REG - Gfinity PLC - Business update and financing

GfinityAnnouncement

09/02/2023 12:00

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RNS Number : 4790P  Gfinity PLC  09 February 2023

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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

09 February 2023

Gfinity PLC

 

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

 

Business update and financing

 

The Board of Gfinity plc (AIM:GFIN), the leading esports solutions provider,
today provides a business update and details on discussions in relation to
equity financing.

Business update

On 23 December 2022, the Company announced its final year results for the year
ended 30 June 2022. These results reported a reduction in Adjusted Operating
Loss of 28% to £2.0m, and a closing year-end cash position of £2.1m.  This
represented a third straight improvement in the Adjusted Operating Loss,
driven by growth in revenue attached to Gfinity's owned tech IP, audience and
esports properties.

 

The Company intends to publish its unaudited financial results for the six
months ended 30 December 2022 during March 2023. Based on management accounts
the Company expects to report the following:

 

Financial Highlights:

 

1.   Revenue of £4.1m; an increase of 26% on H1 FY22 and a 106% improvement
on the previous 6 months.

2.   Adjusted operating loss of £0.8m, an increase of 102% on H1 FY22;
however, this is an improvement of 47% on the previous 6 months.

 

Operational Highlights:

 

Athlos:

Over the past 12 months Gfinity has made a significant investment to
productise its competitive esports technology platform under the Athlos brand,
allowing this technology to be deployed at scale, directly into publishers'
games.  This technology allows publishers to easily deploy competitive
functionality into their games.  Gamers who participate in competitive play
are proven to spend significantly more time and money in-game than casual
gamers, enabling publishers to drive significant increases in revenue per
user.

 

Athlos, has delivered a highly successful beta programme with one of the
world's largest mobile game publishers and was successfully integrated into 2
further betas in FY23. It has now been integrated into 8 games.  In January
2023, Athlos exited its beta phase with the announcement of a deal with
another global top ten mobile game developer.

 

The board believes that Gfinity has first mover advantage in a market worth
over £800m. The Athlos platform delivers an extremely attractive value
proposition to video game developers and publishers.  The platform has
proven, during its beta programme, to deliver deep player engagement, the key
to driving increases in a game's live service revenue. As the only SAAS
tournament platform that is integrated directly into a video game, the player
experience is seamless.   All other competitors require players to engage
outside the game creating a very poor player experience.   Athlos can be
deployed technically within days and operationally within weeks setting itself
apart from competitors.  As a result, there is little reason for a developer
to develop their own competitive technology as it would require scarce
development resources to be deployed, at a significant cost, over many years.
With the industry transition over the last few years to free to play, live
service business models built on in-game monetization, the Athlos platform is
a critical service to dramatically improve player engagement and publisher
revenue.

 

 To accelerate growth and to solidify Athlos' first-mover advantage, Gfinity
is seeking outside investment. The Company is in discussions with several
parties, with a view of taking a direct investment in the Athlos platform and
thereby reducing the cash cost to Gfinity. The Directors currently expect the
pre-money valuation that will be ascribed to Athlos upon external investment
to be at a significant premium to Gfinity's investment cost.   Gfinity
expects to retain a significant stake in the platform, but the venture would
benefit from the additional capital to complete further product enhancements
and scale the marketing, sales and customer support functions to the
substantial business opportunity.

 

Gfinity Digital Media ("GDM")

The Gfinity Digital Media business continues to represent a valuable asset for
the Company, with an average of 13.1m monthly active users (MAUs) visiting
Gfinity's owned and operated platforms in H1.

 

A Google algorithm update impacted our SEO traffic in September of 2022, along
with many of the largest publishing companies; however, the team has made
significant progress to recover and improve GDM's rankings across sites, with
latest audience levels across our network (in January) returning to 13m
monthly unique visitors.

 

External economic factors have impacted advertising rates across the whole
sector over the past 6 months, but GDM still delivered revenue of £1.5m in H1
of FY23, a decrease of 11% on H1 of FY22, but an increase of 20% on the
previous 6 months

 

.

 

Esports Solutions

Esports Solutions delivered revenue of £2.5m in H1 of FY23, representing an
increase of 71% on H1 of FY22; and an increase of 323% on the previous 6
months.  Gfinity has enjoyed success in supporting clients from the
traditional sports sector in the development of their esports and gaming
strategies and business plans, then supporting the roll-out of these plans -
leveraging Gfinity's capability to build digital communities and deploy
market-leading esports technology.

 

The Directors are conscious, however, of the inconsistent nature of service
delivery work, and also the high cost to the Company of delivering a true
end-to-end esports solution; and the resources required to support clients in
their activations around the globe.  To that end, Gfinity has partnered with
a US esports business to jointly deliver solutions on a profit-share basis and
no fixed cost.  This deal gives Gfinity access to a state-of-the-art US based
esports arena as the new home for any production and live events.  As a
result, effective immediately, Gfinity has decided to close the Gfinity Arena
in Fulham, further reducing the Company's fixed cost base.

 

Corporate restructure and proposed board changes:

In April 2020 a new 'what we own' strategy for Gfinity was outlined. As part
of this we set out to:

1.   Manage the economics of the business: right-size the business; reduce
our losses; and create a pathway to profitability by end 2023

2.   Rebalance the Company's revenue sources, with less dependence on
esports services/operations, and delivering improved financial predictability.

This has been achieved by creating three stand-alone revenue generating
pillars within the business:

a.   Our owned community of hard-to-reach gamers, through GDM

b.   Our owned, licensable Technology IP (re-branded Athlos in August 2022)

c.   Our legacy Esports solutions (previously esports operations) which has
pivoted, to focus on fewer, more financially rewarding motorsport and football
assignments, and consulting services.

This strategy has delivered significant progress: 3 consecutive years of
significantly reduced Adjusted Operating Loss.

 

In line with this strategy, experienced experts in their respective sectors
have been brought in to lead each of the business units.

 

Athlos Game Technologies is led by Thomas Preising, a former GM &
Country/Regional Director of India and the Middle East.  Tom works with
Gfinity's Head of Product, Mike Stevens alongside industry veteran Todd Sitrin
(Strategic Advisor), the former Head of Competitive Gaming for EA   Len
Rinaldi, former GM of Apple for Western Europe provides strategic input to
this group from a board perspective.

 

In September 2022, Gfinity announced the appointment of an experienced leader
in the digital media sector - Rebekah Billingsley - as MD of the GDM business,
Rebekah overseas a strong leadership group and is supported by non-executive
director Hugo Drayton, who also sits on the board of Future plc.

 

Gfinity's Esports Solutions team is overseen by Chief Operating Officer
Jonathan Hall, supported by Head of Esports Michael Valentine.

 

The heads of each of these business units report directly to the board.  In
light of this change, the following changes will be made to the board of
directors with immediate effect:

 

1.   Neville Upton, current non-Executive Chairman, will take on the role of
Executive Chairman.

2.   John Clarke, current Chief Executive Officer, will step down from his
role and will leave the Company.

3.   Jonathan Hall, Chief Financial and Operating Officer, will take
Executive responsibility for the Esports Solutions business.

 

Financing discussions

 

As detailed in the Group's final results' announcement on 23 December 2022,
the Board has agreed the Group will require additional external funding, in
order to continue to deliver its strategy.  Today, the Group has cash of
£0.4m. Given the continued investment in Athlos, the directors believe the
Company will require additional working capital in March 2023.

Therefore, the Directors announce their intentions to raise a minimum sum of
£1.5m, via an equity placing and subscription.  Based on the current
business plan, this sum will allow the business the headroom to complete the
proposed corporate restructuring, secure the planned external investment into
Athlos over the next few months and take the business through to break-even
point.  The Directors have received an opinion letter confirming that it is
expected that any eligible investments would qualify for EIS/ VCT relief.

The Directors have engaged with existing and potential new investors over the
past week.  Shareholders should be aware that funding discussions remain
ongoing and while there is no certainty on the outcome of these discussions or
the terms, the Directors expect to close the terms of the equity funding round
in February 2023.  A further update will be made as appropriate.

Investors who are interested in participating in the equity funding round
should contact IR@gfinity.net.

 

Enquiries:

 

 Gfinity plc                                                www.gfinityplc.com (http://www.gfinityplc.com/)

 Neville Upton, Executive Chairman                          ir@gfinity.net (mailto:ir@gfinity.net)
 Canaccord Genuity Limited (Nominated Adviser and Broker)   Tel: +44 (0)207 523 8150

 Bobbie Hilliam / Patrick Dolaghan

 

About Gfinity

 

Gfinity is a leading media and technology company in the fast-growing esports
and gaming sector.  Founded in late 2012, Gfinity established itself as
esports and community engagement experts. More recently, the company's
business model has evolved to reflect the rapidly developing gaming market,
sharpening its strategic focus, based on 3 distinct areas:

 

Gfinity Digital Media is made up of 11 sites that reach up to 15 million
monthly unique active users and delivers 75 million impressions per month
across its social network of over 7,000,000 followers.

 

The Gfinity Engagement Platform (Athlos) is a fully configurable, white-label,
bespoke solution, designed to maximise community engagement through
competitive play, and is already trusted by some of the world's biggest gaming
and esports organisations.

 

Our JVs and Partnerships - Esports Solutions - allow the Company to benefit
from co-owned ideas, working with partners who value and benefit from
Gfinity's expertise, to create products such as the Global Racing Series with
Abu Dhabi Motorsport Management, and esports activities for Manchester United
FC, and Formula 1.

 

 

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