IMMO.L Regulatory News (IMMO)

 a30 September 2022

Immotion Group plc 

("Immotion Group", the "Company" or the "Group")

Interim Results

Immotion Group plc (AIM:IMMO), the immersive entertainment group, is pleased to announce its unaudited interim results for the six months to 30 June 2022 and an update on trading based on unaudited management estimates. 

Highlights

● H1 2022 revenue from continuing operations showing a 91% increase to £4.4m (H1 2021: £2.3m; H2 2021 £4.1m)

● H1 2022 EBITDA from continuing operations rose 150% to £0.5m (H1 2021: £0.2m, which included £0.3m of income from COVID government grants)

● Entry into zoo market with three partner site openings: Milwaukee County Zoo and Pittsburgh Zoo (July) and Chester Zoo (August)

● In principle agreement reached (subject to contract) to sell Uvisan for estimated cash consideration of £100k*

● In principle agreement for £250k third party investment for the Home Based Entertainment (HBE) business in exchange for 51% ownership of this business*

*both deals are expected to complete within next few weeks. Further detailed announcements will be made at that time.

Note: Uvisan and HBE now classed as discontinued operations and reported as such for H1. Continuing operations consist of the Location Based Entertainment (LBE) business along with its direct costs and Group overheads.

Current Trading Update

We expect revenue from continuing operations in Q3 to be approximately £3.4m and adjusted EBITDA of approximately £0.7m, resulting in total revenue for the 9 months ended 30 September 2022 of approximately £7.8m and EBITDA of £1.2m from continuing operations.

Our first three zoo installations featuring our new 'Gorilla Trek' offering - Milwaukee County Zoo, Pittsburgh Zoo and Chester Zoo - launched in July and August 2022. These have been well received by Partners and guests alike and we have learnt a lot from these early installations and will use the knowledge gained to further develop and hone our offering.

The second half of 2022, as we expected, started very strongly with excellent trading across the estate in the summer months of July and August. We will of course see the normal seasonal slow-down from September, as school holidays have ended in both the USA and UK.

Agreement has been reached, subject to contract, for the disposal of the Uvisan business for cash consideration of circa £100,000, and to raise £250,000 in new funding for the HBE business, in exchange for 51% ownership of this business. Full details of the proposed transactions will be announced when the deals complete, which we expect to be within the next few weeks.

Chairman's Statement

With revenue of £4.4m for the first half of 2022, almost double the same period last year (and exceeding that of our seasonally stronger H2 last year) the strength of our core LBE business is being demonstrated clearly and I am excited by its growth prospects.

The decision to focus all our efforts on LBE is delivering results and with the disposal of Uvisan and the spin out of HBE now agreed in principle we can, as we move through the remainder of H2, focus our planning and resources on accelerating growth of our core LBE partner estate. 

We believe that considerable growth opportunities lie ahead of us in both the aquarium sector, where we are now a well-established player, and in the zoo market where we have taken our initial steps in what should be an even larger market.

Our first three 'Gorilla Trek' zoo installations were completed in July and August 2022, all being 'takeovers' of buildings (or part buildings) of differing sizes. These have been well received by Partners and guests alike. We have learned a lot from our initial entry into this market and we are further developing our offering to be able to accelerate growth in this exciting market. This is discussed in more detail in the Chief Executive's review below.

The LBE business has enjoyed a very strong Q3 with revenue expected to be circa £3.4m compared to £2.3m for the same period last year, a 48% increase. We anticipate EBITDA for continuing operations in Q3 to be circa £0.7m, taking the year to date to around £1.2m.

With strong year to date trading, a renewed focus on our core business and plenty of opportunity in our established and new offerings, we look forward with confidence. 

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014 ("MAR") as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

Enquiries:

 For further information please visit www.immotion.co.uk, or contact: 

Chief Executive's Review

We are delighted with the performance of the business in H1, delivering £4.4m of revenue from continuing operations (H1 2021: £2.3m). H1 2022 revenue also exceeded that of H2 2021, which is traditionally our stronger half of the year.

Unaudited gross profit from continuing operations was £2.0m (being total revenue less partner share and other direct costs of sales, including rent and payroll for our ImmotionVR sites). This is double the same period in 2021, with margins rising to 46% from 44% in H1 2021. EBITDA from continuing operations in the period was £0.5m (H1 2021: £0.2m, which was inclusive of £0.3m of COVID government grants).

Total administrative expenses (excluding depreciation, amortisation, share based payments and one-off items) of continuing operations were £1.6m (H1 2021: £1.2m). Whilst our operating costs are not immune from inflationary pressures, and we have made a small number of new hires as part of our growth planning, we expect operating costs to remain fairly stable and the operational gearing of the business to be demonstrated as revenues grow with the expansion of our estate.

The loss before tax from continuing operations narrowed to £0.3m (H1 2021: £1.1m loss). The H1 2022 result is net of depreciation and amortisation of £0.7m (2021: £1.0m). The reduction in this charge reflects the prudent approach we have taken historically to depreciation of all plant and equipment, much of which, whilst still in use, has already been fully depreciated.

With the benefit of several years of operating experience now under our belt, we are confident that the actual useful life of our key hardware such as motion platforms is comfortably in excess of the three years over which we have been depreciating it in full. Whilst this cautious approach has much to commend it, we believe on reflection that this has tended to provide an overly pessimistic picture of our trading results at EBIT level and as such we have changed the basis of the VR cinema pod depreciation to a seven-year useful life.

This change is based on a combination of historical data and hardware testing and has been applied to relevant assets on hand at or acquired after 1 January 2022. Prior periods have not been restated in respect of this policy change. 

During H1, when it became clear that further lockdowns could be taking place in China and that global shipping conditions, though improving, could deteriorate again, we invested further in our stock of motion platforms and headsets. We currently hold 136 motion platform pod seats in stock ready to be deployed.

Our estate has grown from 364 headsets (across 48 sites) at the beginning of the year to 414 headsets (across 50 sites) as 30 June 2022. As at today's date the Group has 476 headsets (across 52 sites). This increase in seats has been driven both by an increase in the number of seats at established sites such as Shark Reef Aquarium at Mandalay Bay, OdySea Aquarium and SEA LIFE London (32 seats in aggregate); and new installations, predominantly the 70 headsets in aggregate installed across our first three zoo partner sites in July and August 2022. With known install opportunities for the remainder of the year, we remain confident of exceeding 500 installed headsets by year end.

Our portfolio as at 30 September 2022 is presented in the table below.

We have learned a lot from our initial entry into the zoo market and it is apparent that in order to maximise the speed of roll-out to a large number of high traffic sites (many of which have no surplus indoor space) we need a standardised 'drop-in' pre-fabricated solution.

This should be capable of being deployed outdoors, balancing the need for ease of installation with capacity to serve large volumes of customers, whilst delivering attractive returns for Immotion and its partners.

With our new solution at an advanced stage of development we are looking to make at least one installation of this format in this calendar year and data from this installation will help drive our accelerated roll-out plan for zoos in 2023 and beyond. We have in the meantime been building interest with zoos in this product and the response has been encouraging.

We will be exhibiting at a number of key industry events in H2 2022 to further stimulate demand in both the aquarium and zoo markets.

Discontinued operations

Uvisan and HBE have been classed as discontinued operations for the period and historic comparables restated on that basis. In the period, the aggregate revenue from discontinued operations was £0.4m (H1 2021: £0.4m) with an operating loss of £47k (H1 2021: £0.2m). Aggregate operating cash outflow was £0.2m (H1 2021: £0.4m outflow).

We took the decision to dispose of or spin out our HBE division in the early part of 2022 in order to focus our time and resources on our core LBE business. We still believe that the HBE business has potential and we have had some initial success in trials with a major shopping channel and we are seeing other B2B opportunities.

However, we do not want to fund this business ourselves going forward and so have agreed (subject to contract) to raise £250K in exchange for a 51% equity stake in this business in order to provide this funding. Immotion will have board representation but day-to-day management will fall to the new partner.

The decision to retain a meaningful stake in this business allows the Group to participate in any upside whilst removing the cash and management requirements, allowing us to focus our efforts on the LBE division.

Whilst Uvisan has longer-term potential to scale, it does require ongoing investment in stock and it is still establishing its distributor base. As we seek to focus all our resources on our LBE business, we have agreed to sell this business, subject to contract, for circa £100k in cash and will have an option to subscribe for 15% of the equity of the business in the event of a sale or stock market listing.

Further information will be provided upon completion of both transactions. 

Outlook

Having recorded a strong H1 and record Q3 the directors are confident as to the outlook for the full year for the continuing operations. Whilst we are cognisant of the wider economic picture and are not naive enough to believe our consumers will be immune from the cost-of-living crisis, we continue to believe that there are substantial untapped growth opportunities in front of us in both the aquarium and zoo sectors on a global basis.

CONSOLIDATED INCOME STATEMENT

for the six months ended 30 June 2022

* The results for the six months ended 30 June 2021 and the year ended 31 December 2021 have been restated to exclude the results of discontinued operations (refer to note 4).

* The results for the six months ended 30 June 2021 and the year ended 31 December 2021 have been restated to exclude the results of discontinued operations (refer to note 4).

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 June 2022

(Unaudited)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 30 June 2022

CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 30 June 2022

* The results for the six months ended 30 June 2021 and the year ended 31 December 2021 have been restated to exclude the results of discontinued operations (refer to note 4).

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

for the six months ended 30 June 2022

1 Corporate information

The interim consolidated financial statements of the Group for the period ended 30 June 2022 were authorised for issue in accordance with a resolution of the directors on 30 September 2022. Immotion Group plc ("the Company") is a Public Limited Company quoted on AIM, incorporated in England and Wales. The interim consolidated financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.

2 Statement of accounting policies

2.1 Basis of preparation

The interim consolidated financial statements of the Group for the six months ended 30 June 2022 have been prepared in accordance with the UK-adopted International Accounting Standard 34 Interim Financial Reporting.

The entities consolidated in the interim financial statements of the Group for the six months to 30 June 2022 comprise the Company and its subsidiaries (together referred to as "the Group").

The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual audited consolidated financial statements for the year ended 31 December 2021.

The directors are satisfied that, at the time of approving the interim consolidated financial statements, it is appropriate to adopt a going concern basis in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS") as adopted by the European Union.

In reaching this conclusion, the directors considered the financial position of the Group and prepared forecasts and projections for the next 12 months, taking into account reasonably possible changes in trading performance and capital expenditure requirements.

The financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate.

2.2 Accounting policies

The principal accounting policies adopted in the preparation of these interim statements are consistent with those applied in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2021 other than:

(i) the Group has adopted amended financial standards effective as of 1 January 2022. None of the amendments adopted on 1 January 2022 have had a material impact on the interim statements of the Group; and

(ii) the Group has changed its depreciation policy in respect of certain VR hardware and VR content to seven years on a straight-line basis.

The preparation of these consolidated half year financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates in preparing these consolidated half year financial statements.

Discontinued operations and assets held for sale

The directors consider it probable that the sale of the Uvisan and Home Based Entertainment (HBE) businesses and net assets will be completed shortly. The Uvisan and HBE results have been separated from those of continuing operations and are shown as discontinued operations within the consolidated income statement. Comparative periods within the consolidated income statement have been restated accordingly. In accordance with IFRS 5, the Uvisan and HBE assets held for sale are valued at the lower of book value and fair value less selling costs. Further information on discontinued operations is contained in note 4.

Impairment of intangible assets and goodwill - recoverable amounts are based on value in use calculations using management's best estimate of future performance. On the basis of the forecast cash flows prepared it is concluded

that no impairment of intangible assets and goodwill is required.

3 Segmental information

The Group's primary reporting format for segmental information is business segments which reflect the management reporting structure in the Group. The information for discontinued segments is aggregated and shown as a separate segment.

6 months to 30 June 2022

LBE - Location Based Entertainment

HO - Head Office

The segments discontinued in the 6 months to 30 June 2022 were Uvisan, the sale of UV-C cleansing equipment and Home Based Entertainment (HBE) - the sale of in-home virtual reality equipment and experiences.

*Administrative expenses exclude depreciation, amortisation, impairment, loss on disposal, one-off costs and share based payments.

The segmental analysis above reflects the parameters applied by the Board when considering the Group's monthly management accounts.

Geographical disclosures

Continuing operations

The geographical breakdown of the Group's revenue, assets and net tangible capital expenditure for continuing operations is as follows. The comparative amounts for the period to 30 June 2021 and the year to 31 December 2021 are restated.

The Group had certain customers whose revenue individually represented 10% or more of the Group's total revenue. For the six months ended 30 June 2022, two customers accounted for 37% and 28% of the revenue respectively.

4 Discontinued operations and assets held for sale

The Uvisan and HBE businesses and net assets are in the process of being sold with the sales expected to take place within the next few weeks. They are deemed to be discontinued operations as they represent separate major lines of business. The results for these businesses have been excluded from the continuing results of the Group for the period ended 30 June 2022. The results for the period ended 30 June 2021 and the year ended 31 December 2021 have been restated to exclude the results of these businesses from the continuing operations of the Group in those periods. 

Summary income statement

The results for Uvisan and HBE included in the income statement as discontinued operations are as follows:

Uvisan - ultra violet disinfection equipment

HBE - Home Based Entertainment

Summary cash flow statement

The results for Uvisan and HBE included in the cash flow statement are as follows:

Net assets held for sale:

The major classes of assets and liabilities classified as held for sale are as follows:

Other assets comprise inventories and receivables. Liabilities comprise payables, accruals and deferred income.

5 Other income

The Group is satisfied that it has met all the conditions relating to grants received and that no liability for repayment of any of the grants exists.

6 Earnings per share

The calculation of the group basic and diluted loss per ordinary share is based on the following data:

Earnings per ordinary share has been calculated using the weighted average number of shares in issue during the period. The weighted average number of equity shares in issue in the period to 30 June 2022 was 415,538,083.

7 Tangible assets

The method of depreciation for each class of depreciable asset is:

Leasehold property - Over term of lease

IFRS 16 right of use assets - Over term of lease

Fixtures, fittings and equipment - two to seven years on a straight-line basis

8 Intangible assets