Iconic Labs PLC New management services contract with JOE Media (3221S)

TIDMICON

RNS Number : 3221S

Iconic Labs PLC

08 July 2020

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

New management services contract with JOE Media Business generating revenues of at least GBP50,000 a month. Intention to look at conventional financing options to replace current facility.

Iconic Labs Plc (LSE:ICON), a multidivisional new media and technology business, today announces that it has entered into a management services contract with Greencastle MM LLP ("Greencastle Capital"), which has at the same time, completed the acquisition of the JOE media UK business, which includes the 'House of Rugby' show, the most watched Rugby show in the world, out of administration. The JOE media businesses already generate in excess of GBP10m of revenue per year.

-- Under the terms of the management services contract, which came into effect today, Iconic Labs will be paid a monthly management fee of GBP50,000 plus external costs, and in addition shall receive 25% of all profits if certain revenue and profit targets are met.

-- Iconic Labs anticipates this management services contract will contribute a significant amount of revenue to the Company and will enable Iconic Labs to become operationally profitable within three months.

-- Iconic Labs will immediately manage all operational and commercial aspects of the JOE media businesses in the UK and will do so in Ireland following regulatory clearance. JOE media is a market leader in digital media in Ireland and in the UK described as 'most influential publisher' by the BBC.

-- The JOE media businesses generated in excess of GBP10m of revenue in FY 2019 with the UK part of the business having grown annual revenue at an annual rate of 117.7% between 2016 and 2019.

JOE Media

Greencastle Capital has acquired the JOE media business in the UK out of administration. It expects to imminently sign a contract for the acquisition of the JOE media Irish business and once an Irish Media Merger notification period has expired completion of the acquisition of the JOE media Irish business will occur. This is expected to take place within two months.

The management services contract with Greencastle Capital also provides that Iconic Labs will manage the JOE media Irish business once completion of the acquisition of the JOE Irish business has occurred in Ireland.

JOE media is the largest independent digital media company in the Republic of Ireland and has been one of the fastest growing media companies in the UK since its launch in 2015. JOE media is particularly well known for the 'House of Rugby' series which, aside from live matches, is the most watched rugby show in the world with the most recent series sponsored by Guinness. In 2019, JOE media generated the majority of its revenue by working with many global brands and blue-chip clients.

JOE media has developed ten digital lifestyle channels: JOE.uk, JOE.ie, Her.ie, HerFamily.ie, FootballJOE, PoliticsJOE, MMAJOE, SportsJOE, RugbyJOE and ComedyJOE. Having started as a single website, JOE.co.uk has evolved into an active publisher with distinct media brands and 17 original series. The combined social following of JOE media now stands at over 11 million.

JOE media is a trusted and highly reputable brand regarded by key industry figures as one of the brightest and most important entities in the Irish and UK media landscape in the past decade. In the past 12 months alone, JOE media has won the European Publisher of the Year award, had the most viewed political video anywhere in the UK during the 2019 general election period, and had the most shared video on YouTube in 2019. JOE media has invested in its journalistic and production capabilities, and this has resulted in excellent and incisive writing combined with broadcast-quality video production.

The Company believes that resolving the duplication of costs by moving to a one-company structure covering both Ireland and the UK (following completion of the acquisition of the JOE media business in Ireland), together with a more disciplined focus on revenue capture, will enable Iconic Labs to return JOE media to profitability in 2021, or before. In parallel, the Company will work on growing the existing channels and brands as well as expanding the coverage into new areas and sports, while maintaining rigorous quality control on writing and production. Iconic Labs will also seek to create profitable links into mainstream media content providers including terrestrial broadcasters.

Given the number of channels where JOE media currently has a presence Iconic Labs believes there are several growth opportunities even without the need to add additional resources. In particular, Iconic Labs believe the Her and Her family brands have got significant potential after previously being underutilised.

As part of managing all commercial aspects of the JOE media and House of Rugby businesses, the Company will also manage the existing JOE media team and be responsible for general day to day management of the business. In consideration, Iconic receives a monthly retainer fee of GBP50,000 plus external costs and shall receive 25% of all profits if certain revenue and profit targets are met.

The management services contract commenced today and is for an initial period of one year, following which it renews automatically every 12 months until terminated by both parties. It is intended to run in perpetuity.

Balance sheet of Iconic Labs and future funding

Iconic Labs believes that the step change in revenues, operations and prospects as a result of this management services contract allows for a strategic financial review of Iconic Labs itself. This will specifically include a review of how the Company is funded. Consistent with the previously announced intention, it is hoped that this will provide an opportunity for the Company to raise sufficient capital to be able to clean up its balance sheet. This could include a conventional equity fundraise and/or conventional debt facilities, and the Company aims to have the new funding in place in the autumn of 2020. Iconic Labs does not intend to enter into another variable conversion facility or similar arrangement.

John Quinlan, Chief Executive Officer of Iconic Labs, said :

"We are delighted to have been involved in Greencastle Capital's successful bid for JOE media, which involved a very competitive sales process among more than 15 different bidders.

The acquisition of the JOE media UK businesses by Greencastle Capital is by far the biggest deal we have been involved with as a Company so far. Both the JOE media business and the management contract structure fit our strategy of leveraging scarce capital while operating the best brands in digital media. With JOE media's credibility in specific areas like politics and sport, Iconic Labs now has access to some best in class assets through the management services contract.

With access to these assets and significant immediate revenues, the Company's business is now reached the stage where we can as promised consider other financing arrangements. I hope this deal will provide an opportunity for the Company to raise sufficient equity capital to be able to look at the Company's options for more conventional equity raises and/or conventional debt in order to finance the Company's growth on a more conventional funding basis."

Liam Harrington, Chief Business Officer of Iconic Labs, said :

"The JOE product and brands are incredibly exciting. As well as being the largest independent digital media business in Ireland it is one of the most respected brands in the UK for it's coverage of news, sport and politics. We, the team at Iconic Labs, are able to transfer the skills used to build one of the World's largest digital publishers in UNILAD, and use them to grow and develop in JOE media what is already a prestigious brand with an offering that is unique and unrivalled in quality within the market. We have many unused plans that can now be rolled out to help JOE media further develop further as the market leader within the digital space in the UK and Ireland. We also intend to look at joint ventures or other opportunities with existing broadcast media, and in Katharine Lewis have a non-executive director who is perfectly placed to assist us in doing so."

Paul O'Donohoe, Partner, Greencastle Capital, said:

"We are very excited by our acquisition of JOE media, which is one of the most reputable and recognisable digital publishing brands in the UK & Ireland. Greencastle Capital, alongside Iconic Labs with its commercial expertise in this space, have plans to invest in this business in a focused way that will ensure its long-term sustainable growth. While the UK & Irish companies were separate entities before, the intention, following completion of the acquisition of the Irish business is to combine the two to create one single JOE media business. In combining the two entities, the sheer scale of the UK market makes that the key area for growth opportunity for JOE media. However, JOE media is a brand which is Irish to its roots and therefore it is expected that the Irish acquisition company will be the holding company for the structure of the JOE media businesses following completion of the acquisition of the Irish JOE media business, and JOE media's global headquarters will be in Dublin. In the current digital media landscape, we are seeing more opportunities like this to restructure valuable brands such as JOE media to set them up for success and this addition to our portfolio is a major milestone in our plans."

Note to Editors: JOE Media, Reasons for Sale and Deal Structure

Having established itself in the market from the ground up, JOE media was historically profitable in its core business in Ireland but with expansion into the UK it made losses overall. However the Irish and UK businesses were legally separate with each owned directly by the same individual shareholders. The COVID-19 crisis led to short term decrease in revenues and cash flow, as clients and advertising agencies reduced spend due to falling consumer demand and financial uncertainties. Of particular relevance to JOE media was the cessation of all professional sport (primarily football, rugby and cricket), on which several of its principal series are based.

Both UK and Irish operating companies were funded by the same financial investor, whose relationship with the individual shareholders deteriorated over concerns about senior management costs and the costs of expanding into the UK. When the JOE media businesses breached their debt covenants the financial investor declined to waive rights or agree to a standstill and the businesses were put into Administration and Examinership processes respectively. Seventeen bidders took part in the auction process, with the eventual winner being Greencastle Capital.

Greencastle Capital is managed jointly by David Sefton and Paul O'Donohoe. It is owned by Linton Capital, a 15 year old private equity business, which is owned by David Sefton, the former Chairman of Iconic Labs, who continues to work with Iconic Labs. David's ownership of Linton Capital pre-dates the existence of Iconic Labs and is run entirely separately from the Company. Neither David Sefton or Paul O'Donohoe sit on the board of Iconic Labs and all transactions between Iconic Labs and Linton or Greencastle Capital are carefully considered by the board of Iconic Labs and conducted on an arm's length basis.

The structure as set out in the management services contract is that Iconic Labs provides it's commercial expertise in running all commercial and operational activities of JOE media in consideration for a GBP50,000 monthly management fee plus external costs and in addition shall receive 25% of all profits if certain revenue and profit targets are met. As part of negotiating the management services agreement, the Company has entered into a GBP1 million loan agreement with Greencastle Capital. The loan is repayable within one year, or can, at the sole discretion and election of the Company, be converted into equity in the JOE media Business using a valuation which is a 20% discount to the enterprise value of the JOE media Business as acquired by Greencastle Capital.

Greencastle Capital has now completed Greencastle Capital's acquisition of the JOE media business in the UK and expects to enter into a binding contract in respect of the Irish company imminently, and following successful clearance under the Irish merger notification process Greencastle Capital will own 100% of JOE media in both the UK and Ireland.

David Sefton will be Chairman of JOE media and Paul O'Donohoe will be Executive Vice Chairman of JOE media. Going forward they intend to appoint representatives from Iconic Labs to the board of JOE media.

Market Abuse Regulation (MAR) Disclosure

The information contained within this announcement is deemed by the Company to constitute inside information for the purposes of the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

**ENDS**

For further information, please visit the Company's website www.iconiclabs.co.uk or contact:

 
 Damon Heath   Shard Capital Partners   Tel: [phone] 
                LLP 
 
                                                   Iconic Labs                                          [e-mail] 

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July 08, 2020 02:00 ET (06:00 GMT)