Zinc Media Group (ZIN ), a TV and multimedia producer, has announced a placing of shares at a discounted price to help fund the acquisition of Edge Picture Co.
Zinc Media is looking to raise £5m via a placing of 5 million new shares at a price of 100p/share, representing a 7% discount to the closing mid-price of Zinc Media on 2 August 2022. The proceeds will be used to fund the £2.1m acquisition of Edge Picture Co, another broadcasting and media production company, as well as providing additional growth capital for Zinc Media and its subsidiaries. In total, the new shares will represent 32.4% of Zinc's existing share capital.
Retail participation
Zinc Media will also allow retail participation in the fundraise, up to £250K, via the platform REX rather than PrimaryBid.
REX is fully owned by UK investment bank and popular small and mid-cap broker Peel Hunt. The platform has been gaining traction and was recently adopted by AJ Bell and Hargreaves Lansdown for their new retail offer services. REX is being touted by Peel Hunt as a "democratisation of capital markets", expanding retail access to IPOs and fundraises significantly in the UK.
Existing Zinc Media retail shareholders can refer to their broker in order to participate in the REX retail offer. AJ Bell, Hargreaves Lansdown, and Interactive Investor, three of the largest retail brokers in the UK, have already confirmed participation, with a minimum subscription of £50 per applicant.
Availability of the REX retail offer is conditional on the new shares being admitted to trading on AIM, expected to occur at 8 AM on 23 August 2022.
Zinc Media said a circular including further details of the placing, the REX retail offer, the acquisition of Edge Picture Co, and related general meeting, will be made available to shareholders around 4 August, and then published on the company's website www.zincmedia.com.
Edge Picture Co
Edge Picture Co (Edge) is a corporate film making production company. It is one of just a few major players in the UK brand and corporate production market, which is valued in excess of £1b per year. In FY 2021, Edge generated £8.2m of revenue , delivering an adjusted EBITDA profit of £0.8m and pretax profit of £0.5m. As of June 2022, Edge had £8m of revenue booked for 2022.
Zinc Media said it would offer an initial consideration of £1.56m in cash and £0.54m in new shares for Edge, as well as an additional consideration of up to £3.875m satisfied by a combination of cash, new shares, and/or issues of loan notes, contingent on Edge generating £5m of EBIT over a 3-year period ending 30 June 2025.
Zinc Media's management believes this acquisition will add scale and be "earnings accretive" in the long-term. Zinc sees opportunities for organic revenue growth with "attractive operational leverage".
Edge Picture's long-term client relationships will present "up-sell and cross-sell opportunities" for the enlarged entity, according to Zinc. In FY 2021, 75% of Edge's business was from repeat customers.
For Zinc Media, the move represents significant revenue diversification by increasing its proportion of non-TV revenues, and presents opportunities for new synergies as Edge operates in complementary production markets.
Zinc Media FY 2021 results and stock performance
On April 22, Zinc Media released final results for the year ended 31 December 2021 (FY 2021).
The company registered £17.5m in revenues, with H2 2021 revenues up 50% from £7m in H1 2021. Its adjusted EBITDA loss for the year was £0.6m, although H2 2021 saw adjusted EBITDA profit of £0.5m. Also in H2, Zinc Media generated free cash flow of £0.5m. These numbers indicate a good post-pandemic recovery in H2 2021.
Zinc Media also continued to diversify its revenue base. Five new businesses were launched in 2020 and 2021, introducing new content creation areas, which collectively generated £5m or 29% of the company's revenue in FY 2021.
On 26 May 2022, Zinc Media released a trading update which reported £17m of revenue already booked for 2022.
Zinc Media's stock fell 5.5% today on the news of the placing via discounted shares. However, Zinc Media shares have performed well over the past year despite difficult economic and market conditions. ZIN stock is up 39% YTD and 74% in the past 12 months
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