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Team17 Group PLC (TM17)

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Tuesday 16 March, 2021

Team17 Group PLC

Unaudited Final Results

RNS Number : 3334S
Team17 Group PLC
16 March 2021
 

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.

 

16 March 2021

Team17 Group plc

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

 

Unaudited Final Results for the year ended 31 December 2020

 

Record year underpinned by Team17's strong Games portfolio

 

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 2020.

 

2020 Headlines:

 

· More titles released than any previous year helping to deliver revenue growth of 34%

· Record £26.2m profit before tax - up 36% year on year

· Continued improvement in shareholder value with basic EPS growth of 32%

 

Financial highlights:

 

 

12 Months ended

 

 

 

 

 

 

 

 

 

31 December 2020

 

31 December 2019

 

Growth

 

 

 

 

 

 

Revenue

£83.0m

 

£61.8m

 

34%

Gross Profit

£39.1m

 

£29.5m

 

33%

Gross Profit Margin

47%

 

48%

 

 

Profit Before Tax

£26.2m

 

£19.2m

 

36%

Adjusted EBITDA1

£30.1m

 

£22.1m

 

36%

Operating Cash Conversion2

109%

 

103%

 

 

Cash and cash equivalents

£61.5m

 

£41.9m

 

47%

Basic Earnings per Share ("EPS")

17.0 pence

 

12.9 pence

 

32%

Diluted EPS

16.8 pence

 

12.9 pence

 

30%

Basic Adjusted EPS ("AEPS")3

18.2 pence

 

13.6 pence

 

34%

Diluted AEPS3

18.1 pence

 

13.6 pence

 

33%

 

Operational and strategic highlights:

 

Strengthening portfolio with 12 titles launched in the year providing new revenue lines which included a record 10 new games released, supported by an increasing depth of back catalogue titles:

Approaching 400 digital revenue lines delivered across the whole portfolio

2 titles launched on next-generation consoles, Worms Rumble and Overcooked! All You Can Eat

Cross-play tech integration in Next Generation titles (forms the wrapper for releases in future years for online games using the Unreal and Unity engines)

Solid underlying Back Catalogue performance making up 78% of revenues.

First party IP reached 21% of revenues, supported by 2 first party titles launched in Q4.

Seamless transition to remote working in early March 2020 ahead of the Covid-19 ("Covid") outbreak with the safety of our Teamsters paramount.

Continued investment in senior management and core infrastructure:

CFO appointed and key hires made in Development Studio, HR and IT

Martin Hellawell appointed Senior Independent Non-Executive Director (with immediate effect)

Finance system upgrade initiated

With the acquisition and integration of Yippee Entertainment Limited ("Yippee") establishing a second UK   development studio based in Media City, Manchester, the team has now doubled in size.

Overall headcount growth of 25% to 250 Teamsters at year end (2019: 200)

●  In January 2021, completed the acquisition of all rights and assets for Golf With Your Friends, an existing   third party title to become a fully owned IP for a total consideration of £12m.

 

Outlook:

 

Team17 has a solid and diverse pipeline of launches for 2021 and beyond and is well positioned to continue to deliver on our growth plans

The year has started well and the expansion of both major new consoles and distribution platforms underpins management's optimism about the future of gaming given its unique mixture of technology and entertainment

The board continues to be mindful of any potential headwinds associated with a prolonged pandemic, including uncertain macro-economic and consumer environments alongside manufacturing and supply chain challenges

However, the Company remains confident that its ever-growing and diverse portfolio and high-quality development and commercial teams will continue to underpin performance

Team17 continues to review a healthy pipeline of potential M&A opportunities that could bring long term value to the Group

 

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

"I am delighted that our Teamsters and the wider Team17 family have pulled together, in what has been a challenging 12 months for many. It is because of their hard work and creativity, alongside that of our brilliant label partners, that we can report yet another record year of profitability.

 

Team17 has been able to offer gamers a means of escapism and a way to interact with their friends and family more than ever before, even when they were unable to meet face to face. The ability to enjoy interactive entertainment between multiple households is something that is almost unique to gaming and we are pleased that our inclusive and family-oriented games have proven so popular.

 

2020 was a significant year for the gaming industry as a whole, as we saw the launch of both Sony and Microsoft's next-gen consoles. It is fantastic to see our titles being launched on both these platforms and that another generation of gamers will get to explore Team17's gaming universes. Incredibly, our Worms franchise is now twenty-five years old and in December we launched the franchise's newest title, Worms Rumble , on PlayStation 5. While we have all been delighted to see how well the game has taken to this new platform, I know many gamers, myself included, will fondly remember Worms' first iteration, developed for the Commodore Amiga and released in 1995.

 

2021 will be a very exciting and busy year for Team17, with more games signed to our label than any time in our history and new IP launches to look forward to including Rogue Heroes, King of Seas, Narita Boy, Epic Chef, Super Magbot, Greak: Memories of Azur, Honey I Joined a Cult and Hokko Life with three new games still to be announced. Alongside these, Hell Let Loose is due to exit Early Access and launch on PlayStation 5 and Xbox X/S, Overcooked! All You Can Eat will launch on Nintendo Switch, PlayStation 4, Xbox One & PC and Worms Rumble will launch on Xbox X/S, Xbox One and Nintendo Switch. I look forward to updating our shareholders on our progress as the year goes on."

 

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) and share based payment costs.

 

2 Operating cash conversion is defined as cash generated from operating activities as per the statement of cash flows, divided by EBITDA.

 

3 Adjusted earnings per share is calculated by dividing the adjusted profit after tax by the weighted average number of ordinary shares. This is adjusted for the effect of share options when calculating the diluted adjusted earnings per share (Note 5).

 

 

Enquiries:

 

Team17 Group plc

Debbie Bestwick MBE, Chief Executive Officer

Mark Crawford, Chief Financial Officer

 

via Vigo Communications

 

GCA Altium (Nominated Adviser)

Adrian Reed / Paul Lines

 

+44 (0)161 250 3577

Berenberg (Broker)

Chris Bowman / Toby Flaux / Marie Moy / Alix Mecklenburg-Solodkoff

 

+44 (0)20 3207 7800

Vigo Communications  (Financial Public Relations)

Jeremy Garcia / Charlie Neish

[email protected]  

+44 (0)20 7390 0238

 

 

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, console, 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 and in bringing them to market across multiple platforms for fixed percentage royalties ("third party IP").

Since foundation in 1990, the Company has launched over 100 games, including the iconic Worms, Overcooked! and Escapists franchises, Yooka-Laylee, Yoku's Island Express, My Time at Portia, Hell Let Loose, Blasphemous, Golf With Your Friends, Neon Abyss and Moving Out making Team17 one of the most prolific developers and diverse partners of games for the indie market.

  Visit  www.team17.com   for more info.

 

Chair and Chief Executive's Review

Introduction

We are delighted to report a sixth consecutive record performance year. Supported by our Teamsters and Games Label partners, we delivered one of our most ambitious rosters of game launches, built upon our internal tech wrappers for 1st and 3rd party online Games to include Cross-Play (for Unity and Unreal engine games), alongside further enhancements to our back catalogue portfolio contributing to another excellent year.

 

Pleasingly, we launched 2 existing titles on new platforms and released a record 10 new game titles in 2020 which included 7 new game releases and 3 new games set in existing gaming universes. We continued to build on our existing franchises with additional 34 downloadable content packs ("DLC") delivered across 15 titles, further enhancing their lifecycles and encouraging continued player interaction.

 

Across the year, 78% of the Company's revenues came from our strong and diverse back catalogue portfolio, partly as a result of Covid related lockdowns which provided an opportunity for gamers globally to explore our diverse mix of content. This contributed to a significantly better than expected performance in FY2020 with new releases in total for the year accounting for 22% of sales. Our portfolio model came into its own in 2020 and underpins our low risk business model that we believe in so strongly. 
 

2020 Launches

As referenced above, we continued to strengthen our IP portfolio with record title releases during the year working alongside development teams globally:

 

· Moving Out - physics-based moving simulator (SMG Studio, Australia & DevM Games, Sweden)

· Golf with Your Friends (console*) - multiplayer mini golf game (Blacklight Interactive, Australia)

· Main Assembly - robot building sandbox game (Bad Yolk, Sweden)

· Crown Trick - role-playing game with turn-based combat (NeXT Studios, China)

· Going Under - satirical dungeon crawler (Aggro Crab, USA)

· Ageless - time altering puzzle platformer (One More Dream Studios, Malaysia)

· Neon Abyss - dungeon-based action-platformer (Veewoo Games, China)

· Hammerting - dwarf mining simulator (Warpzone Studios, Sweden)

· The Survivalists - island survival in The Escapists universe (own-IP, UK)

· Overcooked! All You Can Eat - boosted Overcooked bundle for next-gen (Ghost Town Games, UK)

· Worms Rumble - real-time, cross-platform Worms title (own-IP, UK)

· Monster Sanctuary (console*) - monster collecting and turn-based combat (Moi Rai Games, Germany)

 

* existing games launched on to new platforms

 

As a result of both the strength of our portfolio model and the successful launch of new titles in 2020, we are delighted to report revenues of £83.0m up 34% (2019: £61.8m), an increase of 36% in gross profit to £39.1m (2019: £29.5m), profit before tax up 36% to £26.2m (2019: £19.2m) and a 33% increase in adjusted EBITDA to £30.1m (2019: £22.1m), all of which are records for the business. We continue to be highly cash generative, ending the year with cash and cash equivalents of £61.5m (2019: £41.9m).

 

The Company's portfolio continues to grow and now comprises nearly 400 digital revenue lines ("DRL"), compared to just over 300 DRL this time last year. The expansion of our DRL across our genre and platform agnostic portfolio continues to underpin the Company's growth and mitigates the risks associated with over-dependence on any one title or specific distribution platform.

 

The Company's core business model has remained focused, robust and is central to our ongoing success. Therefore, we will continue to focus on our key priorities:

 

· Growing our strong portfolio of titles, including additional paid and free DLC;

· Harnessing new technology and platforms;

· Capitalising on the strength of the Games Label model and our unique Greenlight process that identifies and contracts new IP;

· Evaluating selective M&A opportunities; and

· Continuing to invest in our people and infrastructure, while identifying new creative and commercial talent

 

Covid

Over the course of the pandemic and continuing into 2021, the safety and wellbeing of our Teamsters and Label Partners has remained our number one priority. Due to the seamless transition to remote working, the business suffered minimal interruption during the early stages of the pandemic. Having proven their ability to work effectively from home, we will continue to bring our people back to the office only when we feel safe and comfortable to do so. We also expect to see a permanent shift in working and business travel practices across our industry and will listen closely to feedback from our teams and partners, as we develop increasingly flexible working practices across the business.

 

2021 Pipeline

Continuing on from 2020, with one of our most ambitious pipelines delivered not just in the number of game launches and updates but technically as a remote work force, our fiscal 2021 pipeline is no less ambitious. We have a solid and diverse pipeline of new IP to look forward to including: Rogue Heroes, King of Seas, Narita Boy, Epic Chef, Super Magbot, Greak: Memories of Azur, Honey I Joined a Cult and Hokko Life with three new games yet to be announced. In addition to new IP, there is a special mention for some of our existing portfolio titles such as Hell Let Loose which will arrive on Next Generation Consoles this year alongside Worms Rumble and Overcooked! All You Can Eat which will launch on additional existing platforms with full cross play.

 

Rogue Heroes was launched in February 2021 and, together with the new titles already announced, we look forward to updating our shareholders on further titles to be released in 2021.

 

Industry recognition

The quality of Team17's business, management and games has continued to be recognised within the video game industry throughout 2020 with many awards and nominations but call out to:

 

· Team17 named Indie Publisher of the Year at MCV Develop Awards

· Blasphemous won Game of the Year, Best Art, Best Game Design, Best PC Game, and Best Console Game at Gamelab

· Moving Out awarded Game of the Year Award at Australian Game Developer Awards

· Team17 named Publishing Star at Develop:Star Awards

· Team17 and Worms inducted into Golden Joysticks Hall of Fame

· Greak: Memories of Azur won the Award for the Best Upcoming Game for PC/Consoles as well as Best Graphic Art at VJMX Awards

· Debbie Bestwick named Entrepreneur of the Year at the 2020 AIM Awards

 

 

 

Market overview

In 2020, the video games market saw an unprecedented period of growth, accelerated by the significant increase in demand for at home entertainment during the Covid pandemic.

 

As a result of this positive tailwind, the overall market grew4 19.6% 2020 vs 2019 to $174.9 billion whilst previous estimates were for 8.2% growth to $164.6 billion. The market is now predicted to reach $217.9 billion by 2023 growing at 7.6% CAGR, a slightly lower rate than prior year predictions reflecting uncertainty within the global marketplace. Over the same period, the mobile gaming sector is expected to grow at 9.8% CAGR, whilst console and PC sectors are predicted to grow at 7.4% and 2.4% respectively. 

 

With the launch of next-generation consoles in November 2020, we entered a new era of gaming with both consoles boasting significant improvements to architecture, processing, and graphics capabilities. Our platform agnostic approach means that although we will continue to release games across all platforms, including PlayStation 5 and Xbox Series X|S, the Company's performance remains untethered to a single console.

 

(4 market data sourced from NewZoo Global Games Market Data January 2021)

 

Outlook

Team17 has a solid pipeline of launches for 2021 and beyond coupled with a strengthening Greenlight process continually adding further IP and strengthening our offering to 3rd party partners with our unique development tools and resources. The Company is therefore well positioned to continue to deliver on our growth plans.

The expansion of both major consoles and distribution platforms underpins management's optimism about the future of gaming given its unique mixture of technology and entertainment.

Whilst gaming has proven to be extremely resilient, the board continues to be mindful of any potential headwinds associated with a prolonged pandemic, including uncertain macro-economic and consumer environments alongside manufacturing and supply chain challenges facing next generation and existing hardware. We expect these to be in part ongoing and key considerations in 2021.

We would like to take this opportunity to thank our Teamsters for their tenacity and faultless commitment in what has been a challenging year for all of us. It is through their endurance and ingenuity that Team17 has been able to thrive in an unprecedented trading environment.

 

With a solid pipeline of launches for 2021 and beyond, Team17 is well positioned to continue to deliver underlying growth and support the long-term prospects aligned with our ambitious strategic plans. The acquisition in early January of IP rights and assets for Golf With Your Friends is a clear indication of our strategic intent and desire to grow our IP base, expanding our portfolio and franchise footprint.

 

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

 

We are confident that our ever-growing portfolio and high quality development and commercial resources place Team17 in a strong position and will continue to underpin the Group's future performance.

 

Debbie Bestwick MBE   Chris Bell

Chief Executive Officer  Non-Executive Chair

 

15 March 2021

 

Chief Financial Officer's Review

 

Performance overview

2020 was undoubtedly an exceptional year with the Covid pandemic impacting individuals and businesses across the globe. Overall we reported record revenues with higher than expected back catalogue sales alongside the launch of 12 titles with 2 existing titles released on new platforms and a record 10 new titles launched during the year (2019: 7) resulting in new releases representing 22% of revenues in the period (2019: 29%). Overall, the Group's revenues grew 34% to another record level of £83.0m (2019: £61.8m) for the year to 31 December 2020.

 

Gross profit grew by 33% to £39.1m (2019: £29.5m) and gross margin percentage was 47% (2019: 48%). Movement in gross margins reflect a combination of the sales mix, the age profile of the titles within our portfolio and the ongoing support provided to titles post launch. It should be noted that this combination of sales mix between back catalogue and new releases together with associated amortisation charges is subject to the scale and timing of new game releases and will vary from year to year.

 

With a growing pipeline of titles in production combined with more internal IP, development costs capitalised in the period have increased by 134% to £7.5m (2019: £3.2m). Capitalised costs will vary from year to year as they reflect the combination of the increased number of titles in development, timing and number of planned launches, the mix of own IP launched in the year and also the technical tools we build within our talented development teams including multiplayer online games and cross platform technology. Costs incurred to support an increasing number of live games or deliver new content as DLC (either paid for or free updates) are fully expensed in the period.

 

Amortisation charges have risen primarily due to the increase in number of titles launched in the period. Team17's amortisation policy means that the majority of the capitalised development costs for a title are written off in the 12 months after the title is launched. Charges will vary year to year in accordance with the timing and quantity of titles launched alongside the level of development costs capitalised.

 

In December 2020, we launched Worms Rumble on PC, PlayStation 4 and the next generation PlayStation 5 console and as part of this launch, revenue was secured under a license agreement with PlayStation which was recognised in the period under IFRS 15. As a result of the licence deal combined with the launch on the next generation console, first year revenues are expected to be more heavily weighted towards the launch date and we have therefore updated our amortisation policy to better reflect this with a higher amortisation charge for this title being recognised in December 2020. The total amortisation charges for this title over the first year after launch will remain in line with the existing policy.

 

Administration costs grew by 23% to £13.0m (2019: £10.6m) with the key driver of the increase being the growth in headcount. We were pleased to be able to continue to recruit throughout the year despite the pandemic related restrictions and as a result total headcount grew by 25% to 250 (2019: 200). The increase in headcount includes the team that joined as a result of the acquisition of Yippee in January 2020, enabling the expansion our development capability with a second studio based in Media City, Manchester with access to a new and broad talent pool. Average headcount increased by 34% to 233 during the period (2019: 173) reflecting the fact that prior year headcount increase was predominantly second half loaded.

 

In line with the increased number of game launches in the period, there were increased marketing costs, however other commercial costs associated with global gaming events were reduced as a direct result of Covid restrictions. In addition, there were relatively small overhead costs associated with the Manchester studio in its first year within Team17.

 

The resulting operating profit for the period was £26.2m which showed a 38% growth compared to the previous year (2019: £19.0m).

 

The business continues to remain debt free (with the exception of the lease liabilities included under IFRS 16); with global interest rates remaining extremely low, bank interest generated net finance income of £0.1m (2019: £0.2m). The resulting profit before tax grew 36% to £26.2m (2019: £19.2m)

 

Adjusted EBITDA was £30.1m which grew 36% year on year (2019: £22.1m) and the Adjusted EBITDA margin as expressed as a percentage remained at 36% (2019: 36%) continuing to support the underlying profitability of the portfolio business model whilst making important investment in the team and infrastructure to support the future growth aspirations for the business. Adjusted EBITDA includes the add back for share based payments charges including employers national insurance contributions of £1.7m (2019: £0.9m) associated with share awards used to reward and incentivise Team17 employees.

 

The effective tax rate after Video Games Tax Relief (VGTR) and adjustments made to prior years is 16% (2019: 13%).

 

Statement of Financial Position

Team17 remains highly cash generative with an operating cash conversion of 109% (2019: 103%). Cash generated from operations increased to £35.4m (2019: 25.1m) which resulted in the continued growth in net cash and cash equivalents to £61.5m (2019: £41.9m) at 31 December 2020, an increase of £19.6m (2019: £18.3m). The Board expects the Group to remain highly cash generative in 2021. Cash and cash equivalents includes £3.2m (2019: £3.2m) held in the Employee Benefit Trust (EBT) which is used to support employee share awards and incentivise Team17 employees.

 

Intangible assets are reviewed for indicators of impairment every six months. As at 31 December 2020 the net book value was £22.4m (2019: £21.1m) for goodwill reflecting the addition to goodwill associated with the Yippee acquisition, £14.3m (2019: £16.0m) for brands and also includes £6.3m (2019: £2.8m) of capitalised development costs relating to unreleased titles and titles that have been launched within the previous two years.

 

Trade and other receivables has increased by £4.9m to £16.4m (2019: £11.5m). This increase is predominantly driven by trading uplift. Timing on tax recoveries has led to a tax receivable of £0.7m (2019: £Nil). Trade and other payables equally increased in line with trading to £17.2m (2019: £11.7m), most notably impacted by royalty accruals and licence income timing on trading towards the end of the financial period.

 

Share Issues

During the year Team17 announced separate share issues, firstly in January 2020 for 114,000 new ordinary shares issued as part of the consideration for the acquisition of Yippee and then in July, further to the exercise of options as part of the Team17 Group plc Long Term Incentive Plan, 70,946 ordinary shares were issued and allotted. The Group's issued share capital now comprises 131,473,222 ordinary shares of £0.01 each.

 

The Group continues to manage a Deferred Bonus Share Plan for its senior management as well as an All Employee Share Incentive Plan ("SIP"). Team17 runs an employee SIP with matching shares and this continues to be well supported with 44% of all employees as shareholders making monthly contributions. These are both funded from the Employee Benefit Trust ("EBT") and therefore will not result in the issue of shares to satisfy the options.

 

Events After the Reporting Date

On 21 January, Team17 announced the acquisition of all rights and assets for Golf With Your Friends, an existing third party title to become a fully owned IP for a total consideration of £12m which will be satisfied totally in cash with an initial payment of £9m and a further £3m paid within 12 months.

 

Mark Crawford

Chief Financial Officer

15 March 2021

 

 

 

Unaudited Consolidated Statement of Comprehensive Income

 

 

 

 

Unaudited

Year ended

31 December

2020

 

Audited

Year ended

31 December

2019

 

Note

 

£'000

£'000

 

 

 

 

 

Revenue

3

 

82,969

61,794

 

 

 

 

 

Cost of sales

 

 

(43,823)

(32,257)

Gross profit

 

 

39,146

29,537

 

 

 

 

 

Administrative expenses

 

 

(12,979)

(10,581)

Operating profit

 

 

26,167

18,956

 

 

 

 

 

Finance income

 

 

112

232

Finance cost

 

 

(43)

(18)

Profit before tax

 

 

26,236

19,170

 

 

 

 

 

Taxation

 

 

(4,292)

(2,551)

Profit and total comprehensive income attributable to shareholders

 

 

21,944

16,619

 

 

 

 

 

Basic earnings per share

5

 

17.0 Pence

12.9 Pence

Diluted earnings per share

5

 

16.8 Pence

12.9 Pence

Basic adjusted earnings per share

5

 

18.2 Pence

13.6 Pence

Diluted adjusted earnings per share

5

 

18.1 Pence

13.6 Pence

 

 

Unaudited Consolidated Statement of Financial Position

 

 

 

Unaudited

31 December 2020

Audited

31 December 2019

 

 

Note

 

£'000

£'000

ASSETS

 

 

 

 

Non-current assets

 

 

 

 

Intangible fixed assets

6

 

42,921

39,925

Property, plant and equipment

 

 

1,353

1,478

Right-of-use asset

 

 

1,378

1,513

Deferred tax

 

 

-

248

 

 

 

45,652

43,164

Current assets

 

 

 

 

Trade and other receivables

 

 

16,430

11,487

Tax receivables

 

 

670

-

Cash and cash equivalents

 

 

61,470

41,853

 

 

 

78,570

53,340

Total assets

 

 

124,222

96,504

EQUITY AND LIABILITIES

 

 

 

 

Non-current liabilities

 

 

 

 

Lease liabilities

 

 

1,320

1,464

Provisions

 

 

76

26

Deferred tax liabilities

 

 

2,126

3,007

Total non-current liabilities

 

 

3,522

4,497

 

Current liabilities

 

 

 

 

Trade and other payables

 

 

17,206

11,736

Lease liabilities

 

 

145

122

Total current liabilities

 

 

17,351

11,858

Total liabilities

 

 

20,873

16,355

Equity

 

 

 

 

Share capital

 

 

1,315

1,313

Share premium

 

 

44,084

44,084

Merger reserve

 

 

(153,822)

(153,822)

Other reserve

 

 

159,296

158,864

Retained earnings

 

 

52,476

29,710

Total equity

 

 

103,349

80,149

 

Total equity and liabilities

 

 

124,222

96,504

 

 

Unaudited Consolidated Statement of Changes in Equity

 

 

Share capital

Share premium

Merger reserve

Other reserves

Retained earnings

Total

Year to 31 December 2019

£'000

£'000

£'000

£'000

£'000

£'000

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 year

 

-

-

-

-

16,619

16,619

Balance at

31 December 2019 (audited)

 

1,313

44,084

(153,822)

158,864

29,710

80,149

 

Year to 31 December 2020

 

 

 

 

 

Balance at

1 January 2020

 

1,313

44,084

(153,822)

158,864

29,710

80,149

Share based compensation

 

-

-

-

-

822

822

Issue of shares on exercise of options

 

1

-

-

-

-

1

Issue of shares on acquisition of subsidiary

7

1

-

-

432

-

433

Total transactions with owners

 

2

-

-

432

822

1,256

Profit and total comprehensive income for the year

 

-

-

-

-

21,944

21,944

Balance at

31 December 2020 (unaudited)

 

1,315

44,084

(153,822)

159,296

52,476

103,349

 

 

 

Unaudited Consolidated Statement of Cash Flows

 

 

 

 

Unaudited

Year ended

31 December

2020

Audited

Year ended

31 December 2019

 

Note

 

£'000

 '000

Operating activities

 

 

 

 

Profit before tax

 

 

26,236

19,170

Adjustments for:

 

 

 

 

Depreciation of property, plant and equipment

 

 

404

355

Depreciation of right-of-use assets

 

 

135

57

Amortisation of intangible fixed assets

6

 

5,812

4,888

Share-based compensation

 

 

822

921

Finance income

 

 

(112)

(232)

Finance cost

 

 

43

18

Loss on disposal

 

 

24

29

Increase in trade and other receivables

 

 

(4,908)

(3,351)

Increase in trade and other payables

 

 

6,908

3,321

Increase/(Decrease) in provisions

 

 

50

(113)

Cash generated from operating activities

 

 

35,414

25,063

  Tax paid

 

 

(7,125)

(2,494)

Net cash inflow from operating activities

 

 

28,289

22,569

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

Acquisition of subsidiary (net of cash received)

7

 

(813)

-

Purchase of property, plant and equipment

 

 

(338)

(1,265)

Sale of property, plant and equipment

 

 

43

43

Capitalised development costs

6

 

(7,512)

(3,215)

Interest received

 

 

112

232

Net cash from investing activities

 

 

(8,508)

(4,205)

Cash flow from financing activities

 

 

 

 

Interest paid

 

 

(43)

(17)

Receipt of lease incentive

 

 

-

48

Repayment of lease liabilities

 

 

(121)

(54)

Net cash from financing activities

 

 

(164)

(23)

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

19,617

18,341

Cash and cash equivalents at beginning of period

 

 

41,853

23,512

Cash and cash equivalents at end of period

 

 

61,470

41,853

Notes to the Unaudited 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 2020 are unaudited. The financial information set out in this announcement does not constitute the Group's financial statements for the year ended 31 December 2020 as defined by Section 434 of the Companies Act. This financial information has been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. 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 2019 (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 2020 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.

 

Accounting policies

The Group's principal accounting policies used in preparing this information are as stated on pages 31 to 37 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.

 

3. Segmental information

Whilst the chief operating decision maker considers there to be only one segment, the Company's portfolio of games is split between those based on IP owned by the Group and IP owned by a third party and hence to aid the readers understanding of our results, the split of revenue from these two categories are shown below:

Revenue by first party/third party IP:

 

 

Unaudited

Year ended

31 December 2020

Audited

Year ended

31 December 2019

 

 

£'000

 '000

First party IP

 

17,310

10,312

Third party IP

 

65,659

51,482

 

 

82,969

61,794

 

 

 

4. Adjusted EBITDA

 

 

 

Unaudited

Year ended

31 December 2020

Audited

Year ended

31 December 2019

Profit attributable to shareholders

 

21,944

16,619

Share based compensation

 

1,662

921

Adjusted profit after tax

 

23,606

17,540

Taxation

 

4,292

2,551

Finance income

 

(112)

(232)

Finance cost

 

43

18

Amortisation of brands

 

1,784

1,783

Depreciation

 

535

412

Adjusted EBITDA

 

30,148

22,072

 

 

5. Earnings per share

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 Team17 Employee Benefit Trust. The diluted earnings per share uses the same calculation however the number of shares in issue are adjusted to include shares considered to be dilutive under the treasury stock method. An option is considered to be dilutive when the total proceeds per option is less than the average share price for the period.

 

 

Unaudited

Year ended 

31 December 

2020  

Audited

Year ended 

31 December 

2019  

Profit attributable to shareholders £'000 

21,944 

16,619 

Weighted average number of shares 

129,398,375 

129,246,382 

Weighted average diluted number of shares 

130,607,624 

129,253,947 

Basic earnings per share (pence) 

17.0 

12.9 

Diluted earnings per share (pence) 

16.8 

12.9 

 

The calculation of adjusted earnings per share is based on the profit attributable to shareholders as shown in the Statement of Comprehensive Income plus additional costs added back during the year as shown in note 4. The weighted average diluted number of shares includes share options considered to be dilutive under the treasury stock method as described above. 

 

 

Unaudited

Year ended 

31 December 

2020 

Audited

Year ended 

31 December 

2019 

Adjusted profit after tax £'000 

23,606 

17,540 

Weighted average number of shares 

129,398,375 

129,246,382 

Weighted average diluted number of shares 

130,607,624 

129,253,947 

Basic adjusted earnings per share (pence) 

18.2 

13.6

Diluted adjusted earnings per share (pence) 

18.1 

13.6

 

 

 

6. Intangibles

 

 

Development costs

 

Brands

 

Goodwill

 

Total

 

£'000

£'000

£'000

£'000

Cost

 

 

 

 

At 1 January 2019

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

Additions

7,512

-

-

7,512

Amounts arising on acquisitions

-

-

1,296

1,296

At 31 December 2020

21,342

21,983

22,379

65,704

 

 

 

 

 

Accumulated amortisation

 

 

 

 

At 1 January 2019

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

Charge for the year

4,028

1,784

-

5,812

At 31 December 2020

15,055

7,728

-

22,783

 

 

 

 

 

Net carrying amount

 

 

 

 

At 31 December 2020

6,287

14,255

22,379

42,921

 

 

 

 

 

At 31 December 2019

2,803

16,039

21,083

39,925

 

 

 

 

 

             

Goodwill

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

 

The recoverable amount of the cash generating unit ("CGU") at 31 December 2020 is determined from the fair value less costs of disposal of the underlying business units. The key assumption in calculating the fair value was the expected future cashflows at 31 December 2020. No impairment is considered necessary at 31 December 2020.

 

 

7. Acquisition of subsidiary

On 1 January 2020 Team17 Group plc acquired 100% of the issued shares in Yippee Entertainment Limited, for total consideration of £1,363,000. The acquisition is expected to increase the studio capacity by adding a talented and versatile team which will continue to be run by Mike Delves, an industry veteran with over 30 years' experience. Details of the purchase consideration, the net assets acquired and goodwill are as follows:

 

 

£'000

Purchase consideration

 

Cash consideration

780

Deferred consideration

150

Total cash consideration

930

Shares issued in Team17 Group plc

433

Total purchase consideration

1,363

 

The assets and liabilities recognised as a result of the acquisition are as follows:

 

£'000

Cash and cash equivalents

116

Property, plant and equipment

8

Receivables

58

Payables

(115)

Net identifiable assets acquired

67

Add: Goodwill

1,296

 

1,363

 

The goodwill is attributable to Yippee Entertainment Limited's talented multi-award winning video game development team. It has been allocated to the sole segment of the business which is the production and publishing of video games. None of the goodwill is expected to be deductible for tax purposes.

 

Acquisition related costs of £108,000 are included in administrative expenses in the Statement of Comprehensive Income for the year ended 31 December 2019.

 

Financial performance of Yippee Entertainment Limited has not been disclosed as it was wholly immaterial to the year ended 31 December 2020 results.

 

Deferred consideration

The deferred consideration arrangement required the Group to pay the former owners of Yippee Entertainment Limited up to a maximum of £150,000 by 31 December 2020 with no minimum. The full amount of £150,000 was paid in December 2020.

 

Shares issued in Team17 Group plc  

The shares were issued as part of the consideration for the acquisition of Yippee and therefore merger relief has been applied to the premium on the issue.

 

Trade and other receivables

The fair value of trade and other receivables at acquisition was £58,000 and the full amount was deemed to be collectible.

 

8 . Post balance sheet events

On 4 January 2021 Team 17 Digital Limited acquired the Golf With Your Friends IP from Entertainment Holdings Pty Ltd a company incorporated in Australia for £12,000,000. This consideration is made up of an initial cash payment of £9,000,000 and deferred cash consideration of £3,000,000 due within 12 months of the acquisition date.

 

The acquisition underlines part of the Company's strategy to make value enhancing acquisitions that will support the growth ambitions alongside organic growth and the Board expects this to be an ongoing part of the growth strategy.

 

At the time when these financial statements are authorized for issue, the Group had not yet completed the accounting for the acquisition and hence the fair values of assets acquired have not been disclosed.

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