Quickflix boss defends $5.5m share capital raising and signals shift in marketing strategy
Stephen Langsford, the chief executive of DVD rental and online streaming company Quickflix, has defended a new capital raising, announced yesterday, saying the $5.5m will be used for more marketing and invested in greater content for the service.
This is third time in a year the company has gone to market for equity funds. In November last year the company faced a cashflow crisis, which saw the share price collapse from 0.05 cents to 0.013 cents, and then it had a second injection of $1.7m from the Crede Capital Group in March.
Langsford told Mumbrella the capital raising, which will be down in two rounds, is being done to position the company for growth and to fund a new round of marketing.
“The reason we are doing this is for growth,” said Langsford, “”We are in a now great position to do more marketing and invest in more content.”
Quickflix has previously been using television advertising but will now return to using direct channels and its relationships with partners such as AAPT, following a restructure earlier this year.
“Going forward our marketing approach has reverted to cost effective performance-based direct response with our channel partners to bring on more customers.
“We have successfully affected a restructuring and reset the costs of the business. That has been achieved through the streamlining of the DVD business, outsourcing our call centres and announcing a deal with AAPT, which gives us scale.
“As we’ve singled with our update to the market we are now back on the growth path having reset our costs to a new level and with our cash burn down to a record low.”
The $5.5m capital raising will be raised through a share placement at 1cent per share raise $2.1m and an underwritten rights issue to raise $3.4m. Quickflix shares last traded at 1.5 cents.
The capital raising comes after end of financial year result showing a loss of $6.4m on revenue of $19m. Langsford noted that this capital raising would allow Quickflix to pay outstanding debt of $900,000.
“This additional cash will enable us to invest in additional growth marketing and invest in content and we are also cleaning up our balance sheet, removing the debt that was there, ” he said.
“This puts the company in a strong position as our streaming business grows.”
Quickflix faces any increasingly competitive market with new entrants such as Hoyts, Telstra, EzyFlix all establishing a toehold in the streaming market. Foxtel has also launched a non-contract product in the market, Foxtel Play.
“It is early days in the market but the market appears to be turning on to streaming and these funds will enable us to go forward,” said Langsford.
Nic Christensen
I think they missed the streaming boat!!
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