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Team17 Group PLC (TM17)

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Tuesday 10 March, 2020

Team17 Group PLC

Unaudited Final Results

RNS Number : 5197F
Team17 Group PLC
10 March 2020
 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014. Upon the publication of this announcement, this information is now considered to be in the public domain.

 

10 March 2020

Team17 Group plc

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

 

Unaudited Final Results for the year ended 31 December 2019

 

A record year underpinned by strong portfolio performance with continued revenue and EBITDA growth.

 

 

Team17 , a global games entertainment label, creative partner and developer of independent ("indie") premium video games, is pleased to announce its full year preliminary results for the year ended 31 December 2019.

 

Financial Summary:

 

 

12 Months ended

 

 

 

 

 

 

 

 

 

31 December 2019

 

31 December 2018

 

Growth

 

 

 

 

 

 

Revenue

£61.8m

 

£43.2m

 

43%

Gross Profit

£29.5m

 

£19.8m

 

49%

Gross Profit Margin

48%

 

46%

 

 

Adjusted EBITDA 1

£22.1m

 

£15.3m

 

44%

Operating Cash Conversion 2

103%

 

107%

 

 

Cash and cash equivalents

£41.9m

 

£23.5m

 

78%

Basic and diluted Earnings per Share ("EPS")

12.9 pence

 

6.1 pence

 

111%

Basic and diluted Adjusted Earnings per Share 3 ("AEPS")

13.6 pence

 

8.1 pence

 

68%

 

 

Highlights for the year ended 31 December 2019:

 

Portfolio continued to grow strongly in 2019 with 7 new game launches (2018: 12) culminating in over 300 Digital Revenue Lines

Solid 2020 pipeline of game launches planned with 10 titles already announced including Moving Out and Main Assembly which launch April 2020

Headcount increased 20% to 200 at the end of the year (2018: 167) reflecting further investment across all areas of the business

Continued industry recognition, with wins for Yoku's Island Express (Bafta: Best Debut Game) and Overcooked! 2 (Develop: Star Game of the Year) and numerous nominations across the portfolio during 2019

Board strengthened with the appointment of Jennifer Lawrence and Martin Hellawell as Non-Executive Directors

Development studio moved to new Wakefield premises in November with significantly improved working environment and medium-term expansion capacity

 

 

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

"I'm delighted to report on an excellent year for Team17, delivering record revenues and operating profits.  Seeing our Teamsters and Label Partners grow into the best versions of themselves is one of my proudest achievements in 2019. Last year we set ourselves some significant challenges from a new technology perspective; successfully launching our first 100 player game in Hell Let Loose and broadening our skill sets in new game genres with the likes of Blasphemous.

 

"Gaming runs deep through everything we do at Team17, working with likeminded people with a shared vision is an incredible experience and something everyone at Team17 should feel very proud about. Our culture and people are everything that Team17 is and as we head into our 30th anniversary celebrations we are delighted to share we are working on one of our most loved franchises Worms and will bring a new title this year to market launching on Console and PC.

 

"We continue to develop our technology skillset to enhance our first and third party IP, with cross-platform play central to maintaining the longevity of our portfolio which is perfectly demonstrated in our beloved Worms franchise celebrating its 25th anniversary.

 

"We welcomed a number of new Teamsters to our family last year across the operational, creative, development and commercial sides of the business and I'm excited to see their contributions during 2020 supporting more new original game IP launches than in previous years.

 

"We look forward to another year of continued growth with a solid pipeline of new game launches, consistent performance from the back catalogue and will continue to update our shareholders on our progress in due course."

 

 

Footnotes:

 

1 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), exceptional items, share based payment costs and one-off amortisation accounting estimation change relating to prior periods. Exceptional items are those items believed to be exceptional in nature by virtue of their size and or incidence (Note 4)

 

2 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

 

3 Adjusted earnings per share is calculated by dividing the adjusted profit after tax by the weighted average number of ordinary shares in issue since admission to trading on AIM as adjusted for the dilutive effect of share options (Note 6)

 

 

 

Enquiries:

 

Team17 Group plc

Debbie Bestwick MBE, Chief Executive Officer

Mark Crawford, Interim Chief Financial Officer

 

via Vigo Communications

+44 (0)20 7390 0238

GCA Altium (Nominated Adviser)

Phil Adams / 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 / Charlie Neish / Fiona Norman

[email protected]  

+44 (0)20 7390 0233

 

 

About Team17

 

Team17 is a leading games entertainment label and creative partner for independent ("indie") developers, focused on the premium, rather than free to play market, and creating games for the PC home computer market, the video games console market and the mobile and tablet gaming markets. Alongside developing the Company's own games in house ("first party IP"), Team17 also partners with independent developers across the globe to add value to their games in all areas of development and production alongside bringing them to market across multiple platforms for fixed percentage royalties ("third-party IP"). Since foundation in 1990, we have launched over 100 games, including the iconic Worms franchise, the Overcooked franchise, the Escapists franchise, Yooka-Laylee, Yoku's Island Express, My Time at Portia, Hell Let Loose and Blasphemous, making Team17 one of the most prolific developers and partners of games for the indie market.

 

Visit www.team17.com for more info.

 

 

 

CHAIRMAN AND CHIEF EXECUTIVE'S REVIEW

 

OPERATIONAL REVIEW

 

Introduction

 

We are delighted to report another record performance in 2019, underpinned by positive momentum across our portfolio of games. The strength of our portfolio model is central to our business as we continue to build on our strong track record, delivering another record financial performance in which we delivered revenues of £61.8m up 43% (2018: £43.2m), record gross profit up 49% to £29.5m (2018: £19.8m) and adjusted EBITDA of £22.1m (2018: £15.3m) up 44%.

 

In 2019, we saw a consistent performance across our portfolio from both newly launched titles and our back catalogue, which includes all games released on a platform prior to the first day of the current financial year. Team17 has launched (all games released prior to the first day of the current financial period) over 100 games into their back catalogue, culminating in over 300 Digital Revenue Lines from which our commercial team generate back catalogue revenues. We published 7 new game releases in 2019 comprising 6 new Intellectual Property ("IP") games alongside 1 new game set in the same universe but not a sequel. Additionally, 2 existing games were launched on new platforms, and we continued to release new paid and free downloadable content ("PDLC" and "FDLC") at optimal stages during the lifecycle to further enhance the value and extend the lifecycle of games that form part of the back catalogue.

 

Importantly, our significant back catalogue portfolio continues to underpin growth, with £43.7m (71%) of revenues derived from this channel in 2019 (2018: £22.3m) with the remainder comprising of newly launched games.

 

Our vision for the business remains clear, guided by the following key growth priorities:

 

· Continue to leverage our 'greenlight' process which underpins the Group's portfolio-based model of first and third party IP 4

· Ongoing investment in both creative and commercial talent that can support new releases and extend the life of our growing back catalogue

· Continue to be at the forefront of new business models and new platforms focussing on return on investment

· Seek further opportunities to expand the Group's operational/development studio base through ongoing investment

· Seek further opportunities to grow the Group via acquisitions where it brings long term Group value

 

On behalf of everyone at Team17, we'd like to thank all our label partners and shareholders for their support and contribution to our journey thus far.

 

Game Development and launches

Our portfolio continued to grow strongly in 2019, launching 7 new games. Additionally, we continued to release new paid and free downloadable content at optimal stages during the lifecycle to further enhance the value and extend the life cycle of games that form part of the back catalogue:

 

· Genesis Alpha One - launched on the Epic Game store in January and on PlayStation 4 and Xbox One

Hell Let Loose - the 100-person WW2 simulation shooter, launched into early access on the Valve's Steam store in June 2019, achieving number 1 globally within 3 hours of launch

Golf With Your Friends franchise - joined the label in February 2019. Our team and creative developers will be working to grow this franchise further on consoles in 2020

· Blasphemous - launched on Valve's Steam store and console in September 2019, achieving number 2 globally on Steam within hours of launch

· Also launched Automachef (July), Monster Sanctuary (August), Yooka Laylee & the Impossible Lair (October) and a number of back catalogue lifecycle additional content updates for our portfolio of games.

 

We have a solid pipeline of games scheduled for release in 2020, with more new original game IP launches than in any previous year. We have invested strongly in our people and headcount over the last 12 months to best prepare for this, however it is important to note new IP is incredibly difficult to forecast accurately, specifically in new genres and on new hardware, so we reiterate we will continue to take a cautious line on revenue forecasts relating to new IP, as we have done in previous years. Our portfolio model, with a maximum greenlight investment of £1.0m in any third party IP and the strengths of our lifecycle management de-risk new IP over the lifecycle of a digital game.

 

10 titles have been announced so far, including Moving Out launching 28 April 2020, a new Worms title, Hammerting, Neon Abyss, Going Under, Rogue Heroes: Ruins of Talos, Main Assembly, The Survivalists, Ageless and Golf With Your Friends on console.

 

Revenues in 2020 are expected to be more heavily weighted to H2 compared with 2019 due to the impact of new releases. Release dates will be announced at the time that is best for the games and the business.

 

The pedigree of Team17 has continued to be recognised within the video games sector over the course of 2019, with a number of nominations and awards for games within its portfolio, including, Yoku's Island Express being awarded the BAFTA for Best Debut Game in April 2019, and Overcooked! 2 being awarded Game of the Year at the Develop: Star Awards in July 2019.

 

30 years of Team17

 

This year, we'll celebrate 30 years in the games industry; an achievement that can only come in the fast paced and constantly evolving games industry by investing in a process of continual innovation and improvement and reacting in an agile manner to technological change. Since formation in 1990, we have demonstrated an impressive track-record of developing and successfully bringing video games to market across a wide range of platforms. Central to this is ensuring our games remain relevant through utilising downloadable content and sequels, further extending the lifecycle of key titles across many transition periods in hardware and business models.

 

Our games label launched its first game in 2014 and the label now accounts for 83% of total revenue. Of the games label revenues, co-development accounts for 67% and we continue to ensure we strike the right balance between a fun engaging game for consumers and commercial success across a wide range of game genres. Whilst innovations in middleware have lowered the barrier to entry, cost of creating quality content and digital distribution continues to open up new markets, and the ability to select commercially viable opportunities continues to differentiate Team17.

 

Our strategy remains the same as when we listed in 2018. We look to work with great games makers from around the world to help enhance their creations via our internal development talent. Simultaneously, we continue to develop our own first party IP - such as Worms, The Escapists and The Survivalists - and our commercial team bring all IP to market via blue chip games channels and distribution partners in the best possible way to achieve our commercial targets across our portfolio.

In November 2019, we moved our Development Studio to new premises in Wakefield, which has significantly improved the working environment and will allow us to expand in the medium term. This continuous investment in our people and facilities is fundamental to the culture we have created and will remain at the forefront as we continue to grow.

 

Post year end, we were delighted to announce the acquisition of Yippee Entertainment Limited ("Yippee"), for a total consideration of circa £1.4m. Yippee is a UK based, multi-award-winning software developer, and its integration into the Group will enable Team17 to establish a second UK studio, therefore accelerating our recruitment plans in the North West. Manchester offers us a ready-made studio infrastructure within MediaCityUK that can tap into a surrounding population of experienced development talent, with 400,000 students within an hour.

 

Market dynamics

 

The video games market continues to see significant growth and opportunities, with a recent report from gaming analytics firm, Newzoo, estimating the market will grow to $196bn by 2022 with a CAGR of 9.0%5.

 

The industry continues to evolve and over the next 12 months we will see a slight transition period as last generation consoles come to an end, with the introduction of next generation consoles expected later in 2020. This transition we believe will be far smoother than in previous cycles for Team17 due to our platform agnostic and portfolio approach.

 

With the next generation consoles expected to launch towards the end of the year, the global games market is predicted to grow by 8.2% in 2020 (2019: 9.6%)5.  Console growth is the second largest market segment making up 32% with global revenues in 2019 of $48bn. The console segment is expected to grow to $61bn between 2018 and 2022 with a CAGR of 9.7%5 following the launch of the new consoles.

 

Outlook

 

Team17 continue to build on strong foundations, as demonstrated by the expansion of our operational base and the further growth of our portfolio and back catalogue.  Our pipeline for 2020 remains solid, and we look forward to launching several new titles and further digital content throughout the current financial year. We are monitoring the situation regarding the Coronavirus carefully but to date have not seen any clear impact on the business.

 

We remain focused on utilising our existing, very efficient business model to identify, develop and publish new titles and have utilised our cash position by further investing across our business, as evidenced in our new Wakefield facility, the acquisition of Yippee and investment in people. We continue to evaluate a number of further growth initiatives.

 

We are immensely proud of the collective achievements of all our people, past and present over the last three decades. Our Teamsters are fundamental to the ongoing success of our business and remain central to all our future growth priorities.

 

Team17 is in great health and strategically well positioned with our portfolio to drive growth in the year ahead. The board remains confident in continuing to deliver shareholder value in 2020 and well beyond.

 

 

Chris Bell  Debbie Bestwick MBE

 

Non-Executive Chairman  Chief Executive Officer

9 March 2020

 

4First party IP are games owned exclusively by Team17 and third party IP relates to games owned by external developers

 

5 Market data sourced from 2019 newzoo Global Games Market Report https://newzoo.com/products/reports/global-games-market-report/

 

CHIEF FINANCIAL OFFICER'S REVIEW

Performance overview

Building on our successful IPO in 2018, Team17 has delivered another strong financial performance with Group revenues growing 43% to £61.8m (2018: £43.2m) for the year to 31 December 2019. The Group's share of third-party sales continues to build and at year end represented 83% of total revenues (2018: 74%).  These results demonstrate the growing strength of our games label business in identifying, increasingly co-developing, publishing and extending the lifecycle of first and third party titles.

The Group launched 7 new games in 2019, which contributed to the overall new release revenues representing 29% of total revenues for the period. The back catalogue continues to perform strongly, with the focus on further extending the lifecycle value of our portfolio. The proportion of revenue coming from new releases compared to our back catalogue will vary from year to year and is dependent on the number, timing and scale of new game releases.  This sales mix will impact the scale of both revenue and profit for the Group across the 12 months cycle and is systematic of managing a growing portfolio business.

Gross profit continued to grow during the year, up 49% to £29.5m (2018: £19.8m), with gross margins increasing by 2 percentage points to 48% (2018: 46%) despite the higher mix of third party sales (revenue from games which the Group does not own the IP for), which was driven by a greater proportion of co-developed titles with improved commercial terms. In addition, other cost of sales grew at a lower rate than revenue contributing to the overall improved gross margin.

Administrative expenses grew by 45% to £10.6m (2018: £7.3m excluding one off IPO costs of £2.6m incurred last year) predominantly reflecting the increased investment in the team with a 20% increase in total headcount at year end to 200 (2018: 167). Since recruitment was predominantly second half loaded, this resulted in a 14% increase in average headcount rising to 173 during the period (2018: 152).

In addition, the annualised impact of the IPO contributed to the increase in overheads as a result of the normalisation of directors' remuneration compared to pre-IPO being heavily dividend weighted. Legal and professional costs of £0.3m (2018: £0.1m) also increased year on year due to: full year PLC costs; the finalisation of the Deferred Bonus Share Plan and Share Incentive Plan; and one-off costs associated with the acquisition of Yippee announced on 2 January 2020.

The resulting operating profit for the period was £19.0m which grew 52% compared to the previous year, when excluding the one-off IPO costs in 2018 (2018: £12.5m).

Development costs capitalised during the period were £3.2m which is comparable to the normalised costs in the prior year (2018: £3.0m excluding exceptional adjustments of £0.9m relating to a change in accounting estimates). This demonstrates the continued investment in future titles alongside ongoing development investment to support live games, the latter being fully expensed in the period.

Adjusted EBITDA grew by 44% to £22.1m (2018: £15.3m) with the adjusted EBITDA margin expressed as a percentage of revenue holding steady at 35.8% (2018: 35.4%), demonstrating the continued strong underlying profit growth of the business. Adjusted EBITDA includes add backs of £0.9m (2018: £0.4m) for share based payment charges associated with share awards used to reward and incentivise Team17 employees.

Team17 is effectively debt free (apart from the lease liabilities now included following adoption of IFRS 16 this year). As a result we generated net finance income of £0.2m driven by bank interest earned during the period in comparison to the prior year net finance costs of £1.2m, which related to interest on the loan notes held by Directors of the Company and LDC, which were repaid in full at the IPO.

The effective tax rate (or taxation divided by profit before tax) for the year was 13.3% (2018: 17.2%) reflecting the impact of Video Games Tax Relief (VGTR) and adjustments made to the tax treatment of IPO costs from the prior year.

Performance summary for the period ended 31 December 2019

 

 

FY19

FY18

Growth

Revenue (£m)

61.8

43.2

43%

Gross profit (£m)

29.5

19.8

49%

Gross profit margin

48%

46%

 

Operating profit (excluding exceptional costs) (£m)

19.0

12.5

52%

EBITDA (£m)

21.2

12.0

77%

Adjusted EBITDA (£m)

22.1

15.3

44%

Profit before tax (£m)

19.2

8.7

121%

Profit after tax (£m)

16.6

7.2

131%

Basic and diluted EPS

12.9 pence

6.1 pence

111%

Basic and diluted adjusted EPS

13.6 pence

8.1 pence

68%

Cash and cash equivalents (£m)

41.9

23.5

78%

Operating cash conversion

103%

107%

 

 

 

 

Statement of Financial Position

Cash generated from operations rose to £25.0m (2018: £17.5m) resulting in a net increase of £18.3m (2018: £15.1m) in cash and cash equivalents, taking these to £41.9m (2018: £23.5m), which includes £3.2m (2018: £3.2m) held in the Employee Benefit Trust (EBT) and used to support share awards to reward and incentivise Team17 employees. Team17 remains highly cash generative with an operating cash conversion of 103% (2018: 107%) and the Board expects the Group to remain significantly cash generative in 2020.

The Statement of Financial Position now carries net book intangible asset values as at 31 December 2019 of £21.1m (2018: £21.1m) and £16.0m (2018: £17.8m) for goodwill and brands respectively and reviewed every six months for impairment. In addition, £2.8m net book value of intangible assets relates to capitalised development costs on titles launched within the last two years (2018: £2.7m). 

Trade and other receivables rose to £11.5m (2018: £8.1m) in line with the increase and mix in revenues compared to the prior year. Trade and other payables are £11.7m (2018: £8.0m) and are directly related to the revenue growth which has driven higher accruals and deferred income.

During the year the Development studio moved to new leased premises in Wakefield. The capitalised costs for this were £1.0m, with the new studio creating a better working environment and ensuring that our facilities support the current and medium-term growth needs of the business.

For the first time, the Group has adopted IFRS 16 which means that leases are now recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group. The adoption of the policy resulted in the capitalisation of £1.6m of right-of-use assets and corresponding lease liabilities of £1.6m split between current and non-current liabilities during the period.

Share Issues

During the year, the Group implemented a Deferred Bonus Share Plan for its senior management and an All Employee Share incentive plan. These were funded from the EBT so do not represent a dilution impact on shares. This means that all current employees that were employed during the year of the IPO are now shareholders. In addition, currently just under half of our employees make regular contributions to the share incentive plan under the tax efficient share savings scheme and continue to grow their shareholding in the Group.

Dividend

The Group continues to focus on retaining cash generated from operations to further invest in the business and its growth plans and as such the Directors do not propose a dividend at this time.

Events After the Reporting Date  

On 2 January 2020, Team17 announced the acquisition of Yippee Entertainment Limited ("Yippee") for a total consideration of circa 1.4m. The acquisition consideration was satisfied through a combination of cash and shares.

 

 

Mark Crawford

 

Interim Chief Finance Officer

 

9 March 2020

 

 

 

 

Unaudited Condensed Consolidated Statement of Comprehensive Income

 

 

 

 

Unaudited

Year ended

31 December

2019

 

Audited

Year ended

31 December

2018

 

Note

 

£'000

£'000

 

 

 

 

 

Revenue

3

 

61,794

43,201

 

 

 

 

 

Cost of sales

 

 

(32,257)

(23,399)

Gross profit

 

29,537

19,802

 

 

 

 

 

 

 

 

 

Administrative expenses

 

 

(10,581)

(7,264)

Exceptional items

4

 

-

(2,597)

Total administrative expenses

 

(10,581)

(9,861)

 

 

 

 

 

Operating profit

 

 

18,956

9,941

 

 

 

 

 

Finance income

 

 

232

79

Finance cost

 

 

(18)

(1,323)

 

 

 

 

Profit before tax

 

 

19,170

8,697

 

 

 

 

 

Taxation

 

 

(2,551)

(1,494)

 

 

 

 

Profit and total comprehensive income attributable to shareholders

 

 

16,619

7,203

 

 

 

 

Basic and diluted earnings per share

6

 

12.9 Pence

6.1 Pence

Basic and diluted adjusted earnings per share

6

 

13.6 Pence

8.1 Pence

 

 

 

 

 

Unaudited Condensed Consolidated Statement of Financial Position

 

 

 

 

Unaudited

31 December 2019

Audited

31 December 2018

 

 

Note

 

£'000

£'000

ASSETS

 

 

 

 

Non-current assets

 

 

 

 

Goodwill

7

 

21,083

21,083

Brands

7

 

16,039

17,822

Development costs

7

 

2,803

2,693

Property, plant and equipment

 

 

1,478

640

Right-of-use asset

8

 

1,513

-

Deferred tax

 

 

248

-

 

 

 

43,164

42,238

Current assets

 

 

 

 

Trade and other receivables

 

 

11,487

8,145

Cash and cash equivalents

 

 

41,853

23,512

 

 

 

53,340

31,657

Total assets

 

 

96,504

73,895

EQUITY AND LIABILITIES

 

 

 

 

Non-current liabilities

 

 

 

 

Lease liabilities

8

 

1,464

-

Provisions

 

 

26

140

Deferred tax liabilities

 

 

3,007

3,142

Total non-current liabilities

 

 

4,497

3,282

 

Current liabilities

 

 

 

 

Trade and other payables

 

 

11,736

8,004

Lease liabilities

8

 

122

-

Total current liabilities

 

 

11,858

8,004

Total liabilities

 

 

16,355

11,286

Equity

 

 

 

 

Share capital

 

 

1,313

1,313

Share premium

 

 

44,084

44,084

Merger reserve

 

 

(153,822)

(153,822)

Other reserve

 

 

158,864

158,864

Retained earnings

 

 

29,710

12,170

Total equity

 

 

80,149

62,609

 

Total equity and liabilities

 

 

96,504

73,895

 

Unaudited Condensed Consolidated Statement of Changes in Equity

 

 

Share capital

Share premium

Merger reserve

Other reserves

Retained earnings

Total

Year to 31 December 2018

£'000

£'000

£'000

£'000

£'000

£'000

Balance at

1 January 2018

 

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 instruments

 

 

-

 

(730)

 

-

 

-

 

-

 

(730)

Treasury shares

 

-

-

-

3,616

(1,808)

1,808

Sale of shares by Employee Benefit Trust

 

-

-

-

1,435

-

1,435

Share based compensation

 

 

 

 

 

362

362

Total transactions with owners

 

1,303

43,707

(153,822)

158,220

(1,446)

47,962

Profit and total comprehensive income for the period

 

-

-

-

-

7,203

7,203

Balance at

31 December 2018 (audited)

 

1,313

44,084

(153,822)

158,864

12,170

62,609

 

Year to 31 December 2019

 

 

 

 

 

Balance at

1 January 2019

 

1,313

44,084

(153,822)

158,864

12,170

62,609

Share based compensation

 

-

-

-

-

921

921

Total transactions with owners

 

-

-

-

-

921

921

Profit and total comprehensive income for the period

 

-

-

-

-

16,619

16,619

Balance at

31 December 2019 (unaudited)

 

1,313

44,084

(153,822)

158,864

29,710

80,149

 

 

 

Unaudited Condensed Consolidated Statement of Cash Flows

 

 

 

 

Unaudited

Year ended

31 December

2019

Audited

Year ended

31 December 2018

 

Note

 

£'000

 '000

Operating activities

 

 

 

 

Profit before tax

 

 

19,170

8,697

Adjustments for:

 

 

 

 

Depreciation of property, plant and equipment

 

 

355

305

Depreciation of right-of-use assets

 

 

57

-

Amortisation of intangible fixed assets

7

 

4,888

6,103

Share-based compensation

5

 

921

362

Finance income

 

 

(232)

(79)

Finance cost

 

 

18

1,323

Financing fees written off

 

 

-

258

Loss on disposal

 

 

(34)

-

Increase in trade and other receivables

 

 

(3,351)

(1,328)

Increase in trade and other payables

 

 

3,321

1,784

(Increase)/Decrease in provisions

 

 

(113)

89

Cash generated from operating activities

 

 

25,000

17,514

  Tax paid

 

 

(2,494)

(1,316)

Net cash inflow from operating activities

 

 

22,506

16,198

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

Purchase of property, plant and equipment

 

 

(1,239)

(327)

Sale of property, plant and equipment

 

 

80

16

Capitalisation of development costs

7

 

(3,215)

(3,908)

Net cash from investing activities

 

 

(4,374)

(4,219)

Cash flow from financing activities

 

 

 

 

Proceeds from new equity issued

 

 

-

45,087

Sale of share by EBT

 

 

-

3,243

Capitalised transaction costs of new equity instruments

 

 

-

(730)

Interest received

 

 

232

79

Interest paid (including rolled up loan note interest)

 

 

(17)

(5,015)

Repayment of directors loans

 

 

-

(1,345)

Receipt of lease incentive

 

 

48

-

Repayment of lease liabilities

 

 

(54)

-

Repayment of loan notes

 

 

-

(38,226)

Net cash from financing activities

 

 

209

3,093

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

18,341

15,072

Cash and cash equivalents at beginning of period

 

 

23,512

8,440

Cash and cash equivalents at end of period

 

 

41,853

23,512

 

Notes to the Unaudited Condensed Consolidated 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

The preliminary results for the year ended 31 December 2019 are unaudited. The financial information set out in this announcement does not constitute the Group's financial statements for the year ended 31 December 2019 as defined by Section 434 of the Companies Act. This financial information has been prepared in accordance with International Financial Reporting Standards ("IFRS") adopted by the EU, IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS and therefore complies with Article 4 of the EU IAS regulations. It has been prepared on the historical cost basis, except for those items which are measured at fair value.

 

This financial information should be read in conjunction with the financial statements of Team17 Group plc for the year ended 31 December 2018 (the "Prior year financial statements"), which are available from the Registrar of Companies. The auditors, PricewaterhouseCoopers LLP, reported on those accounts and their report was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 (2) or (3) of the Companies Act 2006.

 

The Group's financial statements for the year ended 31 December 2019 will be finalised on the basis of the financial information presented by the Directors' in these preliminary results and will be delivered to the Registrar of Companies following the Annual General Meeting of Team17 Group plc.

 

The same accounting policies and methods of computation are followed in this financial information as in the prior year financial statements, except for as described below.

 

Accounting policies

The Group's principal accounting policies used in preparing this information are as stated on pages 26 to 31 of the prior year financial statements. There has been no significant change to any accounting policy from the date of the prior year financial statements except for the adoption of IFRS 16 Leases described below.

 

IFRS 16 'Leases' - Applied from 1 January 2019

This new standard requires lessees to recognise a lease liability reflecting future lease payments and a right-of-use asset for lease contracts. The value of the assets and liabilities recognised at application date is calculated from the total of the future lease payments discounted for the incremental borrowing rate at the date of application. Interest on the lease liability is calculated on a monthly basis and recognised in the Statement of Comprehensive Income. The right-of-use assets created are depreciated over the length of the lease and the depreciation is included in the Statement of Comprehensive Income. Lease incentives affect the total of the future lease payments and therefore are included within the right-of-use assets and lease liabilities recognised at the start of the lease.

 

The Group used the modified retrospective approach which applies the cumulative effect of the policy adoption from 1 January 2019. Comparative figures for the year ending 31 December 2018 are not restated to reflect the adoption of IFRS 16.

 

In applying IFRS 16 for the first time, the group has used the following practical expedients permitted by the standard:

· accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases; and

· using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

 

The group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the group relied on its assessment made applying IAS 17 and Interpretation 4 Determining whether an Arrangement contains a Lease.

 

The incremental borrowing rate of the business is decided through discussion with our bankers and comparison to other businesses in the industry.

3. Segmental information

 

Revenue by first party/third party IP:

 

 

Unaudited

Year ended

31 December 2019

Audited

Year ended

31 December 2018

 

 

£'000

 '000

First party IP

 

10,312

11,101

Third party IP

 

51,482

32,100

 

 

61,794

43,201

 

 

4. Exceptional items

 

 

 

Unaudited

Year ended

31 December 2019

Audited

Year ended

31 December 2018

 

 

£'000

 '000

IPO related costs

 

-

2,597

 

5. Adjusted EBITDA

 

 

 

Unaudited

Year ended

31 December 2019

Audited

Year ended

31 December 2018

Profit attributable to shareholders

 

16,619

7,203

Exceptional costs

 

-

2,597

Share based compensation

 

921

362

Revision of accounting estimate

 

-

263

Adjusted earnings

 

17,540

10,425

Taxation

 

2,551

1,494

Finance income

 

(232)

(79)

Finance cost

 

18

1,323

Amortisation of brands

 

1,783

1,784

Depreciation

 

412

305

Adjusted EBITDA

 

22,072

15,252

 

 

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.

 

 

 

Unaudited

Year ended

31 December 2019

Audited

Year ended

31 December 2018

Profit attributable to shareholders £'000

 

16,619

7,203

Weighted average number of shares

 

129,246,382

118,356,852

Basic earnings per share (pence)

 

12.9

6.1

 

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 adjusted for the dilutive effect of share options.

 

 

 

Unaudited

Year ended

31 December 2019

Audited

Year ended

31 December 2018

Profit attributable to shareholders £'000

 

16,619

7,203

Diluted weighted average number of shares

 

129,253,947

118,356,852

Diluted earnings per share (pence)

 

12.9

6.1

 

The calculation of the adjusted earnings per share is based on the profits as shown above plus additional costs added back during the year. The adjusted weighted average number of shares has been calculated using the number of shares in issue since admission to trading on AIM.

 

 

 

Unaudited

Year ended

31 December 2019

Audited

Year ended

31 December 2018

Adjusted earnings £'000 (Note 5)

 

17,540

10,425

Adjusted Weighted average number of shares

 

129,246,382

129,246,382

Adjusted Diluted weighted average number of shares

 

129,253,947

129,246,382

Adjusted basic earnings per share (pence)

 

13.6

8.1

Adjusted diluted earnings per share (pence)

 

13.6

8.1

 

 

 

7. Intangibles

 

 

Development costs

 

Brands

 

Goodwill

 

Total

 

£'000

£'000

£'000

£'000

Cost

 

 

 

 

At 1 January 2018

6,707

21,983

21,083

49,773

Additions

3,908

-

-

3,908

At 31 December 2018

10,615

21,983

21,083

53,681

Additions

3,215

-

-

3,215

At 31 December 2019

13,830

21,983

21,083

56,896

 

 

 

 

 

Accumulated amortisation

 

 

 

 

At 1 January 2018

3,603

2,377

-

5,980

Charge for the year

4,319

1,784

-

6,103

At 31 December 2018

7,922

4,161

-

12,083

Charge for the year

3,105

1,783

-

4,888

At 31 December 2019

11,027

5,944

-

16,971

 

 

 

 

 

Net carrying amount

 

 

 

 

At 31 December 2019

2,803

16,039

21,083

39,925

 

 

 

 

 

At 31 December 2018

2,693

17,822

21,083

41,598

 

 

 

 

 

             

Goodwill

The Group tests every six months for impairment, or more frequently if there are indicators that goodwill might be impaired. Goodwill was tested for impairment at 31 December 2019.

 

8. Right-of-use assets and lease liabilities

 

Prior to the Group's adoption of IFRS 16 on 1 January 2019, leases of property, plant and equipment were classified as either finance leases or operating leases. Under IFRS 16, leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the group. This led to the capitalisation of £1,570,000 as right-of-use assets and corresponding lease liabilities of £1,592,000 split between current and non-current liabilities. Interest expense during the year on the above lease liabilities included in finance costs was £17,000 (2018: £Nil).

Right-of-use assets

 


Buildings
£'000

Total
£'000

Cost

 

 

 

Additions at 1 January 2019 (Adoption of IFRS 16 Leases)

 

103

103

Additions during the year

 

1,467

1,467

At 31 December 2019

 

1,570

1,570

 

 

 

 

Accumulated depreciation

 

 

 

Charge for the year

 

57

57

At 31 December 2019

 

57

57

 

 

 

 

Net Carrying Amount

 

 

 

At 31 December 2019

 

1,513

1,513

 

8. Leases (continued)

 

Lease liabilities

 

Unaudited

Year ended

31 December 2019

Audited

Year ended

31 December 2018

Cost

 

 

 

Current

 

122

-

Non-current

 

1,464

-

At 31 December 2019

 

1,586

-

 


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