REG - Team17 Group PLC - Unaudited Final Results 2023
16/04/2024 07:00
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RNS Number : 7100K Team17 Group PLC 16 April 2024
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No
596/2014. Upon the publication of this announcement, this information is now
considered to be in the public domain.
16 April 2024
Team17 Group plc
("Team17", the "Group" or the "Company")
Unaudited Final Results for the year ended 31 December 2023
· Delivered a solid revenue performance in FY 2023
· Strong balance sheet and renewed rigour around cost controls and
working practices
· Games pipeline and lifecycle management will deliver continued growth
in FY 2024
Team17 Group plc, a leading global independent ("Indie") games label developer
and publisher of premium video games and apps, is pleased to announce its
unaudited final results for the year ended 31 December 2023 ("FY 2023").
Financial summary:
Year ended
31 December 2023 31 December
(unaudited) 2022
(audited)
(restated) % change
Revenue £159.1m £142.3m 12%
Gross Profit £57.5m £69.6m (17%)
Gross Profit Margin 36% 49%
Adjusted EBITDA(1) £29.9m* £48.8m (39%)
Adjusted Profit Before Tax(1) £28.7m £47.1m (39%)
(Loss)/Profit Before Tax (£1.1)m £28.7m
Basic Earnings per Share ("EPS") (2.6)p 16.5p
Adjusted Basic EPS ("AEPS")(1) 17.5p 27.8p (37%)
Operating Cash Conversion(2) 87% 108%
Cash and cash equivalents £42.8m £50.8m (16%)
*Adjusted EBITDA excluding title impairments was £41.0 million (FY 2022:
£48.8 million)
· The review of the carrying value of intangible assets resulted in
one-off non-cash charges of £11.1 million relating to games title impairments
and a £20.9 million goodwill impairment charge relating to the acquisition of
The Label Inc.
Operational summary:
· Revenues grew 12% to £159.1 million (FY 2022: £142.3 million) with
17 new games and apps released in the period (FY 2022: 12) alongside 6
existing games released on additional platforms (FY 2022: 6).
· Revenues from the back catalogue grew 10%, accounting for 71% of
Group revenues (FY 2022: 73%), while the Group's first-party IP represented
35% of total revenues (FY 2022: 40%).
· Games Label showed revenue growth of 12%, launching 11 new games (FY
2022: 11) including the multi award-winning 2023 game Dredge, which has sold
over one million units, along with Blasphemous 2, Headbangers: Rhythm Royale,
Killer Frequency, Moving Out 2 and Trepang 2. In addition, five existing
titles were released on new platforms. Games Label's content portfolio now
comprises over 900 digital revenue lines (FY 2022: over 700 digital revenue
lines).
· astragon delivered revenue growth of 5%, launching 3 new games (FY
2022: 3) - Tram Sim, ABRISS and Howl - as well as 1 additional existing
first-party IP game released on additional platforms and 16 paid DLCs(3)
across its existing IP. It completed the acquisition of Independent Arts
Software GmbH ("IAS") in April 2023, expanding the working simulation
development team to accelerate the creation and launch of a new first-party IP
game.
· StoryToys posted revenue growth of 26%. It developed and launched 3
new apps, including Barbie(TM) Color Creations, LEGO® DUPLO® DISNEY - MICKEY
AND FRIENDS and Marvel HQ and 327 apps updates across its existing titles (FY
2022: 216). Active subscribers continue to grow and now exceed 320,000 (FY
2022: over 300,000).
· FY 2023 was a strong year for gaming awards across the Group, with
multiple awards for Dredge (including Best Indie Game - IGN & Windows
Central, Best Setting - PC Gamer) and Blasphemous 2 (including Best Game -
IndieDevDay2023, Best Game Rising Star Award - TGBUS), with Moving Out 2
winning Best Strategy Game (Playstation Universe) and LEGO® DUPLO® DISNEY
(Google Play Best of 2023, Best for Families, Honourable Mention).
· A thorough review of the Games Label strategic direction (now
re-focussed on its core Indie games roots), cost base structure and processes
was completed in the last quarter of FY 2023.
· Headcount reduced to 348 as of 31 December 2023 (as at 31 December
2022: 392), reflecting the impact of the Games Label restructuring review and
increased utilisation of an outsourced studio resourcing model.
· Continued to strengthen the Board and leadership team, bringing in
operational depth and video gaming experience. Frank Sagnier joined the Board
as Chair, with Debbie Bestwick moving to a Non-Executive Director role, also
joined by Peter Whiting. Steve Bell joined as Group Chief Executive Officer.
Other additions include a Group People & Culture Director and Group
Investor Relations Director.
Outlook:
· The Group has made a pleasing start to FY 2024, although we remain
mindful of the challenging competitive landscape, the ongoing cost of living
pressures affecting discretionary spending and geopolitical uncertainty
weighing on global markets more broadly.
· We have a solid pipeline of at least 10 new games and apps expected
to launch in FY 2024 (skewed to third-party IP) and beyond, and we will
continue to use our exceptional lifecycle management capabilities to drive
sales growth across our back catalogue.
· Following the restructuring of Games Label, including its strategic
refocus on Indie titles and the impairment of the development costs of certain
titles, we enter FY 2024 on a more appropriate cost base with stricter cost
controls in place.
· In addition, an action plan is in place to accelerate revenue and
profit growth, which includes increasing the proportion of revenues from
first-party IP over time, sharpening our greenlight process, more innovative
marketing and publishing models, while pursuing an active M&A agenda.
· We remain confident that the Group can deliver an improved underlying
trading performance in FY 2024, in line with current market expectations, and
remains well positioned for continued growth over the mid to long term.
Steve Bell, Chief Executive Officer of Team17, commented:
"While 2023 presented some challenges for the Games Label, the speed and
tenacity with which the teams have responded has demonstrated the exceptional
talent we have at Team17.
"The Games Label is now realigned to its proven low-risk Indie model, tighter
cost controls have been enforced and one-off actions taken to clean up the
balance sheet.
"We are back on form in 2024, with a solid slate of games and apps, our
exceptional back catalogue and a clear plan for growth across the Games Label,
astragon and StoryToys. The year has started well."
Footnotes:
(1) A full description of Alternative Performance Measures, the rationale for
their use, and reconciliation between adjusted and reported statutory measures
can be found within the Chief Financial Officer's Report.
Adjusted profit before tax excludes acquisition-related costs and adjustments,
amortisation and impairment of acquired intangible assets, share-based
compensation and one-off Games Label restructuring costs from the statutory
measure whilst adding back development cost amortisation eliminated through
acquisition fair value adjustments.
Adjusted profit after tax excludes the same items as adjusted profit before
tax removing corporation tax net of any tax effects on these items.
Adjusted EBITDA can be calculated from adjusted profit after tax by adding
back all remaining finance income and costs, tax, depreciation, amortisation
and impairment except for those on development costs.
The calculation of adjusted earnings per share is based on the adjusted profit
after tax divided by the weighted average number of shares (either basic or
diluted).
(2)Operating cash conversion is defined as cash generated from operating
activities adjusted to add back payments made to satisfy pre-acquisition
liabilities recognised under IFRS 3 "Business Combinations" divided by
earnings before interest, tax, depreciation and amortisation ("EBITDA").
(3)Downloadable content.
Analyst and institutional investor webcast
A presentation for analysts will be held on Tuesday, 16 April 2024 at 08.30
BST. The event will also be webcast. To register for this event and join the
stream on the day, please click the following link:
https://brrmedia.news/TM17_FY
(https://url.uk.m.mimecastprotect.com/s/aaApC89LAIyXgOun2Y6y?domain=brrmedia.news)
Retail investor webcast
A webcast for retail investors will be held on Friday 19 April at 1.00 p.m.
BST. The presentation will be hosted on the Investor Meet Company platform.
Questions can be submitted pre-event via the Investor Meet Company dashboard
up until 9.00 a.m. the day before the meeting or at any time during the live
presentation.
Investors can sign up for free and add to meet Team17 via:
https://www.investormeetcompany.com/team17-group-plc/register-investor
(https://www.investormeetcompany.com/team17-group-plc/register-investor)
Enquiries:
Team17 Group plc ir@team17.com
Steve Bell, Chief Executive Officer
Mark Crawford, Chief Financial Officer
James Targett, Group Investor Relations Director
Houlihan Lokey Advisory Limited (Nominated Adviser) +44 (0)20 7839 3355
Adrian Reed / Tim Richardson
Berenberg (Joint Corporate Broker) +44 (0)20 3207 7800
Toby Flaux / Ben Wright / Marie Moy / Alix Mecklenburg-Solodkoff
Peel Hunt (Joint Corporate Broker) +44 (0)20 7418 8900
Neil Patel / Paul Gillam / Kate Bannatyne
Vigo Consulting (Financial Public Relations) +44 (0)20 7390 0233
Jeremy Garcia / Fiona Hetherington / Aisling Fitzgerald
team17@vigoconsulting.com
About Team17
Team17 Group plc is a leading global developer and publisher of video games
entertainment to a broad audience. The Group includes a games entertainment
label and creative partner for Indie developers, a developer of educational
apps appealing to children under the age of eight, and a working simulation
games developer and publisher.
Visit www.team17.com (http://www.team17.com/) for more info.
Chair's Statement
I have been involved in the games industry for over 25 years and have long
admired the Team17 Group as a business, as well as the passion and dedication
of the team behind the name. When the opportunity arose to join the Group as
Chair, I was delighted to accept and to support on the next phase of its
growth.
The Group has an enviable track record of discovering innovative new games,
bringing them to market, and nurturing many of them into enduring, quality
franchises. As a leading Indie games developer and publisher, the Group has
built a solid foundation for the business to scale upon. I am excited to be
part of this journey going forward.
I would like to personally thank Chris Bell for his significant contribution
to the Group throughout his tenure as Chair. Chris joined the business pre-IPO
to provide guidance and insight during the process of transitioning from a
private to public business, which has been invaluable. I have had the pleasure
of working with Chris as we undertook a thorough handover, and I wish him
every success with his future endeavours.
In the year ended 31 December 2023, the Group generated revenues of £159.1
million (FY 2022: £142.3 million), gross profit of £57.5 million (FY 2022:
£69.6 million) and adjusted EBITDA of £29.9 million (FY 2022: £48.8
million). Despite our strong revenue performance, we are disappointed to
deliver this level of adjusted EBITDA alongside a reported statutory loss,
both of which were significantly impacted by one off non-cash impairment
charges. More detail is provided later in the Chief Financial Officer's
review. We feel these results fall short of our own expectations and do not
reflect the potential of the Group. We have proactively sought to realign our
underlying cost base and development costs to support an improvement in the
future underlying trading performance of the Group.
The Group continues to boast a strong balance sheet, with £42.8 million of
cash and cash equivalents at 31 December 2023 (FY 2022: £50.8 million). The
senior team is firmly focused on ensuring the Group's cash position is
leveraged effectively to expand the business' existing operational
capabilities and support enhanced revenue generation across the Group. The
performance of astragon and StoryToys highlights the importance of quality
M&A as a pillar in the Group's strategy to complement the existing
business as and when compelling opportunities arise.
The Group has created a uniquely diversified portfolio of games and IP over
the last 30 years, which reaches and engages with a growing global audience.
The team has successfully expanded its footprint through a number of highly
targeted acquisitions, which further strengthened its commercial position.
These acquisitions are delivering new customer segments and gaming genres,
alongside providing a reliable contribution to Group revenues. In addition,
the Group has also grown its back catalogue, which represents 71% of total
Group revenues, demonstrating its ability to successfully manage product
lifecycle.
More people than ever are playing games, with 3.3 billion(1) gamers in 2023
rising to an estimated 3.8 billion by 2026, supporting a global games market
generating revenues of $184 billion(1) in 2023 expected to rise to $205
billion(1) by 2026. This growth is underpinned by increasing demand for
interactive entertainment, advancements in technology, growth in new
geographies, expanding demographics, and the rise of new gaming platforms and
business models.
(1) https://newzoo.com/resources/blog/explore-the-global-games-market-in-2023
(https://newzoo.com/resources/blog/explore-the-global-games-market-in-2023)
At the same time, the number of games coming to the market is currently
growing at a faster rate than revenues, and the quality of the top games is
getting higher. Competition for gamers' time and disposable income is intense,
and the current headwinds from the cost of living crisis clearly remain an
obstacle.
In a market where launching new IP is challenging, the Group is, more than
ever, the partner of choice thanks to its experience, know-how and proven
track record of working alongside independent developers to create
long-running, successful projects and franchises. There are plenty of talented
developers who will look for a trusted partner for their games. Major releases
such as Hell Let Loose (full release launched at the end of FY 2021),
Blasphemous 2 and Dredge (both launched in FY 2023) are just a few examples of
successes we have brought to market.
From game design to production processes and technology, we assist talented
developers in optimising their game's quality while providing the full suite
of publishing services and leveraging our extensive relationships in the
global gaming eco-system to maximise success.
Last year saw quite a few changes at the Group, and we entered 2024 with
several new team members ready to support the business on its next stage of
growth. During 2023, Chris Bell, Martin Hellawell and Jennifer Lawrence
stepped down from the Board. Debbie Bestwick also stepped down as CEO of the
business and has transitioned to a Non-Executive Director role. As founder and
former CEO, as well as the biggest shareholder, Debbie will continue to help
guide the business, albeit on a more strategic level. Chris, Martin and
Jennifer worked alongside Debbie during the period after the Group's IPO, and
the Group would not be where it is today without their valuable insights and
contributions.
The renewed Board will bring deeper insights and knowledge from their games
industry experience, guiding management to scale the business and build on the
strong foundations in place.
We have proven talent across the senior management team, and I look forward in
particular to working alongside our Group CEO Steve Bell, an entrepreneur with
a proven pedigree for scaling and managing businesses. With Steve - and
supported by our outstanding divisional leaders - I believe the team is well
positioned to guide the Group forwards, to maximise our growth potential. I
have been particularly impressed with the thoroughness and rigour demonstrated
by the senior management team and am confident with the strategic plans that
have been put together for FY 2024 and beyond.
Following Michael Pattison's departure as CEO of our Games Label, Ann Hurley,
a highly experienced games industry veteran, has been overseeing the division
on an interim basis. Following the review of a range of potential candidates
by a global search agency, Ann has formally been confirmed as General Manager
for the Games Label on a permanent basis with immediate effect. In her role
she will continue to lead the great team we have in place to deliver on our
near-term release roadmap.
Publishing games remains a highly competitive and complex process. Today's
market is now highly challenging, with consumers splitting their time between
gaming and other entertainment activities, alongside the pressures created by
the ongoing cost of living crisis reducing historic levels of discretionary
spending. Set against this backdrop, the Group's track record of successfully
bringing products to market should ensure it remains well positioned to
continue to gain market share over the coming years.
We look forward to driving and scaling the business in the medium term through
both organic growth and, where appropriate, selective, value-accretive
acquisitions.
Frank Sagnier
Chair
Group Chief Executive Officer's Review
Introduction
I was excited to join Team17 Group plc as the Group's Chief Executive Officer
designate in September 2023, and since my arrival I have been hugely impressed
by the talent and enthusiasm that defines our team. We are proudly committed
to producing market leading, engaging, high-quality Indie games, working
simulation experiences and edutainment apps that appeal to a broad demographic
across multiple genres. The shared drive of our people to deliver this has
been evident to me from the very outset of my time at the Group.
The market backdrop this year has been immensely challenging, with exceptional
competition in the sector throughout the year. In this context, we delivered a
strong revenue performance with Group revenues of £159.1 million (FY 2022:
£142.3 million).
Profits came in below our initial expectations, with gross profit of £57.5
million (FY 2022: £69.5 million), and adjusted EBITDA of £29.9 million (FY
2022: £48.8 million), driven by certain games within the Games Label not
meeting internal expectations. The outcome also reflects the result of the
review of the carrying value of intangible assets which led to an impairment
charge on some launched games and on some games currently under development.
Reported profit before tax was significantly impacted by one off non-cash
impairment charges which resulted in a reported loss of £1.1 million (FY
2022: £28.7 million profit). More detail is provided later in the Chief
Financial Officer's review.
In the second half of the year, we undertook a comprehensive review of our
cost base within the Games Label, which was completed in November 2023. Whilst
this unfortunately resulted in redundancies, we believe our cost base is now
aligned to our core Indie strategy, and the business is now even better placed
to capitalise on future opportunities while continuing to optimise our
existing pipeline.
The Group retains a strong balance sheet, with £42.8 million of cash and cash
equivalents at 31 December 2023 (FY 2022: £50.8 million).
The senior team is firmly focused on effectively leveraging the business'
operational capabilities to support enhanced revenue generation across the
Group. The successful addition of astragon and StoryToys to the Group,
highlights the importance of identifying quality acquisitions that complement
the existing business as and when compelling opportunities arise.
As at 31 December 2023, the Group had 348 employees (FY 2022: 392), spread
across 8 locations in 5 countries. Over the course of FY 2023, we invested in
our senior leadership team, including the recruitment of a Group People &
Culture Director and Group Investor Relations Director, and now benefit from a
strengthened divisional management structure to support all team members
across all locations.
Operational review
The Games Label launched 11 new games in the period, including the hugely
successful Dredge, which has sold over one million copies to date and has
received high praise from critics and players alike. More generally, the
average review score on Steam for our 5 bestselling new releases during FY
2023 was 91%. Other major releases included Moving Out 2, Blasphemous 2,
Killer Frequency, Trepang 2, Gord and Headbangers - Rhythm Royale, along with
additional content for games including Golf With Your Friends. The Games Label
also released multiple content updates for its existing portfolio,
demonstrating the strength of its back catalogue and the focus of the team on
maximising the lifecycle of games within the portfolio.
StoryToys' content portfolio continued to expand this year, with the launch of
new apps, such as Marvel HQ in May and Barbie(TM) Color Creations in July, and
a further 327 app updates across nine apps, including Iron Man Target Game,
which was added to the Marvel HQ app in October. Additionally, we have
increased the number of platforms on which our products are available, with
users now able to access Barbie(TM) Color Creations and Lego® Duplo® World
via Apple Arcade. StoryToys strengthened its licensing partnerships with
leading, international brands in the period, notably adding Mattel to its
existing roster, which to date includes: The LEGO Group, Disney, Pixar, Marvel
Entertainment, Penguin Books, and Dick Bruna. These partnerships are a
testament to StoryToys' strong track record and growing reputation as an
established, reliable partner for international companies looking to expand
their trusted and iconic brands into the edutainment space.
astragon's working simulation games continued to perform strongly in FY 2023,
driven by the launch of additional content across numerous games, including
Police Simulator - Crime Scene Update and Firefighting Simulator - The Squad.
In addition, ABRISS - Build to Destroy, an atmospheric physics-destruction
building game developed by Randwerk Games and published by astragon, was
launched across all platforms in FY 2023, receiving positive user reviews as
well as critical acclaim, having been awarded the title of Best Graphic Design
at the German Computer Game Awards. FY 2023 also saw the successful
introduction of season passes, 16 paid DLCs across first-party IP games and
the introduction of five new brand licenses.
3 of the top 5 game revenues across the Group come from first-party IP games
and within the top 10 selling games there is a spread of games from each
division with 5 from Games Label- 3 from astragon and 3 from StoryToys,
demonstrating the breadth of the portfolio across the Group. The top ten
selling games represent 60% of total revenues in FY 2023, which compares with
65% in FY 2022.
The Team
The quality of our games is testament to the exceptional talent and depth of
experience across our business. The team's unwavering dedication and technical
prowess are essential to developing games that immerse and captivate their
audiences. I have particular respect and understanding for the creative
process, gained from my own experience working for over 25 years across the
branding and digital marketing arena, which has enabled an instant connection
to the team. I have been extremely impressed by their ability to craft
compelling narratives and to design captivating user journeys that are both
seamless and intricately detailed. Each game and content release showcases the
immense passion of those in the Group and their commitment to continually
enhance the games within our broader portfolio.
The Group benefits enormously from its dedicated divisional leaders - Ann,
Emmet, Tim and Julia - who, along with their senior leadership teams, bring
well over 200 years of specialised sector and market expertise as well as
industry relationships. This is crucial in identifying key trends in their
respective market segments, and in delivering unique and captivating content
to their distinct target audiences, from multi-genre Indie games in the Games
Label, to working simulation experiences in astragon, and children's
edutainment apps in StoryToys. This agility in the face of rapidly evolving
market dynamics ensures the Group is able to capitalise on new opportunities
and stay ahead of the curve when it comes to producing innovative, exciting
content for our diverse customer base.
Our leadership team will also benefit from the valuable industry experience
offered from our new Board members, especially our Chair, Frank Sagnier, and
from the strategic rigour and gaming knowledge Debbie Bestwick will provide in
her new role as a Non-Executive Director.
2023 was one of the most competitive and challenging years seen in the games
industry in terms of high-quality launches and aggressive product discounting,
set against the well documented cost of living crisis. Like its peers in the
sector, the Games Label felt the pressure associated with these challenges
acutely. Combining the external market conditions with an internal strategic
review, the Group made the difficult decision to initiate a reorganisation of
the division in October, resulting in a reduction in headcount. Management is
confident that the business' cost base is now aligned with the Group's
long-term focus, enabling it to better leverage both fixed and flexible
resources and invest in the games and teams of the future.
At a broader, Group level, the business remains cognisant of the inherently
higher attrition levels observed across the games industry, and the
detrimental impact this can have on preserving the quality and drive of our
teams if not managed proactively. To this end, we continue to implement
internal programmes and processes to ensure high retention levels and a
positive working environment for our people.
Strong communication is integral to the culture within the Group, both in
terms of employee engagement but critically in terms of superior market
execution. We are committed to keeping pace with changing expectations within
workplaces to facilitate a range of office, home-based, and hybrid working,
and support multiple flexible working arrangements for our people. However, we
have implemented various initiatives to preserve a collaborative, collegiate
environment amongst our teams. We have regular town hall meetings - online and
in-person events for both team members and their families - and multiple
social groups that are all supported by management. In addition, our
employee-led environmental groups, including Green17 in the UK, continue to
raise awareness and drive the Group's ESG strategy.
Strategy and business priorities
I firmly believe the Group provides a differentiated and compelling investment
proposition within the games industry. Alongside the development of
high-quality, engaging games and apps, we have a track record of consistently
leveraging the strength of our back catalogue to drive additional, reliable
revenue streams from our existing content portfolio. In addition, the Group
benefits from a distinct divisional structure, wherein each of the distinct
business offerings is headed by talented industry leaders who are all experts
in their respective fields.
As we seek to move the business forward, I will be focusing on five core
strategic pillars, namely:
· Building relationships; to be the leading Indie publisher, nurturing
world-class partnerships with developers, platforms or licenses.
· Creating evergreen brands; to focus on our original first-party IP
games while fully leveraging our lifecycle management skills.
· Powering up; to foster greater collaboration between teams and
divisions, fully harnessing our collective skills and strengths to optimise
efficiencies.
· Attracting talent; to deliver our strategic and financial ambition by
nurturing a culture that enables ambition, creativity and belonging.
· Leveraging our pioneering minds; to drive growth into new markets,
audiences & IP organically and through M&A.
StoryToys and astragon are focused on developing and bringing the highest
quality working simulation games and edutainment apps to our users, the latter
collaborating with some of the best known and most loved brands in the world.
Amongst our peers, the Games Label remains a market leader within the Indie
games community, developing games in-house while also acting as a co-developer
and publisher for independent developers looking for a partner to support them
in bringing games to market. We have an exceptional game scouting team, which
continuously assesses vast numbers of game submissions through the Games
Label's greenlight process.
Whilst we had seen an increase in the budgets of games we developed in the
Games Label over the last couple of years, during the second half of FY 2023
we sought to realign our strategy to focus on our core strength of developing
and publishing Indie games. While we will continue to invest in our
established and highly profitable larger first-party IP franchises, the focus
of new third-party game releases will in future be firmly in the Indie space,
where we believe we can make the highest returns from our investment. This
return to our historic strengths should ensure that only the very best games
make it through our extensive quality control processes and into our launch
schedule.
I am excited to explore how my experience within digital marketing can further
support discoverability of our content in an ever expanding and rapidly
evolving marketplace.
The Group has long been an advocate of first-class lifecycle management as a
means to expand and enhance returns on its back catalogue of existing titles,
ensuring the generation of sustained revenues through the launch of engaging
new content and continuous improvements to user experience. This core
component of the business model is as important as it has ever been, driving
multi-year revenue generation and underpinning profits well into the future.
Following multiple game and app launches over the course of FY 2023, in the
Games Label alone our back catalogue has grown, to over 900 digital revenue
lines ("DRL") (FY 2022: over 700 DRL), which will continue to expand in the
years to come.
We have already developed collaboration and cross-selling opportunities
between our divisions, and the potential for additional synergies and sharing
of resources, best practice and industry relationships will only accelerate as
the business grows. Driving operational efficiencies across the Group has
always been a key business focus, and I believe there is still much more to be
gained from our broader operational footprint. A key part of my role as Group
CEO will be finding ways to capitalise on these priorities to drive further
innovation and efficiencies across all segments of the business, drawing on my
experience of acquiring, integrating and further developing businesses in my
previous role. We have invested in "Group-wide" functions to step up our
performance, drive greater levels of efficiencies and reposition the business
back to strong growth and improved profitability over the mid-term.
We have taken considerable steps to strengthen our rigour around commercial
governance and controls, in particular new game development costs. This
includes implementing a more comprehensive contract review process, updating
our milestone payments process, and ensuring more rigorous internal procedures
are in place.
Outlook
The Group has made a pleasing start to FY 2024, although we remain mindful of
the challenging near-term competitive landscape; we know of a number of
high-quality new games releases that have been delayed into the current
calendar year; the cost of living pressure continues to impact discretionary
spending across the board; and geopolitical uncertainty continues to weigh on
global markets more broadly.
However, the vision for the Group remains clear - to accompany our gamers
through a lifetime of play, creating pioneering and captivating experiences
that enrich and inspire players around the world. This will be achieved
through the release of new games and apps, as well as continuing to innovate
lifecycle management strategies, supported by the launch of additional content
updates across the portfolio to capitalise on the existing audience demand for
our games.
In addition, an action plan is in place to accelerate revenue and profit
growth, which includes increasing the proportion of revenues from first-party
IP over time, sharpening our greenlight process, more innovative marketing and
publishing models, while pursuing an active M&A agenda.
We have a strong pipeline of new games and apps scheduled for launch in FY
2024 and beyond, and we will continue to develop and launch additional content
across the existing portfolio.
We remain confident that the Group can deliver an improved underlying trading
performance in FY 2024 and is well positioned for growth over the mid to long
term. We look forward to updating all stakeholders on our progress as the year
continues.
Steve Bell
Chief Executive Officer
Chief Financial Officer's Report
Performance Overview
FY 2023 was a challenging and highly competitive year for the gaming sector.
Against this backdrop, the Group increased revenue by +12% compared to the
prior year. This growth was generated solely through revenues from existing
businesses. The Group saw strong sales growth delivered through a combination
of new releases alongside continued strengthening and broadening of the back
catalogue. However, reported results were impacted by lower margins, weak cost
controls and one-off non-cash impairment charges meaning that the Group
delivered an overall loss before tax of £1.1 million (FY 2022: £28.7 million
profit).
Towards the back end of FY 2023, management identified a number of operational
issues within the Games Label and implemented a series of more rigorous cost
controls and strategic initiatives to address areas that had impacted the
profitability of the division. A thorough review of the strategic direction of
the Games Label, its cost base structure and processes was completed in the
last quarter of FY 2023, resulting in a restructuring program that impacted
both headcount and cost control processes. Most notably, the Games Label has
re-focussed back to its core Indie games roots, resulting in changes to games
scouting and increased rigour around development spend. These changes were
implemented to ensure that the Games Label can return to its historical track
record as a consistent performer and one of the leading developer and
publishers of Indie games.
Revenue
100% of the revenues(1) in the period were generated from existing businesses,
with all three divisions contributing in line with expectations and delivering
a pleasing uplift in trading across the Black Friday and festive seasonal
periods resulting in Group revenues up 12% to £159.1 million (FY 2022: 142.3
million). The Games Label contributed £103.6 million (FY 2022: £92.8
million) growing 12% and astragon delivered £36.0 million (FY 2022: £34.1
million) showing growth of 5% against a very strong revenue comparative in FY
2022 whilst StoryToys revenue grew 26% with revenues of £19.5 million (FY
2022: £15.4 million).
Overall Group first-party IP revenues were £55.8 million (FY 2022: £56.4
million) reflecting a solid performance on games such as Hell Let Loose which
remains one of the Group's top selling individual games together with
astragon's Construction Simulator and Police Simulator. Third-party game
revenues grew 20% to £103.3 million (FY 2022: £85.8 million). There were
pleasing performances across the portfolio led by the standout third-party
game Dredge which was released on 30 March 2023. Growth was also seen in new
release revenues to £45.5 million (FY 2022: £38.8 million) in FY 2023, a
growth of 17%, coming from games including Trepang 2 and Blasphemous 2
alongside the aforementioned Dredge.
In a highly competitive market that was reported to have grown(2) at <3% in
the calendar year 2023, the Group's back catalogue continues to strengthen,
growing at 10% with revenues of £113.6 million (FY 2022: £103.5 million)
representing 71% (FY 2022: 73%) of total revenues. This growth is testament
both to the quality of the Group's portfolio, and the team's skills in
lifecycle management.
((1) Due to a change in accounting policy, revenue recognition on digital
sales through Apple and Google app stores is now recognised gross of any
platform fees charged where historically the net amount was recognised. For
these platforms only, the platforms are deemed to be an agent in the
transaction under IFRS15, this change has no impact on profits in either the
current or prior year, however, does impact both gross margin and adjusted
EBITDA margin percentages, see note 2)
((2) NewZoo global games report January 2024 Update)
Gross Profit
Gross profit in the year fell to £57.5 million (FY 2022: £69.6 million). The
reported gross margin fell to 36% from 49%, having been impacted by a number
of factors, some one-off in nature. These included: a one-off impairment
charge; a higher proportion of third-party revenue; higher development cost
amortisation charges; and higher expensed development costs which include the
studio related one-off restructuring costs. These are dealt with in turn
below.
A full review was undertaken of the value of intangible assets held on the
balance sheet which included both released games with a residual net book
value as well as future games. As a result of the review, an impairment charge
of £11.1 million was made in FY 2023. This one-off non-cash charge
correspondingly reduced the intangible assets value held on the balance sheet
at year end.
As outlined in our November 2023 trading update, whilst the Group delivered
revenues in line with expectations, a higher proportion of third-party games
(which generate higher levels of royalty payments) impacted gross margins in
the period. Revenues from astragon's first-party IP simulation games
represented 47% (FY 2022: 44%) of the Group's first-party IP revenues and
unlike the Games Label first-party IP games, these attract a royalty paid to
astragon's dedicated development partners, which in turn further reduced the
overall gross profit margin.
Development cost amortisation charges grew to £12.7 million (FY 2022: £9.3
million). This results from an increase in capitalised development costs
within astragon (which has typically larger development spend by game, similar
to that invested in the Games Label's first-party IP games), together with an
increase in development budgets for some larger third-party games within the
Games Label division.
The Group's overall amortisation policy is to charge back a high proportion of
the capitalised development costs within the first twelve months after launch
(Games Label 70% in year 1 and astragon 50% in year 1) and correspondingly the
annual amortisation charge reflects not only the level of historic investment
but also the timing and quantity of games launched in the period and in the
prior year.
The final driver of gross margin pressure came from expensed development costs
which were also elevated in the year. This reflected increased support costs
post launch including investment in free DLC within the Games Label; post
launch support to live games such as Hell Let Loose. In addition, expensed
development costs included £1.0 million out of a total £1.2 million costs
associated with the restructuring within Games Label.
Capitalised development costs
IAS 38 requires development costs to be capitalised during the process of
creating a game until its launch. If a game is launched on Early Access, then
the incremental costs of developing the title to full release are also
capitalised. Development costs that were capitalised in the year increased to
£32.2 million (FY 2022: £26.1 million) of which £22.5 million (FY 2022:
£18.3 million) related to Games Label, £7.1 million (FY 2022: £6.3 million)
related to astragon and £2.6 million (FY 2022: £1.4 million) related to
StoryToys. As outlined above, the review of intangible assets resulted in
£11.1 million of the carrying value of capitalised development costs being
impaired. As a result of the capitalisation, the one-off impairment and
development cost amortisation charges, capitalised development costs on the
balance sheet at the end of the period stood at £35.1 million (FY 2022:
£26.8 million).
The levels of investment in capitalised development costs have increased
significantly over the last two years. This resulted in part from the
acquisitions - astragon in particular has a higher investment per game,
similar to the levels of Games Label's first-party IP investment. Further
increases resulted from the shift by the Games Label over the last two years
to larger third-party game development investments, a move which took the
business away from its core Indie-focused business model and one that, as
outlined above, has been reversed towards the end of FY 2023. As a result of
that reversal, the majority of third-party game investments are expected once
more to fall in or below the range £1.0 million to £1.5 million. A small
number of games may exceed that range should they meet the relevant internal
investment hurdles. Investment in the Games Label's first-party IP (which is
entirely internal) will be higher, as has been the case historically. These
changes are expected to result in lower investment in development costs within
the Games Label.
Within StoryToys, our strategy has been to broaden our licence partners and
subsequent apps, and within astragon, our focus has been to grow our content
portfolio with new first-party IP simulation games. In the short term,
reductions in investment in the Games Label will be offset by increased
investment in the two other divisions, enabling both StoryToys and astragon to
continue to deliver on their growth ambitions.
Administrative Expenses
Total costs in the period increased to £57.6 million (FY 2022: £37.8
million). Within this total are acquisition-related adjustments, costs and
amortisation of £9.2 million (FY 2022: £15.2 million) and a £20.9 million
(FY 2022: nil) one off non-cash impairment of goodwill charge relating to The
Label Inc., following the annual review of the carrying value on all
acquisitions. This is covered in more detail below.
Marketing costs were elevated in H1 2023 in particular, however, tighter
controls were implemented in H2 2023 to help reduce the overall increase in
spend in the year to £0.8 million and importantly to ensure that these costs
are better aligned to the Indie model and reduced in FY 2024 and beyond. Some
FX cost pressure was experienced in year compared with a positive FX tailwind
in FY 2022. However other costs including premises, professional fees and
travel & entertainment were lower than the prior year demonstrating
tighter controls in place particularly in the latter part of the year.
Staff costs within administrative expenses were lower in the period reflecting
the fact that performance bonus payments were not made within the Games Label
nor at Group level. They include £0.2 million out of a total £1.2 million
costs associated with the restructuring within Games Label.
Headcount for the Group at year end reflects the impact of the Games Label
restructuring review as well as reflecting the move to increase the
utilisation of an outsourced studio resourcing model in areas such as QA (game
testing), localisation and console porting. As a result, the total headcount
for the Group at 31 December 2023 was 348 (31 December 2022: 392) with the
average headcount higher at 380 (FY 2022: 351) resulting from the timing of
the restructuring within the UK Games Label team.
The annualised cost reduction impact of the restructuring within the UK Games
Label business administrative expenses is anticipated to be £0.7 million.
Additional savings in studio headcount costs have been partly offset by
increased spend on outsourced providers. The restructuring was completed
mid-November so had a relatively small impact on operational costs in the
period. The associated one-off costs of the restructuring are not included
within the adjusted EBITDA measure which is covered in more detail in the
Alternative Performance Measures (APMs) below.
The headcount totals also reflect the addition of 45 employees that joined the
astragon business following the acquisition of Independent Arts Software GmBH
("IAS") earlier in the year together with growth in headcount across astragon
and StoryToys to support the broadening of the content portfolio in both
businesses.
Following the annual impairment review, the goodwill associated with the
acquisition of The Label Inc. (re-named Team17 USA) was impaired. The
impairment charge of £20.9 million is marginally offset by the release of
£2.6 million contingent consideration previously held on the balance sheet
relating to earn-out targets for FY 2023 not being met. Both items reflect the
reduced performance of the business compared with expectations at the time of
the acquisition. Over the last two years the mobile subscription market has
seen increased competition reducing the ongoing performance income received
for launched games as well as reduced third-party new mobile games being
secured for development.
The Team17 USA business continues to be an important part of the Games Label,
offering strategic expertise to identify, develop and bring to market mobile
subscription games from third-party developers but importantly also provides a
route for the Games Label's own back catalogue portfolio where the potential
exists to bring key games to mobile subscription platforms. The first of the
Games Label games entered this development pipeline towards the end of FY
2023.
Alternative Performance Measures ("APMs")
The Directors believe that the reported APMs provide meaningful performance
information to aid the understanding of the underlying business trading
performance and profitability. Although these are not GAAP measures as defined
by IFRS, they have been applied to provide an accurate comparison as well as
provide readers of the financial statements a clear understanding of the
underlying profitability of the business and more consistent comparisons over
time. A breakdown of the adjusting factors is provided in the table below.
Adjusted EBITDA reflects the EBITDA of the Group in a steady state, without
the impact of acquisition-related costs which vary year on year based on
acquisition activity. In addition, we include the impact of amortisation and
impairment of development costs as this reflects the primary costs incurred by
the Group in generating revenue. In the current year, restructuring costs have
also been excluded as this is also considered a one-off cost impact which is
not reflective of the underlying performance of the Group.
Adjusted Profit before tax reflects the profitability of the Group, adjusted
for the impact on profit of acquisition-related costs which vary year on year
based on acquisition activity. This is also adjusted for the goodwill
impairment which arose in the year which is not a recurring cost to the Group.
A breakdown of the adjusting factors is provided in the table below:
Adjusted EBITDA Adjusted Profit After Tax
FY23 £'000 FY22 £'000 FY23 £'000 FY22 £'000
(Loss) / Profit before tax (1,080) 28,665 (1,080) 28,665
Impairment of goodwill 20,879 - 20,879 -
Development cost amortisation eliminated through FV adjustments
(3,791) (976) (3,791) (976)
Share based compensation(1) 417 (93) 417 (93)
Games Label restructuring costs 1,209 - 1,209 -
Acquisition related costs & adjustments
Amortisation on acquired intangible assets 13,759 10,300 13,759 10,300
Acquisition related costs 1,360 4,708 1,360 4,708
Earn out fair value (5,086) 883 (5,086) 883
Other fair value adjustments - 238 - 238
Interest & FX on contingent consideration 1,023 3,392 1,023 3,392
Adjusted profit before tax 28,690 47,117 28,690 47,117
Finance income and costs net of acquisition related costs and adjustments (106) 556 n/a n/a
Depreciation and loss on disposal of tangible assets 1,289 1,085 n/a n/a
Amortisation of intangible assets (excluding development costs and acquired - 16 n/a n/a
intangibles)
Adjusted EBITDA 29,873 48,774
Taxation (net of impacts on adjustments) (3,467) (7,457)
Adjusted profit after tax 25,223 39,660
Adjusted basic EPS(2) 17.5 27.8
Note: amortisation and impairment on development costs are included in the
calculation of adjusted EBITDA, adjusted profit before tax and adjusted profit
after tax.
(1) Share-based compensation charges include employers' national insurance
contributions due on the exercising of the share options.
(2) The calculation of adjusted earnings per share is based on the adjusted
profit after tax divided by the weighted average number of shares (either
basic or diluted).
Share-based compensation charges of £0.4 million (FY 2022: £0.1 million
credit) relate to options that were granted to the Executive Directors, the
senior leadership team and other members of the team under a variety of
schemes which other than in the case of the Executive Directors will be
satisfied by shares held in the Employee Benefit Trust ("EBT"). The charge in
the period was impacted by a credit which relates to the Executive options
granted in 2021 that have failed to meet the minimum performance criteria. The
credit in the prior year relates to the reversal of a national insurance
accrual made in FY 2021 reflecting a lower actual charge in FY 2022.
Acquisition-related adjustments created a net benefit in the period compared
to a cost impact in the prior year with a credit of £2.7 million (FY 2022:
£9.2 million debit) relating to one-off costs directly associated with the
acquisitions made over the last two years. Fair value movements in respect of
contingent consideration payments gave rise to a £5.1 million credit (FY
2022: £0.9 million cost). There were no associated management incentive
payments in FY 2023 (FY 2022: £3.8 million) and other acquisition costs and
fair value adjustments totalled £1.4 million (FY 2022: £1.1 million).
Finance costs relating to contingent consideration fell to £1.0 million (FY
2022: £3.4 million) reflecting the lower balances outstanding.
Adjusted EBITDA
Adjusted EBITDA was £29.9 million (FY 2022: £48.8 million) reflecting the
pressure on gross margins and administrative expenses and including the
non-cash title impairment charges as outlined above. Adjusted EBITDA excludes
acquisition related adjustments and fees, amortisation on and impairment of
acquired intangible assets, share-based compensation, one-off Games Label
restructuring costs and tax.
Loss Before Tax
The non-cash impairment charges outlined above totalling £32.0 million (FY
2022: £nil) had a significant impact in the period resulting in a reported
pre-tax loss of £1.1 million (FY 2022: £28.7 million profit). This also
reflects the reduced gross margins and the acquisition-related costs that are
required to be taken through the profit and loss account. Adjusted profit
before tax, adjusting for the items outlined in the APMs table above, was
£28.7 million (FY 2022: £47.1 million).
The tax charge for the year was £2.7 million (FY 2022: £5.2 million). There
were two significant non-taxable items during the year that affected loss
before tax which were goodwill impairment and fair value adjustments on
contingent consideration from business acquisitions totalling £18.3 million
(FY 2022: negative £0.9 million). Removing these from the loss before tax
gives an effective tax rate for the year of 16% (FY 2022: 18%).
Earnings Per Share ("EPS")
Basic EPS was (2.6) pence (FY 2022: 16.5 pence) and reflects the impact of
one-off acquisition-related adjustments and fees (net of tax) described in the
APMs table above as well as being materially impacted by the non-cash
impairment charges. Basic adjusted EPS, reflecting the APM adjustments noted
above and calculated using the adjusted profit after tax was 17.5 pence (FY
2022: 27.8 pence).
Statement of Financial Position
The Group remains highly cash generative with an operating cash conversion of
87% (FY 2022: 108%), and a net inflow of cash from operations of £41.4
million (FY 2022: £49.4 million). As a result of the outflow of
acquisition-related payments for IAS (£1.8m), cash earn-out payments in the
period for astragon, Team17 USA, HLL and IAS (£18.6 million) and investment
in capitalised development costs (£32.2 million), there was an overall net
decrease in cash and cash equivalents to £42.8 million (FY 2022: £50.8
million) which includes £2.9 million (FY 2022: £3.0 million) held in the
Employee Benefit Trust.
The EBT remains an important fund established at IPO to support employee share
awards and incentivise team members across the Group. All UK and EU employees
across the Group continue to be awarded share options on joining, noting that
the use of the EBT ensures that this avoids the issue of new shares to satisfy
these and other employee options.
Goodwill and intangible assets now total £210.0 million (FY 2022: £234.1
million) following the impairment reviews outlined above. As at 31 December
2023, the net book value of goodwill was £86.2 million (FY 2022: £113.4
million) which reflects the impairment of goodwill associated with Team17 USA.
The value of the Group's brands now stands at £57.6 million (FY 2022: £63.8
million) which takes into account the annual brand amortisation charge. The
current net book value of capitalised development costs at year end stands at
£35.1 million (FY 2022: £26.8 million).
There were no material trading-related movements in working capital. Trade and
other payables reduced significantly at the year end to £35.4 million (FY
2022: £52.3 million) primarily driven by the reduction in contingent
consideration reflecting the final anticipated earn-out payment due to be made
in the first half of FY 2024.
As a result of the ending of payments related to past acquisitions, and
subject to the level of future M&A activity, the Group expects to be cash
generative in FY 2024.
Acquisition in the year
As previously announced on 28 April 2023, astragon Entertainment GmbH
completed the acquisition of 100% of the share capital of Independent Arts
Software GmbH ("IAS") for a maximum payment of £3.1 million (€3.5 million)
subject to the seller and business meeting certain requirements. IAS is a
games development studio based in Germany and is now supporting astragon's
strategic development of first-party IP simulation games.
Share Issues
As at 31 December 2023, the Group's issued share capital comprised 145,803,620
ordinary shares of £0.01 each (FY 2022: 145,593,271). A total of 210,349
shares were issued during the year as part of the FY 2022 earn-out relating to
the acquisition of Team17 USA.
A total of 294,535 (FY 2022: 313,500) share options were issued during the
year to the Executive Directors with a three-year vesting period with
performance criteria and a further 532,858 (FY 2022: 131,300) share options
were issued to other employees across the Group also with a similar three-year
vesting period and performance criteria.
The Group has extended the use of its Long-Term Incentive Plan with
performance criteria across its senior divisional leadership team together
with the deferred bonus share plan for senior management. The Games Label
continues to administer an All-Employee Share Incentive Plan ("SIP") which is
a UK employee SIP with matching shares open to all UK employees and which
continues to be well supported.
Mark Crawford
Chief Financial Officer
Team17 Group plc
Unaudited Consolidated Income Statement
Unaudited Audited
Year ended Year ended
31 December 31 December
2023 2022
(restated)
Note £'000 £'000
Revenue 4 159,125 142,282
Cost of sales (101,620) (72,666)
Gross profit 57,505 69,616
Other income 176 469
Administrative expenses (57,639) (37,819)
Operating profit 5 42 32,266
Finance income 344 34
Finance cost (1,261) (3,982)
Share of net (loss)/profit of associates accounted for using the equity method
(205) 347
(Loss)/Profit before tax (1,080) 28,665
Taxation 6 (2,665) (5,187)
(Loss)/Profit for the year (3,745) 23,478
Basic earnings per share 7 (2.6) Pence 16.5 Pence
Diluted earnings per share 7 (2.6) Pence 16.4 Pence
Certain comparative balances included within the consolidated income statement
have been restated as disclosed in note 2.
Team17 Group plc
Unaudited Consolidated Statement of Comprehensive Income
Unaudited Audited
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
(Loss)/Profit for the year (3,745) 23,478
Items which might be reclassified to profit or loss:
Exchange (loss)/gain on translation of foreign operations (3,209) 8,070
Total comprehensive (expense)/income for the year
(6,954) 31,548
Team17 Group plc
Unaudited Consolidated Statement of Financial Position
31 December 2023 31 December 2022
(unaudited) (audited)
(restated)
Note £'000 £'000
ASSETS
Non-current assets
Goodwill 8 86,244 113,424
Other intangible assets 8 123,748 120,685
Investments accounted for using the 867 1,045
equity method
Property, plant and equipment 1,440 1,692
Right-of-use assets 3,172 2,785
215,471 239,631
Current assets
Inventories 960 1,225
Trade and other receivables 38,408 36,044
Cash and cash equivalents 10 42,824 50,828
82,192 88,097
Total assets 297,663 327,728
EQUITY AND LIABILITIES
Equity
Share capital 1,458 1,456
Share premium 137,572 132,126
Retained earnings 97,514 100,785
Other reserves 10,235 18,093
Total equity 246,779 252,460
Non-Current liabilities
Lease liabilities 2,889 2,625
Contingent consideration 11 - 9,369
Provisions 113 140
Deferred tax liabilities 8,386 9,169
Total non-current liabilities 11,388 21,303
Current liabilities
Trade and other payables 35,422 52,339
Tax payables 3,391 1,262
Lease liabilities 683 364
Total current liabilities 39,496 53,965
Total liabilities 50,884 75,268
Total equity and liabilities 297,663 327,728
Certain comparative balances included within the consolidated statement of
financial position have been reallocated as disclosed in note 2.
Team17 Group plc
Unaudited Consolidated Statement of Changes in Equity
Share capital Share premium Retained earnings Other reserves Total
£'000 £'000 £'000 (restated) £'000
£'000
Balance at 1,315 44,084 76,863 5,374 127,636
1 January 2022 (audited)
Comprehensive income
Profit for the year - - 23,478 - 23,478
Other comprehensive expense for the year - - - 8,070 8,070
Total comprehensive income - - 23,478 8,070 31,548
Transactions with owners
Issue of shares for a business combination 6 - - 4,649 4,655
Issue of shares for acquisition of IP 15 11,779 - - 11,794
Issue of shares to satisfy share options 10 - - - 10
Contributions of equity 110 76,263 - - 76,373
Share based compensation - - 444 - 444
Total transactions with owners 141 88,042 444 4,649 93,276
Balance at 1,456 132,126 100,785 18,093 252,460
31 December 2022 (audited)
Adjustment - 4,649 - (4,649) -
Comprehensive income
Loss for the year - - (3,745) - (3,745)
Other comprehensive expense for the year - - (3,209) (3,209)
Total comprehensive income - - (3,745) (3,209) (6,954)
Transactions with owners
Issue of shares for a business combination 2 797 - - 799
Share based compensation - - 474 - 474
Total transactions with owners 2 797 474 - 1,273
Balance at 1,458 137,572 97,514 10,235 246,779
31 December 2023 (unaudited)
Certain comparative balances included within the consolidated statement of
changes in equity have been reallocated as disclosed in note 2.
Team17 Group plc
Unaudited Consolidated Statement of Cash Flows
Unaudited Audited
Year ended Year ended
31 December 31 December 2022
2023
Note £'000 £'000
Operating activities
(Loss)/Profit before tax (1,080) 28,665
Adjustments for:
Amortisation of intangible assets 8 26,433 19,593
Impairment of intangible assets 8 32,000 -
Depreciation of property, plant and equipment 692 625
Depreciation of right-of-use assets 563 461
Loss on disposal of property, plant and equipment 34 -
Fair value movement in contingent 11 (5,086) 884
consideration
Share-based compensation (474) 443
Share of loss/(profit) of associates 205 (347)
Finance income (344) (34)
Finance cost 1,261 3,983
(Increase) in trade and other receivables (394) (1,892)
(Decrease)/Increase in provisions (27) 31
(Decrease)/Increase in trade and other payables (3,301) 4,510
Increase/(Decrease) in inventories 239 (735)
Cash generated from operations 50,721 56,187
Payments for contingent consideration on business acquisitions
(4,189) -
Income taxes paid (5,148) (6,761)
Net cash inflow from operating activities 41,384 49,426
Cash flow from investing activities
Acquisition of astragon (net of cash acquired) - (65,024)
Acquisition of the Label (net of cash acquired) - (12,134)
Acquisition of Independent Arts Software (net of cash acquired) 9 (1,792) -
Payment for contingent consideration on business acquisitions 11 (6,886) (5,236)
Purchase of IP 11 (7,500) (18,750)
Purchase of other intangibles 8 (900) -
Purchase of property, plant and equipment (477) (723)
Payments for capitalised development costs 8 (32,184) (26,110)
Proceeds from sale of property, plant and equipment 35 -
Interest received 299 34
Net cash from investing activities (49,405) (127,943)
Cash flow from financing activities
Proceeds from issue of shares - 76,397
Interest paid (89) (131)
Principal elements of lease payments (546) (417)
Repayment of bank loans - (2,136)
Net cash from financing activities (635) 73,713
Net decrease in cash and cash equivalents (8,656) (4,804)
Cash and cash equivalents at beginning of period 50,828 55,302
Effects of exchange rates on cash and cash equivalents 652 330
Cash and cash equivalents at end of period 10 42,824 50,828
Notes to the Unaudited Consolidated Financial Statements
1. Nature of operations and general information
The principal activity of Team17 Group plc and its subsidiaries (the Group) is
the development and publishing of independent ("Indie') premium video games
and development of educational entertainment apps for children and a leading
working simulation games developer and publisher.
2. Basis of preparation
The preliminary results for the year ended 31 December 2023 are unaudited. The
financial information set out in this announcement does not constitute the
Group's financial statements for the year ended 31 December 2023 as defined by
Section 434 of the Companies Act. This financial information has been prepared
in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006. It has been prepared on the historical
cost basis, except for those items which are measured at fair value.
This financial information should be read in conjunction with the financial
statements of Team17 Group plc for the year ended 31 December 2022 (the "Prior
year financial statements"), which are available from the Registrar of
Companies. The Prior year financial statements which were prepared in
accordance with UK adopted international accounting standards (UK IFRS) and
the applicable legal requirements of the Companies Act 2006. The auditors,
PricewaterhouseCoopers LLP, reported on those accounts and their report was
unqualified, did not contain an emphasis of matter paragraph and did not
contain any statement under Section 498 (2) or (3) of the Companies Act 2006.
The Group's financial statements for the year ended 31 December 2023 will be
finalised on the basis of the financial information presented by the Directors
in these preliminary results and will be delivered to the Registrar of
Companies following the Annual General Meeting of Team17 Group plc.
Reclassification of comparatives
The Group previously presented merger reserve and currency translation reserve
separately in the Consolidated Statement of Financial Position and
Consolidated Statement of Changes in Equity. Management believes it to be more
relevant to amalgamate these reserves into "other reserves". Prior year
comparatives as at 31 December 2022 have been restated to conform with current
year presentation.
Accounting policies
The Group's principal accounting policies used in preparing this information
are as stated on pages 55 to 63 of the prior year financial statements. There
have been no changes to accounting policies implemented since the date of the
prior year financial statement except as disclosed below:
Revenue recognition and restatement
The Group is constantly reviewing revenue contracts to assess whether the
Group is acting as an agent or a principal. As part of this review, it has
been determined that the Group acts as a principal in contracts generating
digital sales through the Apple and Google app stores. Revenue from these
contracts should be recognised gross of platform fees with the corresponding
platform fees being included in cost of sales to better reflect the substance
of the transaction whereas historically revenue was recognised net of platform
fees. This restatement has no impact on profits in either the current or prior
year. For consistency, the revenue balances for the year ending 31 December
2022 have been restated increasing revenue by £4,838,000 with a corresponding
increase in cost of sales. There are no further changes to the revenue
recognition policies in the year.
Going Concern
Management has produced a Group forecast that has also been sensitised to
reflect a severe but plausible downside scenario, which has been reviewed by
the Directors. This demonstrates the Group is forecast to generate profits and
cash in the year ending 31 December 2024 and beyond and that the Group has
sufficient cash reserves to enable the Group to meet its obligations as they
fall due for a period of at least 12 months from the release of these results.
As such, the Directors are satisfied that the Group has adequate resources to
continue to operate for the foreseeable future. For this reason, they continue
to adopt the going concern basis for preparing these results.
3. Segmental information
The Group has three different operating segments within the business which are
as follows:
● Games Label - Developing and publishing video
games for the digital and physical market
● Simulation - Developing and publishing simulation
games for the digital and physical market
● Edutainment - Developing educational entertainment
apps for children
The chief operating decision maker ("CODM") of the Group is considered to be
the Group CEO and CFO, the group executive directors. The CODM reviews the
Group's internal reporting in order to assess performance and allocate
resources. The CODM determines the operating segments based on these reports
and on the internal reporting structure.
The CODM considered the aggregation criteria set out within IFRS 8 "Operating
Segments" where two or more operating segments can be combined for reporting
purposes so long as aggregation provides financial statement users with
information to evaluate the business and the environment in which it operates.
After assessing this criteria, the CODM deems it appropriate for all three
operating segments to be aggregated and reported as a single segment. Each
segment develops and publishes games and apps using own and third-party IP
through similar distribution methods with similar margins in the same
regulatory environments. Therefore, all figures reported in the annual report
are reported as a single aggregated reporting segment.
Non-current assets are located in the following locations:
Unaudited Audited
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
UK 101,690 106,535
EU 108,792 105,588
Rest of World 4,989 27,508
215,471 239,631
4. Revenue
All revenue was generated by the sale of goods.
Whilst the CODM considers there to be only one reportable segment, the
Company's portfolio of games is split between first-party IP (those based on
IP owned by the Group) and third-party IP incurring royalties. Therefore, to
aid the readers understanding of our results, the split of revenue from these
two categories is shown below:
Unaudited Audited
Year ended Year ended
31 December 2023 31 December 2022
(restated)
£'000 £'000
Internal IP 55,854 56,484
Third Party IP 103,271 85,798
159,125 142,282
The Group is constantly reviewing contracts in line with the significant
estimates and judgements as set out in note 2. As part of this review, it has
been determined that the Group acts as a principal for digital sales through
the Apple and Google app stores. Revenue from these contracts should be
recognised gross of platform fees with the corresponding platform fees being
included in cost of sales to better reflect the substance of the transaction.
Historically revenue was recognised net of platform fees. This restatement has
no impact on profits in either the current or prior year. For consistency, the
revenue balances for the year ending 31 December 2022 have been restated
increasing revenue by £4,838,000 with a corresponding increase in cost of
sales.
The Group does not provide any information on the geographical location of
sales as the majority of revenue is through third-party distribution platforms
which are responsible for the sales data of consumers.
All committed revenue contracts in progress at the 31 December 2023 are
expected to be completed and recognised in revenue within one year or less. As
permitted under IFRS 15, the transaction price allocated to these unsatisfied
contracts is not disclosed. All brought forward accrued income and deferred
income has been recognised or released during the year.
The following customers each contributed over 10% of the total revenue in FY
2023:
Unaudited Audited
Year ended Year ended
31 December 2023 31 December 2022
(restated)
£'000 £'000
Steam 45,066 38,310
Microsoft 17,679 13,993
Sony 28,952 21,104
Nintendo 17,344 16,039
Apple 19,980 15,667
129,021 105,113
5. Operating profit
Unaudited Audited
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
The following items are charged/(credited) in operating profit:
Cost of sales
Amortisation of development costs 12,674 9,277
Impairment of development costs 11,121 -
Redundancy costs 1,010 -
Administrative expenses
Amortisation of intangible assets (excluding development costs) 13,759 10,316
Impairment of goodwill 20,879 -
Depreciation of property, plant and equipment 692 625
Depreciation of right-of-use assets 563 461
Redundancy costs 199 -
Acquisition fees 44 863
Fair value adjustment on contingent consideration (5,086) 884
6. Taxation
Unaudited Audited
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Current tax:
Current year tax 6,756 7,284
Video Games Tax Relief (1,067) (455)
Research & Development Relief - (75)
Adjustments in respect of prior periods:
Video Games Tax Relief (589) (453)
Other 564 (127)
Deferred tax:
Origination and reversal of temporary differences (2,999) (987)
Total tax charge 2,665 5,187
Unaudited Audited
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Reconciliation of total tax charge:
(Loss)/Profit before tax (1,080) 28,665
Taxation using the UK Corporation Tax rate of 23.5% (2022: 19%) (254) 5,446
Effects of:
Expenses not deductible for tax purposes 3,964 164
R&D Relief - (75)
Video Games Tax Relief (1,067) (455)
Adjustments in respect of prior periods (25) (580)
Change in tax rate (192) (372)
Overseas tax on profits 239 1,059
Total tax charge 2,665 5,187
Deferred taxes at the balance sheet date have been measured using the enacted
tax rates of between 12.5% and 30% (2022: 12.5% and 30%).
In the Spring Budget 2021, the Government announced that from 1 April 2023 the
corporation tax rate would increase to 25%. This was substantively enacted on
24 May 2021 as part of Finance Bill 2021. During the year a hybrid rate of
23.5% has been used representing 3 months at the previous tax rate of 19% and
9 months at the new rate of 25%.
7. Earnings per share
The calculation of the basic earnings per share is based on the (loss) /
profit attributable to the shareholders of Team17 Group plc divided by the
weighted average number of shares in issue. The weighted average number of
shares takes into account treasury shares held by the Team17 Employee Benefit
Trust. The diluted earnings per share uses the same calculation however the
number of shares in issue are adjusted to include shares considered to be
dilutive under the treasury stock method. An option is considered to be
dilutive when the total proceeds per option is less than the average share
price for the period.
Unaudited Audited
Year ended Year ended
31 December 31 December
2023 2022
Profit attributable to shareholders £'000 (3,745) 23,478
Weighted average number of shares 143,809,466 142,644,403
Weighted average diluted number of shares 144,005,551 143,247,940
Basic earnings per share (pence) (2.6) 16.5
Diluted earnings per share (pence) (2.6) 16.4
8. Intangible assets
Customer and developer relationships
Development costs Acquired Apps £'000 Other intangibles
£'000 Brands £'000 Goodwill £'000 Total
£'000 £'000 £'000
Cost
At 1 January 2022 29,597 34,738 6,228 - 41,449 107 112,119
Additions 26,032 43,773 - - 11 69,816
Amounts arising on acquisitions
- 2,034 21,716 4,720 65,964 - 94,434
Translations on foreign operations
303 138 1,410 560 6,011 6 8,428
Disposals (440) - - - - - (440)
At 31 December 2022 55,492 80,683 29,354 5,280 113,424 124 284,357
Additions 32,184 - - - - 900 33,084
Adjustments - - 8,269 - (5,561) - 2,708
Amounts arising on acquisitions
- - - - 2,103 - 2,103
Translation on foreign operations
(195) (66) (405) (261) (2,843) (4) (3,774)
Disposals (3,401) - - - - - (3,401)
At 31 December 2023 84,080 80,617 37,218 5,019 107,123 1,020 315,077
Amortisation
At 1 January 2022 19,749 10,749 311 - - 2 30,811
Charge for the year 9,277 6,115 3,669 516 - 16 19,593
Translation on foreign operations
76 9 164 12 23 284
Disposals (440) - - - - - (440)
At 31 December 2022 28,662 16,873 4,144 528 - 41 50,248
Charge for the year 12,674 6,118 6,365 512 - 764 26,433
Impairment 11,121 - - - 20,879 - 32,000
Translation on foreign operations
(48) (6) (100) (37) - (4) (195)
Disposals (3,401) - - - - - (3,401)
At 31 December 2023 49,008 22,985 10,409 1,003 20,879 801 105,085
Net carrying amount
At 31 December 2023 35,072 57,632 26,809 4,016 86,244 219 209,992
At 31 December 2022 26,830 63,810 25,210 4,752 113,424 83 234,109
Adjustments
During the year the valuation of brands related to the acquisition of astragon
Entertainment GmbH was reassessed and an adjustment was identified in the
valuation model after the permitted IFRS 3 measurement period for determining
fair value. This reassessment increased the valuation of the acquired apps
asset by £8,269,000, whilst decreasing the value of Goodwill by £5,561,000
and increasing the related deferred tax liability by £2,708,000. These
reclassification adjustments have been made in the current year accordingly.
Development costs
The Group capitalises the costs of developing new games for release to the
market. The balance consists of internal salary costs, advances payable to
external developers under development agreements and other external payments.
Amortisation is calculated over the assets useful life of between 2 to 5
years. The assets are tested for impairment annually or more frequently if
there are indicators of impairment.
The recoverable amount of development cost assets at 31 December 2023 are
determined from the value in use. In arriving at a value in use, management
has used a 2 to 3 year cashflow forecast in line with the expected useful life
of the assets. These cashflows are not discounted due to the short term nature
of the assets. Through this process, impairment of £11,121,000 was recognised
on development cost assets. This impairment is due to the titles not meeting
their full market potential in a congested marketplace.
Key assumptions used for value-in use calculations
Management considers the projected future cash inflows to be the key
assumption in calculating the value in use of each asset. Budgeting is done on
a game by game basis, with game revenues varying based on management's best
estimates.
Impact of possible changes in key assumptions
In assessing the carrying value of Development costs, management performed
sensitivity analysis on each of the key assumptions. In assessing the
sensitivity of projected future cash inflows the effects of a decrease in
revenue of 10% were modelled and this would cause an additional impairment of
£604,000.
Brands
These reflect the value of brands acquired either through direct purchases of
IP recognised under IAS 38 "Intangible Assets" or brands recognised under IFRS
3 "Business Combinations". Amortisation on brands are calculated on a
straight-line basis over the assets estimated useful life of between 10 and 15
years.
Acquired games and apps
These represent the fair value of games and apps arising at acquisition. The
assets are tested for impairment annually or more frequently if there are
indicators of impairment. Amortisation is calculated over the estimated useful
life using the following policy:
Acquired
Apps
7 to 10 years straight-line
Indicators of impairment
The financial performance of games and apps were assessed against the
forecasts produced at the point of acquisition for indicators of impairment.
Where an impairment trigger was identified due to under performance, a 10 year
cashflow forecast was produced to measure the value in use. No impairment was
identified through this process.
Key assumptions used for value-in use calculations
Management consider the pre-tax discount rate to be a key assumption in the
calculation of value in use and the rate used in the model is 17.5%. We
reviewed sensitivities to this and any increase of the discount rate to over
18.4% would reduce the headroom in the value in use model over the carrying
value to £Nil.
Projected future cash inflows (revenue) from unreleased titles are also
considered to be a key assumption. Budgeting is done on a game by game basis,
with game revenues varying based on management's best estimates. A reduction
of 3% to future unreleased sequel revenue in the model would reduce the
headroom over the carrying value to £Nil.
Customer and developer relationships
This is the fair value of relationships held with customers and developers
acquired through business combinations. Group capitalises the costs of
developing new games for release to the market. Amortisation is calculated
over the assets estimated useful life of 10 years. The assets are tested for
impairment annually or more frequently if there are indicators of impairment.
Customer and developer relationships 10 years
straight-line
Goodwill
The Group tests for impairment annually, or more frequently if there are
indicators that goodwill might be impaired. There are 4 cash-generating units
("CGUs") in the Group which are as follows:
· Team 17 Digital (Indie Games)
· StoryToys (Edutainment)
· Astragon (Simulation)
· Team17 (USA) (Mobile licence)
The carrying value of Goodwill allocated to those CGU's is split as follows:
Team 17 Digital StoryToys (Edutainment) astragon (Simulation)
£'000 £'000 £'000 Team17 (USA) Total
£'000 £'000
At 1 January 2022 22,379 19,070 - - 41,449
Acquisitions - - 45,410 20,554 65,964
Foreign exchange - 1,054 2,519 2,438 6,011
At 31 December 2022 22,379 20,124 47,929 22,992 113,424
Adjustments - - (5,561) - (5,561)
Acquisitions - - 2,103 - 2,103
Foreign exchange - (450) (1,254) (1,139) (2,843)
Impairment - - - (20,879) (20,879)
At 31 December 2023 22,379 19,674 43,217 974 86,244
The recoverable amount of each of the cash-generating units ("CGUs") at 31
December 2023 is determined from the value in use which is higher than the
fair value less costs of disposal. In arriving at a value in use management
has used a discounted 5-year bottom up forecast before applying a long-term
growth assumption. The discount rates and terminal growth used in the
impairment assessment of each CGU is as follows:
2023 2022
Pre-Tax Discount Rate Used Terminal Growth Rate Used Pre-Tax Discount Rate Used Terminal Growth Rate Used
CGU
Team 17 Digital 12.9% 2.0% 12.5% 2.0%
StoryToys (Edutainment) 21.2% 2.0% 19.9% 2.0%
astragon (Simulation) 17.5% 2.0% 15.9% 2.0%
Team17 USA 29.5% 2.5% 27.8% 3.0%
Key assumptions used for value-in use calculations
When reviewing for impairment of goodwill in CGU's, management prepare
cashflow forecasts to estimate the value in use. Management consider the
following to be the key assumptions in the cashflow:
· Pre-Tax discount rate
· Terminal growth rate
During the year the pre-tax discount rate has been adjusted to take into
account the Group's size risk premium which is based on the market cap for the
Group.
Projected future cash inflows (revenue) are also considered to be a key
assumption. Budgeting is done on a game by game basis, with game revenues
varying based on management's best estimates.
Impact of possible changes in key assumptions
In assessing the carrying value of Goodwill management performed sensitivity
analysis on each of the key assumptions. The result of the sensitivity tests
on each CGU are detailed below. In assessing the sensitivity of projected
future cash inflows the sensitivity test was split between new release revenue
and back catalogue revenue. New release revenue is deemed to be inherently
riskier in nature and as such a higher level of sensitivity was applied to new
release cash inflows than to back catalogue cash inflows.
The recoverable amount of each CGU would equal its carrying amount if the key
assumptions were to change as follows:
2023 2022
Decrease of Terminal Growth Rate Decrease of Terminal Growth Rate
Reduction in New Release Revenue Reduction in Back Catalogue Revenue Increase in Discount Rate Reduction in New Release Revenue Reduction in Back Catalogue Revenue Increase in Discount Rate
CGU
Team 17 Digital >100%* 36% 14.4% 143% >100%* >100%* 12.1% 42.7%
StoryToys (Edutainment)
24% 23% 4.6% 10.4% 33% 15% 6.7% 14%
astragon (Simulation)
9% 32% 1.9% 3.3% >100%* 44% 4.2% 6.8%
Team17 USA See impairment section below 5% 10% 0.5% 0.9%
*In the case of a 100% reduction in new release revenue the recoverable amount
of the CGU would still exceed its carrying value.
Impairment of Team17 (USA) Goodwill
The impairment review of Team17 (USA) identified impairment of £20,879,000.
Team17 (USA) is focussed on developing games for the mobile subscription
market. During the last two years the mobile subscription market has seen
increased competition reducing the ongoing performance income received for
launched games as well as reduced third-party new games being secured for
development. The below table shows the increase in impairment from changes to
the key estimates disclosed above:
Change in key estimate Resulting increase in impairment £'000
Reduction in new release revenue 10% 568
Reduction in back catalogue revenue 5% 109
Increase in discount rate 1% 259
Decrease of terminal growth rate 1% 135
Other intangibles
These are made up of capitalised software and are amortised under the
following policies:
Capitalised software 2
years straight-line
9. Business combinations
Acquisition of Independent Arts Software GmbH
On 27 April 2023 astragon Entertainment GmbH acquired 100% of the share
capital of Independent Arts Software GmbH for a maximum payment of £3.1m
(€3.5m) subject to the seller and Company meeting certain requirements. The
initial payment for the acquisition was £1.8m (€2.0m) in cash. A further
payment of up to £1.3m (€1.5m) is payable in cash based on the seller
meeting certain requirements following completion of the acquisition. There
was no minimum due on the contingent payment. The results of the business have
been included in the Consolidated Statement of Profit or Loss from the date of
acquisition. In the period from 1 January 2023 to the date of acquisition, the
results of the business were wholly immaterial and therefore not disclosed.
Independent Arts Software GmbH is a talented video game developer based in
Germany. The acquisition increases astragon's development capabilities in the
simulation space. Independent Arts Software GmbH is a talented video game
developer based in Germany. The acquisition increases astragon's development
capabilities in the simulation space. The total consideration was made up of
£1,792,000 of initial consideration and £964,000 of contingent
consideration. Details of the movement in contingent consideration can be
found in note 11.
Deferred and contingent consideration has been recognised at present value
which has been calculated using a discount rate of 14.5%. Details of the
purchase consideration at initial recognition are as follows:
Contingent consideration consists of the payments to the sellers included at
fair value and payable based on them and the Company meeting certain
requirements.
Contingent consideration requirements - Management have assessed the
likelihood of these requirements being met. At acquisition, management
assessed the fair value of the contingent consideration using a risk weighted
model. This will be reassessed at each reporting date and the movement in the
fair value of the consideration amount recognised in the Consolidated
Statement of Profit or Loss.
The assets and liabilities recognised as a result of the acquisition are as
follows:
Book value Fair value adjustment Fair value acquired
£'000 £'000 £'000
Property, plant and equipment 29 - 29
Right of use asset - 135 135
Trade and other receivables 783 - 783
Trade and other payables (207) 40 (167)
Lease liabilities - (127) (127)
Net identifiable assets acquired 605 48 653
Add: Goodwill 2,103
Total consideration 2,756
The goodwill is attributable to Independent Arts Software's talented
development team. It has been allocated to the Simulation segment of the
business led by astragon Entertainment GmbH which is the development and
publishing of simulation games for the digital and physical market. None of
the goodwill is expected to be deductible for tax purposes.
Acquisition fees
Total acquisition fees for the year ended 31 December 2023 of £44,000 (2022:
£863,000) are included in administrative expenses in the Consolidated
Statement of Profit or Loss.
Results from acquisitions
Financial performance of Independent Arts Software GmbH has not been disclosed
as it was wholly immaterial to the results for the year ended 31 December
2023. The business was acquired in order to provide development support to the
astragon (Simulation) CGU and received no significant revenues from outside of
Group companies.
10. Cash and cash equivalents
Unaudited Audited
31 December 2023 31 December 2022
£'000 £'000
Cash at bank and in hand 39,923 47,875
Cash equivalents 2,901 2,953
42,824 50,828
Included within the cash equivalents balance above is £2,901,000 (2022:
£2,953,000) held by the Team17 Employment Benefit Trust. This cash is not
readily available for use by the Group to meet its everyday operating costs
but can be spent for the benefit of the employees and as such is considered
restricted cash.
11. Contingent consideration
31 December 2023 31 December 2022
£'000 £'000
Amounts falling due in under one year 4,944 17,965
Amounts falling due in over one year - 9,369
4,944 27,334
Included within trade and other payables is £4,944,000 (FY 2022:
£17,965,000) of contingent consideration. Contingent consideration is broken
down as follows:
Business acquisitions £'000 Total
IP Purchase £'000
£'000
At 1 January 2022 5,287 - 5,287
On acquisition 14,379 13,228 27,607
Fair value adjustment 884 - 884
Interest 1,240 1,080 2,320
Foreign exchange 1,234 - 1,234
Payment (9,998) - (9,998)
At 31 December 2022 13,026 14,308 27,334
On acquisition 964 - 964
Fair value adjustment (2,614) (2,472) (5,086)
Interest 518 608 1,126
Foreign exchange (332) - (332)
Payment - Cash (classified as investing activities in the statement of cash (6,886) (7,500) (14,386)
flows)
Payment - Cash (classified as operating activities in the statement of cash (4,189) - (4,189)
flows)
Payment - Shares (487) - (487)
At 31 December 2023 - 4,944 4,944
Contingent consideration on business acquisitions includes the following:
astragon Entertainment GmbH Total
£'000 Independent Arts Software GmbH £'000
StoryToys Limited The Label Inc £'000
£'000 £'000
At 1 January 2022 5,287 - - - 5,287
On acquisition - 7,848 6,531 - 14,379
Fair value adjustment - 4,466 (3,582) - 884
Interest - 560 680 - 1,240
Foreign exchange 193 250 791 - 1,234
Payment (5,480) (4,518) - - (9,998)
At 31 December 2022 - 8,606 4,420 - 13,026
On acquisition - - - 964 964
Fair value adjustment - - (2,601) (13) (2,614)
Interest - 257 261 - 518
Foreign exchange - (184) (131) (17) (332)
Payment - Cash - (8,679) (1,462) (934) (11,075)
Payment-- Shares - - (487) - (487)
At 31 December 2023 - - - - -
The maximum value of outstanding contingent consideration at the year end was
£16.7 million (FY 2022: £48.8 million). A fair value adjustment was made
during the year reflecting the position of expected earnout payments at the
year end and included within administrative expenses in the statement of
profit or loss. The value of the earnout was determined based on the
performance criteria included in the underlying contract.
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