28 September 2023

Let's Explore Group plc

("Let's Explore Group", the "Company" or the "Group")

Interim Results

Let's Explore Group plc (AIM:LETS), is pleased to announce its unaudited interim results for the six months to 30 June 2023. During the period, the Location Based Entertainment (LBE) and Uvisan divisions were sold and there was a subsequent return of cash to shareholders via a tender offer.

Highlights

Post period highlights

Change of Name of Nominated Adviser and Broker

The Company also announces that its Nominated Adviser and Joint Broker has changed its name to Cavendish Securities plc following completion of its own corporate merger.

Martin Higginson, Chief Executive Officer of Let's Explore Group, commented:

"During the period, we delivered significant value to shareholders through the sale of LBE and Uvisan businesses. The return of £12.52m to shareholders left us with £6.8m of cash on hand, plus a further $1.25m of cash due in February 2024. As such the Group is well positioned for further investments as it seeks value enhancing opportunities for shareholders."

Enquiries:

For further information please visit www.LetsExploreGroup.com, or contact:

Chairman's Statement

The Group entered the year with three divisions: Location Based Entertainment (LBE), Home Based Entertainment (HBE) and Uvisan.

As previously announced on 2 February 2023 and 1 March 2023 respectively, we took the strategic decision to sell the LBE business (including the Immotion trading name) to minimise risk for shareholders and provide a significant liquidity event in highly uncertain markets.  We also sold the Uvisan business, leaving the Group with HBE as its only remaining trading business. 

The sale of these businesses brought in proceeds of £18,964,000 net of costs and cash disposed of with these businesses.  Further cash of $1,250,000 (circa £1,000,000) in respect of repayment of loan note from the buyer of the LBE business is due to be received in February 2024.

Following completion of these sales, the Company set about returning the majority of the sale proceeds to shareholders via a tender offer process which concluded in June 2023 with a total of £12,527,000 distributed (the net cash outflow being £11,364,000 when taking account of share option exercise proceeds).

With £6,827,000 cash on hand at the period end, plus the loan note due to be repaid in February 2024, we believe the Company is well positioned to capitalise upon opportunities in front of it.

Chief Executive's Review

Whilst the sale of the LBE and Uvisan businesses left the group with the HBE business as its only trading business at present, this was never the long-term plan for the Group. As previously announced, the Board's intention was to find a suitable opportunity for the Group, which we would expect to become its principal activity. I am pleased to report that we have identified an acquisition target, full details of which will be provided in an announcement to be released later today.

Home Based Entertainment (HBE)

The Group's HBE business comprises themed 'Immersive Learning' Let's Explore products, as well as the affordable 'Vodiac' VR headset, an affordable smartphone-powered VR headset and companion app which provides the user with 75 different virtual reality experiences across seven channels. These products retail to consumers via a variety of channels including QVC, Amazon as well as direct to consumer offering via Facebook and other social media channels. 

The HBE business is predominantly a Q4 focused business, with the first half of the year being about investment into the development and planning of new products.

As expected, HBE revenue was modest in the period at £62,000 (H1 2022: £103,000) reflecting the seasonality of the business. This revenue was primarily generated through the sale of 6,000 units of the Vodiac product.  HBE cost of sales of £139,000 included a £32,000 write-off in respect of materials previously purchased which are now obsolete due to the redesign of the Let's Explore product range. This produced a gross loss of £77,000 from HBE in the period (H1 2022: £65,000), and a divisional adjusted EBITDA loss of £175,000 (H1 2022: £151,000).

As announced earlier in the year, the Group has developed three new Let's Explore products: a revamped 'Let's Explore Oceans' offering as well as 'Let's Explore Space' and 'Let's Explore Wildlife' which are two completely new products, all focused on delivering a comprehensive immersive learning experience. 

Each pack comes complete with the new improved smartphone-powered VR headset, a range of VR experiences, a holographic cube which unlocks a selection of in-app augmented reality experiences, a full-colour hardback fact book, a sticker book, a giant poster, and an interactive model.  The Group has produced a total of 22,500 units in conjunction with a respected publisher on a profit-sharing basis for an initial test of these new products and, subject to the results in Q4, the intention is to expand the product range as well as the territories in which they are sold over the coming year.

The RRP of each pack will be £99, or $125. Sales will be focused around the busy Q4 period and will, as in previous years, be offered via either a direct sale, or through Amazon both in the UK and USA.

Following technical improvements in the Vodiac offering, and a successful TV airing in August 2023 on QVC USA, during which some 4,000 Vodiac headsets were sold, the Group has received additional orders worth over $330,000 for circa 26,000 Vodiac units. These will predominantly be sold through QVC USA, and UK, as well as two tests on QVC Canada, and Australia, all to be fulfilled in Q4.

Financial review

Overall profit after tax for the period was £14,060,000.  The results of LBE and Uvisan are included within discontinued operations in the period as they were in the published full year 2022 results.  The 2022 interim figures have been restated for comparison purposes.

The split between continuing and discontinued activities is summarised below:

^*Administrative expenses exclude depreciation, amortisation, impairment, gains/losses on disposal, share based payments and one-off costs.

^**Adjusted EBITDA is a non-GAAP metric.

Adjusted EBITDA loss from continuing operations (comprising HBE and head office costs) in the period was £455,000 (H1 2022: £770,000).

The Company has been able to mitigate its head office costs in the period through income of £129,000 received for the provision of transitional finance and other services to the disposed subsidiaries (recognised in other income). 

The Company also received £189,000 finance income in the period on its cash deposits and the accrued loan note interest payable by the buyer of the LBE business.

The Group recorded a profit of £15,115,000 on the sale of the LBE and Uvisan subsidiaries and, as a result of the UK Substantial Shareholding Exemption (SSE) legislation applying to the disposals, no tax is expected to be payable on this gain.

The cash proceeds of the disposals net of deal costs and cash disposed with the entities were £18,964,000.  This excludes the repayment of the $1,250,000 loan note (plus interest at 6% per annum) to be received from the buyers of the LBE business on 28 February 2024. Repayment of the loan note is subject to adjustments for any warranty claims made under the LBE business sale and purchase agreement. The board is not aware presently of any information which would result in any other than full repayment of the loan notes being received.

Outlook

We are excited by the launch of the new Let's Explore range ready for the peak gifting season. The mix of virtual reality, augmented reality, interactive models and traditional books has allowed us to create a range of immersive learning products.

With a strong balance sheet, we are optimistic about the potential the Group has to deliver shareholder value, both through the HBE business and acquisition opportunities.