Virtual reality (VR) group Immotion Group PLC (LON:IMMO) has raised £3.3mln via a share placing so it can deliver on a number of significant new contracts it has signed.
The company 45,499,996 new ordinary shares were placed at 6p a pop, a 26% discount to Monday's closing price of 8.1p. In late morning trading, Immotion shares were 16.7% lower at 6.75p.
The company said, additionally, as part of the fund-raising, certain directors and other individuals have entered into conditional agreements to subscribe for, in aggregate, 9,499,998 new ordinary shares at the placing price.
The placing came as the group revealed that, following a successful trial, Immotion has agreed with Merlin Entertainments PLC (LON:MERL), the entertainment centres and theme parks operator, to a significant roll-out of the Immotion Group VR Cinematic Platforms across the majority of the Lego Discovery Centres estate plus a LEGOLAND hotel in Germany.
Furthermore, Merlin has also agreed to extend the relationship to cover an initial trial in three Sea Life Centres. The Sea Life Centres will operate Immotion Group's 'sub-sea edutainment' experiences.
Wider roll-out possible
Depending on how the trial goes, the "Blue Ocean" VR cinematic experiences will be rolled out across the wider Sea Life estate, which currently numbers 49 Sea Life Centres.
The company, which has other irons in the fire with Merlin, operates on a concession basis with the company, sharing the revenue generated from the operations. Immotion Group provides the equipment, content, technical support and training while Merlin operates the platforms and provides the locations.
Immotion also unveiled two content licensing agreements with LEKE VR, the company's China-based VR hardware supplier.
The first relates to the licensing of two pieces of content, with Immotion set to receive minimum revenue from the deal of £224,000 by 31 March 2021.
The second is for the licensing of 12 of Immotion Group's VR experiences in territories not operated in by the company through to 31 March 2020.
Immotion has agreed to grant exclusivity for these 12 experiences on the proviso that a minimum annual revenue of 5mln renminbi (RMB) - roughly £588,000 – is achieved, in which case the licence would be extended to 31 March 2021. Immotion will receive 70% of all revenue generated by LEKE.
"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,” said Martin Higginson, the chief executive officer of Immotion Group.
"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,” he added.
Calling all #adrenaline junkies! How #fast can you go? Come join us— ImmotionVR (@Immotion_VR) 4 February 2019
behind the wheel of #ProjectCars2 #VR #VirtualReality #Racing#RacingSimulation #MotorRacing https://t.co/3ZUevQKWke pic.twitter.com/qyivMQUrYj
The company has also signed a distribution agreement with Crown Leisure, the UK’s largest distributor of entertainment machines, relating to machine sales of Immotion’s motion platforms.
The company's range of motion platforms currently retails on average for around £15,000 per headset depending on machine and content. The directors believe this allows sufficient margin for both the company and its distributors and leaves the company free to focus on product and content development while saving some overhead costs on warehouses and the like.
“We believe our offering will be attractive to leisure arcades and family entertainment centres in Crown's key markets,” Higginson said, adding that the company would now look for similar arrangements in the USA.
The company said trading in 2018 was in line with market expectations, with VR revenue in the second half of the year topping £1mln after clocking in at just £100,000 or so in the first half.
Even with this level of explosive growth, the company is looking to scale-up even more quickly and to do that it needs fresh capital.
"The significant increased demand from concession partners has allowed the company to undertake a fund-raise 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,” Higginson told shareholders.
-- Adds placing completion details, share price --