Gfinity PLC Half-year Report (6796A)

TIDMGFIN

RNS Number : 6796A

Gfinity PLC

28 March 2017

Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR)

Gfinity plc

("GFIN" or the "Company")

Unaudited Half Year results for the period ended 31 December 2016

Gfinity plc (AIM: GFIN), a leading eSports business, announces its half year results for the six-month period ended 31 December 2016.

Financial Highlights:

-- Revenue increased 45% on the same period in the prior year to GBP0.9m (H1 2016: GBP0.6m), up 10% sequentially on the previous six months.

-- Operating loss decreased by GBP0.2m on the same period in the prior year to GBP1.7m, (H1 2016: loss of GBP1.9m), up GBP0.4m sequentially on the previous six months, reflecting planned investment in events, strengthening the quality of the Gfinity team and advancements in technology.

-- Loss per share reduced 75% to 1p (H1 2016: 4p) reflecting the increased number of shares in issue in the period.

-- Cash and cash equivalents, as at 31 December 2016, of GBP2.7m (30 June 2016: GBP0.8m and 31 December 2015: GBP1.6m).

Operational highlights

-- Raised GBP3.7m in July 2016, through oversubscribed placing. This included the introduction of a new strategic investor, Charles Street International Holdings Ltd.

-- Appointed by development studio "The Coalition" and game publisher Microsoft as one of two global partners for 2016/17 Gears of War Pro-Circuit. London event delivered in December 2016, with further events to follow in Mexico City and Paris during H1 2017.

   --     Delivered events across a number of game titles and with a wide range of partners: 

o HP Omen: CS:GO invitational at EGX in September 2016, the UK's largest gaming exhibition, delivering over 10 million online views across four days.

o Gillette: The Gillette Championship in July 2016, a Pro-Evolution soccer event staged on line and at the Gfinity arena, attracting players from across Europe.

o Activision Blizzard: Call of Duty Summer Masters in July 2016, featuring Europe's top teams as part of the Call of Duty World Championship Series.

o Microsoft Xbox/ The Coalition: Gears of War UK Open, featuring the UK's top Gears of War teams.

o Nintendo: The Great British Splat-Off. A first partnership with Nintendo, featuring the Splatoon game.

-- Co-staged the inaugural eSports Industry Awards event from The Brewery in Central London, a celebration of achievements within the fast-growing eSports sector, attended by a number of the top players, talent and team owners, attracting sponsors including Now TV, Twitch and Xbox.

-- Appointed by studio "343i" and Microsoft to deliver London and Mexico City events as part of Halo Championship Series in February 2017

-- Announced launch of the Gfinity Elite Series UK, a bedroom to podium framework for eSports in the UK, to launch in June 2017.

Post Period Highlights:

   --     Delivered Gears of War Pro Circuit and Halo Championship Series events in Mexico City 

-- Contracted with Valve (Counter-Strike: Global Offensive), Capcom (Street-Fighter V) and Rocket League (Psyonix) for those games to form part of inaugural Elite Series.

-- Announced partnership with Mediacom to develop and value sponsorship proposition around Elite Series.

-- Delivered first European event as part of the Call of Duty World League, Presented by PlayStation(R)4 programme at the Gfinity Arena in London in January 2017.

   --     OMEN by HP announced as official hardware provider to the Gfinity Elite Series. 

Neville Upton, Chief Executive Officer, Gfinity plc, said:

"During the six months to December 2016, we continued to build on our strategic objective to establish Gfinity as a leading player in the fast-growing eSports sector. I am also very pleased to be able to report another period of strong revenue growth, 45% up on the equivalent period in 2015. Gfinity has now built an excellent reputation for the quality of our technology, people and service delivery. This is evidenced by the range of companies, that selected Gfinity as their partner during the latter half of 2016, both in the UK and overseas.

"The eSports sector continues to grow rapidly. Market analysts Newzoo estimate that the global eSports audience will reach 385 million during 2017, a 19% increase on the prior year, with more and more sponsors and broadcasters seeking to enter the market. Having established a strong reputation for quality and as the only independent and publicly listed eSports company in Europe, Gfinity is well positioned to take advantage of this opportunity."

Enquiries:

 
 Gfinity plc                                  www.gfinityplc.com 
 Neville Upton, Chief Executive                  Via Walbrook PR 
  Officer 
 
 Allenby Capital Limited - Nominated            Tel. [phone] 
  Adviser and Broker                                        5656 
 Jeremy Porter / John Depasquale 
  / James Thomas 
 
 Walbrook PR (Media & Investor                    Tel: +44 (0)20 
  Relations)                                           7933 8780 
 Paul Cornelius / Sam Allen / Paul     or [e-mail] 
  Whittington 
 

About Gfinity:

Founded in 2012, Gfinity has quickly established itself as one of the world's leading eSports companies. The London-based business enjoys strong relationships with game publishers, players and the wider eSports community and has already built an excellent reputation for delivering high quality competitions, both on-line and off-line, and producing industry leading eSports broadcasts.

Gfinity operates a market leading tournament platform, with over 700,000 registered users eligible to compete in its online competitions across a number of leading game titles. It also stages high profile live off-line events, which see the top players in the world travel to the Gfinity Arena in London to take part in competitions, which are broadcast on-line to millions of viewers around the world.

Gfinity expects to be able to monetise its strong position in eSports by exploiting the commercial rights relating to its own events, including the Gfinity Elite Series, launching in 2017, and by creating and delivering bespoke events for sponsors and game publishers seeking to engage with the growing eSports community.

Gfinity websites:

Investor: www.gfinityplc.com

Commercial: www.gfinity.net

About eSports:

eSports is a global term for organised multi-player video game competitions, particularly between professional players, that are streamed on the internet and watched by hundreds of millions of fans around the world. Leading titles include League of Legends, Counter Strike: Global Offensive, Defense of the Ancients 2 (DotA 2), Call of Duty and Rocket League. The industry is growing rapidly, with new communities developing around more and more titles.

The global eSports audience is expected to reach 385 million in 2017 (source Newzoo). With the majority of this audience being male, under the age of 35 and relatively affluent, this is an attractive demographic for broadcasters and sponsors, with many of these people difficult to reach via conventional channels.

The 2015 League of Legends Championships finals in Berlin were watched by 36 million people, with a peak concurrent viewership of 14 million viewers, while at DotA 2's flagship annual championship 'The International 2016' competitors from around the world competed for a prize pot of over $20 million.

Commercially, the global eSports market is expected to grow 41% to $696 million in 2017. By 2020, eSports revenues are expected to grow to $1.49 billion.

Chairman's Review

Overview

The half year to December 2016 was a period in which Gfinity continued to deliver on its strategic objective to build a leading brand within the fast-growing eSports sector. The period saw further strong revenue growth, up 45% on the equivalent period in the prior year, achieved across a wide range of clients and relating to events both in the UK and overseas.

Gfinity raised GBP3.7 million before costs by way of a placing in July 2016, which included the introduction of a new major shareholder, Charles Street International Holdings Limited. This provided the capital to continue to invest in the quality of its team and in its underlying technology, including a scaleable, automated tournament platform that will enable Gfinity to continue to deliver a high quality product to an ever growing number of customers. The operational capability that Gfinity has now established is reflected in the breadth of partners with whom Gfinity worked during the period, ranging from established major games publishers to new sponsors making their first entry into the eSports market.

The eSports market continues to grow rapidly. The global audience of 385 million in 2017 represents an increase of 19% on 2016, while commercial activity in the sector is starting to increase. The past six months have seen a number of major new sponsors enter the marketing. The competition between broadcasters for content rights is increasing, with a number of streaming platforms challenging Twitch's market leading position and several leading linear broadcasters, most notably, Turner Sports in the USA, broadcasting eSports content for the first time.

During 2016, Gfinity announced the Gfinity Elite Series, to launch in June 2017. This new and dynamic competition format allows gamers of any level to be able to compete for an opportunity to be selected into professional eSports teams. We expect the national reach of the competition and the high-quality content produced to be an extremely attractive proposition for potential partners, sponsors and broadcasters.

Operating Review

Partnership and Events

As a result of its strong reputation within the industry, Gfinity has continued to develop valuable relationships with games publishers, potential sponsors and broadcasters throughout the period.

In August 2016, Gfinity announced that it was to be one of only two global partners for the 2016/17 Gears of War 4 Pro-Circuit eSports tournament alongside Major League Gaming. This agreement, signed with the video game developer The Coalition and Xbox, means that Gfinity will host live events in London, Paris and Mexico City as part of the international circuit, with a cumulative prize pool for all events on the circuit reaching $1 million (GBP760,000).

In the same month, Gfinity also signed a partnership agreement with OMEN by HP, the high-performance gaming laptop, desktop and accessory range, to deliver the Counter Strike: Global Offensive invitational competition. The OMEN and Gfinity branded tournament was held at the NEC in Birmingham in September as part of the EGX, the UK's largest gaming exhibition and delivered over 10 million online views across four days. The winner took home a prize pot of $100,000 ( GBP76,000).

Gfinity hosted other notable events during the period. The Gillette Championship was a football based eSports competition that took place in the Gfinity Arena in July in association with the popular gaming title Pro-Evolution Soccer by Konami. Other events staged on behalf of publishers included the Call of Duty Summer Masters on behalf of Activision Blizzard, forming part of the World Championship series for that game and the Great British Splat-Off, which represented a first partnership with the game publisher Nintendo.

In November 2016, Gfinity co-staged the inaugural eSports Industry Awards event from The Brewery in Central London. This event was a celebration of the achievements within the fast-growing eSports sector and was attended by a number of top players, talent and team owners, attracting sponsors including Now TV, an Internet television service owned by Sky plc, Twitch, the world's leading video platform and community for gamers and Xbox, a video gaming brand created and owned by Microsoft.

Also in November 2016, the Company announced the launch of the Gfinity Elite Series UK, a dynamic new eSports league format, featuring three of the world's most popular gaming titles, giving gamers of all competencies a chance to be drafted into professional teams in 2017. Launching first in the UK, the Gfinity Elite Series will provide regular, year-round high quality eSports content and will have a national reach, offering a target audience attractive to potential sponsors.

Financial Review:

Revenue for the six months to 31 December increased to GBP0.9m (H1 2016: GBP0.6m), up 45% on the equivalent period in 2015 and 10% on the previous six months to June 2016, resulting from a mix of sponsorship fees from game publishers, premium subscriptions and ticket sales.

The operating loss of GBP1.7 million decreased by GBP0.2 million (H1 2016 (GBP1.9m), but is up GBP0.4 million on the previous six-month period, reflecting planned investment in events and in further strengthening the quality of the Gfinity team and technology platform.

In July 2016, the Company raised GBP3.7million through an oversubscribed placing. This included introduction of new strategic investor, Charles Street International Holdings Limited, which has strong sector experience. Loss per share reduced 75% to 1p (H1 2016: 4p), while cash and cash equivalents as at 31 December 2016 were GBP2.7m (30 June 2016: GBP0.83m and 31 December 2015: GBP1.55m).

Post-period

In January 2017, Gfinity announced that it had been appointed by Activision Blizzard to stage two events as part of the Call of Duty World League programme, the first of which took place from 26(th) to 29(th) January.

Since the period end, Gfinity has also delivered a number of other previously announced events, including the Gears of War Pro Circuit event in Mexico City and Halo Championship Series events in both London and Mexico City.

In January 2017, Gfinity entered into a strategic partnership with MediaCom, one of the world's leading media agencies, to develop and value the sponsorship proposition around Gfinity Elite Series UK.

Finally, in March 2017, the Company contracted with Valve, publisher of CS:GO, Capcom, publisher of Street-Fighter V, and Psyonix, publisher of Rocket League, for those games to form part of the inaugural Gfinity Elite Series. Also in March, HP Omen was announced as the first sponsor for the series.

Outlook

This has been a strong period for Gfinity, during which time we have continued to establish ourselves as a leading eSports business with an excellent reputation, further illustrated by the quality and range of partners signed up in the latter half of 2016. We are experiencing significant ongoing growth of the eSports market and an increasing in commercial activity in the sector, leaving Gfinity very well positioned as the only independent and publicly listed eSports company in Europe. Gfinity will continue to invest in the quality of its people, technology and its own tournaments, including the launch of the Gfinity Elite Series in June 2017, in order to leverage this position.

Tony Collyer

Chairman

28 March 2017

Statement of Comprehensive Income

 
 
                                     6 months          6 Months        6 Months 
                                   to 31 December    to 31 December      to 30 
                                        2016              2015         June 2016 
                                     Unaudited         Unaudited       Unaudited 
                                              GBP               GBP           GBP 
 CONTINUING OPERATIONS 
 
 Revenue                                  902,212           624,292       822,227 
 
 Cost of sales                          (993,174)         (957,190)     (648,846) 
 
 
 Gross profit/(loss)                     (90,962)         (332,898)       173,381 
 
 Administrative expenses              (1,623,952)       (1,550,279)   (1,442,148) 
 
 
 Operating loss                       (1,714,914)       (1,883,177)   (1,268,767) 
 
 Finance income                             4,038             5,272         9,921 
 
 
 Loss on ordinary activities 
  before tax                          (1,710,876)       (1,877,905)   (1,258,846) 
 
 Taxation                                       0            97,176             4 
                                 ----------------  ----------------  ------------ 
 
 Retained loss for 
  the year                            (1,710,876)       (1,780,729)   (1,258,842) 
 
 
 
 Loss and total comprehensive 
  income for the period               (1,710,876)       (1,780,729)   (1,258,842) 
 
 
 
 Loss per share (basic                   -GBP0.01          -GBP0.02      -GBP0.04 
  and diluted) 
 

Statement of Financial Position

 
                                      As at         As at 
                                31 December       30 June 
                                       2016          2016 
                                  Unaudited       Audited 
                                        GBP           GBP 
 NON CURRENT ASSETS 
 Property, plant 
  and equipment                     237,274       294,219 
 Intangible fixed 
  assets                             97,979       122,974 
 
 CURRENT ASSETS 
 Inventories                          9,749         9,707 
 Trade and other 
  receivables                       727,984       439,270 
 Cash and cash equivalents        2,713,212       830,403 
 
 
                                  3,450,945     1,279,380 
 
 
 TOTAL ASSETS                     3,786,198     1,696,573 
 
 
 EQUITY AND LIABILITIES 
 Equity 
 Ordinary shares                    157,414        83,414 
 Share premium account            9,202,990     5,640,233 
 Other reserves                      84,935        55,458 
 Retained earnings              (6,646,548)   (4,935,672) 
 
 
 Total equity                     2,798,791       843,433 
 
 Non-current liabilities 
 Borrowings                               0             0 
 
 Current liabilities 
 Trade and other 
  payables                          987,407       853,140 
 
 
 Total liabilities                  987,407       853,140 
 
 
 TOTAL EQUITY AND 
  LIABILITIES                     3,786,198     1,696,573 
 
 
 

Cash Flow Statement

 
                                    6 months      6 Months      6 Months 
                                       to 31         to 31         to 30 
                                    December      December     June 2016 
                                        2016          2015     Unaudited 
                                   Unaudited     Unaudited 
                                         GBP           GBP           GBP 
 
 Cash flow used in operating 
  activities 
 Net cash used in operating 
  activities                     (1,723,043)   (1,936,349)     (564,901) 
 
 
 Cash flow from/(used 
  in) investing activities 
 Interest received                     4,038         5,272         9,921 
 Additions to property, 
  plant and equipment               (34,943)     (215,833)      (17,784) 
 Additions to intangible 
  fixed assets                             0             0     (148,750) 
 
 
 Net cash used in investing 
  activities                        (30,905)     (210,561)     (156,613) 
 
 Cash flow from/(used 
  in) financing activities 
 Issue of equity share 
  capital                          3,636,757       968,767       (2,501) 
 
 
 Net cash from financing 
  activities                       3,636,757       968,767       (2,501) 
 
 Net increase in cash 
  and cash equivalents             1,882,809   (1,178,143)     (724,015) 
 Opening cash and cash 
  equivalents                        830,403     2,732,561             0 
 
 
 Closing cash and cash 
  equivalents                      2,713,212     1,554,418     (724,015) 
 
 
 

Statement of Changes in Equity

 
                          Ordinary       Share      Share      Retained         Total 
                            shares     premium     option      earnings        equity 
                                                  reserve 
                               GBP         GBP        GBP           GBP           GBP 
 
  At 30 June 2015           77,845   4,679,536     62,447   (1,896,101)     2,923,727 
 
  Loss for the 
   period                        0           0          0   (1,780,729)   (1,780,729) 
  Total comprehensive 
   income                        0           0          0   (1,780,729)   (1,780,729) 
 
  Reduction in 
   capital                       0           0          0             0             0 
  New shares issued          5,569   1,052,431          0             0     1,058,000 
  Share issue cost               0    (89,233)          0             0      (89,233) 
  Share options 
   expensed                                        48,178 
  Total transactions 
   with owners, 
   recognised directly 
   in equity                 5,569     963,198     48,178             0     1,016,945 
 
  At 31 December 
   2015                     83,414   5,642,734    110,625   (3,676,830)     2,159,943 
 
  Loss for the 
   period                        0           0          0   (1,258,842)   (1,258,842) 
  Total comprehensive 
   income                        0           0          0   (1,258,842)   (1,258,842) 
 
  New shares issued              0           0          0             0             0 
  Share issue cost               0     (2,501)          0             0       (2,501) 
  Share options 
   expensed                      0           0   (55,167)             0      (55,167) 
  Total transactions 
   with owners, 
   recognised directly 
   in equity                     0     (2,501)   (55,167)             0      (57,668) 
 
  At 30 June 2016           83,414   5,640,233     55,458   (4,935,672)       843,433 
 
 
  Loss for the 
   period                        0           0          0   (1,710,876)   (1,710,876) 
  Total comprehensive 
   income                        0           0          0   (1,710,876)   (1,710,876) 
 
  New shares issued         74,000   3,626,000          0             0     3,700,000 
  Share issue cost                    (63,243)          0             0      (63,244) 
  Share options 
   expensed                      -           0     29,477             0        29,477 
  Total transactions 
   with owners, 
   recognised directly 
   in equity                74,000   3,562,757     29,477             0     3,666,233 
 
  At 31 December 
   2016                    157,414   9,202,990     84,935   (6,646,548)     2,798,790 
 

Notes to the interim financial statements

   1.    Accounting Policies and Basis of Preparation 

Basis of Preparation

The interim financial statements for the six months ended 31 December 2016 have been prepared using accounting policies that are consistent with those of the audited financial statements for the period ended 30 June 2016 and in accordance with IAS 34, "Interim Financial Reporting" as adopted by the European Union. The interim financial information should be read in conjunction with the Group's Annual Report and Accounts for the year ended 30 June 2016, which has been prepared in accordance with IFRSs as adopted by the European Union.

The interim financial information contained in this report has been reviewed but not audited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.

The Annual Report and Accounts for the year ended 30 June 2016 has been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under s498(2) or s498(3) of the Companies Act 2006.

The interim financial statements are unaudited and were approved by the Board of Directors on 28 March 2017.

Significant Accounting Policies

The critical accounting policies and presentation followed in the preparation of this interim report have been consistently applied to all periods in these financial statements and are the same as those applied in the company's annual accounts for the year ended 30 June 2016. A copy of these accounts can be obtained from the company's website www.gfinityplc.com.

Critical Accounting Judgements

The preparation of financial statements in conforming with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and assumptions are based on historical experience and other factors considered reasonable at the time, but actual results may differ from those estimates. Revisions to these estimates are made in the period in which they are recognised. The critical accounting judgements made in preparing this interim report are the same as those in preparing the annual accounts for the Company for the year ended 30 June 2016 which can be obtained from the company's website www.gfinityplc.com.

   2.    Loss per share 

Basic earnings per share is calculated by dividing the loss attributable to shareholders by the weighted average number of ordinary shares in issue during the period.

IAS 33 requires presentation of diluted EPS when a company could be called upon to issue shares that would decrease earnings per share, or increase the loss per share. For a loss making company with outstanding share options, net loss per share would be decreased by the exercise of options and therefore the effect of options has been disregarded in the calculation of diluted EPS.

 
                             6 months       6 months          Year 
                                ended          ended         ended 
                          31 December    31 December       30 June 
                                 2016           2015          2016 
                                  GBP            GBP           GBP 
 
 Profit/ (Loss) 
  attributable 
  to shareholders         (1,710,876)    (1,863,329)   (3,039,571) 
 
                               Number         Number        Number 
                                000's          000's         000's 
 
 Weighted average 
  number of ordinary 
  shares                      149,326         79,404        81,504 
 
                                  GBP            GBP           GBP 
 
 Loss per ordinary           -GBP0.01       -GBP0.02      -GBP0.04 
  share 
 
 
   3.    Notes to the Cash Flow Statement 
 
                                   6 months      6 Months      6 months 
                                      to 31         to 31         to 30 
                                   December      December 
                                       2016          2015     June 2016 
 
 Cash flows from operating 
  activities 
 Loss before taxation           (1,710,876)   (1,780,729)   (1,356,022) 
 
 Depreciation                       116,883        67,874        82,317 
 Amortisation of intangible 
  fixed assets 
 Interest received                  (4,038)       (5,272)       (9,921) 
 Share based payments                29,477        48,178      (55,167) 
 (Increase) in Inventories             (42)       (4,628)       (1,861) 
 (Increase) in trade 
  and other receivables           (288,714)     (220,216)       351,296 
 Increase in trade 
  and other payables                134,267      (41,556)       292,446 
 Disposal of fixed 
  assets                                  0             0         9,055 
 Corporation tax paid/ 
  received                                0             0        97,180 
 
 Cash used by operating 
  activities                    (1,723,043)   (1,936,349)     (590,677) 
 Interest paid                            -             -             - 
 
 Net cash used by 
  operating activities          (1,723,043)   (1,936,349)     (590,677) 
 
 
   4.    Remuneration of Key Management Personnel 

During the period a total of 12,145,670 options over Ordinary shares in the Company were granted. No options lapsed or were exercised during the period.

The total number of outstanding options in issue as at 31 December 2016 was 16,966,711 (30 June 2016: 4,821,041).

Of the options granted in the period, a total of 8,570,670 were granted to directors, as summarised in the table below:

 
 Director                Date of    Exercise      Number        Total options 
                          Option     Price         of Options    held following 
                          Grant                    granted       the grant 
----------------------  ---------  ------------  ------------  ---------------- 
                         21 July 
 Neville Upton            2016      GBP0.11875    7,870,670     7,870,670 
----------------------  ---------  ------------  ------------  ---------------- 
                         21 July 
 Jonathan Hall            2016      GBP0.11875    500,000       1,548,571 
----------------------  ---------  ------------  ------------  ---------------- 
                         21 July 
 Philip Shuldham-Legh     2016      GBP0.11875    100,000       643,000 
----------------------  ---------  ------------  ------------  ---------------- 
                         21 July 
 Paul Kent                2016      GBP0.11875    100,000       200,000 
----------------------  ---------  ------------  ------------  ---------------- 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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March 28, 2017 02:01 ET (06:01 GMT)