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ANNUAL REPORT
& ACCOUNTS
Immotion is a new kind
of entertainment company.
We pride ourselves on looking at things differently.
In bringing together award-winning directors,
world-class CGI experts, state-of-the-art motion
platform technology, and a proprietary Content
Management System we are able to deliver a new level of
immersive entertainment.
Immotion
Group plc
Annual Report
& Accounts 2018
Contents
Contents
Chairman’s Statement
Chief Executive’s Report
Background
Business Models: ImmotionVR Experience Centres
Business Models: Concessions
Risks & Uncertainties
Corporate and Social Responsibility Statement
Corporate Governance
Audit Committee Report
Remuneration Committee Report
Directors’ Report
Directors’ Responsibilities Statement
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Company Statement of Financial Position
Company Statement of Changes in Equity
Company Statement of Cash Flows
Notes to the Company Financial Statements
Advisors
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Immotion
Group plc
Annual Report
& Accounts 2018
Chairman’s Statement
We are quickly
becoming a major
player in the exciting
world of virtual reality.
Sales across our ImmotionVR centres also
saw solid growth, giving us confidence
to explore opening larger centres on a
selective basis, where we will work with
key landlords in a more strategic manner.
We continue to work with our newly
appointed distributors to develop our sales
strategy, and look forward to the launch of
a new ‘attendant free’ VR booth.
Having made a significant investment
throughout 2018 in content creation,
equipment sourcing, and establishing
concession relationships, the Group
is now able to more precisely focus its
expenditure, leading to a reduction in its
cost base and cash outflow. As we move
through 2019, we will begin to capitalise on
the significant investment and activity of
2018 to propel the Group to the next stage.
I would like to place on record the thanks
of the Board to all our existing and new
investors and, in particular, to those who
supported us in the most recent fundraise
despite all the uncertainties surrounding
Brexit.
The Group’s first full year of trading,
2018, was a year of intense activity and
investment, building the foundations of
our plan to become a leading player in the
out-of-home VR market.
During the year we invested heavily in
the creation of a wide range of quality
VR immersive experiences combined
with motion platforms. This was essential
to help unlock the various channels to
market. We are now starting to see the
benefit of this investment. We signed our
first two content licensing deals in January
2019, and are enthused by the ongoing
interest in licensing our experiences.
Early 2019 trading has been very
encouraging, especially across our
concession partner estate.
Sir Robin Miller
Non-Executive Chairman
2 April 2019
5
P I O N
E E R S
Sir David Attenborough at York Museum
for the launch of Jurassic Yorkshire which
featured Immotion’s Feed a Dinosaur VR
experience (March 2018).
Immotion
Group plc
Annual Report
& Accounts 2018
Chief Executive’s Report
Content Creation and Licensing
In order to become a serious player
in this exciting market, the Group has
developed a range of 12 high quality
immersive experiences. In 2018, the
Group invested circa £1.5m in creating
these VR experiences. Immotion Group’s
heritage of content creation through its
award-winning storytellers is important
in our market as we believe people buy
‘experiences’ and not technology per se.
VR hardware manufacturers are now
looking to licence our experiences, and
AAA brands are now engaging with us to
produce immersive experiences for them.
All testament that our content creation
team are ‘best in class’.
To date we have completed two license
deals with LEKE. The first provides
Immotion Group with 70% of all revenue
generated. The licensee must generate
minimum revenue of £588,000 in the
period to March 2020 for Immotion
Group in order to maintain exclusivity. A
further licensing agreement was signed
in January 2019 for two experiences to
be exploited in the Chinese market. This
licence guarantees a minimum revenue
of £224,000 to the Group in the period to
March 2021. Further license discussions
are underway with other hardware
manufacturers.
The Group is in the process of opening up
its experiences, reversioned as appropriate,
to the home and educational markets via
SpringboardVR with SonyVR and mobile
channels to follow in the near future.
The Directors believe the ‘Swimming
with Humpbacks’ experience, the first
in the Group’s ‘Blue Ocean’ series, will be
especially well received by this audience.
I am pleased to report that, following a
year of intense activity and investment,
we are now in a position to start taking
advantage of our efforts. Strong early
trading has encouraged us to focus
on key growth areas, especially our
concession partner relationships, and our
ImmotionVR centres.
In what is a relatively new market we are
quickly gaining traction and establishing
ourselves as a key player in this exciting
sector.
According to Greenlight Insights, the
LBE market is forecast to grow from $1
billion at the end of 2018 to $12 billion
by 2023, making up 11% of the forecast
global VR market. Furthermore, it is now
recognised as the fastest growing revenue
sector for Brand Licensing according to
LicensingSource.net.
We have now established several revenue
generating channels to market, which
we believe can underpin our strategy to
become a leading player in this market.
In what is a relatively new
market we are quickly gaining
traction and establishing
ourselves as a key player in
this exciting sector.
7
Concessions
The concessions model enables the Group to work with
established high-quality leisure operators with proven high
footfall leisure destinations. We are pleased to report that our
concession partners reported record trading during the recent
February half-term holiday, up 68.8% on a like-for-like basis
compared with the Christmas holiday week in 2018.
We rolled out our first revenue sharing partnership in 2018
and it was a significant achievement to develop a relationship
with Merlin Entertainments plc (“Merlin”), one of the largest
entertainment companies in the world. The relationship with
Merlin continues to show good progress with eight Legoland
Discovery Centre (“LDC”) sites now open (versus two sites at 31
December 2018). Following successful trials, the two initial LDCs
in Boston, USA, and Manchester, UK continue to trade well and
the sites opened post period end are also showing very strong
performance.
The total number of headsets within the Group’s concession
estate at the year end was 46, which has now increased
significantly to 85, with most of the additional headsets being
installed into Merlin’s estate. The Group now has 44 headsets
installed at Merlin LDCs with a further 12 scheduled and an
additional 6 headsets going into a Legoland hotel in Germany.
We have also agreed to install a further 18 headsets into three SEA
LIFE centres as an initial trial. Whilst logistics can be a challenge,
the Directors are confident of achieving the short-term target of
82 headsets with Merlin, and the on-going potential to roll out
more headsets across the SEA LIFE centres post the initial three
site trial (there are 52 SEA LIFE centres around the world).
In addition to Merlin we are developing a number of other
partnerships in the entertainment space including Al Hokair, a
major leisure and hotel group in the Middle East. The first site will
open in April 2019 in Abu Dhabi with 12 headsets, with a further
site to follow in their flagship mall in Jeddah, Saudi Arabia. Al
Hokair has 90 sites throughout the Middle East.
With more entertainment sites in SEA LIFE, LDC, and a
number of select Family Entertainment Centres (“FECs”) we are
confident that we now have a model in this sector which, when
operated with the right partners, should provide a good return
on investment, solid recurring revenues and is potentially very
scalable.
Immotion
Group plc
Annual Report
& Accounts 2018
Chief Executive’s Report
ImmotionVR Centres
ImmotionVR is the brand name for the Group’s own Location Based Entertainment VR centres. These are located in high footfall retail
and leisure locations and are operated by the Group. Based on the Group’s initial store in Bristol (opened in December 2017) we have
begun to develop what the Directors believe is the UK’s first recognised retail brand for immersive entertainment and today, all of our
ImmotionVR centres boast five star Trip Advisor reviews. We believe this positions us to be involved in the evolution of retail and leisure
experiences, driven by consumers’ increasing desire for experiences and the needs of retail landlords to develop more rounded leisure
and entertainment offerings, as online shopping takes an ever-increasing share of retail spend.
We have good working relationships in place with intu, Landsec and Hammerson. The Group now operates 11 LBE centres trading
under the ImmotionVR brand.
ImmotionVR’s flagship centre in Bristol has been fully
operational since December 2017, and the Directors are
encouraged by the progress made, and lessons learnt,
during that time. Highlights include:
5 star reviews on Trip Advisor from the public
New online booking system and targeted marketing
plan introduced in Bristol which, over the past six
weeks, has accounted for circa 70% of revenue
Revenue and contribution in the year ended 31
December 2018 were £206k and £67k respectively
Comparing the February half term week in 2019,
against the Christmas holiday week of 2018, we are
pleased to report a 24.8% increase in revenue, a
significant increase in such a short period of time
9
At our Bristol ImmotionVR centre, we are pleased at the
number of returning customers, as well as the impact of our
new marketing campaign. We are further enthused at the
uptake of our recent introduction of our new booking system
and associated marketing plan. It is our intention to roll both
the booking system and marketing plan out to all stores1 over
the coming weeks. It is inevitable that it takes time to build up a
repeat audience but as we have gained greater experience, we
are refining our marketing approach to drive this audience.
The changing landscape now being faced by the retail sector
has allowed us to seek a more collegiate approach with landlords
and no long-term lease commitments. We also try to minimise
irrecoverable shop fit-out costs, focusing where we can on
moveable settings and, of course, equipment.
Having gained a huge amount of knowledge in the past year,
and using proof of concept data from existing sites, the Group
will look to selectively open further ImmotionVR centres in key
cities. We believe larger LBE centres will become an integral
part of the shopping mall of the future. Accordingly, we are in
dialogue with owners of a number of larger sites where there
may be an opportunity to be part of a larger LBE destination,
encompassing a range of immersive experiences (including VR),
particularly those with a competitive or social aspect, as well as
food and beverage offerings. We will update the market as these
discussions evolve.
Immotion Group’s estate of ImmotionVR centres was comprised
of 112 installed headsets at 31 December 2018 and is currently 129
across 11 sites in the UK and USA.
1 Whilst the Group will operate a booking system in the ‘pop up’ ImmotionVR centres, these are seldom used due to the walk by nature of the store.
Immotion
Group plc
Annual Report
& Accounts 2018
Chief Executive’s Report
Hardware Sales
We have been working with our newly appointed distributors
to develop our sales strategy. Whilst there is a lot of interest
in the VR market, the demand is more for ’operator-light‘, or
coin-operated VR machines, with a small footprint and quality
experiences will drive sales into the long tail of FEC’s. To this end
we have developed a standalone ‘free-roaming’ VR booth able to
offer a wide range of VR experiences. We will begin trials of this
machine in the next few weeks.
We have also, on the back of working with larger strategic
partners, decided to offer a more tailored solution. The Group
is able to produce VR content and source motion platforms
in line with their brand guidelines, thus giving it the ability to
develop larger scale ‘turnkey’ solutions. The Directors believe this
combined sales strategy allows the Company to deliver both
volume sales, as well as a more refined higher-margin business
model.
Post Period End Activity & Outlook
Having put in place solid foundations, including a comprehensive
range of VR experiences, a number of major concession partners,
and a growing number of collegiate relationships with major
retail landlords, the Group is well poised to start building a strong
annuity revenue business.
Our ImmotionVR centres continue to grow in revenue and
popularity. Whilst LBE is a relatively new market, the Directors
believe that we have chosen the right market for our focus and
with sector revenues forecast to hit $12 billion by 2023, we want to
ensure we position ourselves to be a leading player in this sector.
Our content creation and licensing team is focused on the
monetisation of what it has created. Having delivered what the
Directors believe to be some of the best VR experiences in the
market today we see great potential in this channel.
New concession partner sites have opened since the year end
in LDCs in Detroit, Chicago, Kansas City, Toronto, New York, and
Phoenix. The initial results are very encouraging. We expect to see
our first concession in SEA LIFE centres opening in April 2019 in
Germany, with two expected to follow in Melbourne and Sydney,
Australia.
Ou first major concession site in the Middle East will open with
Al Hokair. This is expected to commence trading in April 2019 in
Abu Dhabi. Al Hokair has in excess of 90 sites across the region.
We are currently in discussions with Al Hokair about the next site,
in Jeddah, Saudi Arabia, which we expect will be a larger site, with
a greater choice of immersive entertainment offerings.
We have appointed distributors and installers for both the Middle
East and UK markets and will be working closely with them to
optimise our sales offering.
Having made the significant investment throughout 2018
in content creation, equipment sourcing, and establishing
concession relationships, the Group is now looking to significantly
reduce its cost base and reduce cash outflow from operations.
As we move into 2019, we will begin to capitalise on the heavy
investment of 2018 to propel the Group to the next stage of its
development. I look forward to providing more regular news and
updates as we continue to execute on the successes we have
achieved to date.
As we move into 2019, we
will begin to capitalise on the
heavy investment of 2018 to
propel the Group to the next
stage of its development.
11
Our ImmotionVR
centres continue
to grow in revenue
and popularity.
Financial Review
Total revenue for the period was £2.85m, of which £1.95m came
from continuing operations (including £1.33m from VR related
activity) and £0.91m from discontinued operations.
We ceased historic client activity in Japan during the year by
transferring that business for nominal value to its Managing
Director. In H2, we effectively completed all legacy client work in
the UK and consider that activity discontinued.
Overall, the underlying EBITDA loss was £2.22m, as a result of
the investment in VR content production (and cessation of
historic client work in the UK) and putting in place the central
management and sales teams and infrastructure necessary to
grow the Group’s new core activities. In short, the Group is now
focused on achieving significant growth in scale of revenue to
drive towards break even. The Board is also very conscious of the
Group’s rapidly expanded fixed costs of operation and has begun
to take steps post the end of the period to review and reduce
these as appropriate. The Board continues to look for further
savings, particularly in property occupancy costs.
infrastructure and hardware for our Concession activities resulted
in combined capital expenditure of £2.99m.
Net cash inflow from equity and debt funding (net of
repayments) was £6.37m and £0.03m respectively, making a total
inflow from financing activities of £6.40m in the period.
Growth in tangible fixed assets pre-dominantly reflected the
investment in hardware for our ImmotionVR centres, as well as
our concession operations.
Growth in intangible assets reflects the investment in our
proprietary content and software creation.
Net assets at period end were £6.20m and net current assets
were £0.92m.
Underlying loss per share2 was 1.71p. Total loss per share was
2.42p.
Overall cash outflow in the year was £0.58m. Of the total, the
cash outflow (before exceptional and IPO related items) from
operations was £2.64m and the heavy investment in content,
Martin Higginson
Chief Executive Officer
2 April 2019
2 Underlying loss per share is stated before exceptional costs relating to the IPO in July 2018, other one-off items, costs relating to share based payments and the impairment of
intangible assets related to discontinued operations.
Immotion
Group plc
Annual Report
& Accounts 2018
Background
Immotion was founded in 2017 by Group CEO, Martin Higginson, and Group Finance Director, David Marks, who have extensive
experience in the digital media industry. Having assessed the market opportunity for ‘out of home’ VR experiences and identified
the need for higher quality content as part of that offering, they established Immotion and commenced the development of the
Group through three acquisitions in December 2017, namely Studio Liddell Limited (since renamed Immotion Studios Limited), C2K
Entertainment Inc and VR Acquisition (Holdings) Limited. Immotion Studios and C2K are both award winning content creators with
over 40 years combined expertise in CGI and live action story-telling. VR Acquisition (Holdings) Limited was an early stages VR arcade
operator holding an exclusive distribution agreement with the Group’s primary hardware provider, Leke VR.
Immotion Group Plc listed on AIM on 12 July 2018, raising £5.75m gross placing proceeds in the process.
Immotion Group Plc listed on
AIM on 12 July 2018,
raising £4.8m net
placing proceeds in
the process.
Business Models: ImmotionVR Experience Centres
13
Under our experience centres business
model, the Group seeks space in high
footfall retail spaces. The Group pays the
costs of occupancy and staff. Customers
are typically charged £5 for a single
experience, £20 for a thirty-minute pass
or £30 for a one-hour pass. Bookings can
be made in advance via the Immotion
VR website. The Company has a revenue
target of £250 – £300 per headset per
week.
The primary key performance indicator for
experience centres is revenue per installed
headset per week. During the year, the
Group’s experience centres generated
revenue per headset per week of £255.
£255
PER HEADSET
PER WEEK
During the year, the
Group’s experience
centres generated
revenue per headset
per week of £255.
Immotion has trialled a number of retail formats, pre-dominantly in shopping malls
(both primary and secondary), including both centre-aisle sites as well as stores.
Experience centres were a significant
focus for Immotion in 2018 which proved
very useful for testing content and
understanding customer preferences.
At the beginning of 2018, the Group had one experience centre, in Bristol, initially with 12
headsets in operation. By the end of the year that had increased to ten sites in the UK
(including a Christmas pop-up in intu Metrocentre, Gateshead) and one site in the USA
with combined total of 112 headsets in operation.
Immotion
Group plc
Annual Report
& Accounts 2018
Business Models: Concessions
The concessions model enables the Company to work with established high quality leisure operators with proven high footfall leisure
destinations. Immotion provides, at its cost, VR hardware and experiences to the operator. The operator will typically provide the site,
staff and utilities, with Immotion Group providing technical and other business support. The parties share the revenue on a pre-agreed
basis.
The primary key performance indicator for concessions is revenue per installed headset per week. A number of concessions
arrangements were entered into during the year and subsequently terminated following an unsuccessful trial period and a number
of other relationships are likely to be renegotiated or terminated. Taking into account only the concessions arrangements which are
expected to be representative of the 2019 roll-out, the revenue per headset per week was £265 during the year.
As at 31 December 2018, the Group had 46 Concession headsets in operation at 7 locations.
During 2018, the Company entered into a number of concession
arrangements, most notably with Merlin Entertainments.
Immotion installed its VX2 cinema pods into Merlin’s Legoland
Discovery Centres in Boston, USA and Manchester, UK during the
year on a trial basis.
£265
PER HEADSET
PER WEEK
Risks & Uncertainties
15
During the year, the Group established a
Risk Committee to identify and monitor
risks which could threaten the Group’s
operations. The Committee will meet
twice each year and is comprised of
the Audit Committee and the Finance
Director. The Committee has the power
to call on Executive Directors and senior
management for the purposes of
seeking information as well as making
recommendations.
The Group’s process for managing risks is as follows:
Identify Risk
Review & Evaluate
Assess impact of Risk
Create Mitigation Strategy
The risks are those which the Board considers, as at the date of this report, are the most critical to the continued operation of the
Group. The risks described do not represent the totality of the risks facing the Group and should not be relied on as such by any person
considering any investment decision in relation to the Company’s ordinary shares.
Risk
Potential Impact
Mitigation and Control
Failure to
implement
the Group’s
strategy
A failure to implement the Group’s strategy may have an adverse impact on its
business, financial and other conditions, profitability and results of operations. There
can be no assurance that the Group will be able to maintain or grow its financial
performance to anticipated future levels.
Technological
advances
within the
industry
The technology industry as a whole is prone to rapid change with new entrants
and ideas continuously changing the market. There is a risk that the Group’s
technology could become obsolete or uncompetitive which could have a material
adverse impact on the prospects of the Group. Additionally, advances in hardware
may require the Group to incur additional capital expenditure that is not currently
foreseen, which could have an adverse material impact on the cash position of the
Group, and potentially trigger the requirement for further fundraising.
Any failure to keep pace with changes in the virtual reality and gaming industry or
to adapt to technological developments, or the development and introduction of
a superior product by a competitor, could mean that the Group fails to successfully
commercialise its products and this may have a material adverse effect on the
Group’s business, financial condition, results of operations and prospects.
The Group have regular Board meetings as
well as constant communication with senior
management to monitor and refine the Group’s
progress against its targets.
Weekly KPIs are distributed to senior
management to enable them to monitor
performance.
Industry trends are monitored and the Group
sends representatives to key trade shows to
establish what new products are coming to
market.
Competition
Given the dynamic state of the market in which the Group operates, there may be
new and current competitors which could include well resourced, international
players in the virtual reality entertainment industry which have greater market
presence, brand recognition, access to more popular and/or engaging virtual reality
content, financial resources and economies of scale or lower cost bases than the
Group and may be able to withstand or respond more swiftly to changes in market
conditions, any of which could give them a competitive advantage over the Group.
It is the Group’s intent to build up a large install
base of Immotion hardware which will create a
barrier to entry.
Another key focus is to ensure that the Group’s
hardware and VR experiences are amongst the
best in the market.
Cash
requirement
The Group’s retail, concessions and content creation ambitions require capital
expenditure in advance of revenue generation.
Foreign
exchange
movements
The Group has certain contracts priced in foreign currencies and also has employees
based overseas paid in foreign currencies. It is therefore exposed to the risk that
adverse exchange rate movements could cause its costs to increase (relative to its
reporting currency) resulting in reduced profitability for the Group.
Political
uncertainty
The current political climate – Brexit in the UK and the trade war with China in the
USA – give rise to some uncertainty in relation to our supply chain and trade with
European customers.
Martin Higginson
Chief Executive Officer
2 April 2019
Cash forecasts are maintained and regularly
updated.
The Group endeavours to allocate resources
into opportunities which give the most effective
payback.
Focus is balanced between hardware sales,
which are cash positive, and retail and
concessions operations which typically require
advance capital expenditure.
The Group does not use speculative financial
instruments to hedge against potential currency
loss.
The Group has foreign currency accounts
which it uses to hold funds and settle liabilities
denominated in those currencies.
The Group continue to monitor the political
environment and will take action to protect
or strengthen the Group’s position as
circumstances change.
Immotion
Group plc
Annual Report
& Accounts 2018
Corporate & Social Responsibility Report
The Group aims to operate ethically and be socially-responsible in its actions. Below are a number of the approaches through which
this is achieved.
Business Conduct, Ethics and Anti-Corruption
It is the Group’s policy to conduct business in an honest way and without the use of corrupt practices or acts of bribery to obtain an
unfair advantage.
The Group has a zero-tolerance approach to bribery and corruption.
On 12 July 2018, the Group adopted an Anti-Bribery and Anti-Corruption Policy which was provided to all staff at the time and is given
to all new starters. Any breach of the policy results in disciplinary action which may include dismissal.
Dealings with Customers
The safety of the customers of our ImmotionVR experience centres is of paramount importance and the Group conducts regular
audits of its sites which includes significant focus on health & safety practices.
Relationship with Employees
The Group encourages an environment of openness and debate and welcomes all feedback from within.
The Group engages with its employees regularly through email newsletters. The Group also operates an intranet which is a source of
key information which staff can access as required. Details of the Group’s performance are shared with all employees at appropriate
times using these methods.
The Group expects a high standard from its staff and provides training to achieve this. Where possible, as new roles in the organisation
arise, the Group aims to promote from within. This has been a successful strategy which saw several staff move into more senior
positions during the year.
Corporate Governance Report
17
The Board
The Board is comprised of four Executive Directors and two Non-Executive Directors. Both of the Non-Executive Directors are deemed
to be independent.
The four Executive Directors are full time and are contracted to work for a minimum of forty hours per week. The two Non-Executive
Directors are expected to devote such time as is necessary for proper performance of their duties.
The Board are of the view that the Directors have the necessary mix of experience, skills and personal qualities to enable to the Group
to deliver its strategy, although there is currently no gender diversity. The Board’s composition will be kept under continuous review.
The Directors are encouraged to undertake any activities or further training they deem necessary in order to keep their skills and
knowledge relevant to the business.
Details of the current Directors, their roles and background are as follows:
Sir Robin Miller
Non-Executive Chairman
Martin Higginson
Group Chief Executive Officer
Robin has extensive PLC experience
spanning many years, particularly in
the media sector. He was formerly Chief
Executive (1985-1998 and 2001-2003)
and Chairman (1998-2001) of Emap Plc,
a leading international media group in
consumer and trade publishing, commercial radio, music TV
channels and events. Robin is currently Non-Executive Chairman
of Edge VCT and social video company Brave Bison. Additionally
he holds the role of Non-Executive Director of Premier Sports
Holdings Plc, Gemini Network Media Ltd, Crash Media Group Ltd,
Digitalbox Group Ltd, Gruppo Media Ltd, Bikesportnews.com and
is a Trustee of the Golf Foundation.
Martin is a seasoned Technology, Media
and Telecoms (TMT) entrepreneur. He has
set up sold and listed multiple businesses.
His first business, a BMX magazine, was
sold to IPC Magazines in 1982. Following
three years with IPC he left to set up
his own publishing and telecoms business Megafone. This
was subsequently sold to Scottish Power Plc. During his time
with Scottish Power he joined its subsidiary, Scottish Telecom,
as Managing Director of the Internet and Interactive division,
including Internet ISP Demon Internet. Following the flotation
of Thus plc (formerly Scottish Telecom) Martin moved on to
establish Monstermob Group Plc which listed on AIM in 2003.
Over a three year period it grew to become a Top 50 AIM listed
business with a market capitalisation of £192m. This business
was sold to Zed Worldwide in late 2006. Martin has subsequently
founded a range of businesses including Cityblock plc, a luxury
student accommodation business which was privatised and sold
to management in 2009; NetPlayTV plc, an interactive TV gaming
business which boasted exclusive partnerships with Virgin
Media, Channel Five, and ITV; and Digitalbox Plc, a digital media
business. Digitalbox was ranked as a FastTrack 100 Company
in 2016 and 2017. Martin holds the position of Non-Executive
Director of Digitalbox Plc and has previously held Non-Executive
Director positions with Legend Plc and Cupid Plc
Immotion
Group plc
Annual Report
& Accounts 2018
Corporate Governance Report
David Marks
Group Finance Director
David began his career with Arthur
Andersen in its corporate recovery &
restructuring department, during which
time he was involved in some of the
largest and most complex restructuring
assignments in the UK at the time. David
Rod Findley
Group Commercial Director
Rod has over 20 years’ experience as a
director, writer and creative director and
has won a range of awards for his creative
work. He has a Bachelor of Arts degree
from McGill University in Montreal and
an MFA in Film at USC. He is founder and
then pursued a career in corporate finance and M&A, initially
with UBS and latterly with Deutsche Bank. In 2001 David was
appointed as a Partner and was responsible for making private
equity investment at Nikko Principal Investments Limited,
the European Principal Finance arm of Nikko Cordial, one of
Japan’s largest securities businesses. David subsequently joined
Monstermob Group Plc, initially as a Non-Executive Director
and subsequently as Group Finance Director. Along with Martin
Higginson, David founded the Digitalbox Group. David has an
honours degree in Law from the University of Glasgow and is a
member of the Institute of Chartered Accountants of Scotland.
CEO of C.2K Entertainment Inc, which was acquired by Immotion
Group on 21 December 2017. Thanks to his strong reputation for
creating narratives and engaging consumers using pioneering
technology, Rod has delivered campaigns (broadcast, digital
and print) for major brands such as Toshiba, Sony, Guthy-Renker
and Canon. International broadcasters NHK and WoWoW have
broadcast his long-form documentary and narrative work.
Rod is now harnessing the power of virtual reality and recently
completed projects on behalf of Toyota and AbbVie.
Ian Liddell
Group Creative Director
Ian has over 25 years’ experience in
creating cutting edge storytelling and
TV. He is the founder and CEO of Studio
Liddell, a multi-award winning creative
production studio acquired by Immotion
Group and played a key role in the growth
of the company. The Company delivers CGI, cut-scene animation,
VR and AR, 4D and interactive content.
The quality of the studio’s work has cemented Studio Liddell’s
reputation as a highly innovative studio, helping to attract a client
base comprised of major global businesses such as Pfizer, Merck,
Saatchi Health and Digitas. Notable productions include Ranger
Rob for Nelvana, Canada, Let’s Play! for Zodiac Entertainment
& BBC, Cloudbabies for Hoho Entertainment & BBC. Ian also is
an elected council member of Animation UK and sits on the All
Party Parliamentary Group (APPG) on Trade.
Nicholas Lee
Non-Executive Director
Nicholas has extensive capital markets
experience and is actively involved in AIM.
Having read Engineering at St. John’s
College, Cambridge, he commenced his
career at Coopers & Lybrand where he
qualified as a chartered accountant.
He joined Dresdner Kleinwort, where he worked in the corporate
finance department advising a range of companies across
a number of different sectors. When he left in 2009, he was
a Managing Director and Head of Investment Banking for
Dresdner Kleinwort’s hedge fund/alternative asset manager
clients. He now holds a number of directorships of public
companies.
The Board meets once every two months to discuss significant
matters including strategic decisions and performance. The
Company’s day-to-day operations are managed by the Executive
Directors. Any Director needing independent professional advice
in the furtherance of his duties may obtain this advice at the
expense of the Company.
The Company Secretary also attends meetings of the Board,
takes minutes and circulates them shortly thereafter. The
Company Secretary is also responsible for coordinating Board
meetings and circulating Board papers in advance.
19
On 12 July 2018, the Board established Audit, Disclosure, Nomination, Remuneration and Risk Committees with formally
delegated duties and responsibilities, details of which are provided below.
Audit Committee
Nomination Committee
The Audit Committee is chaired by Nicholas Lee and meets at
least twice per year. Sir Robin Miller also serves on the Audit
Committee. The Audit Committee’s responsibilities include:
(i) ensuring that appropriate financial reporting procedures are
properly maintained and reported on;
The Nomination Committee is chaired by Sir Robin Miller and has
been established to identify and nominate, for the approval of the
Board, candidates to fill Board vacancies as and when they arise.
The Nomination Committee will meet as required. Nicholas Lee
also serves on the Nomination Committee.
(ii) meeting with the Group’s auditors to discuss matters of
relevance, including risk issues;
(iii) ensuring the internal controls of the Group are properly
maintained;
(iv) reviewing the financial statements prior to issue to the
shareholders;
(v) reviewing reports from the Group’s auditors;
(vi) reviewing and approving the scope and content of the
Group’s annual risk assessment programme and the annual
audit; and
(vii) monitoring the independence of the external auditors.
The Group’s Finance Director and the external auditors attend
meetings of the Audit Committee by invitation. The Committee
also holds separate meetings with the auditors as appropriate.
The Group does not have an internal audit function as this is not
considered appropriate given the scale of the Group’s operations,
however the Group operates internal peer review with the scope
of evaluating and testing the Group’s internal control procedures
to standardise processes around best practice. Any significant
issues are reported to the Chair of the Audit Committee and
shared with the external auditors as appropriate.
Disclosure Committee
The Disclosure Committee is chaired by Martin Higginson
and has been established to ensure compliance with the AIM
Rules and the Market Abuse Regulations (MAR) concerning the
management of inside information. The Disclosure Committee
works closely with the Board to ensure that the Company’s
nominated adviser is provided with any information it reasonably
request or requires in order for it to carry out its responsibilities
under the AIM Rules and the AIM Rules for Nominated Advisers.
The Disclosure Committee meet as required. David Marks and Sir
Robin Miller also sit on the Disclosure Committee.
Remuneration Committee
The Remuneration Committee is chaired by Sir Robin Miller
and meets at least twice per year. Nicholas Lee also serves
on the Remuneration Committee. The Remuneration
Committee’s responsibilities include reviewing the performance
of the Executive Directors, setting their remuneration levels,
determining the payment of bonuses and considering the
grant of options under the share options schemes. Martin
Higginson and David Marks will also attend the Remuneration
Committee but shall not be involved in decisions regarding
their own remuneration and, other than providing input to the
Non-Executives, shall not have a vote on the Remuneration
Committee.
Members of the Remuneration Committee do not participate in
decisions concerning their own remuneration.
Whilst the Quoted Companies Alliance Corporate Governance
Code suggests that the Chairman of the Board should not also
chair the Remuneration Committee, given that Sir Robin Miller
is only one of two independent Non-Executives, it is considered
appropriate by the Group for him to serve in this position.
Risk Committee
The Company has a Risk Committee, comprised of the Audit
Committee and the Finance Director, which meets twice
each year. The committee examines the key risks that impact
the Company and assesses the adequacy of the Company’s
mitigation strategies. It has the power to call on Executive
Directors and senior management for the purposes of seeking
information as well as making recommendations.
Immotion
Group plc
Annual Report
& Accounts 2018
Corporate Governance Report
Attendance
Directors’ attendances at meetings of the Board and its Committees during 2018 were as follows:
Board
Audit
Disclosure
Nomination
Remuneration
Risk
Martin Higginson
David Marks
Rod Findley
Ian Liddell
(appointed 22 June 2018)
Sir Robin Miller
(appointed 22 June 2018)
Nicholas Lee
(appointed 22 June 2018)
Alasdair Ritchie
(resigned 22 June 2018)
10/10
9/10
6/10
5/5
4/5
4/5
3/5
-
1/1
-
-
1/1
1/1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Remuneration, Nomination, Disclosure and Risk Committees were established on 12 July 2018 and no formal meetings of these
Committees took place during 2018.
The Board keeps under review the effectiveness of its performance, the performance of the Committees and the performance of
individual Directors. Given that the Board in its current composition was only established on 22 June 2018, no formal review took place
during 2018.
Compliance with Corporate Governance Codes
As an AIM-quoted company, the Company is required to apply a
recognised corporate governance code and demonstrate how it
complies with that code and where it departs from it.
The Directors of the Company have formally taken the decision
to apply the Quoted Companies’ Alliance Corporate Governance
Code (the “QCA Code”).
As far as the Directors are aware, the Company is fully compliant
with the principles of the QCA Code other than that the
Chairman of the Board also chairs the Remuneration Committee.
Full details of the QCA Code’s ten principles and the steps the
Company takes to adhere to them can be found at:
https://immotion.co.uk/investors/corporate-governance/
The Directors of
the Company have
formally taken the
decision to apply the
the QCA Code.
21
Financial Controls
Going Concern
The Board has overall responsibility for the Group’s system of
internal financial control and for reviewing its effectiveness.
The purpose of the system of control is to manage rather than
eliminate the risk of failure to achieve business objectives and
can only provide reasonable, but not absolute, assurance against
misstatement or loss.
Since its establishment on 12 July 2018, the Audit Committee has
kept the effectiveness of the Company’s internal controls and risk
management systems under review.
The Finance Director is the executive within the Group
responsible for day-to-day financial management of the Group’s
affairs and its internal accounting.
Risk Management Review
Risk management is ultimately the responsibility of the Board
but is overseen by the Risk Committee. The Group’s key risks
are recorded in a risk register and those risks together with their
respective mitigants, controls and corrective actions are reviewed
regularly by the Risk Committee.
Shareholder Relations
The Company regularly updates its investor relations website
which can be found at: immotion.co.uk/investors.
The Company is happy to engage directly with shareholders
to answer any questions they have where it is possible to do
so without releasing price-sensitive information. The investor
relations website includes details of how to contact the Company
by email and telephone.
At the time of approving the financial statements, the Directors
have a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for
the foreseeable future. In reaching this conclusion the Directors
have considered the financial position of the Group, taking into
consideration the recent placing, together with its forecasts and
projections for 18 months from the reporting date that take into
account reasonably possible changes in trading performance.
The going concern basis of accounting has therefore been
adopted in preparing the financial statements.
Long-Term Viability Statement
At the time of approving the financial statements, the Directors
are of the opinion that the Group will be in a position to continue
in operation and to meet its liabilities as they fall due.
The Directors’ expectations are based on assessment of the
Group’s current financial position, financial projections over the
next 18 months, and the principal risks facing the Group.
Key assumptions made in coming to this view include:
(i) that the assumptions made in preparing the Group’s
financial projections will come to fruition which include the
expected roll-out of the Group’s own ImmotionVR experience
centres, concession partnerships and the sale of hardware;
and
(ii) that no unforeseen risks affect the Group.
Immotion
Group plc
Annual Report
& Accounts 2018
Corporate Governance Report
Culture
The Directors recognise the importance of creating a corporate
culture which is consistent with the Group’s business models and
strategy.
The Audit Committee is chaired by Nicholas Lee and meets at
least twice per year. Sir Robin Miller also serves on the Audit
Committee. The Audit Committee’s responsibilities include:
Virtual Reality has a broad appeal and is enjoyed by people of
all genders and ages. It is the Group’s intention that its non-
discriminatory policy when hiring staff produces a workforce as
diverse as its customer base, which should increase the value of
feedback from within the organisation.
The Group is geographically spread with operations in the
UK, USA and the UAE, each of which are in a different stage of
maturity. It is therefore crucial that knowledge sharing across
regions is facilitated and encouraged.
(i) ensuring that appropriate financial reporting procedures are
properly maintained and reported on;
(ii) meeting with the Group’s auditors to discuss matters of
relevance, including risk issues;
(iii) ensuring the internal controls of the Group are properly
maintained;
(iv) reviewing the financial statements prior to issue to the
shareholders;
The Group encourages an environment of openness and debate
and welcomes all feedback from within.
(v) reviewing reports from the Group’s auditors;
Each department within the Group prepares a weekly report
of key issues which are circulated around the Board, a process
which facilitates internal feedback and knowledge sharing.
The Board believe that the current culture is appropriate to
enable the Group to deliver its strategy, though they also
recognise that it is inevitable that there is always room for
improvement in this area and any new initiatives to facilitate
communication and promote diversity will be implemented as
required.
(vi) reviewing and approving the scope and content of the
Group’s annual risk assessment programme and the annual
audit; and
(vii) monitoring the independence of the external auditors.
The Group encourages
an environment of
openness and debate
and welcomes all
feedback from within.
Audit Committee Report
23
The Group’s Finance Director and the external auditors attend meetings of the Audit Committee by invitation. The Committee also
holds separate meetings with the auditors as appropriate.
The Audit Committee was established on 12 July 2018 and met once during the year to approve the interim financial statements.
The Audit Committee have also met with the Group’s external auditors since the period end to approve the 2018 accounts.
Significant Accounting Issues
The main accounting issues which the Audit Committee
focused their attention on during the period were:
(i) Revenue recognition of concessions partnership revenue
– the Audit Committee have deemed that the Group is the
principal in concession partnership (with the concession
partner being the Group’s agent), and as a result the Group
records 100% of the end user revenue through its income
statement with the concession partner’s share being
recognised as a cost of sales.
(iii) The capitalisation of staff time spent creating VR experiences
– the Group has a dedicated team of VR content creators
who have created a range of VR experiences during the
period which are generating revenue for the group and are
expected to continue doing so. Where the conditions of
IAS 38 are met, the Group capitalises internal and external
costs associated with development of these experiences as
intangible assets. The Audit Committee concluded that they
were comfortable that the Group’s accounting policy was
compliant with IAS 38.
(ii) The carrying value of the Group’s goodwill and intangible
assets – the Audit Committee have reviewed the goodwill
and intangible assets on the Group’s balance sheet in the
context of future earnings expected to be generated from
those assets. The decision has been taken to fully impair the
customer list which was recognised on the acquisition of
Immotion Studios Limited given that the relevant operations
have since been discontinued. No other intangible assets
have been subject to impairment.
(iv) Accounting treatment of IPO fees – the Group incurred
significant fees in connection with its IPO in July 2018. The
various costs were categorised between fundraising and
listing costs with some costs being split between the two
categories. Fundraising costs were deducted from share
premium whilst listing costs were expensed through the
income statement in the period. The Audit Committee
concluded that the Group’s accounting policy was
appropriate.
Immotion
Group plc
Annual Report
& Accounts 2018
Audit Committee Report
Impact of New Accounting Standards on Future Reports
The following new International Financial Reporting Standards (IFRS) will be adopted by the Group from 1 January 2019. The expected
consequences of the application of these new standards is outlined below:
•
•
•
IFRS 16: Leases – application of IFRS 16 is expected to have a significant effect on the Group’s financial statements.
IFRIC 23 Uncertainty over Income Tax Treatments – application of IFRIC 23 is not expected to have a material effect on the
Group’s financial statements.
Prepayment Features with Negative Compensation (Amendments to IFRS 9) – application of the amendments to IFRS 9 is
not expected to have a material effect on the Group’s financial statements.
Internal Audit
External Auditors
The Group does not have an internal audit function as this is not
considered appropriate given the scale of the Group’s operations,
however the Group operates internal peer review with the scope
of evaluating and testing the Group’s internal control procedures
to standardise processes around best practice. Any significant
issues are reported to the Chair of the Audit Committee and
shared with the external auditors as appropriate.
The Audit Committee has reviewed the independence and
effectiveness of Haysmacintyre LLP, the Group’s external auditors,
and are satisfied in both respects.
Haysmacintyre LLP’s fees in the year in respect of audit services
were £53k (2017: £nil) and in respect of non-audit services were
£111k (2017: £nil) as detailed in note 8.
Haysmacintyre LLP have signified their willingness to continue in
office and a resolution to reappoint Haysmacintyre LLP as auditor
to the Company will be proposed at the AGM.
Nicholas Lee
Chairman of the Audit Committee
2 April 2019
Internal Controls
The Board has overall responsibility for the Group’s system of
internal financial control and for reviewing its effectiveness.
The purpose of the system of control is to manage rather than
eliminate the risk of failure to achieve business objectives and
can only provide reasonable, but not absolute, assurance against
misstatement or loss.
Since its establishment on 12 July 2018, the Audit Committee has
kept the effectiveness of the Company’s internal controls and risk
management systems under review.
The Finance Director is the executive within the Group
responsible for day-to-day financial management of the Group’s
affairs and its internal accounting.
25
Immotion
Group plc
Annual Report
& Accounts 2018
Remuneration Committee Report
The Remuneration Committee determines the remuneration packages for Executive Directors and other senior employees and keeps
the Group’s policy on pay and benefits under review generally.
The Remuneration Committee will keep under review the long-term incentivisation of Executive Directors and senior employees,
balancing the need to control costs while ensuring that pay and benefits offered by the Group are appropriate for attracting and
retaining high calibre staff.
The Committee will continue to have due regard to remuneration reports from independent sources, to the guidance of its
professional advisers and to good practice generally.
Directors’ Remuneration
Directors’ remuneration for the year of 2018 are shown in the table below:
Salary
2018
£
Consultancy
2018
£
Bonus1
2018
£
Benefits
2018
£
Pension
2018
£
M Higginson2
60,417
124,583
75,000
3,444
D Marks3
74,667
87,500
75,000
-
363
202
Total
2018
£
263,807
237,369
R Findley
128,267
I Liddell4
51,955
-
-
R Miller4
14,115
8,750
N Lee4
16,468
-
A Ritchie5
-
10,763
-
-
-
-
-
2,294
-
130,561
1,120
1,053
54,128
-
-
-
-
274
-
22,865
16,742
10,763
345,889
231,596
150,000
6,858
1,892
736,235
Total
2017
£
-
-
-
-
-
-
-
-
1 IPO bonuses
2 £102,750 of M Higginson’s consultancy fees were invoiced pre-IPO
3 All of D Marks’ consultancy fees were invoiced pre-IPO
4 Appointed 22 June 2018
5 Resigned 22 June 2018
27
Service Contracts
Directors & their Interests
There are no Directors’ service contracts with notice periods in
excess of 12 months.
The Directors’ beneficial interests in the Company were as
follows:
2 April 2019
Shares of
£0.00040108663
31 December 2018
Shares of
£0.00040108663
31 December 2017
Shares of
£0.01
M Higginson
D Marks
R Findley
23,109,514
23,109,514
9,767,580
9,767,580
9,501,016
9,501,016
I Liddell (appointed 22 June 2018)
4,902,857
4,902,857
R Miller (appointed 22 June 2018)
N Lee (appointed 22 June 2018)
350,024
241,743
350,024
241,743
A Ritchie (resigned 22 June 2018)
2,855,593
2,855,593
Note 25 to the Financial Statements details a bonus issue and two sub-divisions which took place during 2018.
The Directors hold share options in the Company as detailed below:
M Higginson
D Marks
R Findley
EMI Options
Shares
Unapproved Options
Shares
1,950,000
1,750,000
-
-
-
1,250,000
9,651
3,805
3,015
1,947
139
-
1,134
Total
Shares
1,950,000
1,750,000
1,250,000
I Liddell (appointed 22 June 2018)
1,000,000
-
1,000,000
4,700,000
1,250,000
5,950,000
All of the above options were issued on 12 July 2018.
The options have the following vesting criteria:
(i) One-ninth of the options vest on 12 July 2019;
(ii) One-ninth of the options vest on 12 July 2020;
(iii) One-ninth of the options vest on 12 July 2021;
(iv) One-third of the options vest on announcement of the 2019 Annual Report, subject to performance criteria being met; and
(v) One-third of the options vest on announcement of the 2020 Annual Report, subject to performance criteria being met.
Sir Robin Miller
Chairman of the Remuneration Committee
2 April 2019
Immotion
Group plc
Annual Report
& Accounts 2018
Directors’ Report
The Directors present their report and audited financial statements for the year ended 31 December 2018.
Principal Activities
Future Developments
The principal activities of the Group are: (i) the sale of virtual reality
(VR) experiences in its own experience centres; (ii) the provision
of VR experiences to concession partners; and (iii) the sale of VR
hardware and experiences.
The principal activity of the Company is as a holding company.
Board of Directors
The Directors who served during the year were:
Martin Higginson
David Marks
Rodney Findley
Alasdair Ritchie (resigned 22 June 2018)
Ian Liddell (appointed 22 June 2018)
Sir Robin Miller (appointed 22 June 2018)
Nicholas Lee (appointed 22 June 2018)
In accordance with the Articles of Association of the Company,
any Director who has been appointed since the previous annual
general meeting or for whom it is the third annual general
meeting since the annual general meeting at which that Director
was elected shall retire but shall be eligible for re-appointment.
Accordingly, all Directors will retire at the annual general meeting
and offer themselves for re-election.
The Company has chosen in accordance with section 414C(11) of
the Companies Act 2006 to include the disclosure of likely future
developments in the Chief Executive’s Statement on pages 6
to 11.
Dividends
No dividends were paid during the year (2017: £Nil). The Board is
not recommending the payment of a final dividend in respect of
the year ended 31 December 2018.
Earnings per Share
Loss per share in the period from continuing operations was
2.31p (2017: 1.29p) and diluted loss per share from continuing
operations in the period was 2.31p (2017: 1.29p).
Underlying loss per share from continuing operations in the
period was 1.80p (2017: 0.84p) and diluted underlying profit per
share from discontinued operations in the period was 0.09 (2017:
Nil).
Going Concern
At the time of approving the financial statements, the Directors
have a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for
the foreseeable future. In reaching this conclusion the Directors
have considered the financial position of the Group, taking into
consideration the recent placing, together with its forecasts and
projections for 18 months from the reporting date that take into
account reasonably possible changes in trading performance.
The going concern basis of accounting has therefore been
adopted in preparing the financial statements.
29
Post Balance Sheet Events
On 6th March 2019, the Company issued 54,999,994 new ordinary
shares at a price of £0.06 per share, raising gross proceeds of
£3.3m through a placing and subscription.
Treasury Operations & Financial Instruments
The Group operates a centralised treasury function which is
responsible for managing liquidity, interest and foreign currency
risks associated with the Group’s activities.
The Group’s principal financial instrument is cash, the main
purpose of which is to fund the Group’s operations.
The Group has various other financial assets and liabilities such
as trade receivables and trade payables naturally arising through
from its operations.
The Group’s exposure and approach to capital and financial risk,
and approach to managing these is set out in note 24 to the
consolidated financial statements.
Research & Development
During the year the Group has undertaken research and
development in order to develop a content management system
and VR experiences. During the year, the Group invested in
excess of £1m in research and development activities. The Group
has claimed R&D tax credits where eligible.
Employee Engagements
The Group engages with its employees regularly through email
newsletters. The Group also operates an intranet which is a
source of key information which staff can access as required.
Details of the Group’s performance are shared with all employees
at appropriate times using these methods.
Employee Policies
The Group has established employment policies which are
compliant with current legislation and codes of practice. The
Group is an equal opportunities employer.
Payment of Suppliers
The Group’s policy is to pay suppliers in accordance with the
relevant contractual terms between the Group and the supplier.
Where no specific terms are agreed, the Group’s standard policy
is 30 days.
Directors’ Indemnity
The Company’s Articles of Association provide, subject to the
provisions of UK legislation, an indemnity for Directors and
officers of the Company in respect of liabilities they may incur
in the discharge of their duties or in the exercise of their powers,
including any liabilities relating to the defence of any proceedings
brought against them which relate to anything done or omitted,
or alleged to have been done or omitted, by them as officers or
employees of the Company. Appropriate directors’ and officers’
liability insurance cover is in place in respect of all the Directors.
Directors’ Conflicts of Interest
In the event that a Director becomes aware that they, or their
connected parties, have an interest in an existing or proposed
transaction involving the Group, they will notify the Board in
writing or at the next Board meeting.
Immotion
Group plc
Annual Report
& Accounts 2018
Directors’ Report
Significant Shareholdings
As at 31 December 2018, the following shareholders owned 3% or
more of the Company:
As at 2 April 2019, the following shareholders owned 3% or more of
the Company:
Shareholder
Shares
%
Shareholder
Shares
%
Martin Higginson
23,109,514
11.83%
Martin Higginson
Leonie Dobbie
12,633,607
6.47%
Unicorn AIM VCT
Unicorn AIM VCT
10,000,000
5.12%
Cavendish Asset Management
- AIM Fund
David Marks
9,767,580
5.00%
Leonie Dobbie
Cavendish Asset Management
- AIM Fund
9,585,010
4.91%
David Marks
23,109,514
18,333,333
14,717,510
12,633,607
9,767,580
9.23%
7.32%
5.88%
5.05%
3.90%
Rod Findley
9,501,016
4.86%
Rod Findley
9,501,016
3.80%
Sure Ventures Plc
8,043,002
4.12%
Sure Ventures Plc
8,043,002
Ken Musen
7,592,251
3.89%
Ken Musen
7,592,251
3.21%
3.03%
Octopus AIM VCT Plc
7,546,000
Sam Higginson
7,373,171
3.86%
3.77%
Political Donations
The Group did not make any political donations during 2018 (2017:
£Nil).
Matters Covered in the Chairman’s Statement
& Financial Statements
Certain matters which are required to be disclosed in the
Directors’ Report (such as review of the business and future
developments) have been omitted as they are included within
the Strategic Report (on pages 12 to 15) and the Chief Executive’s
Statement (on pages 6 to 11) and within the notes to the Financial
Statements.
Statement as to Disclosure of Information to
the Auditor
As far as the Directors are aware they have each taken all
necessary steps to make themselves aware of any relevant audit
information and to establish that the auditor is aware of that
information.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the Companies
Act 2006.
Auditors
Haysmacintyre LLP have signified their willingness to continue in
office and a resolution to reappoint Haysmacintyre LLP as auditor
to the Company will be proposed at the AGM.
Approved by the Board on 2 April 2019 and signed on its behalf
Annual General Meeting
The Company’s Annual General Meeting will be held later in the
year.
Martin Higginson
Chief Executive Officer
Directors’ Responsibilities Statement
31
The Directors are responsible for preparing the Strategic Report, Directors’ Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have
elected to prepare the financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by
the European Union and applicable law. Under company law the Directors must not approve the financial statements unless they
are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the
Company and the Group for that period.
In preparing these financial statements, the Directors are
required to:
•
select suitable accounting policies and then apply them
consistently;
• make judgments and accounting estimates that are
reasonable and prudent;
•
state whether IFRS as adopted by the European Union have
been followed subject to any material departures disclosed
and explained in the financial statements;
• provide additional disclosures when compliance with
specific requirements in IFRS is insufficient to enable users
to understand the impact of particular transactions, other
events and conditions on the Company’s and the Group’s
financial position and financial performance; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company and
the Group will continue in business.
Financial statements are published on the Group’s website in
accordance with legislation in the United Kingdom governing
the preparation and dissemination of financial statements, which
may vary from legislation in other jurisdictions. The maintenance
and integrity of the corporate and financial information on
the Group’s website is the responsibility of the Directors. The
Directors’ responsibility also extends to the ongoing integrity of
the financial statements contained therein. The work carried
out by the auditors does not include consideration of the
maintenance and the integrity of the website and accordingly
the auditor accepts no responsibility for any changes that have
occurred to the financial statements when they are presented
on the website.
Immotion
Group plc
Annual Report
& Accounts 2018
Independent Auditor’s Report to the Shareholders
of Immotion Group Plc
Opinion
Material Uncertainty Related to Going Concern
We have audited the financial statements of Immotion Group Plc
(the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the
year ended 31 December 2018 which comprise the Consolidated
Statement of Comprehensive Income, the Consolidated
and Parent Company Statement of Financial Position, the
Consolidated and Parent Company Statement of Changes
in Equity, the Consolidated and Parent Company Cash Flow
Statements and notes to the financial statements, including
a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation
is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
In our opinion, the financial statements:
• give a true and fair view of the state of the Group’s and of the
Parent Company’s affairs as at 31 December
2018 and of the Group’s loss for the year then ended;
•
•
have been properly prepared in accordance with IFRSs as
adopted by the European Union; and
have been prepared in accordance with the requirements of
the Companies Act 2006.
Basis for Opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described
in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of
the Group in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard as applied to listed
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
We draw attention to Note 4 in the financial statements,
which indicates that the Group incurred a loss after taxation of
£3,823,000 and had a net cash outflow of £58,000 during the year
ended 31 December 2018. As stated in Note 4, these facts, along,
with other matters may indicate that a material uncertainty exists
that may cast significant doubt on the Group’s ability to continue
as a going concern. Our opinion is not modified in respect of this
matter.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the
allocation of resources in the audit; and directing the efforts of
the engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate
opinion on these matters.
In addition to the matter described in the material uncertainty
related to going concern section, we determined the
matters described below to be the key audit matters to be
communicated in our report.
Key Audit Matter: Revenue Recognition
A significant proportion of the Group’s activities are accounted
for as long-term contracts. Accounting for these contracts can be
complex and requires management to exercise their judgment
when considering the likely costs to complete on a contract.
Revenue is also recognised as Bill-and-Hold arrangements.
How the matter was addressed in the audit
Our audit work included, but was not restricted to:
• Considering the stated accounting policies in respect of
revenue recognition and whether these are consistent with
IFRS 15;
33
• A detailed review of how revenue is recognised. This included
a review of the estimated costs on completion of a project;
Key Audit Matter: Capitalisation of Development
Costs
• A review of the judgments made as to the likely completion
of a contract;
• A review of management’s judgments as to whether an
agency or principal relationship existed on each stream of
revenue;
• A receivables circularisation to confirm hardware delivery
There is a risk that the capitalised software development costs
may have been capitalised without meeting the relevant
recognition criteria of IAS 38 ‘intangible assets’.
How the matter was addressed in the audit
Our audit work included, but was not restricted to:
after the year-end was on request of the customer and that all
other conditions had been satisfied at the year-end;
• Reviewing the criteria for capitalising development costs
under IAS 38 and ensuring these had been met;
•
•
Substantive testing a sample of sales transactions ensuring
that the significant risks and rewards had been passed to the
customer on recognition of revenue; and
Testing a sample of transactions recorded either side of the
balance sheet date for correct application of cut-off.
• Reviewing the methodology of calculating development
costs; and
• Review of management’s rationale for capitalising costs and
consideration of whether there is sufficient indication of
future economic benefits to justify capitalisation.
No material misstatements were identified as a result of the audit
procedures performed.
Our audit work did not identify any material errors in the
capitalisation of development costs.
Key Audit Matter: Acquisition of subsidiaries &
valuation of goodwill and other intangibles
There is a risk that the goodwill arising on acquisitions has been
incorrectly calculated and not split across the other intangible
assets acquired. There is also a risk as to the valuation of goodwill
at 31 December 2018 and the need for impairment.
How the matter was addressed in the audit
Our audit work included, but was not restricted to:
• Reviewing the Share Purchase Agreements for the entities
acquired at 31 December 2017;
• Reviewing the goodwill calculations prepared by
management including a review of the IFRS calculations
apportioning the goodwill across other intangible assets
acquired;
Our Application of Materiality
The scope and focus of our audit was influenced by our
assessment and application of materiality. We define materiality
as the magnitude of misstatement that could reasonably be
expected to influence the economic decisions of the users of
the financial statements. We use materiality to determine the
scope of our audit and the nature, timing and extent of our audit
procedures and to evaluate the effect of misstatements, both
individually and on the financial statements as a whole.
Materiality for the Financial Statements as a whole was set
at £32,000, determined by reference to Group revenue. We
report to the Audit Committee any corrected or uncorrected
misstatements arising exceeding £1,600. Performance materiality
was set at £24,000, being 75% of materiality. This was considered
an appropriate level of materiality given the focus on revenue
generating activities.
• Reviewing future budgets and cash flow forecasts as well as
An Overview of the Scope of our Audit
managements impairment review of goodwill;
• Reviewing fundraising costs to ensure these had been
correctly apportioned between administrative expenditure
and share premium; and
• Reviewing acquisition costs to ensure that these had been
expensed within the Statement of Comprehensive Income in
accordance with IFRS 3.
Our audit work did not identify any material errors in the
calculation of goodwill and other separately identifiable
intangible assets.
Our audit scope included the audit of each of the subsidiaries for
the year ended 31 December 2018 except C.2K Entertainment
Inc. Our audit work for the audited subsidiaries therefore
covered revenue, loss and assets and liabilities. The subsidiary
audits were performed to subsidiary level materiality which was
calculated for each subsidiary with reference to their respective
turnover and was lower than Group materiality in each case.
C.2K Entertainment Inc was audited to Group materiality. The
subsidiaries, VR Acquisition (Holdings) Limited and Ranger
Rob Limited, were exempt from audit by virtue of S479A of
Companies Act 2006 and were audited to Group materiality.
Immotion
Group plc
Annual Report
& Accounts 2018
Independent Auditor’s Report to the Shareholders
of Immotion Group Plc
Other Information
The directors are responsible for the other information. The other
information comprises the information included in the annual
report, other than the financial statements and our auditor’s
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there
is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Matters on Which We are Required to Report by
Exception
In the light of the knowledge and understanding of the Group
and the Parent Company and its environment obtained
in the course of the audit, we have not identified material
misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
•
•
•
adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
the parent company financial statements are not in
agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law
are not made; or
• we have not received all the information and explanations we
require for our audit.
Opinions on Other Matters Prescribed by the
Companies Act 2006
Responsibilities of Directors
In our opinion, based on the work undertaken in the course of
the audit:
•
•
the information given in the strategic report and the directors’
report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been
prepared in accordance with applicable legal requirements.
As explained more fully in the directors’ responsibilities
statement, set out on page 31, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the parent company’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate
the group or the parent company or to cease operations, or have
no realistic alternative but to do so.
35
Auditor’s Responsibilities for the Audit of the
Financial Statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Use of Our Report
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required
to state to them in an Auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and
the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Laura Mott (Senior Statutory Auditor)
For and on behalf of Haysmacintyre LLP, Statutory Auditors
10 Queen Street Place, London EC4R 1AG
2 April 2019
Immotion
Group plc
Annual Report
& Accounts 2018
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2018
Year ended
Restated
Year ended
31 December
31 December
Revenue – continuing operations
Cost of sales – continuing operations
Gross profit
Note
7
Administrative expenses– continuing operations
Loss from Operations
8
Memorandum:
Adjusted EBITDA
Depreciation
Amortisation
Share based payments
Acquisition & listing costs
Loss from Operations
Finance costs
Finance income
Loss before taxation and attributable to
equity holders of the parent
Taxation
Loss from continuing operations
Discontinued operations (net of tax)
Loss after taxation
Other comprehensive expense
Loss on translation of subsidiary
Loss after taxation and attributable to equity holders
of the parent and total comprehensive income for the period
Loss per share
Basic (continuing)
Basic (discontinuing)
Earnings/(Loss) per share
Diluted (continuing)
Diluted (discontinuing)
10
11
12
32
13
13
2018
£’000
1,948
(1,436 )
512
(4,264 )
(3,752 )
(2,360 )
(405 )
(178 )
(137 )
(672 )
(3,752 )
(57 )
2
(3,807 )
159
(3,648 )
(175 )
(3,823 )
(16 )
(3,839 )
(2.31 )
(0.11 )
(2.42 )
(2.31 )
(0.11 )
(2.42 )
2017
£’000
-
-
-
(175 )
(175 )
(114 )
-
-
-
(61 )
(175 )
-
(175 )
-
(175 )
-
(175 )
-
(175 )
(1.29 )
-
(1.29 )
(1.29 )
-
(1.29 )
The notes on pages 41 to 74 form part of the group financial statements.
Consolidated Statement of Changes In Equity
for the year ended 31 December 2018
37
Share
capital
£’000
Share
premium
£’000
Foreign
Exchange
Reserve
£’000
Retained
(deficit)/
earnings
£’000
Total
equity
£’000
Issue of shares
Loss after tax and total comprehensive
income
Balance at 31 December 2017
Issue of shares
Issue costs deducted from equity
Loss after tax
Equity settled share-based payments
Bonus Issue
Currency translation of overseas
subsidiary
Balance at 31 December 2018
-
-
-
26
-
-
-
52
-
78
3,704
-
3,704
6,786
(439 )
-
-
(52 )
-
9,999
-
-
-
-
-
-
-
-
(16 )
(16 )
-
3,704
(175 )
(175 )
-
-
(3,823 )
137
-
-
(3,861 )
(175 )
3,529
6,812
(439 )
(3,823 )
137
-
(16 )
6,200
The notes on pages 41 to 74 form part of the group financial statements.
Immotion
Group plc
Annual Report
& Accounts 2018
Consolidated Statement of Financial Position
as at 31 December 2018
ASSETS
Note
Non-current assets
Property, plant and equipment
Intangible fixed assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Deferred tax asset
Cash and cash equivalents
Total current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Loans and borrowings
Deferred tax liability
Contract liabilities
Total current liabilities
Non-current liabilities
Other payables
Loans
Deferred tax liability
Total liabilities
Total net assets
Capital and reserves attributable to owners
of the parent
Share capital
Share premium
Foreign exchange reserve
Retained deficit
Total equity
15
16
17
18
23
19
19
23
20
19
19
23
25
27
27
27
31 December
31 December
Restated
2018
£’000
1,574
4,038
5,612
133
1,410
-
711
2,254
7,866
(886 )
(229 )
(26 )
(189 )
(1,330 )
(54 )
(218 )
(64 )
(336 )
(1,666 )
6,200
78
9,999
(16 )
(3,861 )
6,200
2017
£’000
493
2,895
3,388
-
866
85
769
1,720
5,108
(1,160 )
(245 )
-
(62 )
(1,467 )
-
(112 )
-
(112 )
(1,579 )
3,529
-
3,704
-
(175)
3,529
The financial statements were approved by the Board and authorised for issue on 2 April 2019.
Martin Higginson
Chief Executive Officer
David Marks
Finance Director
The notes on pages 41 to 74 form part of the group financial statements.
Consolidated Statement of Cash Flows
for the year ended 31 December 2018
39
Year ended
Restated
Year ended
31 December
31 December
Cash flows from operating activities
Loss before tax including discontinued operations
Adjustments for:
Share based payments
Depreciation of property plant and equipment
Depreciation of stock transfers
Amortisation of intangible assets
Impairment of intangible assets
Finance costs
Finance income
Foreign exchange on retranslation of fixed assets
Foreign exchange loss
Corporation tax paid
2018
£’000
(3,982 )
137
405
(20 )
178
231
57
(2 )
(28 )
(16 )
(13 )
Cash flows from operating activities before changes in working capital
(3,053 )
Increase in stocks
Increase in trade and other receivables
Increase in trade and other payables
Cash used in operations
Investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Disposals of property, plant and equipment
Cash on acquisition
Net cash (used in)/generated from investing activities
Financing activities
Finance costs
Finance income
New loans and finance leases
Loan repayments
Issue of convertible loan stock
Issue of new share capital
Costs on issue of shares
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
(133 )
(458 )
168
(3,476 )
(1,542 )
(1,524 )
76
-
(2,990 )
(57 )
2
179
(89 )
488
6,324
(439 )
6,408
(58 )
769
711
2017
£’000
(175 )
-
-
-
-
-
-
-
-
-
(175 )
-
(12 )
163
(24 )
-
-
-
202
202
-
-
-
-
591
-
591
769
-
769
Immotion
Group plc
Annual Report
& Accounts 2018
Consolidated Statement of Cash Flows
for the year ended 31 December 2018
Reconciliation of net cash flow to movement in net funds:
Net (decrease)/increase in cash and cash equivalents
New loans and finance leases
Repayment of loans
Loans acquired on acquisition
Movement in net funds in the year
Net funds at 1 January
Net funds at 31 December
Year ended
31 December 2018
£000
Year ended
31 December 2017
£000
(58 )
(179 )
89
-
(148 )
412
264
769
-
-
(357 )
412
-
412
The notes on pages 41 to 74 form part of the group financial statements.
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
41
1. GENERAL INFORMATION
Immotion Group plc is a public limited company incorporated and domiciled in the United Kingdom. The address of the registered
office is East Wing, Ground Floor, The Victoria, Mediacity, Manchester, M50 3SP. The Company is listed on AIM of the London Stock
Exchange.
The principal activity of the Group during the year was the production of virtual reality content, experiences, equipment and software
design.
These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in
which the Group operates. Foreign operations are included in accordance with the policies set out in note 4.
2. STANDARDS, AMENDMENTS & INTERPRETATIONS ADOPTED IN THE CURRENT FINANCIAL YEAR
ENDED 31 DECEMBER 2018
IFRS 15: Revenue from Contracts with Customers
In the current year, the Group has applied IFRS 15 Revenue from Contracts with Customers which is effective for annual periods
beginning on or after 1 January 2018. IFRS 15 introduced a 5-step approach to revenue recognition. Far more prescriptive guidance
has been added in IFRS 15 to deal with specific scenarios. Adoption of IFRS 15 had no material effect on the financial statements of the
Group.
However, there are some presentational and disclosure changes which have been reflected in the report and financial statements. The
main change is explained below:
•
Contract Liabilities in relation to unfulfilled performance obligations where we have received proforma payments were previously
included in deferred revenue (2017: £62k).
These reclassifications have been reflected in the current year and comparative balance sheet. The revenue accounting policy has
been updated in accordance with IFRS 15. There has been no impact on the Group’s Statement of Comprehensive Income.
The Group’s accounting policies for its revenue streams are disclosed in detail in note 4 below.
IFRIC 22: Foreign Currency Transactions and Advance Consideration
IFRIC 22 addresses how to determine the ‘date of transaction’ for the purpose of determining the exchange rate to use on initial
recognition of an asset, expense or income, when consideration for that item has been paid or received in advance in a foreign
currency which resulted in the recognition of a non-monetary asset or non-monetary liability.
The interpretation specifies that the date of transaction is the date on which the entity initially recognises the non-monetary asset
or non-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts
in advance, the Interpretation requires an entity to determine the date of transaction for each payment or receipt of advance
consideration. The Directors do not consider there to be a material impact on the Group financial statements.
IFRS 9: Financial Instruments
IFRS 9 replaced the provisions of IAS 39 that relate to the recognition, classification and measurement of financial assets and financial
liabilities, derecognition of financial instruments and impairment of financial assets. The adoption of IFRS 9 has not had a material
effect on the Group’s financial statements.
3. NEW AND REVISED IFRS STANDARDS IN ISSUE BUT NOT YET EFFECTIVE
IFRS 16: Leases
IFRS 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements
for both lessors and lessees. IFRS 16 will supersede the current lease guidance including IAS 17 Leases and the related interpretations
when it becomes effective for accounting periods beginning on or after 1 January 2019. The date of initial application of IFRS 16 for the
Group will be 1 January 2019.
IFRS 16 will change how the Group accounts for leases previously classified as operating leases, which were off-balance sheet. On initial
application of IFRS 16, for all leases, the Group will:
a) Recognise right-of-use assets and lease liabilities in the consolidated statement of financial position, initially measured at the
present value of the future lease payments;
b) Recognise depreciation of right-of-use assets and interest on lease liabilities in the consolidated statement of profit or loss;
c) Separate the total amount of cash paid into a principal portion and interest in the consolidated cash flow statement.
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
The Directors anticipate that the standard will impact almost all commonly used financial metrics including gearing ratio, current
ratio, asset turnover, EBITDA, operating profit, EPS and operating cash flows.
At 31 December 2018, operating lease commitments were £1.3m (see note 28) and operating lease payments for 2018 were £0.523m
(see note 8).
Amendments to IAS 28: Long Term Interests in Associates and Joint Ventures (effective 1 January 2019)
The amendment clarifies that IFRS 9, including its impairment requirements, applies to long-term interests. Furthermore, in applying
IFRS 9 to long-term interests, an entity does not take into account adjustments to their carrying amount required by IAS 28.
The amendments apply retrospectively to annual reporting periods beginning on or after 1 January 2019. The directors of the Company
do not anticipate that the application of the amendments in the future will have an impact on the Group’s consolidated financial
statements, due to their joint venture, Abominable Snowman Limited, being dormant currently. The amendment is not expected to
have a material impact on the Group financial statements.
Annual Improvements to IAS 12: Income Taxes (effective 1 January 2019)
The amendments clarify that an entity should recognise the income tax consequences of dividends in profit or loss, other
comprehensive income or equity according to where the entity originally recognised the transactions that generated the distributable
profits. This is the case irrespective of whether different tax rates apply to distributed or undistributed profits. The amendment is not
expected to have a material impact on the Group financial statements.
Annual Improvement to IAS 23: Borrowing Costs (effective 1 January 2019)
The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or
sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general
borrowings. The amendment is not expected to have a material impact on the Group financial statements.
Annual Improvement to IFRS 3: Business Combinations (effective 1 January 2019)
The amendments to IFRS 3 clarify that when an entity obtains control of a business that is a joint operation, the entity applies the
requirements for a business combination achieved in stages, including remeasuring its previously held interest in the joint operation
at fair value. The previously held interest to be remeasured includes any unrecognised assets, liabilities and goodwill relating to the
joint operation. The amendment is not expected to have a material impact on the Group financial statements..
4. ACCOUNTING POLICIES
Principal accounting policies
The Company is a public company incorporated and domiciled in the United Kingdom. The principal accounting policies applied in
the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the
periods presented, unless otherwise stated.
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards, International
Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as
adopted by the European Union (“adopted IFRSs”) and those parts of the Companies Act 2006 which apply to companies preparing
their financial statements under IFRSs. The financial statements are presented to the nearest round thousand (£’000) except when
otherwise indicated.
Basis of consolidation
The Group comprises a holding company and a number of individual subsidiaries and all of these have been included in the
consolidated financial statements in accordance with the principles of acquisition accounting as laid out by IFRS 3 Business
Combinations.
43
Prior year restatement
Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured. Revenue is measured as the fair value of the
consideration received or receivable, excluding discounts, rebates,
value added tax and other sales taxes. The following criteria must
also be met before revenue is recognised:
Hardware sales
Revenue from the sale of goods is recognised when all of the
following conditions are satisfied:
•
•
•
•
•
the Group has transferred the significant risks and rewards of
ownership to the buyer;
the Group retains neither continuing managerial
involvement to the degree usually associated with ownership
nor effective control over the goods sold;
the amount of revenue can be reliably measured;
it is probable that the Group will receive the consideration
due under the transaction; and
the costs incurred or to be incurred in respect of the
transaction can be reliably measured.
A prior year adjustment has been processed to recognise the
acquisition of VR Acquisition (Holdings) Limited in 2017 given
Immotion Group Plc had control and the substance of the
transaction was that Immotion Group Plc owned 100% of the
shares on 31 December 2017. This has resulted in an increased
investment of £910k in the Company financial statements and
the recognition of goodwill on VR Acquisition (Holdings) in the
comparative figures.
An adjustment to costs of £61k incorrectly reducing the share
premium at 31 December 2017 has been included.
Going concern
The Group incurred a loss after taxation of £3,823k for the year
and a net cash outflow of £58k. If losses after taxation are not
reduced significantly and/or new equity funds raised as required,
this may result in a material uncertainty about the Group’s ability
to continue as a going concern. To this end, on 1 March 2019, the
Group raised £3.3m (before costs) through an additional issue of
shares for cash.
The Directors have, at the time of approving the financial
statements, a reasonable expectation that the Company and
the Group have adequate resources to continue in operational
existence for the foreseeable future. In reaching this conclusion
the Directors have considered the financial position of the
Group, it’s cash, liquidity position and borrowing facilities
together with its forecasts and projections for 18 months from
the reporting date that take into account possible changes in
trading performance. The going concern basis of accounting has
therefore been adopted in preparing the financial statements.
Business combinations and goodwill
Acquisitions of subsidiaries and business are accounted for using
the acquisition method. The assets and liabilities and contingent
liabilities of the subsidiaries are measured at their fair value at
the date of acquisition. Any excess of acquisition over fair values
of the identifiable net assets acquired is recognised as goodwill.
Goodwill arising on consolidation is recognised as an asset and
reviewed for impairment at least annually. Any impairment is
recognised immediately in profit or loss accounts and is not
subsequently reversed. Acquisition related costs are recognised in
the income statement as incurred.
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
Client services
Revenue from a contract to provide services is recognised in the
period in which the services are provided in accordance with
the stage of completion of the contract when all of the following
conditions are satisfied:
•
•
•
•
the amount of revenue can be measured reliably;
it is probable that the Group will receive the consideration
due under the contract;
the stage of completion of the contract at the end of the
reporting period can be measured reliably; and
the costs incurred and the costs to complete the contract
can be measured reliably.
Retail revenue is recognised on the date which the sale to the
customer takes place.
Concessions revenue is recognised on the date which the sale to
the customer takes place. The Group acts as the principal in the
transaction and therefore recognises the revenue charged to the
end user in full with the concession partners’ shares deducted as
a cost of sale.
Hardware sales revenue is normally recognised on the date
that the hardware is delivered to the customer. In the event
that a customer is not ready to take delivery of the hardware
and have requested a delayed delivery date, the Group applies
the specifics of IFRS 15 Bill-and-Hold arrangements. Revenue is
then recognised in advance of delivery. Under the Bill-and-Hold
arrangements:
•
•
•
The goods are complete and ready for collection;
The goods are separately identified from the Group’s other
stock and are not used to fulfil any other areas;
The customer has specifically requested that the goods be
held pending collection.
• Normal payment terms apply to the Bill-and-Hold
arrangement.
No element of financing is deemed present as the sales are
made with standard credit terms of 30 days which is consistent
with market practice. The Group does not expect to have any
contracts where the period between the transfer of the promised
services or goods to the customer and payment by the customer
exceeds one year. As a consequence, the Group does not adjust
any of the transaction prices for the time value of money.
Leases
Leases are classified as finance leases whenever the terms of the
lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the
Group at their fair value or, if lower at the present value of the
minimum lease payments, each determined at the inception of
the lease. The corresponding liability to the lessor is included in
the balance sheet as a finance lease obligation. Lease payments
are apportioned between finance expenses and a reduction of
the lease obligation so as to achieve a constant rate of interest
on the remaining balance of the liability. Finance expenses are
recognised immediately in profit or loss.
Rentals payable under operating leases are charged to the
statement of comprehensive income on a straight-line basis over
the term of the relevant lease.
45
Foreign currency
The individual financial statements of each group company are
presented in the currency of the primary economic environment
in which it operates (its functional currency). For the purpose
of the consolidated financial statements, the results and
financial position of each group company are expressed in
pound sterling, which is the functional currency of the Group,
and the presentational currency for the consolidated financial
statements.
In preparing the financial statements of the individual
companies, transactions in currencies other than the Group
Company’s functional currency (foreign currencies) are recorded
at rates of exchange prevailing on the dates of the transactions.
At the reporting date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates
prevailing on the reporting date. Non-monetary items carried
at fair value that are denominated in foreign currencies are
translated at the rates prevailing at the date when the fair value
was determined. Non-monetary items that are measured in
terms of historical cost in foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary
items, and on the retranslation of monetary items, are included
in profit or loss for the period. Exchange differences arising on
the retranslation of non-monetary items carried at fair value are
included in profit or loss for the period except for differences
arising on the retranslation of non-monetary items in respect of
which gains and losses are recognised directly in equity. For such
non-monetary items, any exchange component of the gain or
loss is also recognised directly in equity.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group’s foreign operations
are translated at exchange rates prevailing on the reporting
date. Income and expense items are translated at the average
exchange rates for the period, unless exchange rates fluctuate
significantly during the period, in which case the exchange rates
at the date of transactions are used. Exchange differences arising,
if any, are classified as equity and transferred to the Group’s
translation reserve. Such translation differences are recognised
as income and expense in the period in which the operation is
disposed of. Goodwill and fair value adjustments arising on the
acquisition of a foreign entity are treated as assets and liabilities of
the foreign entity and translated at the closing rates.
Intangible assets
Intangible assets include goodwill arising on the acquisition of
subsidiaries and represents the difference between the fair value
of the consideration payable and the fair value of the net assets
that have been acquired. The residual element of Goodwill is not
being amortised but is subject to an annual impairment review.
Also included within intangible assets are various assets
separately identified in business combinations (such as customer
lists) to which the Directors have ascribed a commercial value
and a useful economic life. The ascribed value of these intangible
assets is being amortised on a straight-line basis over their
estimated useful economic life, which is considered to be 3 years.
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
Internally-generated intangible assets
Contract liabilities
An internally-generated intangible asset arising from the Group’s
development activities is capitalised and held as an intangible
asset in the statement of financial position when the costs relate
to a clearly defined project; the costs are separately identifiable;
the outcome of such a project has been assessed with reasonable
certainty as to its technical feasibility and its ultimate commercial
viability; the aggregate of the defined costs plus all future
expected costs in bringing the product to market is exceeded by
the future expected sales revenue; and adequate resources are
expected to exist to enable the project to be completed. Internally
generated intangible assets are amortised over their useful lives,
between 3 and 10 years from completion of development. Where
the internally-generated intangible asset can be recognised,
development expenditure is recognised as an expense in the
income statement in the period in which it is incurred.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Costs comprise direct materials and, where applicable,
direct labour costs and overheads that have been incurred in
bringing the inventories to their present location and condition.
Net realisable value represents the estimated selling price less
all estimated costs of completion and costs to be incurred in
marketing, selling and distribution.
Financial instruments
The Group classifies financial instruments, or their component
parts, on initial recognition as a financial asset, a financial liability
or an equity instrument.
Contract liabilities comprise payments in advance of revenue
recognition and revenue deferred due to contract performance
obligations not being completed. They are classified as current
liabilities if the contract performance obligations payments
are due to be completed within one year or less (or in the
normal operating cycle of the business if longer). If not, they
are presented as non-current liabilities. Contract liabilities are
recognised initially at fair value and subsequently at amortised
cost.
Trade & other receivables
Trade and other receivables are measured at initial recognition
at fair value, and subsequently measured at amortised cost
using the effective interest method. A provision is established
when there is objective evidence that the Group will not be
able to collect all amounts due. The amount of any provision is
recognised in profit or loss.
Cash & cash equivalents
Cash and cash equivalents are recognised as financial assets.
They comprise cash held by the Group and short-term bank
deposits with an original maturity date of three months or less.
Loss recognised previously in equity is included in profit or loss
for the period. Dividends are recognised in the income statement
when the right to receive payment has been established.
Trade payables
Trade payables are initially recognised as financial liabilities
measured at fair value, and subsequent to initial recognition
measured at amortised cost.
Bank borrowings
Interest bearing bank loans, overdrafts and other loans are
recognised as financial liabilities and recorded at fair value,
net of direct issue costs. Finance costs are accounted for on an
amortised cost basis in the income statement using the effective
interest rate.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deduction of all its liabilities.
Equity instruments issued by the Company are recorded at the
proceeds received net of direct issue costs.
47
Share based payments
Where share options are awarded to employees, the fair value of
the options at the date of grant is charged to the statement of
comprehensive income on a straight-line basis over the vesting
period. Non-market vesting conditions are taken into account
by adjusting the number of options expected to vest at each
statement of financial position date so that, ultimately, the
cumulative amount recognised over the vesting period is based
on the number of options that eventually vest. Market vesting
conditions are factored into the fair value of the options granted.
The cumulative expense is not adjusted for failure to achieve a
market vesting condition.
Fair value is calculated either using the Monte-Carlo model or
Black-Scholes model, details of which are given in note 26.
Pensions
The pension schemes operated by the Group are defined
contribution schemes. The pension cost charge represents the
contributions payable by the Group.
Property, plant & equipment
Property, plant and equipment are stated at cost net of
accumulated depreciation and provision for impairment.
Depreciation is provided on all property plant and equipment, at
rates calculated to write off the cost less estimated residual value,
of each asset on a straight-line basis over its expected useful life.
The residual value is the estimated amount that would currently
be obtained from disposal of the asset if the asset were already
of the age and in the condition expected at the end of its useful
economic life.
VR hardware
33% straight line
Computer equipmen t
33% straight line
Leasehold property
Over term of lease / 33%
straight line retail premises
Plant & equipment
33% straight line
Fixtures & fittings
33% straight line
Impairment of assets
Impairment tests on goodwill are undertaken annually at
the balance sheet date. The recoverable value of goodwill is
estimated on the basis of value in use, defined as the present
value of the cash generating units with which the goodwill is
associated. When value in use is less than the book value, an
impairment is recorded and is irreversible.
Other non-financial assets are subject to impairment tests
whenever circumstances indicate that their carrying amount
may not be recoverable. Where the carrying value of an asset
exceeds its estimated recoverable value (i.e. the higher of value
in use and fair value less costs to sell), the asset is written down
accordingly. Where it is not possible to estimate the recoverable
value of an individual asset, the impairment test is carried out on
the asset’s cash-generating unit. The carrying value of property,
plant and equipment is assessed in order to determine if there is
an indication of impairment. Any impairment is charged to the
statement of comprehensive income. Impairment charges are
included under administrative expenses within the consolidated
statement of comprehensive income.
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
5. CRITICAL ACCOUNTING ESTIMATES &
JUDGEMENTS
In the application of the Group’s accounting policies, which
are described in note 4, the Directors are required to make
judgments, estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions
are based on experience and other factors considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision
affects only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.
The following are the critical judgments and estimations that the
Directors have made in the process of applying the Company’s
accounting policies and that have the most significant effect on
the amounts recognised in the financial statements.
Taxation & deferred taxation
Corporation tax payable is provided on taxable profits at
prevailing rates.
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the balance sheet differs
from its tax base, except for differences arising on:
•
•
the initial recognition of goodwill; and
the initial recognition of an asset or liability in a transaction
which is not a business combination and at the time of the
transaction affects neither accounting nor taxable profit.
Recognition of deferred tax assets is restricted to those instances
where it is probable that future taxable profit will be available
against which the asset can be utilised. The amount of the asset
or liability is determined using tax rates that have been enacted
or substantively enacted by the balance sheet date and are
expected to apply when the deferred tax liabilities/(assets) are
settled/(recovered).
Deferred tax assets and liabilities are offset when the Group has a
legally enforceable right to offset current tax assets and liabilities
and the deferred tax assets and liabilities relate to taxes levied by
the same tax authority on either:
•
•
the same taxable Group company; or
different Group entities which intend either to settle current
tax assets and liabilities on a net basis, or to realise the
assets and settle the liabilities simultaneously, in each future
period in which significant amounts of deferred tax assets or
liabilities are expected to be settled or recovered.
Segmental reporting
Operating segments are reported in a manner consistent with
the internal reporting provided to the Executive Directors,
who are responsible for allocating resources and assessing
performance of the operating segments.
A business segment is a group of assets and operations,
engaged in providing products or services that are subject to
risks and returns that are different from those of other operating
segments.
A geographical segment is engaged in providing products or
services within a particular economic environment that are
subject to risks and returns that are different from those of
segments operating in other economic environments. The
Executive Directors assess the performance of the operating
segments based on the measures of revenue, profit before
taxation (PBT) and profit after taxation (PAT). Central overheads
are not allocated to business segments.
49
Critical accounting judgements
R&D tax credits
Revenue recognition
The revenue for the sale of hardware is recognised once the
benefits and control of these items are no longer with the Group
and are instead with the customer. Revenue is recognised
under the specifics of IFRS 15 Bill-and-Hold arrangements for VR
Hardware that was not delivered to the customer by the year-end.
Management exercise judgment to consider when the risks have
been transferred to the customer.
Project revenue is recognised in proportion to the Company’s
estimate of project completion at period end. Estimating
project completion requires management judgment as to the
percentage complete at period end and the amount of revenue
to be recognised.
Uncertainties exist in relation to the interpretation of complex tax
legislation, changes in tax laws and the amount and timing of
future taxable income. This could necessitate future adjustments
to taxable income and expenses already recorded.
At the year-end date, tax liabilities and assets reflect
management’s judgments in respect of the application of
the tax regulations, in particular the R&D tax regulations and
management’s estimate of the future amounts that will be
settled.
In assessing our year-end tax liability, the Group has made a
provisional assessment as to the likely amount of development
expenditure that will be eligible under each of the HMRC’s large
company and SME R&D tax credit schemes.
Recoverability criteria for capitalisation of development
expenditure
Critical accounting estimates
Amortisation of intangible assets
The Group recognises costs incurred on development projects
as an intangible asset which satisfies the requirements of IAS 38.
The calculation of the costs incurred includes the percentage of
time spent by certain employees on the development project.
The decision whether to capitalise and how to determine the
period of economic benefit of a development project requires
an assessment of the commercial viability of the project and the
prospect of selling the project to new or existing customers.
The periods of amortisation adopted to write down capitalised
intangible assets and capitalised staff costs requires judgments
to be made in respect of estimating the useful lives of the
intangible assets to determine an appropriate amortisation
rate. Capitalised development costs are being amortised on a
straight-line basis over the period during economic benefits are
expected to be received, which has been estimated at 3 years.
The customer list has been fully impaired in 2018
Impairment of goodwill
Depreciation
Impairment of the valuation of the goodwill relating to the
acquisition of subsidiaries is considered annually for indicators
of impairment to ensure that the asset is not overstated within
the financial statements. The annual impairment assessment in
respect of goodwill requires estimates of the value in use (or fair
value less costs to sell) of subsidiaries to which goodwill has been
allocated. As a result, estimates of future cash flows are required,
together with an appropriate discount factor for the purpose of
determining the present value of those cash flows.
The useful economic lives of tangible fixed assets are based on
management’s judgment and experience. When management
identifies that actual useful economic lives differ materially
from the estimates used to calculate deprecation, that charge is
added retrospectively. Due to the significance of tangible fixed
assets to the Group, variances between actual and estimated
useful economic lives could impact on the operating results both
positively and negatively.
Share based payments expense
Non-market performance and service conditions are included in
the assumptions about the number of options that are expected
to vest. At the end of each reporting period the Group revises
its estimates of the number of options that are expected to
vest based on the non-market vesting conditions. It recognises
the impact of the revision to the original estimates, if any, in
the consolidated statement of comprehensive income, with a
corresponding adjustment to equity.
This requires a judgment as to how many options will meet
the future vesting criteria as well as the judgments required in
estimating the fair value of the options.
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
6. SEGMENTAL INFORMATION
A segmental analysis of revenue and expenditure for the period is:
VR
Experiences
£’000
Client
Services
£’000
Head
Office
£’000
continuing Discountinued
operations
operations
£’000
£’000
Total
1,326
(1,233 )
(726 )
(633 )
(93 )
(357 )
-
-
-
-
-
622
(203 )
(304 )
-
-
(1,842 )
1,948
(1,436 )
(2,872 )
115
(1,842 )
(2,360 )
-
-
-
-
-
-
-
(85 )
(48 )
(672 )
(137 )
(57 )
2
159
(178 )
(405 )
(672 )
(137 )
(57 )
2
159
906
(473 )
(292 )
141
(231 )
-
(85 )
-
-
-
-
Total
2018
£’000
2,854
(1,909 )
(3,164 )
(2,219 )
(409 )
(405 )
(757 )
(137 )
(57 )
2
159
Revenue
Cost of sales
Administrative expenses*
Operating (loss)/profit
Amortisation
Depreciation
Acquisition and listing costs
Share based payments
Finance costs
Finance income
Tax
(Loss)/Profit for the year
(1,083 )
115
(2,680 )
(3,648 )
(175 )
(3,823 )
*Administrative expenses exclude depreciation, amortisation, share based payments and acquisition and listing costs.
For the period to 31 December 2017, all costs were head office costs.
The segmental analysis above reflects the parameters applied by the Board when considering the Group’s monthly management
accounts. For the period to 31 December 2017, no revenue was generated. All costs related to head office costs in the UK.
External revenue by
location of customer
Total assets
by location
Net tangible capital
expenditure by location
31
December
2018
31
December
2018
31
December
2018
31
December
2017
31
December
2018
31
December
2017
Continuing Discontinuing
£’000
£’000
£’000
£’000
£’000
£’000
790
636
49
136
49
48
224
16
-
-
-
-
1,948
221
-
449
-
-
-
-
-
230
8
4
(6 )
906
7,032
834
-
-
-
-
-
-
-
-
-
-
4,618
490
-
-
-
-
-
-
-
-
-
-
1,033
491
-
-
-
-
-
-
-
-
-
-
7,866
5,108
1,524
-
-
-
-
-
-
-
-
-
-
-
-
-
United Kingdom
United States of America
Japan
United Arab Emirates
China
Saudi Arabia
Spain
Estonia
Netherlands
Eire
Switzerland
Germany
7. REVENUE
Revenue by stream is split:
Retail
Concessions
Hardware
Client Services
Revenue by stream is split:
United Kingdom
USA
Japan
United Arab Emirates
China
Saudi Arabia
Spain
Estonia
51
2018
£000
608
186
532
622
1,948
790
636
49
136
49
48
224
16
1,948
2017
£000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Group had certain customers whose revenue individually represented 10% or more of the Group’s total revenue.
For the year ended 31 December 2018, one customer accounted for 19% of revenue.
8. LOSS FROM OPERATIONS
This is arrived at after charging:
Continuing operations
Staff costs (see note 9)
Acquisition and listing costs
Depreciation of property, plant & equipment
Amortisation of intangible fixed assets
Impairment of goodwill
Operating lease expense – property
Foreign exchange differences
Discontinuing operations
Impairment of intangible assets
Auditors’ remuneration in respect of the Company
Audit of the Group and subsidiary undertakings
Auditors’ remuneration – non-audit services – accounting service fees
Auditors’ remuneration – non-audit services –taxation fees
Auditors’ remuneration – corporate finance fees
2018
£000
2,441
672
405
178
-
523
38
231
11
42
20
10
81
164
2017
£000
-
159
-
-
-
-
-
-
-
16
-
-
-
16
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
9. STAFF COSTS
Staff costs for all employees, including Directors consist of:
Wages and salaries
Social security costs
Pensions
Share based payment charge
2018
£000
2,641
351
47
3,039
137
3,176
2017
£000
-
-
-
-
-
-
Staff costs above include £735k capitalised in 2018 as development costs (see note 16). No staff costs were capitalised in the prior year.
The average number of employees of the group during the year was as follows:
Directors
Management and administration
Retail
Operations
Sales and Marketing
Content and software development
Directors’ Detailed Emoluments
Details of individual Directors’ emoluments for the year are as follows:
Number
Number
5
13
16
3
4
20
61
1
-
-
-
-
-
1
M Higginson2
D Marks3
R Findley
I Liddell4
R Miller4
N Lee4
A Ritchie5
Salary
2018
£’000
Consultancy
2018
£’000
Bonus1
2018
£’000
Benefits
2018
£’000
Pension
2018
£’000
Total
2018
£’000
Total
2017
£’000
60
75
128
52
14
17
-
346
125
87
-
-
8
-
11
231
75
75
-
-
-
-
-
150
4
-
2
1
-
-
-
7
-
-
-
1
-
-
-
1
264
237
130
54
22
17
11
735
-
-
-
-
-
-
-
-
1 IPO bonuses
2 £103k of M Higginson’s consultancy fees were invoiced pre-IPO
3 All of D Marks’ consultancy fees were invoiced pre-IPO
4 Appointed 22 June 2018
5 Resigned 22 June 2018
All pension contributions represent payments into defined
contribution schemes. The principal benefits relate to health
insurance.
53
Included within the above were fees totalling £200k including an IPO bonus of £75k (2017: £nil) arose during the year in respect
of the services of Martin Higginson provided by M Capital Investment Properties Limited.
Included within the above were fees totalling £163k including an IPO bonus of £75k (2017: £nil) arose during the year in respect
of the services of David Marks provided by Lanton Investments Limited.
Included within the above were fees totalling £8k (2017: £nil) arose during the year in respect of the services of Sir Robin Miller
provided by Robin Miller Consultants Limited.
Included within the above were fees totalling £11k (2017: £nil) arose during the year in respect of the services of Alasdair Ritchie
provided by Haven Consulting Group LLC.
The Executive Directors have service contracts with the Company which are terminatable by the Company, or relevant director
on 12 months’ notice until 12 July 2019. Thereafter the notice period reduces to 6 months from the Company or the Director.
£72k of the share-based payment expense relates to the directors (2017: £nil).
The Directors’ interests in the issued ordinary share capital of the Company as at 2 April 2019 and 31 December 2018 were as
follows:
Martin Higginson
David Marks
Rod Findley
Ian Liddell
Sir Robin Miller
Nicholas Lee
Shares of £0.00040108663
02/04/2019
23,109,514
9,767,580
9,501,016
4,902,857
350,024
241,743
9.23%
3.90%
3.80%
1.96%
0.14%
0.10%
31/12/2018
23,109,514
9,767,580
9,501,016
4,902,857
350,024
241,743
Shares of £0.01
31/12/2017
9,651
20.79%
3,805
3,015
1,947
139
-
8.20%
6.50%
4.19%
0.30%
-
11.83%
5.00%
4.86%
2.51%
0.18%
0.12%
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
Details of the options over the Company’s shares held by the directors are as follows:
Martin Higginson
Martin Higginson
Martin Higginson
Martin Higginson
Martin Higginson
David Marks
David Marks
David Marks
David Marks
David Marks
Rod Findley
Rod Findley
Rod Findley
Rod Findley
Rod Findley
Ian Liddell
Ian Liddell
Ian Liddell
Ian Liddell
Ian Liddell
Options
held at 31
December
price
Exercise
price
£
Date of Grant
650,000
650,000
216,666
216,667
216,667
583,333
583,334
194,444
194,444
194,445
416,666
416,667
138,889
138,889
138,889
333,333
333,334
111,111
111,111
111,111
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
12/07/2018
12/07/2018
12/07/2018
12/07/2018
12/07/2018
12/07/2018
12/07/2018
12/07/2018
12/07/2018
12/07/2018
12/07/2018
12/07/2018
12/07/2018
12/07/2018
12/07/2018
12/07/2018
12/07/2018
12/07/2018
12/07/2018
12/07/2018
Exercise
period
2030*
2031**
12/07/2029
12/07/2030
12/07/2031
2030*
2031**
12/07/2029
12/07/2030
12/07/2031
2030*
2031**
12/07/2029
12/07/2030
12/07/2031
2030*
2031**
12/07/2029
12/07/2030
12/07/2031
Type of Option
EMI Option
EMI Option
EMI Option
EMI Option
EMI Option
EMI Option
EMI Option
EMI Option
EMI Option
EMI Option
Non-Stat. Option
Non-Stat. Option
Non-Stat. Option
Non-Stat. Option
Non-Stat. Option
EMI Option
EMI Option
EMI Option
EMI Option
EMI Option
* Earlier of expiry of employment or 10 years after announcement of results for year ended 31 December 2019.
** Earlier of expiry of employment or 10 years after announcement of results for year ended 31 December 2020.
Further information on share options is included in note 26.
The market price of the shares at 31 December 2018 was 8.60p with a quoted range from date of admission to AIM on 12 July 2018 of
8.38p to 14.88p. The options at 2018 vest as above based on performance criteria detailed in note 26.
10. FINANCE COSTS
Loan note interest
Other interest
2018
£000
3
54
57
On 23 April 2018, £488,276 of unsecured convertible loan notes were issued with an interest rate of 3%.
These were converted on 12 July 2018.
11. FINANCE INCOME
Other interest
2018
£000
2
2
2017
£000
-
-
-
2017
£000
-
-
55
12. TAXATION ON LOSS FROM ORDINARY ACTIVITIES
R&D tax credit
Adjustment in respect of prior periods
Deferred tax movement
Tax credit for the year
2018
£000
(347 )
13
175
(159 )
2017
£000
-
-
-
-
The tax assessed for the year differs from the standard rate of corporation tax in the UK applied to the loss before tax.
Loss on ordinary activities before tax - continuing operations
Loss on ordinary activities before tax - discontinued operations
Total loss on ordinary activities before tax
Loss on ordinary activities at the standard rate of corporation tax
in the UK of 19% (2017: 20%)
Effects of:
Fixed asset differences
Expenses not deductible for tax purposes
Additional deduction for R&D expenditure
Adjustments to prior periods
Deferred tax not recognised
Adjust closing deferred tax to average rate of tax
Tax credit for the year
2018
£000
(3,807 )
(175 )
(3,982 )
(757 )
23
255
(150 )
13
485
(28 )
(159 )
2017
£000
(175 )
-
(175 )
(35 )
-
-
-
-
35
-
-
The UK corporation tax rate of 19% (effective from 1 April 2017) is reducing to 18% (effective 1 April 2020) which was substantially enacted
on 26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016. The
deferred tax liabilities at 31 December 2018 have been calculated based on these rates.
There were unused tax losses of £4.2m at the 31 December 2018. No deferred tax asset has been recognised due to the uncertainty
surrounding future profits.
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
13. EARNINGS PER SHARE
The earnings per share is based on the following:
Continuing earnings post tax loss attributable to shareholders
Discontinued earnings post tax loss attributable to shareholders
Basic weighted average number of shares
Diluted weighted average number of shares
Basic earnings per share
Diluted earnings per share
Continuing earnings per share
Continuing diluted earnings per share
Discontinued earnings per share
Discontinued diluted earnings per share
Underlying loss: continuing operations
Underlying profit: discontinued operations
2018
£000
(3,648 )
(175 )
158,136,544
158,136,544
£0.01
(2.42 )
(2.42 )
(2.31 )
(2.31 )
(0.11 )
(0.11 )
(2,838 )
140
2017
£000
(175 )
-
13,536,541
13,536,541
£0.01
(1.29 )
(1.29 )
(1.29 )
(1.29 )
-
-
(114 )
-
Basic weighted average number of shares
Diluted weighted average number of shares
158,136,544
164,025,259
13,536,541
13,536,541
Basic underlying loss per share
Diluted underlying loss per share
Basic underlying loss per share: continuing operations
Diluted underlying loss per share: continuing operations
Basic underlying earnings per share: discontinued operations
Diluted underlying earnings per share: discontinued operations
£0.01
(1.71 )
(1.71 )
(1.80 )
(1.80 )
0.09
0.09
£0.01
(0.84 )
(0.84 )
(0.84 )
(0.84 )
-
-
Earnings/(Loss) per ordinary share has been calculated using the weighted average number of shares in issue during the relevant
financial periods. IAS 33 requires presentation of diluted EPS when a company could be called upon to issue shares that would
decrease earnings per share or increase the loss per share. The exercise price of the outstanding share options is significantly more
than the average and closing share price. Therefore, as per IAS33 the potential ordinary shares are disregarded in the calculation of
diluted EPS.
Underlying loss is the loss after taxation, adjusted for share based payments, acquisition and listing costs, and impairment of intangible
assets relating to discontinuing operations.
57
14. BUSINESS COMBINATIONS
Studio Liddell Limited
On 12 December 2017 the Company acquired 100% of the ordinary shares in Studio Liddell Limited (renamed as Immotion Studios
Limited on 7th June 2018) for consideration of £1,600,000. This investment is included in the Parent Company’s balance sheet at its fair
value at the date of acquisition.
The completion accounts show a breakdown of the assets and liabilities of the acquired company to be as follows:
Book value
£’000
Fair value
adjustment
£’000
Fair value
to Group
£’000
Customer relationships
Tangible fixed assets
Receivables
Cash and cash equivalents
Payables
Loans
Deferred tax
Net assets on acquisition
Goodwill on acquisition
Total consideration
Discharged by:
Shares in Immotion Group Plc
-
239
461
(8 )
(476 )
(194 )
134
156
231
-
-
-
-
-
(39 )
192
231
239
461
(8 )
(476 )
(194 )
95
348
1,252
1,600
£’000
1,600
1,600
The revenue and loss after tax included in the Consolidated Statement of Comprehensive Income for the 12 months to 31 December 2018
were £535,000 (including discontinued operations) and £688,000 (after management charges) respectively.
Acquisition costs of approximately £25,000 were written off as overheads in the period.
The Directors have treated the acquisition as occurring on 31 December 2017 on the basis there was no material trade during the
period from acquisition to 31 December 2017.
The intangible fixed asset fair value adjustment is in relation to customer lists. These have been fully impaired in the year ended 31
December 2018 due to the discontinuation of that line of business.
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
C.2K Entertainment, Inc.
On 21 December 2017 the Company acquired 100% of the ordinary shares in C.2K Entertainment, Inc. for consideration of £603,000.
This investment is included in the Parent Company’s balance sheet at its fair value at the date of acquisition.
The completion accounts show a breakdown of the assets and liabilities of the acquired company to be as follows:
Book value
£’000
Fair value
adjustment
£’000
Fair value
to Group
£’000
Tangible fixed assets
Receivables
Cash and cash equivalents
Payables
Loans
Net assets on acquisition
Goodwill on acquisition
Total consideration
Discharged by:
Shares in Immotion Group Plc
1
307
183
(473 )
(163 )
(145 )
-
-
-
-
-
-
1
307
183
(473 )
(163 )
(145 )
748
603
£’000
603
603
The revenue and loss after tax included in the Consolidated Statement of Comprehensive Income for the 12 months to 31 December 2018
were £1,221,000 (including discontinued operations) and £1,338,000 (after management charges) respectively.
Acquisition costs of approximately £25,000 were written off as overheads in the period.
The Directors have treated the acquisition as occurring on 31 December 2017 on the basis there was no material trade during the
period to 31 December 2017.
VR Acquisition (Holdings) Limited
On 21 December 2017 the Company acquired 100% of the ordinary shares in VR Acquisition (Holdings) Limited for consideration of
£911,000. This investment is included in the Parent Company’s balance sheet at its fair value at the date of acquisition.
The completion accounts show a breakdown of the assets and liabilities of the acquired company to be as follows:
Book value
£’000
Fair value
adjustment
£’000
Fair value
to Group
£’000
Intangible fixed assets
Tangible fixed assets
Receivables
Cash and cash equivalents
Payables
Deferred tax
Net assets on acquisition
Goodwill on acquisition
Total consideration
Discharged by:
Shares in Immotion Group Plc
6
254
153
13
(164 )
29
291
221
-
-
-
-
(39 )
182
227
254
153
13
(164 )
(10 )
473
438
911
£’000
911
911
59
The revenue and loss after tax included in the Consolidated Statement of Comprehensive Income for the 12 months to
31 December 2018 was £1,175,000 and £1,025,000 (after management charges) respectively.
Acquisition costs of approximately £25,000 were written off as overheads in the period.
Immotion Group Plc acquired 50.1% of the issued capital, and control, on the 21st December 2017 with instruction to acquire the
remaining shares on this date. Immotion Group Plc acquired the remaining 49.9% of the issued capital on the 8th January 2018
via a Drag Along clause from the Articles of Association of VR Acquisition (Holdings) Limited. The substance of the transaction was
that Immotion Group Plc had 100% control as at 21st December 2017. The Directors have treated the acquisition as occurring on 31
December 2017 on the basis there was no material trade during the period to 31 December 2017.
The intangible fixed asset fair value adjustment is in relation to a supplier contract.
15. TANGIBLE FIXED ASSETS
Cost
Balance at 1 January 2017
Additions on acquisition of subsidiary
Balance at 1 January 2018
Additions
Transfers to inventory
Foreign exchange
Balance at 31 December 2018
Accumulated depreciation
Balance at 1 January 2017
Deprecation on acquired assets
Balance at 1 January 2018
Depreciation charge on owned assets
Depreciation charge on financed assets
Transfers to inventory
Foreign exchange adjustment
Balance at 31 December 2018
Net Book Value
At 31 December 2018
At 31 December 2017
Leasehold
Property
£’000
Equipment
£’000
Fixtures and
Fittings
£’000
-
158
158
245
-
2
405
-
-
-
65
-
-
-
65
340
158
-
310
310
1,263
(76 )
39
1,536
-
-
-
248
75
(20 )
23
326
1,210
310
-
25
25
16
-
2
43
-
-
-
17
-
-
2
19
24
25
Total
£’000
-
493
493
1,524
(76 )
43
1,984
-
-
-
330
75
(20 )
25
410
1,574
493
The net book value of assets held under finance leases or hire purchase contracts, included above, are £137k (2017: £nil) relating to
equipment. The depreciation charge on these assets was £75k (2017: £nil).
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
16. INTANGIBLE ASSETS
Development
Costs
Cost
Balance at 1 January 2017
Additions
Balance at 1 January 2018
Additions
Foreign exchange
Balance at 31 December 2018
Accumulated amortisation
Balance at 1 January 2017
Additions
Balance at 1 January 2018
Amortisation
Impairment
Foreign exchange
Balance at 31 December 2018
Net Book Value
At 31 December 2018
At 31 December 2017
£’000
-
2
2
1,493
11
1,506
-
-
-
93
-
1
94
1,412
2
Goodwill
Arising on
Consolidation
£’000
Other
Intangible
Assets
£’000
-
2,438
2,438
-
-
2,438
-
-
-
-
-
-
-
2,438
2,438
-
455
455
49
-
504
-
-
-
85
231
-
316
188
455
Total
£’000
-
2,895
2,895
1,542
11
4,448
-
-
-
178
231
1
410
4,038
2,895
Other intangible assets comprise £151k (2017: £455k) relating to identifiable relations between acquired companies and associated
client base with the remaining £37k of other intangible assets relating to website development costs.
Amortisation is charged over a period between 1 and 3 years.
Goodwill and impairment
The carrying value of goodwill in respect of each cash generating unit is as follows::
Studio Liddell Limited
C.2K Entertainment Inc.
VR Acquisition (Holdings) Limited
31 December
31 December
2018
£’000
1,252
748
438
2,438
2017
£’000
1,252
748
438
2,438
61
The Group is obliged to test goodwill annually for impairment, or more frequently if there are indications that goodwill and indefinite
life intangibles might be impaired, due to the goodwill deemed to have an indefinite useful life. In order to perform this test,
management is required to compare the carrying value of the relevant cash generating unit (“CGU”) including the goodwill with
its recoverable amount. The recoverable amount of the CGU is determined from a value in use calculation. It is considered that any
reasonable sensitivity analysis of the key assumptions would not result in an impairment of the present carrying value of the goodwill.
17. INVENTORIES
Inventory
2018
£000
133
133
2017
£000
-
-
Inventories recognised in cost of sales during the year were £396k (2017: £Nil). The Directors considered no impairment of inventory
necessary as at 31 December 2018 (2017: £Nil).
18. TRADE & OTHER RECEIVABLES
Trade receivables
Prepayments and accrued income
Other receivables
Tax recoverable
31 December
2018
£’000
31 December
2017
£’000
443
381
238
348
1,410
383
294
189
-
866
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
19. LIABILITIES
Current liabilities
Trade payables
Social security and other taxes
Accruals
Other payables
Loans
Amounts payable under hire purchase agreements
Non-current liabilities
Other loans
Amounts payable under hire purchase agreements
Other payables
31 December
2018
£’000
31 December
2017
£’000
329
77
245
235
177
52
1,115
147
71
54
272
339
36
701
84
245
-
1,405
112
-
-
112
HMRC
The Group has an arrangement with HMRC relating to a tax liability from an Employee Benefit Trust scheme of the subsidiary
company Immotion Studios Limited. The liability was agreed at £169,000 on 27 September 2018. Under the agreement with HMRC,
the liability is payable in monthly instalments over 2 years, with interest at 4.25%. The final payment falls due on 26 September 2020.
The amount payable as at 31 December 2018 was £134,000 of which £54,000 is payable after 31 December 2019.
20. CONTRACT LIABILITIES
Contract liabilities
2018
£’000
189
189
2017
£’000
62
62
Contract liabilities comprise payments in advance of revenue recognition and revenue deferred due to contract performance
obligations not being completed. They are classified as current liabilities if the contract performance obligations payments are due to
be completed within one year or less. All of these liabilities are expected to be recognised in the subsequent financial year. Contract
liabilities were previously treated as deferred revenue in the comparative period accounts.
63
21. LOANS
The Group has the following loan arrangements in place as at 31 December 2018:
Lending Crowd
On 7 March 2017 an agreement was completed between Immotion Studios Limited and Edinburgh Alternative Finance Limited for
the advance of a Lending Crowd loan of £250,000. The loan is repayable, by monthly instalments, with interest at a fixed rate of 7.66%.
The final payment falls due in March 2020. This loan is secured. The total amount payable as at 31 December 2018 was £112,000 of
which £23,000 is payable after 31 December 2019.
Bank of America
An agreement dated 15 October 2012 for a revolving line of credit of $300,000 was completed between the subsidiary C.2K
Entertainment Inc., and the Bank of America with a loan modification on 10 August 2018. The loan is repayable in monthly instalments,
and is secured, with interest payable at a fixed rate of 7.79%. The final payment falls due on 15 August 2021 and the amount payable as
at 31 December 2018 was £212,000 of which £124,000 is payable after 31 December 2019.
Amounts falling due within one year
Lending Crowd loan
Bank of America loan
Amounts falling due 1-2 years
Lending Crowd loan
Bank of America loan
31 December
2018
£’000
31 December
2017
£’000
89
88
177
23
124
147
112
-
112
-
-
-
22. HIRE PURCHASE & FINANCE LEASES
Lombard Technology Services Limited
On 24 April 2018 a loan agreement was completed between the Group and Lombard Technology Services Limited for the sale and
leaseback of equipment valued at £194,000. The loan is repayable by monthly instalments with the final payment falling due in March
2021. The total amount payable under the loan agreement is £179,000 including interest costs. The total amount payable as at 31
December 2018 was £123,000 of which £71,000 is payable after 31 December 2019.
Future minimum lease payments fall as follows:
Within 1 year
Between 1-5 years
31 December
2018
£’000
31 December
2017
£’000
52
71
123
-
-
-
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
23. DEFERRED TAX
Balance at 1 January 2018
Deferred tax charge in the year
Balance at 31 December 2018
Total
£’000
85
(175 )
(90 )
The deferred tax provision comprises:
31 December 2018
£’000
31 December 2017
£’000
Timing differences
Unutilised tax losses
Deferred tax on intangibles
(38 )
-
(52 )
(90 )
(38 )
201
(78 )
85
The expected net reversal of deferred tax in 2019 is £26k with the remaining £64k expected to reverse in greater than 1 year.
24. FINANCIAL RISK MANAGEMENT
The Group is exposed to risks that arise from its use of financial instruments. These financial instruments are within the current assets
and current liabilities shown on the face of the statement of financial position and comprise the following:
Credit risk
The Group is exposed to credit risk primarily on its trade receivables, which are spread over a range of different streams of revenue. The
Group maintains its cash reserves at a reputable bank. It is group policy to assess the credit risk of each new customer before entering
into binding contracts.
The maximum exposure to credit risk is represented by the carrying value in the statement of financial position as shown in note 18.
The credit risk on liquid funds is low as the funds are held at a bank with a high credit rating assigned by international credit agencies.
Current financial assets
Trade receivables
Other receivables
Cash and cash equivalents
31 December 2018
£’000
31 December 2017
£’000
443
238
711
1,392
383
189
769
1,341
65
The table below illustrates the due date of trade receivables:
Current
31 – 60 days
61 – 90 days
91 – 120 days
121 and over
The table below illustrates the geographical location of trade receivables:
United Kingdom
Japan
China
Middle East
USA
Europe
Liquidity risk
31 December
2018
£’000
31 December
2017
£’000
347
52
29
4
11
443
166
83
47
78
9
383
31 December
2018
£’000
31 December
2017
£’000
65
54
52
52
35
185
443
175
86
-
47
11
64
383
Liquidity risk arises from the Group’s management of working capital and the finance charges and repayments of its liabilities.
The Group’s policy is to ensure that it will have sufficient cash to allow it to meet its liabilities when they become due and so cash
holdings may be high during certain periods throughout the period.
Other than the loans referred to in Note 21, the Group currently has no bank borrowing or overdraft facilities.
The Group’s policy in respect of cash and cash equivalents is to limit its exposure by reducing cash holding in the operating units and
investing amounts that are not immediately required in funds that have low risk and are placed with a reputable bank.
Cash at bank and cash equivalents
At the year end the Group had the following cash balances:
711
769
31 December
2018
£’000
31 December
2017
£’000
Cash at bank comprises Sterling cash deposits held within Coutts & Co, as well as a US Dollar account with the Bank of America for
C.2K Entertainment Inc.
All monetary assets and liabilities within the group are denominated in the functional currency of the operating unit in which they are
held. All amounts stated at carrying value equate to fair value.
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
Financial liabilities at amortised cost
Trade payables
Accruals
Contract liabilities
Finance leases
Loans
31 December 2018
£’000
31 December 2017
£’000
329
245
189
123
324
1,210
339
701
62
-
357
1,459
The table below illustrates the ageing of trade payables:
Financial liabilities at amortised cost
31 December 2018
£’000
31 December 2017
£’000
Current
31 – 60 days
61 – 90 days
91 – 120 days
121 and over
The table below shows the ageing of financial liabilities:
231
75
2
4
17
329
231
68
13
27
-
339
Trade payables
Accruals
Contract liabilities
Finance leases
Loans
Other payables
Carrying
amount
£’000
6 months
or less
£’000
6-12
months
£’000
1 or
more year
£’000
329
245
189
123
324
289
329
245
189
26
89
197
1,499
1,075
-
-
-
26
88
38
152
-
-
-
71
147
54
272
Capital disclosures and risk management
The Group’s management define capital as the Group’s equity share capital and reserves.
67
The Group’s objective when maintaining capital is to safeguard its ability to continue as a going concern, so that in due course it can
provide returns for shareholders and benefits for other stakeholders.
The Group manages its capital structure and makes adjustments to it in the light of changes in the business and in economic
conditions. In order to maintain or adjust the capital structure, the Group may from time to time issue new shares, based on working
capital and product development requirements and current and future expectations of the Company’s share price.
Share capital is used to raise cash and as direct payments to third parties for assets or services acquired.
Market risk
Interest rate risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group
considers the interest rates available when deciding where to place cash balances. The Group has borrowings in both the USA and the
UK. Borrowings require approval by the Board, and whilst this does not protect the Group from the risk of paying excess rates,
the Board can ensure the Group are achieving competitive rates.
Foreign currency risk
Foreign exchange transaction risk arises when individual Group operations enter into transactions denominated in a currency other
than the functional currency. The principal risk arises from the Group’s US based subsidiary, C.2K Entertainment Inc. The general policy
for the Group is to sell to customers in the same currency that services or goods are purchased in, reducing the transactional risk.
25. SHARE CAPITAL
Called up share capital
Allotted, called up and fully paid
195,351,590 Ordinary shares of 0.040108663 pence each
(2017: 46,415 ordinary shares of 0.01p)
31 December
2018
£’000
31 December
2017
£’000
78
78
-
-
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
Shares issued during the year ended 31 December 2018:
Date
Description
No. of shares
1 February 2018
Issue of 1p shares
3,908
23 March 2018
23 March 2018
23 April 2018
14 May 2018
14 May 2018
22 June 2018
Issue of 1p shares
Issue of 1p shares
Issue of 1p shares
Issue of 1p shares
Issue of 1p shares
Bonus issue – 100:1
22 June 2018
Sub-division - 0.01 to 0.005
Sub-division – 0.05
to 0.040108663p
Placing on AIM shares of
0.040108663p
Conversion of loan
stock to shares of
0.040108663p
9 July 2018
12 July 2018
12 July 2018
Total
At 31 December 2017
At 31 December 2018
Cash received does not included costs relating to share issues.
In the year to 31 December 2018, costs of £439k were incurred
relating to share issues and these costs were charged against
share premium.
Price per
Share
£
100
100
100
157.61
157.61
157.61
-
-
-
Gross
share
value
£
Cash
received
£
390,800
390,800
7,000
36,400
11,978
24,902
99,925
51,625
-
-
7,000
36,400
11,978
24,902
99,925
-
-
-
70
364
76
158
634
5,162,500
5,214,125
119,571,718
57,500,000
0.10
5,750,000
5,750,000
7,851,622
0.06
491,487
491,487
195,305,175
46,415
195,351,590
6,864,117
6,812,493
3,704,894
591,394
10,569,011
7,403,887
69
26. SHARE BASED PAYMENTS
During the period the Group issued options over 11,008,750 Ordinary shares.
Time Based Shares
These options have been valued using the Black-Scholes pricing model. The share options in issue expire in 3 years, with the
judgment in the model that all participants will exercise their right to sell a year after they have fully vested.
Vesting period
Share price at grant
Exercise price
Expected volatility
Risk free rate
2 years
12p
10p
53.6%
0.74%
3 years
12p
10p
55.4%
0.75%
4 years
12p
10p
57.1%
0.89%
Expected volatility has been determined by reference to the fluctuations in the Group’s share price between the formation of its
current group structure and the grant date of the share options
Vesting date
Number of Options
Estimated fair value
2018 charge
12 July 2019
12 July 2020
12 July 2021
EBITDA Condition
1,223,194
1,223,194
1,223,195
4.7p
5.5p
6.2p
27,091
15,830
11,902
54,823
These options have been valued using the Black-Scholes pricing model spread over the vesting period.
Vesting date
2.97 years
3.97 years
Share price at grant
Exercise price
Expected volatility
Risk free rate
12p
10p
55.3%
0.75%
12p
10p
57.0%
0.88%
Expected volatility has been determined by reference to the fluctuations in the Group’s share price between the formation of its
current group structure and the grant date of the share options
Vesting date
Number of Options
Estimated fair value
2018 charge
Year 1 EBITDA
Year 2 EBITDA
1,834,791
1,834,792
5.5p
6.2p
Share price Condition
These options have been valued using the Monte Carlo pricing model.
Vesting date
2.97 years
3.97 years
Share price at grant
Exercise price
Expected volatility
Risk free rate
12p
10p
55.3%
0.75%
12p
10p
57.0%
0.88%
24,141
18,050
42,191
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
Expected volatility has been determined by reference to the fluctuations in the Group’s share price between the formation of its
current group structure and the grant date of the share options
Vesting date
Number of Options
Estimated fair value
2018 charge
Year 1 EBITDA
Year 2 EBITDA
1,834,792
1,834,792
4.9p
5.2p
21,507
15,139
36,646
No options over Ordinary shares were exercised in the period.
The time-based conditions vest over a period of 3 years. 50% of
the EBITDA condition options in issue are measured against
an EBITDA forecast for the period ending 31 August 2019. The
remaining 50% are measured against an EBITDA forecast for the
period ending 31 August 2020.
2019. The remaining 50% of options shall vest in full provided the
share price of the Group has increased by 25% versus the Year
1 Share Price Target during any one-month period between
the date of grant and the date falling six weeks following the
announcement of the financial results of the Group for the year
ending 31 December 2020.
50% of the share-based options are subjected to the condition
that they will vest in full provided the average share price of the
Group has increased by at least 50% versus the exercise price
during any one month period between the date of grant and
the date falling six weeks following the announcement of the
financial results of the Group for the period ending 31 December
In the event that the Year 1 Share Price Target was not met in
the relevant performance period, then only 50% of the relevant
Options will vest provided the average share price of the Group
has increased by 75% versus the exercise price during any one-
month period prior to the Performance Year 2 vesting date.
Warrants
During the period the Group issued warrants over 1,488,500 Ordinary shares. These warrants have been valued using the Black-Scholes
pricing model.
Date of grant
Share price at grant date
Expected volatility
Risk free rate
27. RESERVES
12p
10p
34%
0.74%
Expected volatility has been determined by reference to the
fluctuations in the Group’s share price between the formation
of its current group structure and the grant date of the share
options. A charge of £2,828 has been included in the year ended
31 December 2018
Full details of movements in reserves are set out in the consolidated statement of changes in equity. The following describes the
nature and purpose of each reserve within owners’ equity:
Share premium: Amount subscribed for share capital in excess of nominal value.
Retained earnings: Cumulative net gains and losses recognised in the consolidated statement of comprehensive income.
Foreign exchange reserve: Reserve arising on translation of the Group’s overseas subsidiary.
71
28. LEASING COMMITMENTS
The Group’s future aggregate minimum lease payments under non-cancellable operating leases fall due as follows:
Financial liabilities at amortised cost
Not later than 1 year
Later than 1 year and not later than 5 years
31 December 2018
£’000
31 December 2017
£’000
474
837
1,311
319
1,050
1,369
29. CAPITAL COMMITMENTS
At 31 December 2018 and 31 December 2017 there were no capital commitments.
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
30. RELATED PARTY TRANSACTIONS
Purchases
Name of related party
Services
Relationship
Lanton Investments Ltd
Consultancy
Partly owned and controlled by a director of Immotion Group Plc
Liddell Jones Ltd
Website construction
M Capital Investment Properties Ltd
Consultancy
Robin Miller Consultants Ltd
Consultancy
Owned and controlled by persons who were directors
of Immotion Studios Limited until 12th July 2018
Related party owned and controlled by a director of Immotion
Group Plc
Related party owned and controlled by a director of Immotion
Group Plc
Samuel Higginson
Consultancy
Adult son of a director of Immotion Group Plc
Digitalbox Group Ltd
Legal service
Directors and shareholders of Immotion Group Plc are also
directors and shareholders of Digitalbox Group Ltd.
Alasdair Ritchie
Consultancy
Director of Immotion Group Plc until 22 June 2018
Lanton Investments Ltd
Liddell Jones Ltd
M Capital Investment Properties Limited
Robin Miller Consultants Ltd
Samuel Higginson
Digitalbox Group Limited
Alasdair Ritchie – Haven Consulting
Costs invoiced
Amounts outstanding
2018
£’000
2017
£’000
2018
£’000
2017
£’000
163
16
205
9
37
30
11
471
-
-
-
-
-
-
-
-
-
-
-
1
-
-
-
1
-
-
-
-
-
(36 )
-
(36 )
Income
Name of related party
Services
Relationship
Digitalbox Group Ltd
Provision of staff
Liddell Jones Ltd
Services & rent
Directors and shareholders of Immotion Group Plc, are also
directors and shareholders of Digitalbox Group Ltd
Owned and controlled by persons who were directors of
Immotion Studios Limited until 12th July 2018
David Marks
Interest on loan
D Marks is a director of Immotion Group Plc
and Immotion Studios Limited
Ian Liddell
Interest on loan
Emma Stanyon
Interest on loan
I Liddell is a director of Immotion Group Plc and Immotion
Studios Ltd
E Stanyon is the adult step-daughter of M Higginson, director
of Immotion Group Plc and Immotion Studios Ltd
73
Income invoiced to related parties
Digitalbox Group Limited
Liddell Jones Ltd
David Marks loan
Ian Liddell loan
Emma Stanyon loan
Expensed in the year
Amounts in receivables
2018
£’000
2017
£’000
2018
£’000
2017
£’000
3
12
1
-
-
16
-
-
-
-
-
-
-
1
15
10
4
30
1
-
15
10
4
30
The key management personnel are considered to be the Board of Directors. Their remuneration is disclosed in detail in note 9. Key
management were remunerated £735k (2017: £nil) in the year ended 31 December 2018.
The key management were provided with 5.95m of share options realising a charge of £72k in the year.
31. POST BALANCE SHEET EVENTS
On 1 March 2019, an additional equity fundraise was approved raising £3.3m with £200k of fees, resulting in a net raise of £3.1m.
32. DISCONTINUED OPERATIONS
2018
continuing
operations
£’000
2018
discontinuing
operations
£’000
Revenue
Cost of sales
Gross profit
Administrative expenses
Loss from Operations
Finance costs
Finance income
Loss before taxation and attributable
to equity holders of the parent
Taxation
Loss after taxation
Other comprehensive expense
Loss on translation of subsidiary
Loss after taxation and attributable to
equity holders of the parent and total
comprehensive income for the period
1,948
(1,436 )
512
(4,264 )
(3,752 )
(57 )
2
(3,807 )
159
(3,648 )
(16 )
906
(473 )
433
(608 )
(175 )
-
(175 )
-
(175 )
-
2018
Total
£’000
2,854
(1,909 )
945
(4,872 )
(3,927 )
(57 )
2
(3,982 )
159
(3,823 )
(16 )
(3,664 )
(175 )
(3,839 )
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
Cash flows from discontinued operations are as follows:
Operating cash flows
Investing cash flows
Financing cash flows
Continuing
£’000
Discontinuing
£’000
(599 )
(2,990 )
6,408
176
-
-
Total
£’000
(423 )
(2,990 )
6,408
33. SUBSIDIARY UNDERTAKINGS
Ranger Rob UK Limited, company number 09511044, and VR Acquisition (Holdings) Limited, company number 11054174, were exempt
from undergoing an audit for year ended 31 December 2018 by virtue of S479A of Companies Act 2006.
Company Statement of Financial Position
as at 31 December 2018
Company number 10964782
75
Fixed assets
Investments
Intangible fixed assets
Current assets
Trade and other receivables
Cash and cash equivalents
III
IV
V
VI
Payables: amounts falling due within one year
VII
Net current assets
Total assets less total liabilities
Capital and reserves
Called up share capital
Share premium account
Retained reserves
Shareholders’ funds
VIII
At 31
December 2018
Restated
December 2017
£’000
3,113
37
3,150
6,053
515
6,568
(60 )
6,508
9,658
78
9,999
(419 )
9,658
3,113
-
3,113
125
567
692
(162 )
530
3,643
-
3,704
(61 )
3,643
The Company has taken advantage of the exemptions allowed under section 408 of the Companies Act 2006 and has not presented
its income statement in these financial statements. The Group loss for the year included a loss on ordinary activities after tax of
£495,000 (2017: £61,000) in respect of the Company which is dealt with in the financial statements of the Parent Company.
The financial statements were approved by the Board and authorised for issue on 2 April 2019.
Martin Higginson
Chief Executive Officer
David Marks
Finance Director
The notes on pages 78 to 81 form part of the Company financial statements.
Immotion
Group plc
Annual Report
& Accounts 2018
Company Statement of Changes in Equity
for the year ended 31 December 2018
Issue of shares
Loss after tax
31 December 2017
Issue of shares
Issue costs deducted from equity
Loss after tax
Equity settled share-based payments
Bonus issue
31 December 2018
Share
Capital
£’000
Share
Premium
£’000
Retained
reserves
£’000
Total
Equity
£’000
-
-
-
26
-
-
-
52
78
3,704
-
3,704
6,786
(439 )
-
-
(52 )
9,999
-
(61 )
(61 )
-
-
(495 )
137
-
(419 )
3,704
(61 )
3,643
6,812
(439 )
(495 )
137
-
9,658
The notes on pages 78 to 81 form part of the Company financial statements.
Company Statement of Cash Flows
for the year ended 31 December 2018
77
Cash flows from operating activities
Loss before tax
Adjustments for:
Share based payments
Amortisation of intangible assets
Corporation tax paid
Cash flows from operating activities before changes in working capital
Increase in trade and other receivables
Increase/(Decrease) in trade and other payables
Cash used in operations
Investing activities
Purchase of intangible assets
Acquisition of subsidiaries
Net cash absorbed in investing activities
Financing activities
Issue of new share capital (net of costs)
Issue of convertible loan stock
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
Reconciliation of net cashflow to movement in net funds:
Net (decrease) / increase in cash and cash equivalents
New loans and finance leases
Repayment of loans
Movement in net funds in the year
Net funds at 1 January
Net funds at 31 December
Year ended
31 December 2018
£’000
Year ended
31 December 2017
£’000
(482 )
137
12
(13 )
(346 )
(5,928 )
(102 )
(6,376 )
(49 )
-
(49 )
5,885
488
6,373
(52 )
567
515
(52 )
-
-
(52 )
567
515
(61 )
-
-
-
(61 )
(125 )
162
(24)
-
(3,113 )
(3,113 )
3,704
-
3,704
567
-
567
567
-
-
567
-
567
The notes on pages 78 to 81 form part of the Company financial statements.
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Company Financial Statements
for the year ended 31 December 2018
I. ACCOUNTING POLICIES
The separate financial statements of the Company are presented as required by the Companies Act 2006. As permitted by the Act
the separate financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by
the European Union. The principal accounting policies adopted are the same as those set out in note 4 to the consolidated financial
statements except as noted below:
Valuation of investments
Investments in subsidiaries are stated at cost less any provision for impairment in value.
Prior year restatement
A prior year adjustment has been processed to recognise the acquisition of VR Acquisition (Holdings) Limited in 2017 given Immotion
Group Plc had control and the substance of the transaction is Immotion Group Plc owned 100% of the shares on 31 December 2017.
An adjustment to costs of £61k incorrectly reducing the share premium at 31 December 2017 has been included.
II. OPERATING LOSS
The auditor remuneration for audit and other services is disclosed in note 8 to the consolidated financial statements.
The average number of employees of the Company during the year was 5 (2017: 1) and total staff costs were £186,400 (2017: £Nil).
Directors remuneration is disclosed in note 9 to the consolidated financial statements.
Notes to the Company Financial Statements
for the year ended 31 December 2018
79
III. FIXED ASSET INVESTMENTS
31 December 2018
£’000
31 December 2017
£’000
Subsidiary undertakings
Cost
Balance at 1 January 2018
Additions
Disposals
Balance at 31 December 2018
Provisions
Balance at 1 January 2018
Balance at 31 December 2018
Carrying value of investments
3,113
-
-
3,113
-
-
3,113
-
3,113
-
3,113
-
-
3,113
At the year end the Company had the following subsidiaries:
Subsidiary name
Class of shares
Proportion of ownership
Registered office
Immotion Studios Limited
Ordinary
VR Acquisition (Holdings) Limited
Ordinary
C.2K Entertainment Inc
Ordinary
Abominable Snowman Limited
Ordinary
Studio Liddell Limited
Ordinary
Immotion VR Limited
Ordinary
Ranger Rob UK Limited
Ordinary
100%
100%
100%
50%
100%
100%
100%
East Wing, Ground Floor
The Victoria, Mediacity,
Manchester, M50 3SP
East Wing, Ground Floor
The Victoria, Mediacity,
Manchester, M50 3SP
1607 Gayley Avenue, Los Angeles,
California, CA 90024
East Wing, Ground Floor
The Victoria, Mediacity,
Manchester, M50 3SP
East Wing, Ground Floor
The Victoria, Mediacity,
Manchester, M50 3SP
East Wing, Ground Floor
The Victoria, Mediacity,
Manchester, M50 3SP
East Wing, Ground Floor
The Victoria, Mediacity,
Manchester, M50 3SP
Immotion
Group plc
Annual Report
& Accounts 2018
Notes to the Company Financial Statements
for the year ended 31 December 2018
Subsidiary name
Principal activity
Immotion Studios Limited
Virtual reality content, software design and development
VR Acquisition (Holdings) Limited
Intermediate holding company
C.2K Entertainment Inc
Virtual reality equipment, experiences and legacy marketing solutions’ consultancy
Abominable Snowman Limited
Dormant company
Studio Liddell Limited
Dormant company
Immotion VR Limited
Virtual reality equipment and experiences
Ranger Rob UK Limited
Group subsidiary with limited trading
Immotion Group Plc acquired 50.1% of the issued capital, and control of VR Acquisition (Holdings) Limited, on the 21 December 2017
with instruction to acquire the remaining shares. Immotion Group Plc acquired the remaining 49.9% of the issued capital on the
8 January 2018 via a Drag Along clause from the Articles of Association of VR Acquisition (Holdings) Limited. The substance of the
transaction was that Immotion Group Plc had 100% control as at 21 December 2017. The Directors have treated the acquisition as
occurring on 31 December 2017 on the basis there was no material trade during the period to 31 December 2017.
IV. INTANGIBLE FIXED ASSETS
Software Cost
Balance at 1 January 2018
Additions
Balance at 31 December 2018
Accumulated amortisation
Balance at 1 January 2018
Amortisation charge
Balance at 31 December 2018
Net Book Value
At 31 December 2018
At 31 December 2017
V. RECEIVABLES: due within one year
Amounts owed by group undertakings
Other receivables
Prepayments and accrued income
VI. CASH & CASH EQUIVALENTS
Cash at bank and in hand
Total
£’000
-
49
49
-
12
12
37
-
31 December 2018
£’000
31 December 2017
£’000
5,984
18
51
6,053
114
1
10
125
31 December 2018
£’000
31 December 2017
£’000
515
515
567
567
Notes to the Company Financial Statements
for the year ended 31 December 2018
81
VII. PAYABLES: amounts falling due within one year
Trade payables
Accruals
Other tax and social security
Other payables
Amounts owed to subsidiary undertakings
31 December 2018
£’000
21
31 December 2017
£’000
-
22
17
-
-
60
112
-
22
28
162
VIII. SHARE CAPITAL
Details of the Company’s share capital and the movements in the period can be found in Note 25 to the consolidated financial
statements.
IX. SHARE OPTIONS
Share Option Scheme
Details of the share options outstanding at 31 December 2018 can be found in Note 26.
X. RESERVES
Details of the reserves can be found in Note 27.
XI. RELATED PARTY TRANSACTIONS
Details of the Company’s related party transactions can be found in Note 30 to the consolidated financial statements.
XII. FIRST TIME ADOPTION OF IFRS
The policies applied under the entity’s previous accounting framework are not materially different to IFRS and have not impacted on
equity or profit or loss.
Immotion
Group plc
Annual Report
& Accounts 2018
Directors, Secretary & Advisors
Directors
Rodney Findley
Martin Higginson
Nicholas Lee
Ian Liddell
David Marks
Sir Robin Miller
Company Secretary
Daniel Wortley
Registered Office
East Wing, Ground Floor
The Victoria
MediaCityUK
M50 3SP
Company Number
10964782
Registrars
Nominated Adviser and Broker
Joint Brokers
Independent Auditors
Solicitors
Country of Incorporation of
Parent Company
Legal Form
Domicile
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen
B62 8HD
WH Ireland Limited
24 Martin Lane
London
EC4R 0DR
Shard Capital Partners LLP
23rd Floor,
20 Fenchurch Street
London
EC3M 3BY
Leander Capital Partners
1st Floor
10 Old Burlington Street
London
W1H 3AG
Haysmacintyre LLP
10 Queen Street Place
London
EC4R 1AG
DWF LLP
Central Square South
Orchard Street
Newcastle
NE1 3AZ
Dorsey & Whitney LLP
600 Anton Boulevard, Suite 2000
Costa Mesa
CA92626 USA
England and Wales
Public Limited Company
United Kingdom
Immotion is a new kind
of entertainment company.
We pride ourselves on looking at things differently.
In bringing together award-winning directors,
world-class CGI experts, state-of-the-art motion
platform technology, and a proprietary Content
Management System we are able to deliver a new level of
immersive entertainment.
A
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P
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&
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S
ANNUAL REPORT
& ACCOUNTS