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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Gfinity Plc | LSE:GFIN | London | Ordinary Share | GB00BT9QD572 | ORD 0.01P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.035 | 0.03 | 0.04 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Amusement & Rec Svcs, Nec | 2.19M | -10.26M | -0.0030 | -0.10 | 1.02M |
From Apr 2019 to Apr 2024
TIDMGFIN
RNS Number : 4595Q
Gfinity PLC
21 October 2019
21 October 2019
Gfinity plc
("Gfinity" or the "Company")
Final results for the year ended 30 June 2019
Appointment of CEO
Strong revenue growth driven by strategic partnerships and new account wins
Hot Features
Premium
2019 (GBPm) 2018 (GBPm) Change
Revenue 7.9 4.3 82.3%
------------ ------------ ----------
Gross profit 1.0 (3.4) GBP4.4m
------------ ------------ ----------
Adjusted administrative
expenses (9.6) (8.7) (GBP0.9m)
------------ ------------ ----------
Adjusted operating
loss (8.6) (12.2) GBP3.6m
------------ ------------ ----------
FINANCIAL HIGHLIGHTS
-- Revenue growth above 80% for the second consecutive year
-- Gross profit of GBP1.0m (2018: loss of GBP3.4m), driven by strategic focus on delivery of higher margin esports
solutions for key partners
-- Demonstration of good operating leverage with opex relatively stable despite rapid growth in the business
-- Reduction of 30% in adjusted operating loss* to GBP8.6m with further reductions expected in 2019/20 financial
year
-- Net cash of GBP0.6m at year end, supplemented by completion of GBP5.25m capital raise in July
-- Robust pipeline of new opportunities
-- On track to reach breakeven Adjusted EBITDA** target by 2021
OPERATIONAL HIGHLIGHTS
-- Refocused business on Strategic Client Management model
-- Continued growth in strategic partnerships such as with F1 and some of the largest games publishers like;
Activision Blizzard and EA Sports
-- Expanded position as leading provider of unique esports solutions with commercial relationships including Premier
League, TRUXTUN Capital, HP Omen and IndyCar
-- Rapid growth of Gfinity's unique community of gamers generating new recurring revenue streams
-- Successful completion of GBP5.25m capital raise in July 2019 to fund future growth and strengthen commercial
capabilities
CEO APPOINTMENT
With the Company's strategic plan now fully embedded and financial performance significantly strengthened, the Board has decided to realign the responsibilities of the senior leadership team. With immediate effect, Graham Wallace, Global Chief Operating Officer, has been promoted to Chief Executive Officer and will be responsible for leading the business on a day-to-day basis and delivering Gfinity's three-year strategic plan. Garry Cook will continue as Executive Chairman with the overall responsibility for strategic direction of the business, identifying new strategic partnerships and relationships with both existing and new investors.
Garry Cook, Executive Chairman, Gfinity plc, said: "Gfinity has delivered a significantly improved financial performance this year and we are on track to reach our target of adjusted EBITDA breakeven by 2021. We have refocused the business on a Strategic Client Management model that has enabled us to strengthen our existing strategic partnerships and build a robust pipeline of new commercial opportunities. The esports market is growing rapidly and Gfinity is at the epicentre of the ecosystem. We are committed to working closely with our partners to provide them with unique esports solutions and to help them to connect with young gamers around the world."
He added: "In light of this solid progress, now is the right moment to refocus our senior management team. Our new CEO, Graham has extensive experience in a number of related industries and over the last 12 months as Global COO has demonstrated the qualities required to lead and accelerate the performance of the Company. The 3-year strategic plan is set, and the business is in a strong financial position. It is now time to write the next chapter of Gfinity's exciting story."
*Adjusted operating loss is before interest, tax, depreciation, amortisation, impairment and the share-based payment expense
** Adjusted EBITDA is earnings before interest, tax, depreciation, impairment, amortisation and the share-based payment expense
Notes for editors
Analyst presentation
There will be an analyst presentation at 8am today that will be available via a live conference call for registered participants. To register for the call, please contact Teneo; gfinity@teneo.com.
Annual Report and Accounts
The Company's Annual Report and Accounts for the year to 30 June 2019 will be posted to shareholders by 01 November 2019 and will be available on the Company's website later today.
The financial information set out in this announcement is abridged and does not constitute statutory accounts for the year ended 30 June 2019 but is derived from those financial statements. The financial information is not audited. The auditors have reported on the statutory accounts for the year ended 30 June 2019, their report was unqualified and did not contain statements under sections 498(2) or (3) of the Companies Act 2006, and these will be delivered to the Registrar of Companies following the Company's annual general meeting. The financial information has been prepared using the recognition and measurement principle of IFRS.
The comparative financial information for the year ended 30 June 2018 was derived from information extracted from the annual report and accounts for that period, which was prepared under IFRS and which has been filed with the UK Registrar of Companies. The auditors have reported on those accounts, their report was unqualified and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.
Enquiries:
Analyst & investor enquiries: www.gfinityplc.com
Garry Cook, Executive Chairman Via Teneo
Gfinity Investor Relations ir@gfinity.net
Allenby Capital Limited - AIM Nominated Tel: +44 (0) 20 3328
Adviser and Broker 5656
Jeremy Porter / John Depasquale
Teneo (Media) Tel: +44 (0) 20 7260
2700
Camilla Cunningham gfinity@teneo.com
About Gfinity
Gfinity is a world leading esports business. Created by gamers for the world's 2.2 billion gamers, Gfinity has a unique understanding of this fast-growing global community. It uses this expertise to provide both advisory services and to design, develop and deliver unparalleled experiences and winning strategies for game publishers, sports rights holders, commercial partners and media companies.
Gfinity connects its partners with the esports community in authentic and innovative ways. This consists of on and off-line competitions and industry leading content production. Partnerships include EA Sports, Activision Blizzard, F1 Esports Series and the Forza Racing Championship.
Gfinity connects directly with competitive gaming consumers through its growing community of gamers on its own platforms, Gfinity esports and Real Sport.
All Gfinity services are underpinned by the Company's proprietary technology platform delivering a level playing field for all competitors and supporting scalable multi-format leagues, ladders and knock out competitions.
More information about Gfinity is available at www.gfinityplc.com.
Executive Chairman's Statement
In the past 12 months we have confirmed Gfinity's position as a leading international esports business and trusted independent partner of some of the world's leading publishers, rights holders and brands. The esports and competitive gaming sector has continued to grow. Its complexity and fragmented nature mean it is a consumer market like no other. Gfinity is uniquely positioned in the gaming community and has proven itself to be a trusted provider in the fragmented esports ecosystem, designing, developing and delivering tailored esports solutions that are helping to create long-term, new business verticals in the virtual world for its clients and partners.
During the year the Company's leadership team has refocused the business around a Strategic Client Management model which has helped build a robust pipeline of new commercial opportunities, whilst at the same time enabling us to deepen relationships with a number of our strategic partners. This revamped growth strategy has delivered a solid financial performance with revenue growth of over 80% for the second year in a row and the focus on higher margin business and discipline on costs, has contributed to a 30% improvement in the adjusted operating loss.
In what has been an incredibly busy year, we have performed in line with our expectations and remain confident that the Company is well on the way to its stated target of breakeven Adjusted EBITDA by 2021.
The consumer always decides
There are currently 2.2 billion gamers globally. Roughly 900 million of them are what we call engaged gamers. These are male and female players, predominantly under the age of 35 and who love esports and competitive gaming. This is not a homogenous group. They have different aspirations and motivations. They play and consume content at a level that surpasses anything seen before in traditional sports. In recent months we have invested in and deepened our understanding of this young and typically hard to reach group, developing proprietary gamer segmentation profiles. In the hands of our in-house gamer experts this is enabling us to deliver insight led and targeted solutions for our partners and clients.
The hard to reach young gamer
We have seen the next wave of investment into the gaming segment coming from non-endemic brands. Global, household names who see competitive gaming as the answer to their business need to find a younger consumer base and give themselves a platform for future growth. They are looking for a trusted partner to help them navigate this new and exciting opportunity. Gfinity's value is unparalleled in creating compelling experiences for this next generation of digital consumers. The fragmented esports ecosystem creates an opportunity for end-to-end esports solutions that can build large sustainable new revenue streams. Gfinity's unique position at the centre of this, means that we are ideally placed to provide these solutions.
Our evolving business model
Over the last year we started to evolve our financial model from one dominated by service provision, where Gfinity is contracted to create a solution which the business client then monetises, to a broader Partnership Model. This is where Gfinity and partners own or co-own a solution, create IP and then monetises it, sharing the commercial rights. Over time this model will become a key offering and contribution to the group. We have also seen a significant increase in the demand for Gfinity's advisory services and the growth in our community building is also going to open up multiple new, recurring revenue streams.
Growth of strategic partnerships
We have deepened the relationships we have built over a number of years and delivered some memorable events. Activision Blizzard brought Call of Duty World League back to London and hired Gfinity to deliver what turned out to be one of the most talked about esports events the UK has ever seen, with sold out signs at the Copper Box Arena, epic game play and an electric atmosphere generated by thousands of fans. EA Sports chose Gfinity to host five events as part of EA SPORTS FIFA 19 Global Series. While for Formula 1 we completed Season 2 of the Formula 1 Esports Series and we have been reappointed for Season 3.
Adding new strategic partners
Gfinity's uniquely strong reputation has led to us secure a number of new partnerships. The Premier League appointed Gfinity as Tournament Operator of the inaugural ePremier League. It proved to be a major success, helped by the first ever final in March being contested by Liverpool and Manchester United. We also entered into a partnership with TRUXTUN Capital to be the primary consulting and programme management partner for the Qatar Esports WEGA Global Games. This promises to be an amazing series of events that is going to further extend the reach of top-level gaming across the globe. We were also appointed by HP Omen as production partner for The Esports Report Season 2, which spanned six episodes and has a worldwide reach.
Gfinity's growing gamer community and media assets
To deliver smart and effective esports solutions it was clear that we would benefit from building a robust community. In April 2018 Gfinity acquired RealSport101, a dynamic news portal covering multiple sports, traditional and virtual. During the year we refocused the RealSport101 web and social channels to focus 100% on esports news and features, adding writers, broadening the games covered and serving content at optimum times for both the UK and US markets. Concurrently we have expanded the reach of gfinityesports.com and its social channels. Gfinity now has a large and growing community and features in the daily news and entertainment gathering habits of millions of esports fans. It is now a credible and valuable Media Distribution Channel, reaching over 20 million gamers, creating new, scalable and recurring revenue streams. From ad serving to site takeovers and content sponsorships, publishers and brands now have a dynamic route to reach and engage with young gamers. In addition, our gamer community enables us to continually stay on top of trends, allowing us to create even more focused solutions for our clients and partners.
Elite Series
Over the last few months we took the decision to review the Elite Series, to relook, reimagine and relaunch it when we have a model that delivers on the strict financial metrics that we have set ourselves. The Elite Series delivered significant value to the business, showcasing our tournament and content creation abilities and driving multiple new commercial relationships. It also became a creative hot house that allowed us to trial formats that had never been seen before, a number of which have now become common practice for publisher-driven global esports programmes. We plan to re-launch the Elite Series with a new format when we have finalised the proposition that works for all stakeholders.
Investing in talent
Gfinity has an outstanding team of gaming experts and professionals. In the last year we complemented the existing team with the appointment of two seasoned professionals in Graham Wallace as Global Chief Operating Officer and John Clarke as Global Brand and Marcomms Officer. We have continued to add talent that now gives us a unique blend of capabilities across gaming, technology, production, marketing, community building, commercial and operations. This broad skill set makes us invaluable to any organisation looking to connect with young gamers. In April we brought the Gfinity family under one roof, moving to an open plan office in Hammersmith that facilitates collaboration and co-creation. We see the benefits of this move on a daily basis.
CSR
We are delighted to have been able to once again support the Digital Schoolhouse Esports Tournament initiative. It is inspiring to see young people come together around gaming, to compete, to socialise and to grow. Negative stereotypes continue to exist around gaming but when you see young people taking part in this project you can see how gaming can be a force of good in our communities. We are exploring ways to take our partnership to another level and utilise gaming to assist those children who are currently underachieving at school.
Outlook
We made good progress in the last year and the Company's strategic plan is now well embedded in the business. Our focus on a Strategic Client Management model has enabled us to deepen existing relationships and build a robust pipeline of exciting new opportunities. We are on the pathway to breakeven on an Adjusted EBITDA basis within the next two years and continue to target a long-term group gross margin of 30-40% and an Adjusted EBITDA margin in the range of 15-25% on a normalised basis.
In closing
Gaming is an integral part of the way young people now live their lives. Digitisation has changed the way they socialise and engage. They have said no to passive entertainment and yes to interactive entertainment. I am excited about what the future holds and the positive role that Gfinity is playing, and will continue to play, in igniting an esports revolution. Our business is at an inflection point. We are at the epicentre of the fragmented esports ecosystem, trusted to deliver high impact esports solutions to an ever-growing list of organisations looking to connect with young gamers. After a year of great progress and with exciting opportunities ahead, I would like to say thank you to our partners for their support and to all the Gfinity team for their passion for what they do. I am inspired daily.
Garry Cook
Executive Chairman
19 October 2019
Chief Financial Officer's Report
Summary
The year to 30 June 2019 was a period of strong growth for the business. I am pleased to be able to report strong revenue growth, a move to a gross profit position and good cost discipline. Overall this has enabled us to deliver a 30% improvement in the adjusted operating losses.
Revenue of GBP7.9m (2018: GBP4.3m) represented a year-on-year increase of over 80% for a second consecutive year, reflecting both the value of our investments in people, products and technology in recent years and the strength of our strategic account relationships with a blue chip client base, who continue to look to Gfinity for their esports solutions.
Revenue growth and an improved product mix delivered a gross profit of GBP1.0m (2018: loss of GBP3.4m), driven by the growth in strategic partnership solutions, coupled with a reduced investment in Gfinity owned content. Notwithstanding the 82% revenue growth and a GBP4.5m improvement at a gross profit level, administrative expenses (adjusted to remove the impact of certain non-cash items, specifically: the share option charge, depreciation, amortisation and impairment of intangible assets) increased by 10%, to GBP9.6m. This increase reflected the full year impact of cost increases during the previous financial year, with expenses remaining flat on a month on month basis throughout the year to 30 June 2019. This demonstrates the strong operating leverage capability in the business.
Year-end cash of GBP0.6m (2018: GBP3.7m) was in-line with expectations and was boosted by strong cash collection following the year end. This was supplemented at the end of July 2019 by the completion of an oversubscribed fundraise, raising a further GBP5.25m (gross) with strong support from both new and existing investors, leaving the business well positioned as it moves into the 2019/20 financial year.
Revenue and cost of sales
Revenue of GBP7.9m represented another year of strong growth, driven principally by growth in both the size and number of Gfinity's strategic client relationships. While relationships with existing major partners, including Microsoft, EA Sports and F1 continued to build, we were also delighted to commence new programmes with Premier League, IndyCar and TRUXTUN Capital. The new programmes with IndyCar and TRUXTUN Capital demonstrate Gfinity's capability to deliver strategic consultancy programmes around the esports sector. The consultancy programme is a higher margin revenue stream, which we expect to grow significantly through the 2019/20 financial year and in the medium term and we expect it to contribute approximately 10% of group revenues over time.
Revenue from Gfinity Elite Series grew 89% to GBP1.5m, with the net investment required reducing significantly to GBP0.4m, reflecting both the increase in revenue and the fact that only one season was delivered during the year, compared to three in the prior year. This product has gained significant traction in the industry, however, over the past two years it has also drawn on a lot of resources from Gfinity's business. We are currently looking at restructuring this property, with a view to relaunching it in a revised format, with stronger commercial performance.
Revenue from esports programmes with our strategic partnerships also grew strongly in the year, increasing 81% to GBP6.4m, delivering gross profit of GBP1.4m at a margin of 21.9%. This margin was strengthened during the year through the inclusion of Gfinity's first strategic consultancy projects. It also included an increasing proportion of programmes in which Gfinity retained a share of the commercial rights to the programmes, alongside a simple delivery fee.
Over the next two years, we expect gross margins to strengthen significantly, driven by the growth in strategic consultancy income, a strengthening of the margins across our service delivery work, growth in value of the commercial rights for our esports programmes and the increase in advertising and sponsorship income for access to the rapidly growing Gfinity and RealSport communities. In the medium term, we expect gross margins to achieve a target blended level of 35%-40%.
Administrative expenses
Administrative expenses, excluding non-cash items([1]) , amounted to GBP9.6m (2018: GBP8.8m). This 10% year-on-year increase is relatively low in the context of revenue growth of 82%, demonstrating the scalability of the current business and also a reprioritisation of resources throughout the year to the areas driving the greatest value. The small increase reflects the full year impact of the uplift seen during 2017/18, which itself was driven by the targeted recruitment of certain high calibre individuals. Actual underlying administrative expenses on a month-on-month basis have remained constant throughout the year.
Full administrative expenses for the year include an impairment charge of GBP0.4m (2018: GBP0), in respect of revenues attached to specific account relationships held in CEVO. While overall revenue across the group has grown strongly, in line with expectations, the intangible asset created on acquisition of CEVO related to a specific company relationship from which revenues declined on a year on year basis. In line with IFRS requirements an impairment charge was therefore recognised in respect of this relationship.
Operating loss
Adjusted operating loss([2]) for the full year was GBP8.6m (2018: GBP12.2m), representing a year-on-year improvement of 30%. We expect to see a further significant improvement in 2019/20, before we reach our breakeven Adjusted EBITDA target by 2021.
Share of loss in associates:
Esports Awards Ltd, in which Gfinity holds a 33% investment, continues to make strong progress as it builds an industry leading awards event for the esports sector. The November 2018 event attracted a global audience of over three million viewers, with more than 300,000 people registered and casting 3.3 million votes between them over the respective award categories. This provides a strong base from which to drive content and sponsorship revenues in the medium term, which we believe will create an investment property of real value for the group. Gfinity's share of loss in Esports Awards Ltd in the year was GBP0.1m (2018: GBP0.1m).
Gfinity Australia achieved some good early traction in terms of audience and commercial partners. However, the net cost required to deliver the programme remained high in relation to the size of the local market. As a result, in August 2019, both Gfinity and the majority shareholder (HT&E plc) announced that the venture would be wound down, ceasing all operations by December 2019. The net loss from this venture during the year was GBP0.9m (2018: GBP0.3m).
Cash and cash equivalents
Year-end cash of GBP0.6m (2018: GBP3.7m) was in line with expectations. This figure was impacted by the phasing of invoicing on certain key projects, which resulted in a trade and other receivables balance of GBP2.3m at year end. A total of GBP1.8m of this balance was collected in the first three weeks of July 2019. This was supplemented at the end of the month by the completion of an oversubscribed equity fundraise, raising a further GBP5.25m (gross) with strong support from both new and existing investors, leaving the business well positioned going into the 2019/20 financial year.
Financial outlook
Our results represent a significant step along the path towards the Company's target of reaching our breakeven Adjusted EBITDA target by 2021.
Strong revenue growth at an improving gross margin is expected to continue, driven by:
-- The development of the Company's strategic consultancy programme;
-- Sponsorship and advertising relating to Gfinity's rapidly growing gamer community;
-- Continuing growth in the esports solutions business with major strategic accounts; and
-- Growth in the value of shared commercial rights attached to these esports programmes, as more and more brands,
rights holders, publishers and media companies seek to reach the growing audience of esports consumers.
Administrative expenses will remain tightly controlled, meaning that we anticipate that the improving gross profit will improve the bottom line.
The Company continues to target a long-term group gross margin of 30-40% and an Adjusted EBITDA margin in the range of 15-25% on a normalised basis.
Jonathan Hall
Chief Financial Officer
19 October 2019
Group Statement of Profit or Loss
Notes 1 July 2017
1 July 2018 to to
30 June 2019 30 June 2018
GBP GBP
CONTINUING OPERATIONS
Revenue 7,870,166 4,317,325
Cost of sales (6,832,652) (7,732,767)
Gross Profit / (Loss) 1,037,514 (3,415,442)
Administrative expenses 6 (12,106,612) (10,033,326)
Operating loss (11,069,098) (13,448,768)
Finance income 8 6,481 1,432
Finance costs 8 (1,583) (1,333)
Share of net loss of associates
& impairment of associates (991,951) (347,237)
Loss on ordinary activities
before tax (12,056,151) (13,795,906)
Taxation 9 59,832 222,356
--------------- --------------
Retained loss from continuing
operations (11,996,319) (13,573,550)
Profit from discontinued
operations 27 1,911
Loss for the year (11,994,408) (13,573,550)
Earnings per share 20 (0.04) (0.06)
Group Statement of Comprehensive Income
Notes 1 July 2017
to
1 July 2018 to 30 June
30 June 2019 2018
GBP GBP
Loss for the period (11,994,408) (13,573,550)
Other comprehensive income
Items reclassified to profit
or loss
Changes in the fair value of
derivatives recognised at fair
value 18 58,083 108,421
Items that will not be reclassified
to profit or loss
Derivatives settled during
the period reclasfied to profit
and loss (166,504)
Foreign exchange loss on retranslation
of foreign subsidiaries 2,221 (1,717)
--------------- -------------
Other comprehensive income
for the period (106,200) (106,704)
Total comprehensive income
for the period (12,100,609) (13,466,846)
Group Statement of Financial Position
Notes 30 June 30 June
2019 2018
GBP GBP
NON CURRENT ASSETS
Property, plant and
equipment 10 483,113 758,861
Goodwill 12 2,544,525 2,544,525
Intangible fixed assets 11 1,033,993 2,070,156
Investment in Associate 14 - 264,464
4,061,631 5,638,006
CURRENT ASSETS
Trade and other receivables 15 2,322,379 2,159,869
Cash and cash equivalents 16 648,454 3,679,288
Current tax assets 27 - 153,000
2,970,833 5,992,157
TOTAL ASSETS 7,032,465 11,630,163
EQUITY AND LIABILITIES
Equity
Ordinary shares 19 362,897 286,348
Share premium account 37,455,838 31,565,734
Other reserves 1,637,763 585,539
Retained earnings (35,731,794) (23,628,965)
Total equity 3,724,704 8,808,656
Non-current Liabilities
Deferred tax liabilities 27 322,718 366,245
Current liabilities
Trade and other payables 17 2,985,042 2,238,420
Derivative Financial
Instruments 18 - 216,842
------------- -------------
Total liabilities 3,307,760 2,821,507
TOTAL EQUITY AND LIABILITIES 7,032,465 11,630,163
The notes on pages 21 to 51 form an integral part of these financial statements.
Signed on behalf of the board on 19 October 2019:
Garry Cook Jonathan Hall Executive Chairman Chief Financial Officer
Company Statement of Financial Position
Notes 30 June 2019 30 June
2018
GBP GBP
NON CURRENT ASSETS
Property, plant and
equipment 10 459,103 739,855
Investment in Subsidiaries 13 4,466,134 4,466,134
Intangible fixed assets 11 - 23,807
Investment in Associate 14 - 264,464
4,925,236 5,494,260
CURRENT ASSETS
Trade and other receivables 15 3,760,364 2,584,689
Cash and cash equivalents 16 603,076 3,563,217
Current tax assets 27 - 153,000
4,363,440 6,300,906
TOTAL ASSETS 9,288,676 11,795,166
EQUITY AND LIABILITIES
Equity
Ordinary shares 19 362,897 286,348
Share premium account 37,445,838 31,565,734
Other reserves 1,637,259 587,257
Retained earnings (33,107,935) (23,028,794)
Total equity 6,348,059 9,410,545
Current liabilities
Trade and other payables 17 2,940,616 2,167,778
Derivative financial
instruments 18 - 216,843
Total liabilities 2,940,616 2,384,621
TOTAL EQUITY AND LIABILITIES 9,288,676 11,795,166
The notes on pages 21 to 51 form an integral part of these financial statements.
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Company is not presented as part of these financial statements. The parent Company's loss for the year amounts to GBP9,970,720 (2018: loss of GBP12,973,380).
Signed on behalf of the board on 19 October 2019:
Garry Cook Jonathan Hall Executive Chairman Chief Financial Officer
Group Statement of Changes in Equity
Ordinary Share premium Share Retained Forex Total equity
shares option earnings
reserve
GBP GBP GBP GBP GBP GBP
At 30 June
2017 188,664 15,254,085 154,217 (10,163,836) - 5,433,130
Loss for the
period - - - (13,573,550) - (13,573,550)
Other Comprehensive
Income - - - 108,421 (1,717) 106,704
Total comprehensive
income - - - (13,465,129) (1,717) (13,466,846)
Proceeds of
Shares Issued 81,763 13,618,704 - - - 13,700,467
Shares as
Consideration 15,921 3,050,663 3,066,584
Share issue
costs - (357,717) - - - (357,717)
Share options
expensed - - 433,039 - - 433,039
Total transactions
with owners,
recognised
directly in
equity 97,684 16,311,650 433,039 - - 16,842,373
At 30 June
2018 286,348 31,565,735 587,256 (23,628,965) (1,717) 8,808,657
Ordinary Share premium Share Retained Forex Total equity
shares option earnings
reserve
GBP GBP GBP GBP GBP GBP
At 30 June
2018 286,348 31,565,735 587,256 (23,628,965) (1,717) 8,808,657
Loss for the
period - - - (11,994,408) - (11,994,408)
Other Comprehensive
Income (108,421) 2,221 (106,200)
Total comprehensive
income - - - (12,102,830) 2,221 (12,100,609)
Proceeds of
Shares Issued 75,000 5,925,000 - - - 6,000,000
Shares as
consideration 1,549 157,211 - - - 158,760
Share issue
costs - (192,107) - - - (192,107)
Share options
expensed - - 1,050,002 - - 1,050,002
Foreign exchange - - - -
on retranslation
of foreign
subsidiaries
Total transactions
with owners,
recognised
directly in
equity 76,549 5,890,104 1,050,002 0 0 7,016,656
At 30 June
2019 362,897 37,455,839 1,637,258 (35,731,795) 504 3,724,704
========= ============== ========== ============= ======== =============
Company Statement of Changes in Equity
Ordinary Share premium Share option Retained Total equity
shares reserve earnings
GBP GBP GBP GBP GBP
At 30 June 2017 188,664 15,254,085 154,217 (10,163,836) 5,433,130
========= ============== ============= ============== ==============
Loss for the period - - - (12,973,379) (12,973,379)
Other Comprehensive
Income - - - 108,421 108,421
--------- -------------- ------------- -------------- --------------
Total comprehensive
income - - - (12,864,958) (12,864,958)
--------- -------------- ------------- -------------- --------------
Proceeds of Shares
Issued 81,763 13,618,703 - - 13,700,466
Share issue costs - (357,717) - - (357,717)
Shares as consideration 15,921 3,050,663 - - 3,066,584
Share options expensed - - 433,039 - 433,039
Total transactions
with owners, recognised
directly in equity 97,684 16,311,649 433,039 - 16,842,372
--------- -------------- ------------- -------------- --------------
At 30 June 2018 286,348 31,565,734 587,256 (23,028,794) 9,410,544
Loss for the period - - - (9,970,720) (9,970,720)
Other comprehensive
income (108,421) (108,421)
Total comprehensive
income - - - (10,079,141) (10,079,141)
--------- -------------- ------------- -------------- --------------
Proceeds of Shares
Issued 75,000 5,9250,000 - - 6,000,000
Shares as Consideration 1,549 157,211 - - 158,760
Share issue costs - (192,107) - - (192,107)
Share options expensed - - 1,050,002 - 1,050,002
Total transactions
with owners, recognised
directly in equity 76,549 5,890,104 1,050,002 - 7,016,656
--------- -------------- ------------- -------------- --------------
At 30 June 2019 362,897 37,455,838 1,637,258 (33,107,935) 6,348,048
========= ============== ============= ============== ==============
Group Statement of Cash Flows
30-Jun-19 30-Jun-18
Note GBP GBP
Cash flow used in
operating activities
Net cash used in operating
activities 24 (8,470,887) (12,505,936)
Cash flow from / (used
in) investing activities
Interest received 8 6,481 1,432
Additions to property,
plant and equipment 10 (123,558) (312,342)
Acquisition of subsidiaries,
net of cash acquired - (1,049,924)
Investment in Associate (270,661) (315,713)
Proceeds from sale
of discontinued operations 17,678
Net cash used in investing
activities (370,061) (1,676,547)
Cash flow from / (used
in) financing activities
Issue of equity share
capital 6,000,000 13,700,466
Share Issue Costs (192,107) (357,717)
Net cash from financing
activities 5,807,893 13,342,749
Net increase in cash
and cash equivalents (3,033,055) (839,736)
Effect of Currency 2,221 -
translation on cash
Opening cash and cash
equivalents 3,679,288 4,519,024
Closing cash and cash
equivalents 648,454 3,679,288
Company Statement of Cash Flows
30-Jun-19 30-Jun-18
Note GBP GBP
Cash flow used in
operating activities
Net cash used in operating
activities 24 (7,579,304) (11,928,671)
Cash flow from/(used
in) investing activities
Interest received 8 6,481 1,432
Additions to property,
plant and equipment 10 (115,256) (298,059)
Acquisition/Disposal
of subsidiaries, net
of cash acquired 45,000 (1,066,500)
Investment in Associate (270,661) (315,713)
Inter-company loans (854,293) (691,046)
Net cash used in investing
activities (1,188,730) (2,369,886)
Cash flow from / (used
in) financing activities
Issue of equity share
capital 6,000,000 13,700,466
Share Issue Costs (192,107)) (357,717)
Net cash from financing
activities 5,807,893 13,342,749
Net increase in cash
and cash equivalents (2,960,141) (955,808)
Opening cash and cash
equivalents 3,563,216 4,519,024
Closing cash and cash
equivalents 603,075 3,563,216
Notes to the Financial Statements
1. GENERAL INFORMATION
Gfinity plc ("the Company") is a public company limited by shares incorporated in the United Kingdom under the Companies Act 2006, registered in England and Wales and is AIM listed. The address of the registered office is given on page 2. The registered number of the company is 08232509.
The functional and presentational currency is GBP sterling because that is the currency of the primary economic environment in which the group operates. Foreign operations are included in accordance with the policies set out in note 2. Principal activities are discussed in the Strategic report.
2. ACCOUNTING POLICIES
Basis of preparation
The Company has prepared the accounts on the basis of all applicable International Financial Reporting Standards (IFRS), including all International Accounting Standards (IAS), Standing Interpretations Committee (SIC) and the International Financial Reporting Interpretations Committee (IFRIC) interpretations issued by the International Accounting Standards Board (IASB) with effective dates for accounting periods beginning on or after 1 July 2018, together with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The accounts have been prepared on the historical cost basis, except for otherwise stated below. The principal accounting policies, which have been consistently applied throughout the period presented, are set out below.
The preparation of financial statements in conformity with IFRS requires the use of certain estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. Estimates and judgements are continually reviewed and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances.
Interpretations and amendments to published standards effective in the accounts
For the purposes of the preparation of the accounts, the Group has applied all standards and interpretations that will be effective for the accounting periods commencing on or after 1 July 2018.
The following standards and interpretations have been adopted:
-- Amendments to IFRS 2, 'Share based payments', on clarifying how to account for certain types of share-based payment transactions (effective for accounting periods beginning on or after 1 January 2018);
-- IFRS 9 'Financial instruments' (effective for accounting periods beginning on or after 1 January 2018);
-- IFRS 15 'Revenue from contracts with customers' (effective for accounting periods beginning on or after 1 January 2018);
-- IFRIC 22, 'Foreign currency transactions and advance consideration' (effective for accounting periods beginning on or after 1 January 2018);
Standards, interpretations and amendments to published standards that are not yet effective
Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Company's accounting periods beginning on or after 1 July 2019 or later periods but which the Company has not adopted early are as follows:
-- IFRS 16 'Leases' (effective for accounting periods commencing on or after 1 January 2019);
Management continues to monitor the IASB's on-going work on improvements to financial reporting but does not currently believe that the amendments and interpretations listed above will have a material effect on the Company's reported income or net assets. The impact of IFRS has been considered in note 23.
Going concern
Gfinity has established itself as a market leader in the fast growing esports sector. Having delivered strong revenue growth for the second consecutive year, the Group is on track to achieve its target of break even at an adjusted operating profit level in the year to 30 June 2021.
At the end of the period the Group had cash and cash equivalents amounting to GBP648,454 and the Company had cash and cash equivalents amounting to GBP603,076. On 15 July 2019 the Group announced its intention to raise a further GBP5.25 million (prior to deduction of expenses) via a placing of shares on AIM. This placing was oversubscribed, with strong support from both new and existing shareholders. The transaction was approved by shareholders on 31 July 2019, with shares being admitted to AIM on 1 August 2019. The placing leaves the Group with a strong cash position from which to pursue its objectives, while the strong strategic client relations that Gfinity has built provide confidence of continued revenue and margin growth. In common with any growth business in a rapidly developing sector, however, it should be noted that there is an inherent degree of uncertainty in the forecasts.
Alongside the improved financial performance of the business, the oversubscribed nature of the recent placing, the continued strong support of existing shareholders and a growing investment market for the esports sector gives the Directors confidence that should there need to be a raise further funds, then the company would be successful in doing so. Accordingly, the board do not believe there to be a material uncertainty with regards to going concern, hence these accounts have been prepared on a going concern basis.
Basis of consolidation
The Group accounts consolidate those of the Company and all of its subsidiary undertakings drawn up to 30 June each year. Subsidiary undertakings are those entities over which the Group has the ability to govern the financial and operating policies through the exercise of voting rights. The results of subsidiaries acquired or sold are consolidated for the periods from or to the date on which control passed. Acquisitions are accounted for under the acquisition method.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.
All intra group balances, transactions, income and expenses and profit and losses on transactions between the Company and its subsidiaries and between subsidiaries are eliminated.
Goodwill
Goodwill is initially recognised and measured as set out above.
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units ('CGUs') expected to benefit from the synergies of the combination. CGUs to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
Investment in associates
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or join control over those policies.
The Group's interests in jointly controlled entities are incorporated in the financial information using the equity method of accounting. Investments in joint ventures are carried in the balance sheet at cost as adjusted by post acquisition changes in the Group's share of the net assets of the associate, less any impairment in the value of the individual investments. The Group's share of the net profit or loss of the joint venture is shown as a single line item in the Consolidated Statement of Comprehensive Income.
Where the Group transacts with a joint venture any profit or loss arising is eliminated to the extent of the Group's interest in the relevant joint venture.
The carrying amount of equity-accounted investments is tested for impairment at least annually.
Investment in Subsidiaries
Investments in subsidiaries are held in the Company balance sheet at cost and reviewed annually for impairment.
Revenue
Revenue comprises the fair value of the consideration received or receivable for the sale of services in the normal course of the Group's activities. Revenue is shown net of value added tax.
To determine whether to recognise revenue, the Group follows a 5-step process:
1 Identifying the contract with a customer
2 Identifying the performance obligations
3 Determining the transaction price
4 Allocating the transaction price to the performance obligations
5 Recognising revenue when/as performance obligation(s) are satisfied.
Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised goods or services to its customers. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
Revenue comprises of:
-- Partner event fees: Revenue recognised in line with the date at which work is performed.
-- Sponsorship revenues: Revenue is recognised on the date the relevant sponsored event takes place. In the event of long-term sponsorship contracts, the revenue is released on a straight-line basis across the term of the contract, except in instances where a significant proportion of the revenue relates to specific activation activities, in which case the revenue is released in line with when that work is performed.
-- Advertising revenues: Fees are earned each time a user clicks on one of the ads that are displayed on the website. Revenue is recognised on a pay-per-click basis.
-- Ticket sales: Revenue is recognised on the date the relevant event is delivered.
-- Broadcaster revenues: Rights fees are received from linear broadcasters and online streaming platforms in return for rights to access broadcast content. Revenue is recognised once the relevant performance obligations are completed which is typically at the point the broadcast occurs.
-- Website subscriptions: Revenue is invoiced in advance and deferred on a straight-line basis over the subscription period.
Operating leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. The impact of the introduction of IFRS 16, Leases, on future accounting periods is discussed in note 23.
Foreign currencies
Transactions in foreign currencies are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the income statement for the year.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period. Exchange differences arising from the translation of the Group's foreign operations are recognised in other comprehensive income.
Taxation
The taxation expense represents the sum of the tax currently payable and deferred tax.
The charge for current tax is based on the results for the period as adjusted for items that are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computations of taxable profit and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill (or any discount on acquisition) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that the directors do not have a high degree of certainty that sufficient taxable profits will be available in the medium-term to allow all or part of the asset to be recovered.
Share Based Payments
The Company provides equity-settled share-based payments in the form of share options. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value determined at the date of grant is expensed on a straight line basis over the vesting period, based on the Company's estimate of shares which will eventually vest and adjusted for the effect of non-market based vesting conditions. The Company uses an appropriate valuation model utilising a Black-Scholes model in order to arrive at a fair value at the date share options are granted.
In instances when shares are used as consideration for goods or services the shares are valued at the fair value of the goods or services provided. The expense to the company is recognised at the point the goods or services are received.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the carrying amount of the asset or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and that the cost of the item can be measured reliably. The carrying amount of parts that are replaced is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
Depreciation is calculated using the straight-line method to allocate the cost or revalued amounts of tangible fixed assets to their residual values over their useful economic lives, as follows:
Office equipment 3 years straight line
Computer equipment 3 years straight line
Production equipment 3 years straight line
Leasehold improvements Over the period of the lease
or, where management have reasonable
grounds to believe the property
will be occupied beyond the
terms of the lease, 3 years
straight line
The residual values and useful economic lives of the assets are reviewed, and adjusted if appropriate, at each balance sheet date. The carrying amount of an asset is written down immediately to its recoverable amount if the carrying amount is greater than its estimated recoverable value. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within other gains or losses in the income statement.
Intangible fixed assets
Intangible assets other than goodwill are recognised where the purchase or internal development of such assets are expected to directly contribute towards the company's ability to generate revenues over a multiple years.
Intangible fixed assets are stated at historical cost less accumulated amortisation and impairment, if any. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Where the cost is not clearly identifiable discounted cash flows are utilised to estimate either the cost to develop the resource or, where there are already profits attributable the asset, to estimate future cash inflows. Historical cost includes expenditure that is directly attributable to the acquisition or development of the items. Subsequent costs are included in the carrying amount of the asset or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and that the cost of the item can be measured reliably.
Amortisation is charged on a straight-line basis over the estimated useful economic life of the asset as follows:
Software development 3 years straight line Web traffic acquired in business 3 years straight line combination Technology Platform 5 years straight line Customer Relationships 5 years
Research and development costs
Development expenditure is capitalised as an intangible asset, only if the development costs can be measured reliably and it is anticipated that the product being built will be completed and will generate future economic benefits in the form of cash flows to the Group.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less. These are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities are obligations to pay cash or other financial instruments and are recognised when the company becomes a party to the contractual provisions of the instrument. Financial liabilities are classified according to the substance of the contractual arrangements entered into. All interest-related charges are recognised as an expense in the income statement.
Trade and other payables are not interest bearing and are recorded initially at fair value net of transactions costs and thereafter at amortised cost using the effective interest rate method.
An equity instrument is any contract that evidence a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Financial assets
Financial assets are recognised in the balance sheet when the Company becomes a party to the contractual provisions of the instrument and are recognised in the balance sheet at the lower of cost and net realisable value.
Provision is made for diminution in value where appropriate.
Income and expenditure arising on financial instruments is recognised on the accruals basis and credited or charged to the statement of comprehensive income in the financial period to which it relates.
Trade receivables do not carry any interest and are initially recognised at fair value, subsequently reduced by appropriate allowances for estimated irrecoverable amounts.
Derivative Financial Instruments
Derivative financial assets and financial liabilities are recognised on the Balance Sheet when the Group becomes a party to the contractual provisions of the instrument. Derivatives are initially recorded at fair value and are subsequently remeasured to fair value based on mid-market prices, estimated future cash flows and forward rates as appropriate. The fair value is re-assessed at each period end with the movements recognised initially in the statement of other comprehensive income before being recycled to the income statement.
3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of financial statements in conformity with IFRS requires the use of certain estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. Estimates and judgements are continually reviewed and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances.
Revenue recognition:
The Group's revenue recognition policy is based on separating contracts into discrete performance obligations with revenue then recognised based on the percentage completion of each performance obligation. Where the value of each distinct performance obligation is not set out in a contract Management estimate the value of each performance obligation based on the level of resource required to complete the performance obligation in comparison to the overall level of resource required to fulfil the contract. For example, if a contract did not stipulate the value by region of a broadcast agreement management would use appropriate weighting (e.g. audience size) to estimate the value of each region, with each region viewed as a separate performance obligation. Revenue would then be recognised based on the percentage completion of each performance obligation. In instances where there is no other readily available proxy Management will estimate the value of each performance obligation based on the relative cost to deliver.
Revenue settled by means other than cash (e.g. via equity in a associate) is recognised based on the value stipulated in the contract for goods or services, which would be set at fair value, with the revenue then recognised based performance obligations in the manner described above.
Intangible assets recognised on business combinations:
Intangible assets in business combinations are recognised when the asset is separately identifiable and based on the probable future economic benefit that arises owing to the Group's control of the asset. Typically, the Group will utilise a discounted cash flow to establish the future economic benefits and therefore the fair value of the asset.
The Group identified three intangible assets in relation to the two acquisitions undertaken in the prior year. As these assets have a finite economic life, in line with IAS 36, they are only subject to further testing for impairment when there are either internal or external indicators of impairment. Based on a review of these assets it was concluded that there were indicators of impairment in relation to the Gaming Platform and CEVO customer relationship. This followed a drop in revenue from third parties as CEVO focused on development in support of Group projects requiring an exercise to calculate the recoverable value of the asset. This is discussed below. Following further review, it was concluded that there was no impairment to the Gaming Platform as the technology had underpinned the successful delivery of a number of events in the year. The further testing in relation to the customer relationship is discussed below.
Impairment testing:
The Group tests goodwill for impairment annually. The recoverable amounts of cash generating units have been determined based on value-in-use calculations which require the use of estimates. Management has prepared discounted cash flows based on the latest strategic plan. Discount rate has been calculated using the Capital Asset Pricing model with reference to the value of UK 10 year gilts as a proxy for a risk free rate and the volatility of Gfinity's share price relative to that of AIM since listing.
Goodwill carried in relation to CEVO: The key assumptions in evaluating whether there was any impairment of the goodwill in relation to CEVO was the discount factor (13%) which was calculated in the manner outlined above and the volume of development work to be undertaken on behalf of the group. The development hours were based on the current pipeline of work and the technology requirements to deliver the strategic goals of the business which are then assumed to grow at a CAGR of 6% over a five year period. This was then compared against the cost to fulfil this work by paying a third party as discussed below. The cost savings established are a key determinant in whether there was any evidence of impairment. This was then evaluated over a five year period using a discounted cash flow.
The third-party cost for work was determined with reference to CEVO's own charge out rates with an assumed 5% CAGR growth in the hourly rate. This indicated a value of GBP1.8m higher than the carrying value of goodwill in relation to CEVO. Reducing development time by 10% has an impact of GBP0.2m.
Goodwill carried in relation to Real Sport: The key assumptions in evaluating whether there was any impairment of the goodwill in relation to Real Sport was the discount factor (13%) which was calculated in the manner outlined above, the prospective growth in users (15% CAGR over five years, per Newzoo the esports industry will grow 20% to FY22) and the timing and successful execution of traffic monetisation strategies. Key costs related to content creation, staff, marketing and traffic acquisition. Where assumptions could not be validated based on historical data, they have been benchmarked based on desk based research with a sensitivity considered for the timing of cash flows where monetisation had not yet occurred. Owing to Real Sport's pre-profit status the discounted cash flow was undertaken for a five-year period with the terminal value then being calculated based on the year five cashflows with an assumed growth rate of 0.5%.
Based on the above the value of Real Sports was GBP3.0m higher than the carrying value. Reducing the CAGR for traffic growth by 5% has an impact of GBP0.7m while a 10% reduction has an impact of GBP1.4m. The impact of delaying certain monetisation strategies with traffic growth as per the base cost has had an adverse impact of GBP0.1m.
CEVO customer relationships: As revenue from third parties declined in the year it was necessary to test the third-party relationships for impairment. The test was based on a discounted cash flow covering the remaining useful economic life of the asset (three years) with the key assumptions being the discount rate (13%), billable revenue per hour, the number of hours work undertaken, and the staffing required to deliver the work. Based on the analysis the recoverable value of the asset was GBP0.3m requiring an impairment to the carrying value of GBP0.4m.
Valuation of investments:
Investments held in the company statement of financial position have been tested in line with the goodwill impairments described above
Deferred tax:
The Company has not recognised a deferred tax asset in respect of its losses given that there is no track record of taxable profits at this time. Deferred tax assets will be recognised when the Company has established a track record of expected future taxable profit. Detail of the unrecognised asset as at the period end are provided in note 9(c).
Share based payments:
The Company issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value at the date of grant. This fair value is measured by use of a Black-Scholes model.
The key assumptions used as inputs into this model are outlined in [note 21] on Share Based Payments. In addition, the company has issued share options as partial consideration for services provided. The cost of these has been recognised based on the timing of the delivery of the service and the fair value.
4. REVENUE
The Group's policy on revenue recognition is as outlined in note 2. The year ending June 2019 included GBP0.9m included in the contract liability balance at the beginning of the period (2018: GBPnil).
The Group's revenue disaggregated by primary geographical markets is as follows:
30-Jun-19 30-Jun-18
Gfinity CEVO Total Gfinity CEVO Total
United Kingdom 7,082,948 - 7,082,948 3,007,511 - 3,007,511
North America 539,210 248,007 787,218 240,513 635,238 875,751
ROW - - - 434,063 - 434,063
Total 7,622,159 248,007 7,870,166 3,682,087 635,238 4,317,325
========== ======== ========== ========== ======== ==========
The Group's revenue disaggregated by pattern of revenue of revenue recognition is as follows:
30-Jun-19 30-Jun-18
Gfinity CEVO Total Gfinity CEVO Total
Services transferred
at
a point in time 5,251,702 27,778 5,279,480 3,093,939 204,153 3,298,093
Services transferred
over time 2,370,457 220,230 2,590,686 548,602 431,085 979,687
Total 7,622,159 248,007 7,870,166 3,642,542 635,238 4,277,780
========== ======== ========== ========== ======== ============
As at 30 June 2019 the Group had the amounts shown below held on the consolidated statement of financial position in relation to contracts either performed in full during the year or ongoing as at the year end. All amounts were either due within one year or, in the case of contract liabilities, the work was to be performed within one year of the balance sheet date
Jun-19 Jun-18
Trade Receivables GBP 1,085,158 GBP 1,284,348
Contract Assets GBP 418,286 GBP 447,849
Contract Liabilities GBP 521,010 GBP 879,881
Trade receivables are non-interest bearing and are generally on 30 day terms.
Contract assets are initially recognised for revenue earned while the services are delivered over time or when billing is subject to final agreement on completion of the milestone. Once the amounts are billed the contract asset is transferred to trade receivables.
Contract liabilities arise when amounts are paid in advance of the delivery of the service. These are then transferred to the statement of comprehensive income as either milestones are completed or work is completed overtime. Revenue of GBP0.9m was recognised in the year ending 30 June 2019 that was held as a contract liability as 30 June 2018. All of these amounts were held in Gfinity
5. SEGMENTAL INFORMATION
The Group manage the business based on two segments: Gfinity and CEVO. The two reportable segments operate as follows:
Gfinity: This segment is the largest part of the business and encompasses the majority of esports related activities and broadcast and production capabilities.
CEVO: The in-house development capabilities which are key to delivering both Gfinity plc's strategy and online esports solutions for third parties. This segment also includes several US based technology revenue streams
30 June 2019 30 June 2018
Gfinity CEVO Group Gfinity CEVO Group
Revenue 7,622,158 248,007 7,870,166 3,682,087 635,238 4,317,325
Loss (11,481,149) (513,259) (11,994,408) (13,420,753) (152,797) (13,573,550)
Gfinity principally operate in the UK and CEVO principally in the US.
The group has four single external customers which have revenue equal to or greater than 10% of the group's revenue. The revenue from each of these customers is: GBP1.5m, GBP1.3m, GBP1.1m and GBP1.1m. The customers are major game publishers, media companies and sports rights holders. These revenues are attributed to the Gfinity segment.
Segmental information for the statement of financial position has not been presented as management do not view this information on a segmental basis. Intra-group recharges are not considered when monitoring performance with central charges (such as senior management costs) retained in Gfinity plc rather than being apportioned across segments.
6. OPERATING EXPENSES
Operating loss is stated after charging:
Group
Year ended Year ended
30 June 2019 30 June 2018
Depreciation of property, plant and
equipment 399,307 442,221
Amortisation & impairment of intangible
fixed assets 1,036,163 418,797
Rentals under operating leases - land
and buildings 613,861 609,373
Expensed development costs 190,308 190,517
Staff costs (see note 7) 5,648,905 4,567,202
Costs of inventories expensed - 1,308
Auditors' remuneration for auditing
the accounts of the Company 47,500 21,000
Auditors' remuneration for other non-audit
services:
* Other services supplied pursuant to such legislation - -
* Other services related to taxation 2,500 1,500
* All other services 8,975 8,250
Net foreign exchange (gains)/ losses 24,546 (11,571)
7. PARTICULARS OF EMPLOYEES
Number of employees
The average number of people (including directors) employed by the Company during the financial period was:
Group Company
Year ended Year ended Year ended Year ended
30 June 30 June 30 June 30 June
2019 2018 2019 2018
----------- ----------- ----------- -----------
62 61 53 58
=========== =========== =========== ===========
The aggregate payroll costs of staff (including directors) were:
Group Company
Year ended Year ended Year ended Year ended
30 June 30 June 30 June 30 June
2019 2018 2019 2018
Wages and salaries 4,081,674 3,775,231 3,723,272 3,400,923
Social security
costs 474,358 380,569 445,557 351,450
Pensions 42,871 22,769 41,744 21,642
Equity settled
transactions 1,050,002 388,633 1,050,002 388,633
5,648,905 4,567,202 5,260,575 4,162,648
Total remuneration for Directors during the year was GBP1,347,307 (2018: GBP572,910).
The board of directors comprise the only persons having authority and responsibility for planning, directing and controlling the activities of the Group.
8. FINANCE INCOME/COSTS
Group
Year ended 30 June Year ended 30
2019 June 2018
GBP GBP
Interest income on bank deposits 6,481 1,432
Interest cost (1,583) (1,333)
9. TAXATION
(a) Major components of taxation expense for the period ended 30 June 2019 are:
Group
Year ended Year ended
30 June 2019 30 June 2018
GBP GBP
Income statement
Current tax
Corporation tax charge / (credit) - (153,000)
------------- -------------
Total current tax - (153,000)
Deferred tax
Relating to origination and reversal of
temporary differences (59,832) (69,356)
------------- -------------
Taxation charge / (credit) reported in the
income statement (59,832) (222,356)
============= =============
(b) Factors affecting tax charge for the period
A reconciliation of taxation expense applicable to accounting profit before taxation at the statutory tax rate of 19% (2017: 19%), to taxation expense at the Company's effective tax rate for the period is as follows:
Group
Year ended Year ended
30 June 2019 30 June 2018
GBP GBP
Loss on ordinary activities before
taxation (12,054,190) (13,795,906)
Profit / (Loss) multiplied by rate
of tax (2,290,296) (2,621,222)
Effects of:
Expenses not deductible for tax
purposes 401,150 103,345
Amortisation and impairment of
intangibles 196,678 10,644
Movement in unrecognised tax losses 1,632,636 (153,000)
(59,832)
------------- -------------
Unrecognised deferred tax asset
at 17% 5,615,4484 2,437,877
------------- -------------
Prior Year at 19% 2,578,032 (222,356)
============= =============
(c) Unrecognised deferred tax asset
The Company has an unrecognised deferred tax asset arising from trading losses carried forward of GBP6,338,036 (2018: GBP4,666,946) calculated at the substantively enacted Corporation tax rate at the balance sheet date of 19% (2018: 19%). These trading losses will reverse against future taxable trading profits and no asset has been recognised due to uncertainties over the timing and nature of such gains in accordance with IAS 12.
10. PROPERTY PLANT AND EQUIPMENT
Group Property Plant and Equipment
Office Computer Leasehold Total
equipment & production Improvement
equipment
GBP GBP GBP GBP
Cost
At 1 July
2017 7,947 746,413 383,451 1,137,811
Additions 14,036 107,249 203,905 325,190
Disposals 0 0 0 0
----------- -------------- ------------- ----------
At 30 June
2018 21,983 853,662 587,356 1,463,001
=========== ============== ============= ==========
Depreciation
At 1 July
2017 4,603 238,108 19,208 261,919
Charge for
the period 4,927 264,093 173,202 442,222
Disposals 0 0 0 0
At 30 June
2018 9,530 502,201 192,410 704,141
Net book value
=========== ============== ============= ==========
At 30 June
2018 12,453 351,461 394,946 758,860
At 30 June
2017 3,344 508,305 364,243 875,892
Office Computer Leasehold Total
equipment & production Improvement
equipment
GBP GBP GBP GBP
Cost
At 1 July 2018 21,983 853,662 587,356 1,463,001
Additions 40,311 50,070 34,506 124,887
Disposals 0 (1,847) 0 (1,847)
Exchange differences 331 331
At 30 June 2019 62,294 902,216 621,862 1,586,373
Depreciation
At 1 July 2018 9,530 502,201 192,410 704,141
Charge for the
period 5,536 238,830 154,940 399,307
Disposals 0 (273) 0 (273)
Exchange Differences - 85 - 85
At 30 June 2019 15,066 740,843 347,350 1,103,260
Net book value
At 30 June 2019 47,228 161,373 274,513 483,113
At 30 June 2018 12,453 351,461 394,946 758,860
Company Property, Plant and Equipment
Office Computer Leasehold Improvement Total
equipment & production
equipment
GBP GBP GBP GBP
Cost
At 1 July
2017 7,947 746,413 383,451 1,137,811
Additions 5,070 89,085 203,904 298,059
Disposals 0 0 0 0
----------- -------------- ---------------------- ----------
At 30 June
2018 13,017 835,498 587,353 1,435,870
=========== ============== ====================== ==========
Depreciation
At 1 July
2017 4,603 238,108 19,208 261,919
Charge for
the period 2,365 258,531 173,202 434,098
Disposals 0 0 0 0
At 30 June
2018 6,968 496,639 192,410 696,017
Net book value
=========== ============== ====================== ==========
At 30 June
2018 6,049 338,859 394,945 739,853
At 30 June
2017 3,344 508,305 364,243 875,892
Office Computer Leasehold Total
equipment & production Improvement
equipment
GBP GBP GBP GBP
Cost
At 1 July 2018 13,017 835,498 587,355 1,435,870
Additions 37,877 44,399 34,506 116,782
Disposals 0 (1,797) 0 (1,797)
At 30 June 2019 50,894 878,100 621,861 1,550,855
Depreciation
At 1 July 2018 6,968 496,639 192,410 696,017
Charge for the
period 5,536 235,532 154,940 396,008
Disposals 0 (273) 0 (273)
At 30 June 2019 12,504 731,899 347,350 1,091,753
Net book value
At 30 June 2019 38,389 146,202 274,511 459,102
At 30 June 2018 6,049 338,859 394,945 739,853
11. INTANGIBLE FIXED ASSETS
Group Intangible Fixed Assets
Customer Real Sport Gaming Software Total
Relationship Web Platform Platform Development
GBP GBP GBP GBP GBP
Cost
At 1 July 2017 - - - 148,750 148,750
Additions 1,198,661 935,518 281,383 - 2,415,562
At 30 June
2018 1,198,661 935,518 281,383 148,750 2,564,312
Amortisation
At 1 July 2017 - - 75,359 75,359
Charge for
the period 223,969 92,524 52,721 49,583 418,797
At 30 June
2018 223,969 92,524 52,721 124,942 494,156
-
============== ============== ============ ============= ==========
Net book value
At 30 June
2018 974,692 842,994 228,662 23,808 2,070,156
At 30 June
2017 - - - 73,391 73,391
============== ============== ============ ============= ==========
Customer Real Sport CEVO Gaming Software
Relationship Web Platform Platform Development Total
GBP GBP
Cost
At 1 July 2018 1,198,661 935,518 281,383 148,750 2,564,312
Additions - - - - -
-------------- -------------- ------------ ----------------- ----------
At 30 June
2019 1,198,661 935,518 281,383 148,750 2,564,312
Amortisation - -
At 1 July 2018 223,969 92,524 52,721 124,942 494,156
Charge for
the period 239,732 312,696 56,431 23,808 632,667
Impairment 403,496 403,496
-------------- -------------- ------------ ----------------- ----------
At 30 June
2019 867,197 405,220 109,152 148,750 1,530,319
Net book value
At 30 June
2019 331,464 530,298 172,231 - 1,033,393
============== ============== ============ ================= ==========
At 30 June
2018 974,692 842,994 228,662 23,808 2,070,156
============== ============== ============ ================= ==========
Company Intangible Fixed Assets
Software Total
Development
GBP GBP
Cost
At 1 July 2017 148,750 148,750
Additions - -
At 30 June 2018 148,750 148,750
============= ==========
Amortisation
At 1 July 2017 75,359 75,359
Charge for the
period 49,583 49,583
------------- ----------
At 30 June 2018 124,942 124,942
============= ========
Net book value
------------- --------
At 30 June 2018 73,391 73,391
============= ========
At 30 June 2017 23,808 23,808
Software Total
Development
GBP GBP
Cost
At 1 July 2018 148,750 148,750
Additions - -
At 30 June 2019 148,750 148,750
Amortisation
At 1 July 2018 124,942 75,359
Charge for the
period 23,808 49,583
------------- --------
At 30 June 2019 148,750 124,943
============= ========
Net book value
------------- --------
At 30 June 2019 - -
============= ========
At 30 June 2018 23,808 23,808
============= ========
Software development costs refer to direct costs incurred in development of the Gfinity TV Player media player. The valuation of the Real Sport web platform has been based on the cost to Gfinity of acquiring Real Sport's traffic
12. GOODWILL
Group
Goodwill Total
GBP GBP
Cost
At 1 July 2018 2,544,526 2,544,526
Additions - -
At 30 June 2019 2,544,526 2,544,526
Impairment
At 1 July 2018 - -
Charge for the period - -
At 30 June 2019 - -
Net book value
At 30 June 2019 2,544,526 2,544,526
At 30 June 2018 2,544,526 2,544,526
The goodwill has arisen on the acquisitions of 100% of the share capital of CEVO Inc. and RealSM Ltd in the prior year. The goodwill arising on the business combinations has been tested for impairment based on the methods outlined in note 3 on accounting estimates and judgements. In both instances the test indicated there was no impairment of the goodwill.
13. INVESTMENT IN SUBSIDIARIES
Company
30 June 2019 30 June 2018
GBP GBP
At 1 July 4,466,134 -
Investment in subsidiary - 4,466,134
At 30 June 4,466,134 4,466,134
The investments in subsidiaries represent the purchase of CEVO and Real Sport on 24 July 2017 and 13 March 2018 respectively. The fair value of consideration at acquisition for CEVO was GBP2,158,498 for 100% of the share capital and the fair value at acquisition of Real Sport was GBP2,307,634 for 100% of the share capital. Both investments are held in Gfinity plc.
Subsidiary undertaking Country of Holding Proportion of voting Nature of business
incorporation rights and capital
held
CEVO Inc. USA Ordinary 100% IT Development
shares and Tournament
and event operator
RealSM Ltd England Ordinary 100% Online media
Shares
RealSM Ltd registered offices are The Foundry, 77 Fulham Palace Road, London, United Kingdom, W6 8JB. CEVO's registered address is 128 Maringo Rd, Ephrata, WA 98823
14. INVESTMENT IN ASSOCIATES
Group Company
30 June 2019 30 June 2018 30 June 2019 30 June 2018
GBP GBP GBP GBP
* 50,000
At 1 July 264,464 50,000 264,464
Investment 727,487 561,701 727,487 561,701
Share of
Losses (877,967) (347,237) (877,967) (347,237)
Impairment (113,984) (113,984)
At 30 June - 264,464 - 264,464
The investment in associate relates to the acquisition of 33% of the Esports Awards Limited on its incorporation in February 2017 and 30% of Gfinity Australia on its incorporation in August 2017. On 14 August 2019 it was announced that Gfinity Australia would close at the end if November 2019. As a result the carrying value of the investment was written off in full. Subsequent investments have maintained Gfinty's investment at the same percentage holding. Both investments are held in Gfinity plc
Associate undertaking Country Holding Proportion Nature of
of incorporation of voting business
rights and
capital held
Esports Industry England Ordinary 33% Event Operator
Awards Ltd shares
Australia 30% Tournament
Gfinity Esports Ordinary and event
Australia PTY Limited Shares operator
Esports Awards LTD's registered offices are Belfry House, Champions Way, Hendon, London, England, NW4 1PX. The registered office of Gfinity Esports Australia is Suite 5, Level 1, 100 William Street, Sydney, NSW 2011.
15. TRADE AND OTHER RECEIVABLES
Group Company
30 June 2019 30 June 2018 30 June 2019 30 June 2018
GBP GBP GBP GBP
Trade receivables 1,085,268 1,504,006 1,054,816 1,389,124
Provision
for doubtful
debts (110) (219,658) (110) (219,658)
1,085,158 1,284,348 1,054,706 1,169,466
Other receivables 374,058 227,165 374,058 228,045
Amounts
due from
group undertakings - - 610,757
Amounts
due from
related
undertakings 51,214 128,692 51,214 128,692
Prepayments
and accrued
income 710,933 519,664 647,321 447,729
Amounts
due in
less than
one year 221,364 2,159,869 2,127,299 2,584,689
Amounts
due from
group undertakings - - 1,532,050
Prepayments
and accrued
income 101,015 101,015
Total 2,322,379 2,159,86 3,760,364 2,584,689
Amount due from group undertakings of GBP1,532,050 are considered to be due in more than one year (2018: GBP17,660) while prepayments include a rental deposit of GBP101,015 that is viewed as recoverable at the expiration of the lease in 2021.
The directors consider that the carrying amount of trade and other receivables approximates to their fair value due to the short-term nature of these financial assets.
16. CASH AND CASH EQUIVALENTS
Group Company
30 June 2019 30 June 2018 30 June 2019 30 June 2018
GBP GBP GBP GBP
Cash at bank and in hand 598,324 3,629,182 552,946 3,513,111
Short-term deposit 50,130 50,106 50,130 50,106
648,454 3,679,288 603,076 3,563,217
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. The fair value of cash and cash equivalents does not differ from the carrying value.
17. TRADE AND OTHER PAYABLES
Group Company
30 June 30 June 2018 30 June 30 June
2019 2019 2018
GBP GBP GBP GBP
Trade payables 1,448,232 666,337 1,412,800 621,879
Other taxation
and social
security 148,589 184,688 139,597 158,506
Accrued expenditure
and deferred
revenue 1,388,221 1,387,395 1,388,219 1,387,393
2,985,042 2,238,420 2,940,616 2,167,778
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The directors consider that the carrying amount of trade payables approximates to their fair value due to their short-term nature.
18. DERIVATIVE FINANCIAL INSTRUMENTS
Group & Company
30 June 2019 30 June
2018
GBP GBP
Derivative financial liabilities
Deferred shares - 216,843
Deferred shares relate to the acquisition of CEVO Inc.. These were paid in full during the year. The value of the shares at acquisition was GBP325,264 with a change in value of GBP108,421 recognised in other comprehensive income at the June 2018 year end. The shares were subsequently issued in September 2018 with the GBP108,421 recycled to the income statement along with a further GBP58,803 relating to the change in value between 30 June 2018 and the issue date.
19. ISSUED CAPITAL
The Company has a single class of ordinary share with nominal value of GBP0.001 each. Movements in the issued share capital of the Company can be summarised as follows:
Issued and fully paid Number GBP As at 30 June 2017 188,663,570 188,664 Issued on 24 July at GBP0.21 3,614,049 3,614 Issued 11 October 2017 at GBP0.27 25,925,926 25,926 Issued 13 March 2018 at GBP0.1875 12,307,382 12,307 Issued 28 March 2018 at GBP0.12 55,837,283 55,837 As at 30 June 2018 286,348,210 286,348 Issued on 17 September at GBP0.10 1,548,877 1,549 Issued on 9 November at GBP0.08 75,000,000 75,000 As at 30 June 2019 362,897,087 362,897 20. EARNINGS 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.
Group Company
Year to Year to Year to Year to
30 June 30 June 30 June 2019 30 June 2018
2019 2018
GBP GBP GBP GBP
Loss attributable
to shareholders
from continuing
operations (12,098,698) (13,466,846) (9,970,720) (12,863,650)
Profit attributable
to shareholders
from discontinued
operations 1,911
Number Number Number Number
000's 000's 000's 000's
Weighted
average
number of
ordinary
shares 335,573 228,815 335,573 228,815
GBP GBP GBP GBP
Loss per
ordinary
share for
continuing
operations (0.04) (0.06) (0.03) (0.06)
Profit per
ordinary
share for
discontinued
operations 0.00
21. SHARE BASED PAYMENTS
Equity-settled share option plans
Options
The Company has a share option scheme for all employees of the Group.
The tables below summarises the exercise terms of the various options over Ordinary shares of GBP0.001 each which had been granted, and were still outstanding, as at 30 June 2019. A total of 21,002,651 were granted in the year. No options were exercised during the year and 3,541,293 lapsed due to members of staff leaving. The total number of outstanding options in issue at 30 June 2019 is 54,359,795 (2018: 36,898,437).
Number Weighted average
exercise price
(GBP)
LTIP options
Shares Options as at
30 June 2017 22,766,711 0.1428
Shares Options Granted 6,967,440 0.1964
Share Options Forfeited (335,714) (0.1962)
LTIP Share Options as
at 30 June 2018 29,398,437 0.1549
Number Weighted average
exercise price
(GBP)
LTIP options
Shares Options as at
30 June 2018 29,398,437 0.1549
Shares Options Granted 21,002,651 0.1230
Share Options Forfeited (3,541,293) (0.1864)
LTIP Share Options as
at 30 June 2019 46,859,795 0.1382
Options for non-employee services
Non-market condition Number Weighted average
shares exercise price
(GBP)
Shares Options as at 7,500,000 n/a
30 June 2018
Shares Options Granted - -
Share Options Lapsed - -
Share Options as at 30 7,500,000 n/a
June 2019
Options vest over periods defined in the respective option agreements and at the discretion of the board of directors. 10,726,129 options vested during the year (2018: 8,485,327).
Of the options outstanding 32,600,133 (2018: 12,429,241) are held by directors. Full details of all options held by directors are contained within the Directors' Remuneration Report.
The principal assumptions input into the Black Scholes model to calculate the value of LTIP share options issued for compliance with IFRS 2 "Share Based Payments" are included below, where applicable.
Year ended Year ended
30 June 30 June 2018
2019
Weighted average exercise price GBP0.1382 GBP0.1549
Average expected life 1.0 years 1.8 years
Expected volatility of options granted
in year 90.02% 111.11%
Risk free rate 1.11% 1.14%
Expected dividend yield 0% 0%
All options were granted at an exercise price equivalent to the market price at the date of grant. The weighted average exercise price of LTIP options outstanding at 30 June 2019 was GBP0.1382 (2018: GBP0.1549). The weighted average fair value of options issued during the period was GBP0.1230 (2018: GBP0.1119).
The average expected life is based on directors' best estimate taking into account the vesting conditions of the options.
Expected volatility has been calculated with reference to the actual volatility of the share price since the Company's admission to AIM in December 2014.
The fair value of the non-employee services options has been based on the fair value of the services provided at the date the services were provided. This equates to a fair value of options issued in the year GBPnil (2018: GBP0.0111).
All options are held in Gfinity plc with no options held over any of the subsidiaries
22. RELATED PARTY TRANSACTIONS
The Directors Remuneration Report provides details of share options issued to certain directors in the period. Further information on share options are provided in Note 21. In addition to the share options granted in the year, Garry Cook and Graham Wallace also participated in the October 2019 share placing acquiring 100,000 and 25,000 shares respectively. These were purchased at the price of GBP0.08 in line with the amount paid by all other participants in the fund raise.
Transactions with Group subsidiaries in the year were inter-company loans from Gfinity to CEVO (GBP476,208, FY18: GBP236,274), Real Sport (GBP471,740 FY18: GBP347,843). The prior year included an inter-company loan to Excel Interactive limited for GBP80,289, which was written off in full in the year, and Gfinity undertook transactions worth GBP18,989 with CEVO in the year ending June 2018.
Transactions with associates in the year were GBP98,600 of revenue from the Esports Industry Awards (GBP90,000 in the prior year) and GBP379,848 with Gfinity Australia (GBP269,893 in the prior year). . These were billable activities based on market rates for delivering the services. At year end GBP51,214 remained outstanding from the Esports Awards LTD. GBP332,548 of the revenue from Gfinity Australia was settled via equity.
23. COMMITMENTS UNDER NON-CANCELLABLE OPERATING LEASES
The Group and Company have the following total commitments under non-cancellable operating leases expiring as follows:
Land and Buildings
Group Company
30 June 30 June 30 June 2019 30 June 2018
2019 2018
GBP GBP GBP GBP
Less than one year 856,368 372,600 856,368 372,600
1 -2 Years 447,759 - 447,759 -
Total 1,304,127 372,600 1,304,127 372,600
In the year ending June 2020 the Group's accounts will be impacted by IFRS 16, Leases, which is effective for accounting periods commencing on or after 1 January 2019. If this had been in effect at the year ending 30 June 2019 both assets and liabilities would have increased by GBP1.3m
24. NOTES TO THE CASH FLOW STATEMENT
Group Company
30 June 2019 30 June 30 June 30 June
2018 2019 2018
Cash flows from
operating activities
Loss before taxation (12,056,151) (13,795,906) (9,971,259) (13,126,379)
Adjustments for:
Depreciation of
property, plant
and equipment 399,307 442,221 396,008 434,097
Amortisation &
impairment of intangible
fixed assets 1,036,163 418,797 23,807 49,583
Interest Received (6,481) (1,432) (6,481) (1,432)
Share based payments 1,050,002 433,039 1,050,002 433,039
Fair Value Adjustment
on Deferred Consideration (166,504) - (166,504)
Share of Associate
Losses 991,951 347,237 991,951 347,237
Revenue Settled
Via Equity (420,232) (246,550) (420.232) (246,550)
Gain on disposal - -
of subsidiary
Bad Debt Charge 28,925 125,191 (49,999) -
Changes in working
capital: 28,295 207,198
Decrease/(Increase) - -
in Inventories
(Increase)/ decrease
in trade and other
receivables (191,435) (624,724) (350,307) (543,679)
Increase in trade
and other payables* 710,028 243,191 736,244 365,215
Corporation tax
(paid)/ received 153,539 153,000 153,539 153,000
Cash used by operating
activities (8,470,887) (12,505,936) (7,579,304) (11,928,671)
Interest paid - - - -
Net cash used by
operating activities (8,470,887) (12,505,936) (7,579,304) (11,928,671)
25. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company uses a limited number of financial instruments, comprising cash, short-term deposits, and various items such as trade receivables and payables, which arise directly from operations. The Company does not trade in financial instruments. All of the Company's financial instruments are measured at amortised cost
The Company's activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk.
Credit risk
The Company's principal financial assets are bank balances and cash, trade and other receivables.
Bank balances and cash are held by banks with high credit ratings assigned by independent credit rating agencies. Management is of the opinion that cash balances do not represent a significant credit risk.
As the Group does not hold security against trade and other receivables, its credit risk exposure is as follows:
Group Company
30 June 30 June 30 June 2019 30 June 2018
2019 2018
GBP GBP GBP GBP
1,243,834 1,292,320 2,745,432 1,788,425
The trade receivables balance represents amounts due from third parties. At the balance sheet date, the Group's trade receivables totalled GBP1,085,268 less a provision of GBP110 (2018: GBP1,504,006 less a provision of GBP219,658). The Company's receivables include GBP1,532,050 of inter-company funding (2018: GBP610,757). The Company's trade receivables totalled GBP1,054,816 less a provision for doubtful debt of GBP110 (2018: GBP1,389,124 less a provision for doubtful debt of GBP219,658).
There are no significant overdue but not impaired trade receivables at the balance sheet date. The Company balance sheet includes inter-company receivables which are not considered to be at risk as the Company retains control over the debtor however it is not anticipated that the Group companies will repay these amounts in the next 12 months.
At the balance sheet date amounts of GBP905,026 were due from two customers representing a concentration of credit risk. All amounts have been recovered since the balance sheet date.
Liquidity risk
All trade and other payables are due for settlement within one year of the balance sheet date. The use of instant access deposits ensures sufficient working capital is available at all times.
Foreign exchange risk
The Company operates in overseas markets by selling directly from the UK, owns an overseas subsidiary and reports in GBP. It is therefore subject to currency exposures on transactions while the Group is subject to currency exposures on consolidation of the overseas subsidiary.
Derivative Financial Instruments
The Group holds derivative financial instruments at their value with the gain or loss on remeasurement of fair value immediately in the statement of comprehensive income as outlined in Note 2. The only financial instruments held on the balance sheet related to deferred consideration for the purchase of CEVO with the liability to be settled via shares in Gfinity.
Financial instruments held by the Company and their carrying values were as follows:
Group
June 2019 June 2018
USD ($) GBP (GBP) USD ($) AUSD ($) GBP (GBP)
Trade
and other
receivables 882,474 441,582 901,508 35,393 1,262,719
Accrued
income 80,783 354,674 88,762 - 380,646
Cash 316,422 399,288 377,085 - 3,380,358
Trade
and other
payables (102,803) (1,367,280) (101,644) (1,164) (2,160,794)
Derivative
Financial
Instruments - - - - (216,843)
Net Current
Assets/
Liabilities 1,176,876 (171,736) 1,265,711 34,229 2,646,086
Company
June 2019 June 2018
USD ($) GBP (GBP) USD ($) AUSD ($) GBP (GBP)
Trade
and other
receivables 843,801 441,582 780,150 35,393 1,168,665
Accrued
income 354,674 - 380,646
Cash 265,100 394,324 321,783 - 3,319,590
Trade
and other
payables (86,079) (1,345,017) (68,424) (1,164) (2,115,304)
Derivative
Financial
Instruments - - - - (216,843)
Net Current
Assets/
Liabilities 1,022,822 (154,437) 1,033,509 (34,229) 2,536,754
Financial liabilities included in the balance sheet relate to the IAS 39 category of other financial liabilities held at amortised cost.
Assets relate to loans and receivables with the exception of other receivables and prepayments which are classified as non-financial assets.
Fair value estimation
The aggregate fair values of all financial assets and liabilities are consistent with their carrying values due to the relatively short-term maturity of these financial instruments.
As cash is held at floating interest rates, its carrying value approximates to fair value.
Capital management
The Company is funded entirely through shareholders' funds.
If financing is required, the Board will consider whether debt or equity financing is more appropriate and proceed accordingly. The Company is not subject to any externally imposed capital requirements.
26. Deferred tax
Group
2018 2018
GBP GBP
At 1 July (366,245) -
Acquisition of subsidiary - (435,601)
Credited to profit or loss 43,526 69,356
At 30 June (322,719) (366,245)
The provision for deferred taxation is made up as follows:
2019 2018
GBP GBP
Temporary timing differences
on intangible assets 322, 719 366,245
322,719 366,245
27. Discontinued operations
Profit on sale of subsidiary
1 July 2018 1 July 2017
to 30 June to 30 June
2019 2018
Consideration received or receivable:
Cash 45,000 -
Total disposal consideration 45,000 -
Carrying amount of net assets sold (37,982)
Gain on sale before income tax 82,982 -
Tax expense on gain (15,767)
Gain on sale after income tax 67,215 -
Losses of Subsidiary in the year
1 July 2018 1 July 2017
to 30 June to 30 June
2019 2018
Revenue - 33,845
Cost of Sales (17,914) (19,574)
Gross Profit / (Loss) (17,914) 14,271
Administrative Expenses (47,389) 27,321
Profit / (Loss) (65,303) 27,321
[1] Administrative expenses include GBP2.5m of non-cash items: depreciation GBP0.4m (2018: GBP0.4m), amortisation and impairment of intangibles GBP1.0m (2018: GBP0.4m) and share option charge GBP1.1m (2018: GBP0.4m).
[2] Per note 1
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR BDBDGUUDBGCG
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