TIDMTM17

RNS Number : 7267L

Team17 Group PLC

10 September 2019

10 September 2019

Team17 Group plc

("Team17", the "Group" or the "Company")

Half year results

New content momentum delivering record breaking performance

Team17, a global games label, creative partner and developer of independent ("indie") premium video games, is pleased to announce its unaudited interim results for the six months ended 30 June 2019 ("H1 2019").

Financial highlights:

   --    Revenues increased 97% to GBP30.4m (H1 2018: GBP15.4m) 

o Revenue profile across FY19 more H1 weighted than previous years due to release schedule

   --    Gross profit up 119% to GBP15.1m (H1 2018: GBP6.9m) 
   --    Gross profit margin of 49.8% (H1 2018: 44.4%) 
   --    Adjusted EBITDA* up 145% to GBP12.0m (H1 2018: GBP4.9m) 
   --    Adjusted Earnings per share ("EPS")** up 356% to 7.31 pence (H1 2018: 1.63 pence) 
   --    Operating cash conversion of 109% (H1 2018: 200%)*** 
   --    Net cash and cash equivalents of GBP35.8m (H1 2018: GBP16.7m) 

Operational highlights:

   --    Launched several new releases in the first half, including: 

o Genesis Alpha One and My Time at Portia, both early launch titles on the new Epic Game Store

o My Time at Portia successfully exited Early Access on Steam, achieving global #1 in January; a successful launch on console followed in April 2019

o Hell Let Loose, the WW2 military simulation and our Games Label's first 100-person multiplayer game, successfully released via Steam Early Access in June, reaching #1 globally

   --    Continued strong performance from our back-catalogue portfolio of over 100 games 

-- Ongoing investment in our facilities, alongside increased recruitment of new commercial and creative talent:

o Development studio relocation planned for H2 2019; a larger site with increased capacity to accommodate Team17's growth ambitions

o Headcount increased to 164 (H1 2018: 154)

   --    Industry recognition at key global awards 

o Yoku's Island Express won the BAFTA for Best Debut Game in April 2019

o Overcooked! 2 won Game of the Year at the Develop: Star Awards in July 2019

-- Board strengthened with the appointment of Jennifer Lawrence as Non-Executive Director and Chair of the Remuneration committee and the appointment of Martin Hellawell as Non-executive Director, announced in September 2019

Outlook:

-- Solid selection of third-party releases planned for H2 2019 from across our global developer network

   --    The Board looks ahead with confidence and is comfortable with full year expectations 

Debbie Bestwick MBE, Chief Executive Officer of Team17, commented:

"Our results during the first six months really underline the dedication and hard work of our people and external Games Label partners, and I want to thank every one of them.

I'm delighted with the excellent start to FY2019, delivering record revenues and operating profit in the period as well as successfully launching several high-profile games.

We have a solid line up of new games to release in H2 2019 and look forward to updating our shareholders on our continued progress in due course".

*Adjusted EBITDA is defined as operating profit adjusted to add back depreciation of property, plant and equipment, amortisation of brands and impairment of intangible assets (excluding capitalised development costs), share based payments and any exceptional items. Exceptional items are those items believed to be exceptional in nature by virtue of their size and or incidence. Exceptional items are detailed in note 4.

** Adjusted EPS is defined as profit after tax adjusted to add back any exceptional items divided by the Weighted Average Number of Shares. Exceptional items are those items believed to be exceptional in nature by virtue of their size and or incidence. Exceptional items are detailed in note 4.

*** Operating cash conversion is defined as cash generated from operating activities as per the statement of cash flows, divided by EBITDA including the add back of amortisation of development costs (not normally included in EBITDA)

Enquiries:

 
 Team17 Group plc                                     via Vigo Communications 
  Debbie Bestwick MBE, Chief Executive Officer 
  Jo Jones, Chief Financial Officer 
 GCA Altium (Nominated Adviser) 
  Adrian Reed / Paul Lines                            +44 (0)845 505 4343 
 Berenberg (Broker) 
  Chris Bowman / Toby Flaux / Marie-Agnes Stolberg    +44 (0)20 3207 7800 
 Vigo Communications (Financial Public Relations) 
  Jeremy Garcia / Fiona Henson / Charlie Neish 
  team17@vigocomms.com                                +44 (0)20 7390 0238 
 

About Team17

Founded in 1990, Team17 Group plc is a leading international premium video games label and creative partner for independent developers.

Beyond developing and publishing its own IP in-house, Team17 is also a premium video games label and creative partner for developers across the world. Team17 leverages its unique go-to-market expertise to support its partners in the development and publishing of games across multiple platforms, typically for a fixed revenue share post game launch. All investments are undertaken in a low risk manner, typically using milestone payments during the development process.

The portfolio comprises over 100 games, including The Escapists, Genesis Alpha One, My Time at Portia, Overcooked, Yoku's Island Express, Yooka-Laylee, the Worms franchise and many more from developers around the world. Visit www.team17.com for more info.

OPERATIONAL REVIEW

Summary

Last year's momentum has continued into 2019, with strong growth in the first half of the year; revenues are up 97.4% to GBP30.4m (H1 2018: GBP15.4m) and gross profit up 118.8% to GBP15.1m (H1 2018: GBP6.9m). We expect the 2019 revenue profile to be more weighted towards H1 due to the profile of scheduled releases.

Since our inception, we have launched over 100 games, all focused on the premium rather than free-to-play-market. This extensive back catalogue, including iconic titles such as Worms, Overcooked, The Escapists and Yooka-Laylee, continues to generate significant revenues.

Our first half has been driven by a mix of new launches and a strong performance from back catalogue titles. In H1 2019, 73.7% of revenues came from our back catalogue (H1 2018: 79.5%), with the remainder of revenue from new game launches.

We are well positioned to capitalise on the continuing growth of digital distribution channels, enabling us to open our extensive library of games to the widest possible audience, and maximise both the life cycle and revenue generation of each individual game.

Our ongoing commitment to growth is based around the following strategic pillars, namely:

-- New games & content - to maintain a steady flow of high-quality new releases alongside additional digital content launches;

-- Technology - to remain at the forefront of innovation, leveraging digital distribution and new emerging digital platforms;

-- IP back catalogue - to continue to capitalise on back catalogue opportunities and to optimise life cycle management revenue streams;

-- M&A - to consider selective acquisition opportunities that complement our strategy and align with our values; and

   --    People & skills - to continue to strengthen our team to support all our growth aspirations. 

We have actively released several new games and post-launch content across multiple platforms during the first half of 2019, including:

 
 My Time at Portia   First Chinese label partner launched 
                      out of Early Access in January 2019 
                      on Steam and the Epic Games store 
 My Time at Portia   Full console launch in April 2019 
 Genesis Alpha One   Launched January 2019 simultaneously 
                      on Epic Games store, PlayStation 4 and 
                      Xbox One 
 Escapists 2         Launched January 2019 on mobile 
 Hell Let Loose      Launched June 2019 into Early Access 
                      on Steam 
 Overcooked! 2       Additional DLC launched across multiple 
                      platforms 
 

In June, we launched Hell Let Loose into Early Access on Steam, a 100 player, military simulation, first person, WW2 shooter. This is our first game launch in this genre and our first on this scale and relies on strong communication and strategy between players. Since its Early Access debut we've seen positive and encouraging player feedback from the game's growing community, improving Hell Let Loose as it gets closer to leaving Early Access in 2020.

As part of our life cycle management, we have also developed and launched new downloadable content ("DLC") to extend player engagement and grow our fanbases. In February 2019, we celebrated Chinese New Year with a free update for Overcooked! 2, which led to an ongoing demand for the game.

Throughout the rest of 2019, we will continue to launch games and DLC content for existing titles:

 
 Automachef                      The challenging kitchen creating 
                                  puzzler 
 Monster Sanctuary               The monster collecting metroidvania 
 Blasphemous                     The punishing action platformer 
 Yooka-Laylee & The Impossible   The second title from Playtonic 
  Lair 
 Worms WMD                       Further downloadable content 
 Overcooked! 2                   Further downloadable content 
 

Digital distribution from established brands - such as Valve's Steam and new digital platforms like the Epic Games Store - has significantly reduced barriers to entry for developers looking to bring games to market. Through our Games Label, we can support independent developers of all sizes (wherever they are located in the world) to launch their titles and maximise their commercial value.

We continue to evaluate a large number of opportunities and potential partnerships through the label's greenlight process. Promising games are identified through our people's existing relationships within the games industry, desk research, crowdfunding platforms or direct submission to the Company itself. Our rigorous screening process ensures opportunities that do progress have the highest chance of success at launch and post launch, through DLC and updates.

In February 2019, we announced a new partnership with Blacklight Interactive on the successful mini-golf game, Golf With Your Friends!. We will continue to work as a full creative partner with Blacklight Interactive, developing updates and new content for the game, as well as publishing it via our Games Label. Initial feedback on Golf With Your Friends!, which is currently available on Steam Early Access, has been positive.

Wider market dynamics

According to a recent report from Newzoo(1) , the global games market is expected to grow to over $150 billion in 2019 and over $196 billion by 2022.

In H1 2019, Sony and Microsoft both announced they will be launching their next generation consoles in 2020, which will incorporate upgraded technology, architecture and graphics capabilities. We are also seeing technology giants entering the market. In March, Apple announced it would be launching Apple Arcade later in 2019, its video game subscription service. Google has announced Stadia, which is due for launch in November 2019. The level of impact caused by the services remains to be seen, but we are well-placed to benefit due to the increased number of distribution channels and IP we look after.

The proliferation of PC digital distribution continues apace, with Steam and the Epic Games store now boasting over 90 million active users and 85 million active users(2) respectively. The evolution of digital distribution has lowered the barriers to entry for independent developers looking to launch games to a wider market. Furthermore, gaming development tools are also now more accessible, enabling independent developers to quickly and inexpensively convert concept to reality.

We will remain focused on the premium indie market. The increasing number of distribution channels only serves to increase the potential addressable market for our games. Our portfolio approach - which remains genre agnostic - means we are able to fully capitalise on this increasing audience.

[1] https://newzoo.com/insights/articles/the-global-games-market-will-generate-152-1-billion-in-2019-as-the-u-s-overtakes-china-as-the-biggest-market/

[2] https://www.businessinsider.com/epic-games-store-total-users-2019-3?r=US&IR=T

Current trading and outlook

We are delighted with the progress made in the first half of 2019, delivering a record H1 performance and successfully launching several new games. We have a solid line up of new releases in H2 from our partners and remain fully focused on our back-catalogue lifecycle as we continue to maximise revenue with existing and new distribution partners.

As said at FY18 year end, our exciting industry continues to grow at a rapid pace. We believe there are more opportunities than ever before for controllers of IP; content creators and publishers. Our ever-growing portfolio, we believe, places us in a strong position to benefit from additional activity in areas such as subscription and the cloud. All channels will need content and looking ahead, these channels will need ongoing content to replenish their stores and offerings.

We equally continue to invest in both commercial and creative talent across both our Wakefield and Nottingham offices.

Therefore, I look forward to the second half of the year and I and the board are confident we can continue to deliver shareholders value in 2019 and well beyond.

Debbie Bestwick MBE

Chief Executive Officer

9 September 2019

Condensed Consolidated Statement of Comprehensive Income

 
                                                   Unaudited       Unaudited        Audited 
                                                  Six months      Six months     Year ended 
                                                       ended           ended    31 December 
                                                     30 June         30 June           2018 
                                                        2019            2018 
                                          Note       GBP'000         GBP'000        GBP'000 
 
 Revenue                                   3          30,396          15,439         43,201 
 
 Cost of sales                                      (15,263)         (8,579)       (23,399) 
=======================================  =====  ============  ==============  ============= 
 
 Gross profit                                         15,133           6,860         19,802 
 Gross profit %                                        49.8%           44.4%          45.8% 
=======================================  =====  ============  ==============  ============= 
 
 Administrative expenses                             (4,859)         (2,984)        (7,264) 
 Exceptional items                         4               -         (2,552)        (2,597) 
=======================================  =====  ============  ==============  ============= 
 Total administrative expenses                       (4,859)         (5,536)        (9,861) 
 
 Operating profit                                     10,274           1,324          9,941 
 
 Finance income                                           86              30             79 
 Finance cost                                            (4)         (1,323)        (1,323) 
=======================================  =====  ============  ==============  ============= 
 
 Profit before tax                                    10,356              31          8,697 
 
 Taxation                                            (1,580)           (479)        (1,494) 
=======================================  =====  ============  ==============  ============= 
 
 Profit/(loss) and total comprehensive 
  income/(expense) attributable 
  to shareholders                                      8,776           (448)          7,203 
=======================================  =====  ============  ==============  ============= 
 
 Basic and diluted earnings/(loss)         6      6.79 Pence    (0.42) Pence     6.09 Pence 
  per share 
 Basic and diluted adjusted                6      7.31 Pence      1.63 Pence     8.07 Pence 
  (loss)/earnings per share 
=======================================  =====  ============  ==============  ============= 
 

All results relate to continuing activities.

Condensed Consolidated Statement of Financial Position

 
                                                          Unaudited        Audited 
                                              Unaudited     30 June    31 December 
                                           30 June 2019        2018           2018 
                                   Note         GBP'000     GBP'000        GBP'000 
================================  =====  ==============  ==========  ============= 
 ASSETS 
 Non-current assets 
  Goodwill                          7            21,083      21,083         21,083 
  Brands                            7            16,930      18,714         17,822 
  Development costs                 7             2,366       3,302          2,693 
  Property, plant and equipment                     512         682            640 
  Right of use assets                                81           -              - 
  Deferred tax                                      172           -              - 
================================  =====  ==============  ==========  ============= 
                                                 41,144      43,781         42,238 
================================  =====  ==============  ==========  ============= 
 Current assets 
  Trade and other receivables                     8,480       4,679          8,145 
  Cash and cash equivalents                      35,785      16,666         23,512 
================================  =====  ==============  ==========  ============= 
                                                 44,265      21,345         31,657 
================================  =====  ==============  ==========  ============= 
 Total assets                                    85,409      65,126         73,895 
================================  =====  ==============  ==========  ============= 
 EQUITY AND LIABILITIES 
 Equity 
  Share capital                                   1,313       1,313          1,313 
  Share premium                                  44,084      44,084         44,084 
  Merger reserve                              (153,822)   (153,822)      (153,822) 
  Other reserves                                158,864     158,864        158,864 
  Retained earnings                              21,620       4,157         12,170 
================================  =====  ==============  ==========  ============= 
 Total equity                                    72,059      54,596         62,609 
================================  =====  ==============  ==========  ============= 
 Non-current liabilities 
  Provisions                                        205          57            140 
  Deferred tax liabilities                        2,962       3,396          3,142 
================================  =====  ==============  ==========  ============= 
 Total non-current liabilities                    3,167       3,453          3,282 
================================  =====  ==============  ==========  ============= 
 Current liabilities 
   Trade and other payables                       7,709       6,346          6,874 
   Current tax liabilities                        2,474         731          1,130 
 Total current liabilities                       10,183       7,077          8,004 
================================  =====  ==============  ==========  ============= 
 Total liabilities                               13,350      10,530         11,286 
================================  =====  ==============  ==========  ============= 
 Total equity and liabilities                    85,409      65,126         73,895 
================================  =====  ==============  ==========  ============= 
 

Condensed Consolidated Statement of Changes in Equity

 
                                 Share      Share      Merger      Other    Retained 
                               capital    premium     reserve    Reserve    earnings     Total 
===========================  =========  =========  ==========  =========  ==========  ======== 
 Six months to                 GBP'000    GBP'000     GBP'000    GBP'000     GBP'000   GBP'000 
  30 June 2018 
===========================  =========  =========  ==========  =========  ==========  ======== 
 Balance at 
  1 January 2018 
  (unaudited)                       10        377           -        644       6,413     7,444 
 Capital re-organisation         1,030      (377)   (153,822)    153,169           -         - 
 New shares issued 
  on the IPO                       273     44,814           -          -           -    45,087 
 Transaction costs 
  of new equity 
  instrument                         -      (730)           -          -           -     (730) 
 Treasury shares                     -          -           -      3,616     (1,808)     1,808 
 Sales of shares 
  by Employee Benefit 
  Trust                              -          -           -      1,435           -     1,435 
===========================  =========  =========  ==========  =========  ==========  ======== 
 Total Transactions 
  with owners recognized 
  directly within 
  equity                         1,303     43,707   (153,822)    158,220     (1,808)    47,600 
===========================  =========  =========  ==========  =========  ==========  ======== 
 Loss and total 
  comprehensive 
  expense for the 
  period                             -          -           -          -       (448)     (448) 
===========================  =========  =========  ==========  =========  ==========  ======== 
 Balance at 
  30 June 2018 (unaudited)       1,313     44,084   (153,822)    158,864       4,157    54,596 
===========================  =========  =========  ==========  =========  ==========  ======== 
 
 
   Six months to 
   31 December 2018 
===========================  ================================================================= 
 Balance at 
  1 July 2018 (unaudited)        1,313     44,084   (153,822)    158,864       4,157    54,596 
 Issue of share 
  options                            -          -           -          -         362       362 
===========================  =========  =========  ==========  =========  ==========  ======== 
 Total transactions 
  with owners recognised 
  directly within 
  equity                             -          -           -          -         362       362 
===========================  =========  =========  ==========  =========  ==========  ======== 
 Profit and total 
  comprehensive 
  income for the 
  year                               -          -           -          -       7,651     7,651 
===========================  =========  =========  ==========  =========  ==========  ======== 
 Balance at 
  31 December 2018 
  (audited)                      1,313     44,084   (153,822)    158,864      12,170    62,609 
===========================  =========  =========  ==========  =========  ==========  ======== 
 
 
 Six months to 
  30 June 2019 
=========================  ======  =======  ==========  ========  =======  ======= 
 Balance at 
  1 January 2019 
  (audited)                 1,313   44,084   (153,822)   158,864   12,170   62,609 
 Issue of share 
  options                       -        -           -         -      674      674 
=========================  ======  =======  ==========  ========  =======  ======= 
 Total Transactions 
  with owners recognised 
  directly within 
  equity                        -        -           -         -      674      674 
=========================  ======  =======  ==========  ========  =======  ======= 
 Profit and total 
  comprehensive 
  income for the 
  period                        -        -           -         -    8,776    8,776 
=========================  ======  =======  ==========  ========  =======  ======= 
 Balance at 
  30 June 2019 
  (unaudited)               1,313   44,084   (153,822)   158,864   21,620   72,059 
=========================  ======  =======  ==========  ========  =======  ======= 
 

Condensed Consolidated Statement of Cash Flows

 
                                                 Unaudited     Unaudited 
                                                Six months    Six months        Audited 
                                                     ended         ended     Year ended 
                                                   30 June       30 June    31 December 
                                                      2019          2018           2018 
                                        Note       GBP'000       GBP'000        GBP'000 
=====================================  =====  ============  ============  ============= 
 Operating activities 
 Profit before tax                                  10,356            31          8,697 
 Adjustments for: 
   Depreciation of property, 
    plant and equipment                                195           153            305 
   Amortisation of intangible 
    fixed assets                         7           2,686         1,981          6,103 
   Share-based compensation                            674             -            362 
   Finance income                                     (86)          (30)           (79) 
   Financial expenses                                    4         1,323          1,323 
   Financing fees written off                            -           258            258 
   (Increase)/decrease in trade 
    and other receivables                            (384)         2,138        (1,328) 
   Increase in trade and other 
    payables                                           816         1,049          1,784 
   Increase in provisions                               65             7             89 
=====================================  =====  ============  ============  ============= 
 Cash generated from operating 
  activities                                        14,326         6,910         17,514 
      Tax paid                                       (600)         (415)        (1,316) 
=====================================  =====  ============  ============  ============= 
 Net cash inflow from operating 
  activities                                        13,726         6,495         16,198 
=====================================  =====  ============  ============  ============= 
 
 Cash flow from investing activities 
 Purchase of property, plant 
  and equipment                                       (75)         (215)          (327) 
 Sale of property, plant and 
  equipment                                             20            17             16 
 Lease payments (New IFRS 16 
  requirement)                                        (13)             -              - 
 Capitalisation of development 
  costs                                  7         (1,467)       (1,287)        (3,908) 
=====================================  =====  ============  ============  ============= 
 Net cash from investing activities                (1,535)       (1,485)        (4,219) 
=====================================  =====  ============  ============  ============= 
 Cash flow from financing activities 
 Proceeds from new equity issued                         -        45,087         45,087 
 Sale of shares by EBT                                   -         3,243          3,243 
 Capitalised transaction costs 
  of new equity instruments                              -         (730)          (730) 
 Interest received                                      86            30             79 
 Interest paid (including rolled 
  up loan note interest)                               (4)       (4,843)        (5,015) 
 Repayment of directors loans                            -       (1,345)        (1,345) 
 Repayment of loan notes                                 -      (38,226)       (38,226) 
 Net cash from financing activities                     82         3,216          3,093 
=====================================  =====  ============  ============  ============= 
 
 Net increase in cash and cash 
  equivalents                                       12,273         8,226         15,072 
 Cash and cash equivalents 
  at beginning of period                            23,512         8,440          8,440 
=====================================  =====  ============  ============  ============= 
 Cash and cash equivalents 
  at end of period                                  35,785        16,666         23,512 
=====================================  =====  ============  ============  ============= 
 

Notes to the Condensed Consolidated Interim Financial Statements

1. Nature of operations and general information

Team17 Group PLC and its subsidiaries (The Group) are a global games label, creative partner and developer of independent ("indie"), premium video games.

2. Basis of preparation

This interim report has been prepared in accordance with the AIM rules and IAS 34 "Interim Financial Reporting" as adopted by the European Union. The condensed consolidated financial statements for the 6 months ended 30 June 2019 should be read in conjunction with the financial statements of Team 17 Group Plc for the year ended 31 December 2018 (the "Prior year financial statements") which includes the financial results of the group prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The report of the auditors for the prior year financial statements for the year ended 31 December 2018 was unqualified, did not contain an emphasis of matter paragraph and did not include a statement under Section 498 of the Companies Act 2006. The Group's interim condensed consolidated financial information is not audited and does not constitute statutory financial statements as defined in Section 434 of the Companies Act 2006. These condensed interim financial statements were approved for issue on xx xxx 2019.

Going concern

The Directors are satisfied that the Group has adequate resources to continue in business for the foreseeable future, and accordingly continue to adopt the going concern basis in preparing the accounts.

Accounting policies

The Group's principal accounting policies used in preparing this information are as stated on pages 24 to 29 of the prior year financial statements with the exception of the Group reorganisation as described below. There has been no change to any accounting policy from the date of the prior year financial statements. In connection with the admission to AIM on 23 May 2018, the Group undertook a reorganisation of its corporate structure which resulted in the Company becoming the ultimate holding company of the Group. Prior to the reorganisation the ultimate holding company was Team 17 Holdings Limited.

The group has adopted IFRS 16 - Leases retrospectively from 1 January 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 January 2019. The total value of Right of use assets recognised at 1 January 2019 was GBP92,000.

3. Segmental information

The Board considers this business as a single operating segment, however this information is voluntarily disclosed.

Revenue by Third Party/Own IP:

 
                     Unaudited     Unaudited 
                    Six months    Six months        Audited 
                         ended         ended     Year ended 
                       30 June       30 June    31 December 
                          2019          2018           2018 
                       GBP'000       GBP'000        GBP'000 
================  ============  ============  ============= 
 Own IP                  5,037         5,763         11,101 
 Third Party IP         25,359         9,676         32,100 
                  ============  ============  ============= 
                        30,396        15,439         43,201 
                  ============  ============  ============= 
 

4. Exceptional items

 
                         Unaudited     Unaudited 
                        Six months    Six months        Audited 
                             ended         ended     Year ended 
                           30 June       30 June    31 December 
                              2019          2018           2018 
                           GBP'000       GBP'000        GBP'000 
===================  =============  ============  ============= 
 IPO related costs               -         2,552          2,597 
                                 -         2,552          2,597 
 =================================  ============  ============= 
 

There were no exceptional items in the 6 months ending 30 June 2019.

Exceptional items in the 6 months ending 30 June 2018 relate to significant one-off costs, which have not been deducted from equity, associated with the Group's admission onto AIM in May 2018. The costs comprise advisors fees (GBP1,323,000), the write off of unamortised loan note fees (GBP240,000), stock exchange listing fees (GBP43,000), other IPO costs (GBP29,000) and bonuses payable to Directors which were contingent on admission to AIM (GBP917,000). Costs totalling GBP730,000 incurred in association with the IPO which met IAS 32 definition of transaction costs (being incremental and directly related to the issuance of new equity instruments and which would have been avoided had the instruments not been issued) have been deducted from share premium.

5. Adjusted EBITDA Calculation

 
                                           Unaudited     Unaudited 
                                          Six months    Six months        Audited 
                                               ended         ended     Year ended 
                                             30 June       30 June    31 December 
                                                2019          2018           2018 
 Profit attributable to shareholders           8,776         (448)          7,203 
 Exceptional costs                                 -         2,552          2,597 
 Share based compensation                        674             -            362 
 Revision of accounting estimate                   -             -            263 
 Adjusted earnings                             9,450         2,104         10,425 
                                        ============  ============  ============= 
 Taxation                                      1,580           479          1,494 
 Finance income                                 (86)          (30)           (79) 
 Finance cost                                      4         1,323          1,323 
 Amortisation                                    892           892          1,784 
 Depreciation                                    195           153            305 
                                        ============  ============  ============= 
 Adjusted EBITDA                              12,035         4,921         15,252 
                                        ============  ============  ============= 
 

Revision of accounting estimate

During 2018 the group revised its approach to the recognition of recoupable costs within its Intellectual Property and its amortisation of development costs - adopting an 85% reducing balance approach over 2 years in the case of the latter (previously straight line over 2 years) and retaining the former within capitalised development costs (previously derecognised when recovered from the third party) and amortising over the useful economic life of the game in line with all other costs. The impact of this revision of accounting estimate was an increase to capitalised costs of GBP1,720,000 and a corresponding increase in amortisation of GBP1,983,000 giving an overall reduction in net book value of GBP263,000. This revision in accounting estimate was accounted for as at 31 December 2018 and then prospectively.

6. EPS

The calculation of the basic earnings per share is based on the profits attributable to the shareholders of Team17 Group plc divided by the weighted average number of shares in issue. The weighted average number of shares takes into account treasury shares held by the Team 17 Employee Benefit Trust.

 
                                             Unaudited     Unaudited 
                                            Six months    Six months        Audited 
                                                 ended         ended     Year ended 
                                          30 June 2019       30 June    31 December 
                                                                2018           2018 
 Profit attributable to shareholders 
  GBP'000                                        8,776         (448)          7,203 
 Weighted average number 
  of shares                                129,246,382   107,286,833    118,356,852 
 Basic earnings per share 
  (pence)                                         6.79        (0.42)           6.09 
                                        ==============  ============  ============= 
 

The calculation of the diluted earnings per share is based on the profits attributable to the shareholders of Team17 Group plc divided by the weighted average number of shares in issue as adjusted for any dilutive effect of share options. At 31 December 2018 the performance criteria for issuing the share options had not been met and therefore there is no dilutive effect.

 
                                    Unaudited     Unaudited 
                                   Six months    Six months         Audited 
                                        ended         ended      Year ended 
                                 30 June 2019       30 June     31 December 
                                                       2018            2018 
 Profit attributable to 
  shareholders GBP'000                  8,776         (448)           7,203 
 Diluted weighted average 
  number of shares                129,303,701   107,286,833     118,356,852 
 Diluted earnings per share 
  (pence)                                6.79        (0.42)            6.09 
                               ==============  ============  ============== 
 

The calculation of adjusted earnings per share is based on the profit attributable to shareholders as shown above plus additional costs added back during the year (Note 5). The weighted average number of shares uses the number of shares in issue post listing on AIM on 23 May 2018. This has been applied retrospectively to the number of shares in issue at 1 January 2018 and the metric has been restated to ensure that the adjusted earnings per share figures are comparable over the two periods.

 
                                   Unaudited     Unaudited 
                                  Six months    Six months        Audited 
                                       ended         ended     Year ended 
                                30 June 2019       30 June    31 December 
                                                      2018           2018 
 Adjusted earnings GBP'000 
  (Note 5)                             9,450         2,104         10,425 
 Weighted average number 
  of shares                      129,246,382   129,246,382    129,246,382 
 Diluted weighted average 
  number of shares               129,303,701   129,246,382    129,246,382 
                              ==============  ============  ============= 
 Adjusted basic earnings 
  per share (pence)                     7.31          1.63           8.07 
 Adjusted diluted earnings 
  per share (pence)                     7.31          1.63           8.07 
                              ==============  ============  ============= 
 

7. Intangibles

 
                                Development 
                                   costs       Brands    Goodwill    Total 
                                    GBP'000   GBP'000     GBP'000  GBP'000 
Cost 
At 1 January 2018 (unaudited)         6,707    21,983      21,083   49,773 
Additions                             1,287         -           -    1,287 
                                ===========  ========  ==========  ======= 
At 30 June 2018 (unaudited)           7,994    21,983      21,083   51,060 
Additions                             2,621         -           -    2,621 
                                ===========  ========  ==========  ======= 
At 31 December 2018 (audited)        10,615    21,983      21,083   53,681 
Additions                             1,467         -           -    1,467 
                                ===========  ========  ==========  ======= 
At 30 June 2019 (unaudited)          12,082    21,983      21,083   55,148 
                                ===========  ========  ==========  ======= 
 
Amortisation 
At 1 January 2018 (unaudited)         3,603     2,377           -    5,980 
Charge for the period                 1,089       892           -    1,981 
                                ===========  ========  ==========  ======= 
At 30 June 2018 (unaudited)           4,692     3,269           -    7,961 
Charge for the period                 3,230       892           -    4,122 
                                ===========  ========  ==========  ======= 
At 31 December 2018 (audited)         7,922     4,161           -   12,083 
Charge for the period                 1,794       892           -    2,686 
                                ===========  ========  ==========  ======= 
At 30 June 2019 (unaudited)           9,716     5,053           -   14,769 
                                ===========  ========  ==========  ======= 
 
Net carrying amount 
At 30 June 2019 (unaudited)           2,366    16,930      21,083   40,379 
                                ===========  ========  ==========  ======= 
 
At 31 December 2018 (audited)         2,693    17,822      21,083   41,598 
                                ===========  ========  ==========  ======= 
 
At 30 June 2018 (unaudited)           3,302    18,714      21,083   43,099 
                                ===========  ========  ==========  ======= 
 
At 1 January 2018 (unaudited)         3,104    19,606      21,083   43,793 
                                ===========  ========  ==========  ======= 
 

Goodwill

The Group tests annually for impairment, or more frequently if there are indicators that goodwill might be impaired.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

IR LLFVRATIAIIA

(END) Dow Jones Newswires

September 10, 2019 02:00 ET (06:00 GMT)

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