ("PSA") with the government of Turkmenistan in relation to one of the largest oil blocks under the Caspian Sea. However, the block lies beneath a disputed border between Turkmenistan and Azerbaijan.

Following on from the signing of the Convention on the Legal Status of the Caspian Sea last year, the first Caspian Economic Summit was held in August 2019 in Turkmenistan, attended by the President of Turkmenistan and Prime Ministers from the four other Caspian littoral countries.  The Buried Hill management team attended and reported that relations between the states continue to improve, they remain serious about developing regional ties, particularly in energy, transport and security and there is growing interest from parties further afield for them to do so, particularly the European Union.

Buried Hill's ongoing focus has been on protecting its rights under the Block III PSA whilst reviewing its ongoing costs to maintain a sustainable level.  The management have been working with the Turkmenistan Government to stop the clock on the licence in order to avoid significant costs associated with moving into the next licence period; this includes taking appropriate legal measures to protect its position.

Meanwhile, Buried Hill remains substantially funded (in relation to this project) and your board is content to leave the valuation as is.

iQur

We are in regular contact with iQur. The company reported some time ago that it has shown that its influenza vaccine lead candidate protects against lethal influenza infection in mice (with experiments conducted at three different independent laboratories) and is confident that its vaccine has true potential as a "universal" flu vaccine on the basis of these tests. iQur continues to seek funding to pursue a phase 1 clinical trial of its flu vaccine, but the investment climate for small bio-tech companies in recent months has been difficult. The company's CEO has told us that the company has sufficient cash for its immediate needs and that its small diagnostics business continues to generate some net cash. However, it is now considering a small investment round as a rights issue to tide it over and provide funding to renew its principal patents.

Red Flat Nickel

Red Flat Nickel has continued to explore available options to reverse the decision to have its claims withdrawn from mineral extraction (effected in the final days of the previous administration). To that end, Red Flat continues to engage with the local Forest Service and make representations to senior political figures both locally and in Washington DC. Meanwhile, it renewed its mining claims over the summer to allow it to seek to establish that it had Valid Existing Rights prior to the withdrawal, in an effort to obtain compensation for the loss of its opportunity.

Mediatainment - Stream TV Networks

Stream TV's most recent shareholder update reported that it continues to make progress. The company's strategic alliance with Chinese panel manufacturing giant BOE is growing stronger as evidenced by a formal visit by their Chief Technology Officer. A team based in Silicon Valley has been added who are closer to the market for recent commercialization / productization developments. The company continues to meet customers on an engineering level to achieve mutual clarity and it has expanded its approved and already strong patent portfolio. The company has raised almost USD$25m during the past 18 months (and an additional USD$4.6m in July 2019) to support operations and accelerate development for the 8K chip solutions.

SPPC was given the opportunity to exchange its shares in Mediatainment Inc., a holding company for Stream TV Networks Inc, into a direct holding in Stream TV Networks Inc itself. As Stream is the entity which is likely if successful to IPO or be sold, we took advantage of this. The restructuring should put SPPC in a better position to take advantage of any future realisation opportunity.

If the company announces a significant fundraising or a product successfully coming to market, this may enable a sale of SPPC's position in Stream TV in the secondary market in advance of an IPO. The company has told investors it would like to pursue an IPO when it is in a position to do so.

Agriculture Investment Group (formerly Union Agriculture Group) ("AIG")

AIG is the largest agricultural company operating in Uruguay with more than 100 farms across over 180,000 hectares, nearly 1% of Uruguay's total land mass. Its revenue streams include land leasing, producing dry crops and its trading activities with Granosur. Its latest shareholder report notes that it has achieved a positive EBITDA (USD$0.7 million) for the second consecutive year. We understand that the company's debt reduction programme continues to make progress and it remains focused on reducing operational costs where possible.

We understand that the company has no current plans to attempt a listing. Any realisation of this position at the current time is therefore dependent on our finding a potential buyer in the secondary market willing to pay a price that the board of St Peter Port considers fair.

Written-down holding - possible uplift

St Peter Port has not written down any of its investments during the period under review. We were notified some time ago by the chairman of one of our portfolio companies that it had received an offer for the company which, having been accepted, has now legally exchanged. This position had previously been written down and the proceeds would generate an uplift in the Company's net asset value and cash holdings of some €700,000.  However, the purchasers undertook to complete the acquisition some weeks ago which has not yet taken place.  Whilst we are not aware of any intention to rescind the contract, we have made no accrual for this potential receipt in our accounts.

Liquidity Prospects

St Peter Port's holdings remain highly illiquid for the reasons discussed above. We do see positive developments in our core companies, however progress remains slow. Although we are working to create opportunities to sell down St Peter Port's positions in the companies, none of them have yet reached an inflexion point which would allow us to conclude a sale at what St Peter Port considers fair value.

Life of the Company

The Board undertook to provide a continuation vote by shareholders each year.  An EGM will be held on 15 January, 2020 to enable shareholders to vote on continuing the life of the Company.  The background to the vote at the EGM and the reasons why the Board recommend that shareholders vote in favour of the resolution being proposed are given below.

Lynn Bruce

Chairman

for and on behalf of

   St Peter Port Capital

Limited Life of the Company - Extraordinary General Meeting

The Board wishes to convene a general meeting to enable shareholders to vote on continuing the life of the Company.  The Company was established with the provision that its life would be reviewed every five years but, following the most recent five year review in 2017, the Board promised to provide a continuation vote by shareholders each year.  The basis of the continuation vote as set out in the Company's Articles is that if the shareholders vote for its life to be brought to an end, the Board would seek to dispose of the Company's holdings over the following year.  After that year a liquidator would be appointed to wind the Company up within a further year.

Reduced costs

As announced on 2 September 2019, the Board has implemented further measures to reduce costs, including changes in investment management arrangements.  The Company has become a self-managed fund and has established a new, wholly owned subsidiary, St Peter Port Capital Services Limited, to provide investment advisory and monitoring services to the Board.  The net effect of these changes will reduce investment management costs by more than half from their previous, already reduced, level.  Other changes have been agreed which will further reduce costs.

Current Status of the Company and Scope for Realisations

The financial position of the Company is set out in the accompanying interim report to shareholders for the 6 months ended 30 September 2019.

The value in the portfolio of investments held by the Company remains concentrated in a small number of minority holdings in unquoted companies.  As a minority investor, it is not open to the Company to effect a rapid realisation of our interests other than through a sale of our holdings on a minority unquoted basis to another investor.  This has proven very difficult to achieve on good terms.  The alternative is to wait for a liquidity event achieved by the investee companies such as an IPO, trade sale or other similar capital action.  Although we have held these investments for many years, we have not yet seen the hoped-for liquidity event in the companies which we continue to hold.

However, the companies in the core portfolio continue to progress.  In addition, the potential remains for the value of one or more of the companies already written down to revive.  Although extending the life of the Company will necessarily incur additional running costs, the Board considers that the scope for materially better realisation terms from the core portfolio (and perhaps from other holdings as well) should justify the continued life of the Company for at least an extra year.  The alternative of liquidation in the short term is unlikely to achieve good value.

Proposal for the Extraordinary General Meeting

The Board proposes the extension of the life of the Company for a further year.  The Company will send shareholders a notice next week convening an extraordinary general meeting (the "EGM") to enable shareholders to vote on continuing the life of the Company for at least one more year (the "Notice").  The EGM of the Company will be held at 3rd Floor, 1 Le Truchot, St Peter Port, Guernsey, GY1 1WD on Wednesday, 15 January, 2020 10 a.m. On posting of the Notice, this will be notified and electronic copies will be available on the Company's website www.stpeterportcapital.com.

The wording of the resolution to be put is as follows:

a.    the life of the Company be continued;

b.    for at least one more year, the Company not be wound up by the directors through a process of orderly realisation by the Company of its investments and cessation of further investment.

Should shareholders approve the resolution, the life of the Company will continue.  If shareholders do no approve it, the Board will seek to dispose of the Company's assets quickly on the basis that a liquidator must be appointed a year later.

If the life of the Company is extended, the Board proposes to put forward a similar resolution at its next Annual General Meeting in 2020.  Thus a vote to continue the Company is effectively a vote to allow a further year of activity, after which the life will again be voted upon.

Given the lower costs of continued operation and the better prospects for realisation if the Company is not seen to be a forced seller of its holdings, the Board strongly recommends to shareholders that they support the continuation resolution.

CONDENSED STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2019

These financial statements are unaudited and are not the Company's statutory financial statements.