Immotion Group capturing demand for Virtual Reality theatres and entertainment (LON:IMMO)

Immotion Group plc (LON:IMMO) Chief Executive Officer Martin Higginson caught up with DirectorsTalk for an exclusive interview to discuss nearing EBITDA breakeven, main drivers of growth and the progress of their Home-Based Entertainment products.

Q1: Now, Immotion Group has just reported EBITDA breakeven, or very close to it, for the first half of 2021. You must be very pleased to achieve this result, given the circumstances?

A1: The first half of 2021 was an absolute nightmare. Obviously, we were still very much in the throes of COVID and through a combination I think of i) probably entrepreneurial spirit ii) strict cost control and I think iii) opening up of our out of home businesses culminating in an excellent June has really driven us to this result of turnover of sort of circa £2.7 million. To have got to close to EBITDA breakeven I think is a major milestone for the company.

Q2: You recently reported June was a record month, with EBITDA circa £100,000, I see it’s come in at 120,000 in July is even better with revenue over £1 million and EBITDA circa £200,000. What have been the main drivers?

A2: Most of this has been driven by our out of home activities and it was always going to be this really, as the sites reopened, they’ve not only just reopened, but they’ve reopened with a real sort of vengeance. We’ve seen massive footfall in the majority of our sites.

June was good, we reported prudent circa £100,000 a few weeks ago, that’s now come in, we’ve got all the figures in and that’s £120, 000 so that’s great. As we look at July, again, still being relatively prudent, but we can see that revenues will be in excess of £1 million, we can see that EBITDA will be around £250,000 mark so a marked improvement on June, all driven really by out of home activity.

This was always going to be the case, we invested heavily at the outset when we set about creating the company, investing in delivering proprietary content, quality content, also doing a lot of the technical heavy lifting, making sure that we could strip costs out, making sure that we could run the sort of VR theatres with motion platforms at scale.

Those are really now starting to pay dividends as we go forward.

Q3: Clearly hitting £1 million revenue a month mark, it shows that you’ve bounced back. When you compare this figure to the H1 revenues of £2.7 million, you can clearly see it. How do you feel about the future given this amazing recovery?

A3: I think you can clearly see, £2.7 million in the first half of 2021 and obviously a lot of that was driven by a great June, you can really start to see where the business should be operating in terms of monthly revenues and monthly EBITDA so  that really gives us confidence.

I think with an incredibly busy inbound inquiry list of quality partners wanting the larger theatre installed, we’re very, very excited, not only about the rest of 2021, where we can start seeing what’s happening in early August, we’re very pleased with early results there. We can start seeing new sites potentially coming on board, inquiries coming in, and all of this really helps to underpin not only the rest of the year, but also as we move forward to 2022.

Q4: Now, I know in lockdown, you introduced two new products, they’re Home-Based Entertainment, Let’s Explore Ocean pack and Uvisan. What’s the update on these businesses?

A4: I think both are good. I think that there’s two things really, when you’re in the middle of a crisis, as we were in lockdown, it is important that we looked for additional revenue sources, we looked for things that were going to drive morale with the team and we looked for things that would generate some cash. Back then, it was all about survival and the company was in a survival mode.

I think we’re now the other side of that so I think in terms of the in-home business, in terms of Let’s Explore, all of this is geared up for a Q4 activity, the cost of the product is £70-odd, $100, it is a considered purchase and it is a considered purchase that  will culminate in a lot of activity around Q4 period.

We sold 11,000 boxes last year, and that was just in the UK only so now we’re in the US, Canada, Australia, the UK, and a number of other key markets. We expect sales to be considerably higher, we’ve got the stock, we’ve now got good distribution, both in Amazon and Google and through Facebook so we’re excited about the Q4 prospects of that business.

Uvisan, we’re seeing a lot of activity, we’re seeing a lot of, again, inbound inquiries coming from some quality partners so we expect those revenues to start ticking up over the coming months, albeit both are non-core really.

Our main focus really over the last six months has been getting our locations-based operations back up and running, they’ve all been mothballed for over 12 months. So, our key focus for the last few months is really getting those back up and running, getting them generating cash, and if you look at July’s number of £1 million of revenue, you can see that the investment and the time that we’ve put in, to getting those up and running has actually paid dividends in the £200,000 EBITDA.

Q5: It does look as though you going places now, and I can see that the operational gearing of the business is kicking in too. Do you expect this to continue or are there more costs to be added as you scale?

A5: We’re very confident about cost controls that we’ve now got in our business, and as we get better at it, obviously it comes with the more you practice, the better we get, but as we get better at it, we think we can really start homing in on that operational gearing.

Now, you saw from the increase in July, basically compared to June, how that has really impacted the EBITDA number and I think we’ll start seeing more and more of that. We think we can add a lot more turnover to our business without necessarily having to increase staff numbers or costs considerably.

So, I think of that profit contribution that we make, I think a lot of that will flow straight to the bottom right-hand corner.

Q6: So, in summary, big focus on the location business, will you need to raise more cash at all?

A6: Well, at the moment, we’re very happy. We were in a position where we are generating, EBITDA profitability, ignoring capital expenditure, which whilst you can’t ignore that, but just putting that to one side for a second, we’re actually generating cash within the business. If we then use that cash that we’re generating to help fund CapEx, that will really help drive the business.

So we’re not intending to raise cash in the short term to medium term future, we think we’ve got enough stock of machines, we’ve got enough cash, we’re generating cash so I think we’re in a very good place at the moment.

As I said, we’re very excited about not only the rest of 2021, but what the order book is starting to look like for 2022.

Q7: Finally, what risks keep you awake at night?

A7: Well, there’s always that niggle at the back of your mind about the pandemic and all the rest of it. I do think Immotion Group has been lucky or fortunate or good planning that we’ve got boots on the ground in the USA so our main business is in the USA, followed by the UK.

We’ve got some outliers in Australia, and Australia is suffering with lockdown on and off, 90% of our business in the US/UK focused. So, as a consequence, with the amount of vaccinations being rolled out in both those territories, we are confident as you possibly can be that we’re in a good place.

What keeps you awake at night? We want to grow this, we want to grow fast, we’ve got big ambitions for the business. It’s really about just taking control of that and it’s just making sure that we remain focused as a business, if we remain focused as a team and as a business then I think we can deliver some great shareholder value in the coming months and years.

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