Tue 5 Feb 2019 07:24 by ukcitymedia.co.uk about : operational news - 0 Comments - 4220 words
Contract Wins, Trading Update and Proposed Placing and Subscription to raise approximately £3 million
Immotion Group plc, the UK-based immersive virtual reality ("VR") 'Out of Home' entertainment business, is pleased to announce that, due to a range of successful developments and contract wins detailed in the highlights below, the Company is carrying out a fundraising to raise approximately £3 million, before expenses, via the issue of an aggregate of approximately 50 million new Ordinary Shares ("New Shares") at a price of 6 pence per share ("the Issue Price") (the "Fundraising"). It is intended that the net proceeds of the Fundraising will be used to accelerate the Company's growth plans.
WH Ireland Limited, Shard Capital Partners LLP and Leander Capital Partners Limited are acting as joint brokers in relation to the Fundraising (the "Joint Brokers"). The Company expects to issue approximately 40 million new Ordinary Shares (the "Placing Shares") via a conditional placing (the "Placing"). A placing agreement has been entered into today between the Company and the Joint Brokers in connection with the Placing (the "Placing Agreement").
Additionally, as part of the Fundraising, certain Directors, either directly or through associated entities, and other individuals (the 'Subscribers") have each entered into agreements (the "Subscription Agreements") to subscribe for, in aggregate, 9,499,998 new Ordinary Shares (the "Subscription Shares") in the Fundraising at the Issue Price (the "Subscription").
The Fundraising is subject to shareholder approval. The Placing is being conducted, subject to the satisfaction of certain conditions set out in the Appendix to this Announcement, through an accelerated book-build process (the "Bookbuild"), which will be launched immediately following this Announcement.
Operational and Trading Highlights
· Following a successful trial, the Company has agreed with a number of subsidiaries of Merlin Entertainments plc ("Merlin"), encompassing the Lego Discovery Centre, LEGOLAND®, and SeaLife brands, a significant roll-out of the Immotion Group VR Cinematic Platforms
· Overall visibility on over 200 additional headsets, expected to be installed through 2019. The majority of these are likely to be Concessions, however some may be machine sales
· A 15-month VR licence deal has been agreed for 12 VR experiences - minimum annual revenue of £588k to be delivered to Immotion Group for licensee to maintain exclusivity
· Further VR Experience licence contract signed for Chinese market - minimum revenue guarantees of £224k
· Distribution agreement with Crown Leisure, the UK's largest distributor of entertainment machines
· Overall 2018 trading in line with market expectations
· H2 2018 VR revenue in excess of £1m (H1 £0.1m) with more than double the anticipated ImmotionVR headsets in place by year-end 2018 (unaudited)
· As at 31 December 2018, the Group had 106 ImmotionVR headsets (10 locations in the UK) and 46 Concession headsets in operation at 7 locations
· 58 ImmotionVR headsets (42 machines) were sold in the year
· 12 VR content experiences developed in the year
· Unaudited net current assets of £1m at 31 December 2018
· Proposed Fundraising of approximately £3 million before expenses at a price of 6 pence per share by way of a Placing and Subscription
· Placing being conducted through an accelerated book-build process which will open with immediate effect following this announcement
· New Shares, assuming full take-up, will represent approximately 20 per cent. of the Company's enlarged issued share capital
· The final number of Placing Shares will be agreed by the Joint Brokers and the Company at the close of the Bookbuild, and the result will be announced as soon as practicable thereafter.
· The timing for the close of the Bookbuild and allocation of the Placing Shares shall be at the discretion of the Joint Brokers, in consultation with the Company. The Placing is not underwritten.
· The Appendix to this Announcement (which forms part of this Announcement) contains the detailed terms and conditions of the Placing.
· Certain Directors, either directly or through associated entities, and other individuals have indicated their intention to subscribe for, in aggregate, 9,499,998 new Ordinary Shares.
Roll out of VR Cinematic Platforms - Merlin
Immotion Group is pleased to announce a significant expansion of its relationship with Merlin, the world's second largest leisure operator. Following a successful revenue share trial in Lego Discovery Centres ("LDC") in Boston, USA and Manchester, U.K., Immotion Group and Merlin have agreed to continue the roll out of its VR Cinematic Platforms across the majority of the LDC estate, as well as a LEGOLAND hotel in Germany.
In addition, Merlin has also agreed to extend the relationship to cover an initial trial in three Sea Life Centres, one based in Germany and two based in Australia (subject to contract). The Sea Life Centres will operate Immotion Group's 'subsea edutainment' experiences. Subject to the trial results, the intention is to roll the "Blue Ocean" VR cinematic experiences out across the wider Sea Life estate, which currently numbers 49 Sea Life Centres. Talks continue with Merlin regarding other opportunities.
In addition to the existing two LDC sites, each containing 8 headsets each, Immotion Group will install, subject to final contract, a total of 42 new headsets across the LDC estate, 6 in LEGOLAND Germany and 18 headsets in the three Sea Life trials, taking the total headsets in operation on a revenue share basis with Merlin to 82 by end of Q1 2019. In addition, LDCs in Asia have purchased a further 6 machines (12 headsets) from Immotion Group, making a total of 47 machines and 94 headsets in the Merlin estate.
With the exception of the LDCs in Asia, which purchased the VR Cinematic Platforms from Immotion Group, the Company operates on a Concession basis with Merlin, sharing the revenue generated from the operations. Immotion Group provides the equipment, content, technical support and training, Merlin operates the platforms and provides the locations.
Content Licensing Agreement
Following the development of a number of new VR experiences, Immotion Group is pleased to announce the signing of two content licensing agreements with LEKE VR, the Company's China-based VR hardware supplier.
The first relates to the license of two pieces of content for installation on development of two specific platforms. The Company has agreed to license these experiences at £1,400 per headset, with a minimum revenue guarantee to 31 March 2021 of £224,000 (14 months to 31 March 2020 - £67,000; 12 months to 31 March 2021 - £157,000). This represents 80 headsets per platform. The Directors believe the potential for these two platforms could be considerable.
The second agreement is the licensing of 12 of Immotion Group's VR experiences in territories not operated in by the Company through to 31 March 2020. (All territories excluding the European Union, including the UK, UAE and the USA). The Company has agreed to grant exclusivity for these 12 experiences on the proviso that a minimum annual revenue of 5m RMB (£588,000) is achieved, in which case the licence would be extended to 31 March 2021. The Company will receive 70 per cent of all revenue generated by LEKE.
Immotion Group will license to LEKE exclusively its Delta Zero and Jinxed titles (together the "Titles") for use on specific machines being developed by LEKE (or any machine with the same functionality).
Delta Zero will be placed by LEKE onto a specified 360 Robot Arm VR platform being developed by LEKE. Each robotic arm will have 4 VR headsets.
Jinxed will be installed on a "Dark Ride" being developed by LEKE. Each 'ride car' on the Dark Ride is planned to have 8 headsets. The Dark Ride will comprise of multiple 'ride cars'.
For each headset on which a Title is installed, Immotion Group will receive revenue of £1,400.
LEKE has guaranteed a minimum of 24 headsets for each Title (48 in total) in the period to 31 March 2020 (£67,200 revenue) and a further 56 headsets per Title (112 in total) in year 2: £156,800 (less any excess over the minimum of 48 installed in year 1). This would take minimum revenue received to £224,000 in aggregate.
If either target is not met then LEKE's licence will become non-exclusive and LEKE is obliged to make up any shortfall.
Immotion Group will license 12 VR experiences to LEKE for installation on LEKE machines globally, with the exception of the European Union (including the U.K); the USA and the U.A.E. LEKE will be permitted in China to license the experiences to other manufacturers of VR machines.
The licence will have an initial term of 15 months and will be subject to automatic renewal on an exclusive basis for a further 12 months if in the initial term LEKE delivers to Immotion Group revenue of not less than 5m RMB (£588,000 at an exchange rate of £1=8.5 RMB).
Martin Higginson, CEO of Immotion Group, said:
"Our mantra has always been; 'Test, Roll-Out' and the extension of the Merlin relationship to cover the majority of Lego Discovery Centres, along with trials in three Sea Life Centres, is a significant milestone for the Company. Endorsement from Merlin, one of the largest entertainment operators in the world, underpins our belief and confidence in our business model.
"The commercial success of our recent trials, which are being converted into long-term agreements, has shown our ability to deliver revenue for our partners. This, together with the positive feedback from the paying public and the discussions we are having with shopping malls and leisure operators around the world, demonstrates that there is a growing demand for our superior out of home immersive experiences.
"We are pleased to have agreed terms with Crown Leisure, the UK's largest distributor of entertainment machines, relating to machine sales of the Immotion Group's motion platforms. We believe our offering will be attractive to leisure arcades and family entertainment centres in Crown's key markets. We will now look for similar arrangements in the USA.
"The significant increased demand from Concession Partners has allowed the Company to undertake a fundraise to fuel this potential growth. Longer term agreements with high quality leisure partners will build visible, recurring revenues. As well as increasing our installed Partner base, we are rolling-out more high-quality VR content, which is key to opening doors with new operators. Notably, the development of this high-quality content has allowed us to secure our two content licensing agreements with LEKE VR, another significant milestone for the Company.
"We believe we are well placed to take advantage of the opportunities ahead of us, and remain extremely confident that Immotion Group is set to become the leading out of home immersive VR operator in the world. We look forward to providing further updates on our progress as they develop."
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