iCreate hunts fresh cash to recapitalise
Published:Wednesday | December 23, 2020 | 12:06 AMNeville Graham/Business Reporter
It’s been a rocky ride for listed training institute iCreate. On top of carrying sizeable accumulated losses that have grown over the past two years, the company has seen a dramatic revenue slide from $24.5 million in its first quarter this year to just shy of $8 million for its third quarter to September, although it managed to eclipse nine months income for last year by $6 million. The 2020 third quarter fall-off from the more than $16 million the company turned over in the corresponding three months last year, is in the region of 52 per cent. Even as a $7 million non-cash revaluation moderated a nine-month net loss of $2.2 million, the four-year-old company registered a third quarter loss of $5.3 million after posting conservative profits of $1.2 million and $1.8 million in the first and second quarters of the year, respectively.
On the back of the release of third quarter results to September, showing COVID-19 pressures nixing a valiant push to grow revenues and profits over last year, and to turn the corner on a $45 million loss in 2019, Tyrone Wilson, CEO of the firm that listed on the junior index of the Jamaica Stock Exchange in early 2019, says the company is eyeing the equities market to raise needed cash.
“We are looking at possible fundraising to recapitalise the company. I don’t think the company can afford debt at this time. We are looking for capital to continue the expansion and to look at some of the ideas we have coming on stream,” Wilson told the Financial Gleaner, stopping short of disclosing how much the firm would be tapping the market for, the precise capital-raising instrument or a firm timeframe for the cash raise.
iCreate is already carrying debt, having taken borrowings of $24 million through an issue of 5-year bonds earlier this year.
In its 2019 annual report, iCreate’s auditors had drawn attention to its mounting losses and sluggish revenues.
“From inception, the company has not achieved the level of revenues projected and required to sustain its operations. This indicates the existence of a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern,” the auditors wrote.
The current year has brought a mixed bag of fortunes for iCreate, which outperformed 2019 Q2 earnings in the corresponding period this year to grow income for the nine months to September to more than $47 million, despite a sharp revenue fall-off in the September quarter. In terms of net profits, iCreate has seen some bright spots, with the fledgling company emerging from $12.5 million in the red for the nine months last year, to just over 2 million in losses in the same period this year, notwithstanding a $5.5 million loss in the most recent quarter.
The institute’s revenues for the nine months ending September was 13.8 per cent more than the $41.4 million for the similar period in 2019. The nine months total also outpaced the $46.35 million it earned for all of 2019. Wilson says the increased revenue, reduced costs and existence of some profit, are evidence of improved performance.
“A look at our last three reports indicates that we have been steadily progressing,” according to Wilson.
The third quarter results showed that iCreate posted total comprehensive income of $1.7 million after a $7 million revaluing of assets to book a licence it acquired to deliver coding and data security courses. The asset revaluation moderated the third quarter net loss of $5.3 million.
iCreate has sought to stem the haemorrhaging of cash by cutting costs and seeking to revamp its business model.
“Almost immediately following the onset of the pandemic, we made some adjustments including reducing our costs across the board. We closed the Montego Bay location and reined in other items, while continuing to grow revenues,” Wilson said of the adjustments.
iCreate develops and delivers degree and certificate courses to students in the creative areas including advertising, film, animation, graphic design, mobile games development and fashion design.
Wilson says expenses have been cut by about 40 per cent as the institute migrates much of its teaching online.
“Moving a lot of the classes online has allowed us to keep costs down while growing aggressively,” according to Wilson, noting that the move has helped to shrink operating bills.
“With the advent of the pandemic, we’ve had to move into lower margin products and we are working with the individuals’ ability to pay,” Wilson noted as some of the challenges facing the firm that is 12 per cent owned by insurance conglomerate Sagicor.
On December 28, iCreate will hold its annual general meeting, at which Wilson says he will make the case for recapitalisation. He will also be seeking a nod from shareholders to reorganise the board. This would be the second major board shakeup in quick succession. Last year, iCreate lost some board members including then chairman Sandra Glasgow. In April this year, the board was cut in half in a reorganisation. In September, executive chairman Dr Jennifer Bailey tendered her resignation and exited the board. She has been replaced by Arlene Martin as a director and acting chairperson.
General manager Sophia Harris and chief financial officer, Antoinette Hamilton, also resigned earlier this year.
“When we speak to our shareholders at the AGM, we will be outlining adjustments to the overall structure of the company. We are looking to have something that is nimbler and stable (with) greater cohesion in terms of the relationship between management and the Board,” Wilson said.