Q&A Document

RNS Number : 1116K

Iconic Labs PLC

23 August 2019

 

23 August 2019

Iconic Labs Plc ("Iconic Labs" or the "Company")

Q&A Document

Following the RNSs released in recent weeks and the Q&A released on 16 August, Iconic Labs would like to clarify several queries from shareholders with regard to its strategy and operational matters; accordingly, it has compiled the following Q&A.  The Company would like to emphasise that the Board and management team are working hard to build a revenue-generative new media and technology business with a long-term growth strategy.

Can you explain the business model/strategy?

Iconic Labs is a media and technology business focused on providing online marketing, content and technology driven products.  The Company plans to create six complimentary divisions that will allow it to provide a broad-based, all-encompassing offering allowing clients to build their online branding and presence, generate significant revenues as well as building its own brand platforms and products that have long term capital value.  In the immediate term, the Company is targeting revenue from agency and consultancy engagements and has already been successful in this arena.

With the addition of the Social Alchemist, which already has a number of online brands/platforms, the Company has the opportunity to start developing its publishing content division and increasing the value of these brands. The agency/consultancy and publishing content divisions are highly complementary as the agency can help clients create advertising assets and then use its online brands to distribute the assets/campaigns online.  Iconic Labs is therefore able to access potential clients' budgets assigned for both 'creative' and 'media'.  This method of cross-selling has previously been used successfully by the management.

As the business matures, the Board will add more synergistic divisions that will offer distinct and additional revenue streams. The development of online brands and the creation of content is the foundation of revenue creation and property brands/distribution platforms can be further monetised over time through licensing content to other businesses and selling e-commerce products to the brands' audiences.

What is the size of the market that you are targeting?

The size of the UK digital advertising market is estimated to be in the region of £14.7 billion, an 11% increase from 2018.  This is anticipated to grow more than 10% over the remainder of 2019 and be worth over £16.2 billion by 2020.  The Company is creating the relevant structure to capitalise on this and pitching for direct online advertising campaigns from clients as well as securing revenues indirectly through third party channels such as Facebook and Google.

As the Company adds new divisions, it will be able to target additional markets but currently the focus is on gaining traction in the UK digital advertising space, providing bespoke advice and implementation for building brands online traction.

How is the strategy to generate revenue in the short-term progressing?

Now that the process to resolve the legacy debt issues attached to the previous stem cell business is nearing completion, the team can focus all its energy on building a multi-divisional new media and technology business, as set out in its initial strategy.  The Board is confident that it can rapidly grow revenue and build a cash generative business.

As announced 3 June 2019, the Company has agreed in principle and commenced work on a consulting and marketing services engagement with a UK based financial services business.  This engagement is on a long-term retainer basis, with initial revenues over the first year expected to exceed £1 million, with the potential for material increases.

What is the status of the consulting and marketing services engagement as announced 3 June 2019 contributing to revenue?

The contract with an exciting Fintech business remains live, and the current proceeds are still estimated to be worth in excess of £1m a year.  The detailed scope of work and KPIs of the contract have all been agreed and the payment schedules are currently being negotiated. The Company believes that its efforts will be crucial to the success of the client's business and is negotiating for some element of the contract to be structured so it is rewarded in equity which aligns Iconic Labs with the long-term success of the client's business operating in a booming sector.  It is envisaged that there will be a small initial upfront payment, with payments increasing as the work is advanced, with the majority of the revenue being booked in the latter half of the year.  This is normal practice for a contract of this type and ensures that both parties are happy with service delivery schedules versus payment.  The Company is fully prepared to deliver the contract and expects to commence work on the initial part of the contract soon after the initial amount of investment is agreed.

The prospective contract is for a minimum period of two years and is centred on the core Iconic Labs proposition of a marketing services and consultancy agreement.  This entails a full service offering that includes a complete rebranding of the client's website, and commercial positioning and the creation of extensive on-going digital campaigns and content production focussed on customer acquisition via all digital channels.  The Company is looking forward to working on such an exciting project in a disruptive market segment which it feels will be a very lucrative area for it going forward.

What is the process of finalising a new contract? Timings on agreement, documentation, signing etc.

The sales cycle of prospective clients varies significantly according to the type and scale of the potential contract. Iconic Labs typically targets two types of contracts, retainers and distinct campaigns.

For a retainer contract it is not unusual for the contract to take a number of months from initial agreement to actual signing and then usually a relatively short amount of time until the actual commencement of the contract.  The size will often dictate the level of 'sign off' required with the various compliance, legal and finance departments all being involved in contracts of a material size.  This revenue is usually consistent and regular every month.

For a campaign contract, the time in between agreeing and signing a contract is generally shorter as it is usually a smaller commitment in terms of duration with exact timings dictated by commercial reality i.e. the six week launch of a specific product.  However, this does not mean that these are insignificant amounts, as clients usually spend a substantial portion of their media and creative budgets around specific events or parts of the calendar.  This revenue is usually seasonal and can be very 'lumpy' in nature.

In both of these cases while the Company would be careful not to incur any unnecessary costs ahead of the formal start of a contract, the team would look to prepare for the commencement of activity by getting ready to 'staff up' to meet the prospective client demands.

How many clients are currently being engaged and where do things stand with the contracts that were in documentation stage?

The Company is currently in negotiation with a number of potential clients in addition to the large Fintech client previously discussed.  The addition of Social Alchemist allows Iconic Labs to reengage clients who had previously expressed a desire to work with the team but were reluctant without an established media platform that Social Alchemist provides.

Can you provide an update on your pipeline of future contracts?

Due to commercial sensitivity the Company cannot reveal the exact scale or identity of specific clients or the sales pipeline.  However, the pipeline is healthy and consists of both potential retainer clients as well as distinct campaigns in a variety of sectors ranging from Financial Services to Fast Moving Consumer Goods, where the team has proven expertise and a track record of success.

Please can you provide more detail on the acquisition of Social Alchemist and how it will expand Iconic Labs' offering?

The Company believes Social Alchemist to be an acquisition that will significantly help build its offering in a number of ways, both in the long and short term:

-      Delivering industry leading and award-winning creative resources when it comes to pitching for both campaigns and retainer contracts.  This allows the Company to pitch for more clients and also win more business.

-      Combining Social Alchemist with its own existing expertise, the Company will be able to cross and up sell to existing and future clients.

-      Social Alchemist's distribution platform will allow the Company to engage with clients who are not only interested in creative services but also in buying media inventory on popular platforms.

-      In the longer term, having both the creative talent and, in particular, the media platform of Social Alchemist is one of the foundations of a publishing business that will allow for regular revenues from programmatic and social media platform monetisation from Google and Facebook, in addition to the current revenue streams targeting clients directly.

How quickly do you expect Social Alchemist to be integrated into Iconic Labs?

The businesses are already working closely, prior to completion of the acquisition, using complimentary skillsets to joint pitch for contracts.  The Company believes further integration will be quick and seamless.

When will you be launching a new website?

The website will be launched as soon as practicable.  It is currently in the design and development phase with the wireframes, structure and the key messaging already complete.  The Company looks forward to unveiling the website with improved functionality and more information that will benefit shareholders and clients alike.

How have legacy issues affected the launch of the Iconic Labs business? Will this be the same going forward?

The Company has been frustrated having to continually deal with the legacy issues and is delighted these are now under control.  Working capital originally allocated for the launch of the website and business had to be used to settle unexpected debts incurred under the previous management.  Having secured the financing £1.375 million as announced on 6 August 2019, the Company will not need to do this in the future and is now looking forward to formally launching its website and offering soon.

What is going to happen to the WideCells business?

The historic stem cell business is no longer operational.  The old businesses and its debts are held in subsidiaries and these are under control, monitored regularly but no longer take up a material amount of management's time.

When will Iconic Labs' management team align itself with shareholders and take a position in the company?

The Company's management is working hard to build a sustainable long-term business.  As the business matures, the Board will implement a reward programme that it believes will fully incentivise the management over the long-term.  The remuneration committee is managing the business prudently and the structure is being put in place to ensure that the team can build value and reward all stakeholders including themselves.   While the Company has been restructured, the Board has been on limited remuneration and deferred pay.  It is fully committed to making the business a success.

What initiatives are being initiated for shareholder engagement?

The Company needs to focus on building its business.  It understands the importance of shareholder engagement but needs to focus on operational performance to generate value.  Accordingly, the Company is initiating monthly written shareholder Q&A's, where it will endeavour to answer questions submitted to the IR lines.   The Company wants to promote transparency and reports all price sensitive news, that it is able to release, through the RNS channel.  The sensitive nature of some transactions/contracts means that it is unable to provide some information requested.  Transactions that breach the class tests under stock exchange rules will obviously be reported but ones with lesser considerations will not be announced, as the Company believes this may be detrimental to future negotiations for additional acquisitions/contracts.  The financial performance will be reflected in the reporting of the financial calendar and once the business matures, Quarterly KPI's will be published.

As per the RNS released on 16 August, the Company has created a number of points of contact to help with investor relations.  A dedicated email has been set up [e-mail], where investors can submit questions which the Company will endeavour to answer regularly.  Additional investors can call two numbers where messages can also be left:

Tel: [phone]

Tel: [phone]

To be added to the Iconic Labs mailing list and receive all regulatory news, shareholders should send a request to [e-mail].

**ENDS**

For further information, please visit the Company's website www.iconiclabs.co.uk, email [e-mail] or contact:

John Quinlan	Iconic Labs Plc	c/o SBP Tel: [phone]
Damon Heath	Shard Capital Partners LLP	Tel: [phone]
Erik Woolgar	Shard Capital Partners LLP	Tel: [phone]
Melissa Hancock	St Brides Partners Limited	Tel: [phone]
Juliet Earl	St Brides Partners Limited	Tel: [phone]

 

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