Can UK-listed VR firms still live up to the hype?
This week saw the International Data Corporation announce that global shipments of augmented reality (AR) and virtual reality (VR) headsets are set to grow 54pc to 9m units this year. Meanwhile, over the longer term, shipment numbers are expected to increase at an impressive rate 68pc annually before reaching 69m in 2023.
These bullish figures paint a very healthy picture for VR – where many have awaited growth for some time – that contradicts the recent subdued performance of many of Britain’s growing number of listed firms in the area. Here, we revisit some of the most well-known UK-listed stocks in the VR sector to see what they have been doing and where they could be heading next.
EVR Holdings, which is arguably the most covered VR stock on London’s junior market, owns an application called Melody VR. The product simulates the experience of being at a live concert and allows fans to buy digital tickets to sold-out real-world events.
The company has secured numerous high-profile deals across various areas over the last couple of years. For example, it has licencing agreements in place with the likes of Warner/Chappel, Big Machine Label, and even Sony/ATV – which owns the rights to records by artists like The Beatles and The Rolling Stones. These multi-year deals typically allow EVR to distribute a label’s music through MelodyVR.
The firm has also bagged arrangements with popular gig venue operators like NEC Group and Ansco Arena Ltd, which runs the O2 arena in London. It even streamed its first-ever virtual gig with One Direction’s Liam Payne in December.
Elsewhere, EVR has also revealed several deals with leading tech companies. Most recently, it announced that it would release a new version of MelodyVR for use on Facebook’s forthcoming Oculus device. It will offer a similar look and feel to previous iterations of MelodyVR but will feature updated features and functionality as well as new content. EVR will receive a financial contribution to offset MelodyVR’s production and development costs as part of the agreement. Following the launch, the product may also be made available on other platforms.
Unfortunately, despite having its fingers in so many pies, EVR has struggled to recover since peaking at c.18p a share last April. Indeed, so far this year, the firm has failed to break out beyond 5p. The organisation’s decline began around the same time as its launch of MelodyVR, and a £20m fundraise to support the platform’s growth.
On the one hand, some would argue that the company’s inability to recover since this placing is indicative of fading interest in its offering. However, those who believe in VR’s prospects over the coming years are likely to see it as an opportunity. After all, the business’s deal flow has continued in line with its highly ambitious strategy.
EVR’s appointment of former Universal Music CFO Andy Brown as its chief financial officer prompted a 27pc increase in its share price in December. This reaction suggests that the market believes Brown can use his vast experience to provide a necessary boost to EVR’s finances. We will wait and see whether this is the case. Now that EVR’s software is running and its deals are in place, its success will come down to whether it can make a success of its unique model.
Another business that has struggled to maintain momentum since listing is VR Education. The firm rose to highs of 25p shortly after entering the market last April but has since fallen to 9.5p.
As its name would suggest, the company focuses on the growing educational VR market. Its flagship product is an online virtual learning and corporate training platform called Engage. The product, which was launched commercially in December, aims to overcome the limitations of existing online courses and learning methods. These include a lack of student places, low completion rates, geographical boundaries, and rising costs.
Engage allows ‘educators’ to create virtual classes, recording their movements and speech to play back to students. It also offers face-to-face interactions and features like virtual whiteboards, screen sharing capabilities, interactive lessons, and live playback. On the corporate side, it allows employers to replicate critical events in a safe and interactive environment.
Engage has already captured the interest of many key players within its market, with VR Education striking up partnerships with institutions like the BBC and Nokia as well as several universities. What’s more, upon releasing the software, the organisation laid out several revenue-generating opportunities for the service including subscription and revenue-share models with both educational institutions and corporations. It is also examining the possibility of opening Engage up to third-party developers on a licence fee basis.
Alongside Engage, VR Education also offers standalone VR showcase experiences. So far, this has included recreations of the Apollo 11 moon landing, the sinking of the Titanic, and, most recently, the famous Dambusters mission. A space shuttle simulation is slated for release in H2 this year. These products are available on various VR platforms, including Oculus Rift, HTC Vive, and Windows Mixed Reality Devices.
VR Education is generating some revenues from its standalone experiences. For example, it enjoyed record monthly revenues in December thanks to €100,000 worth of turnover from its Titanic experience. Meanwhile, revenues for the whole of 2018 came in €716,000, up 15pc on 2017.
However, the outfit has previously said that it does not expect Engage to generate significant revenues until the general adoption of VR increases over the next two or three years. This makes sense when you consider that the business made an overall loss of €4.9m in 2018. That being said, it is worth noting that this was in line with management expectations and stemmed from the cost of developing the product range.
With this two-to-three-year revenue delay in mind, like all of AIM’s VR plays, backing the organisation is something of a bet on the VR sector’s long-term success. However, with its first-mover advantage in the promising virtual education space, some existing revenues, and plenty of cash in the bank (€3.5m as at 31 December), VR Education certainly looks like an interesting punt.
The firm has been fairly quiet so far this year. It will be interesting to see what it does with its cash over the coming months and whether this can help to elevate its market cap above £18.3m, where it currently sits.
Dev Clever Holdings
The newest addition to AIM’s growing suite of VR players is Dev Clever Holdings, which entered the market in January. Upon listing, Dev said it spent the 2017/18 financial year focusing on the development of its core gamification, education, and experience products with the support of debt financing. It said it decided to list as part of its next growth phase, which will see it move towards becoming a ‘productised SaaS business, offering its existing and new customers products on an annual licence basis’.
Since listing, it has launched a multi-player, virtual reality game called ‘Vanguard: fight for Rudiarius’. The pay per play game – introduced at Quasar in Essex – allow up to eight people to ‘compete against each other as space-age gladiators in full 360 virtual reality’. While this launch alone may not sound significant, the company said it signified the start of its plans to roll out ‘lightweight, low-cost installations’ of multiplayer VR experiences across the UK leisure and hospitality sector.
Shortly after this, Dev launched a new career guidance product called LaunchPAD. The platform matches young people to the careers that suit them before providing live government statistics and expert information about the job. It was released in parallel with an integrated VR application called VICTAR that, in Dev’s words, ‘takes the young person through an immersive, guided virtual reality journey to discover their personality and interests. The user can then explore, through full 360-degree environments, the careers and training opportunities that suit them the most.’
Finally, Dev has also launched a cloud-based consumer engagement platform called Engage (nothing to do with VR Education’s platform). This allows brands and retailers to deliver discount rewards and voucher-driven consumer incentives that are entirely controlled by its proprietary gamification engine. Since launching Engage early last month, Dev has announced a commercial partnership agreement for the platform and well as a significant integration agreement.
It is fair to say that Dev has hit the ground running since listing and, while shares have fallen from highs of 14.8p to their current 8p, the business has still held up reasonably well amid difficult VR market conditions. It is early days for the company, and it will be interesting to learn more above it as it continues to release updates. If it can strike the right chord with investors in one of the various sectors it has positioned itself in, then it’s market cap could head north of its current £29.3m.
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The author does not hold shares but was remunerated