Half Yearly Report

RNS Number : 8470Z

Frontier Developments PLC

12 February 2014

 



12 February 2014

Frontier Developments plc

Half yearly results

Frontier Developments plc (AIM: FDEV; "Frontier" or the "Group"), a leading independent developer of video games with studios in Cambridge, UK and Halifax, Canada, has published its results for the six months to 30 November 2013.

Financial highlights

·      Investment in self published titles and technology up 114%

·      Revenue down only 15% to £5.05m as strategic focus changes during the transitional period

·      EBITDA loss of £0.35m  (2012: £1.63m profit)

·      Adjusted EBITDA of £0.04m (2012: £1.93m)

·      Earnings per share of (5.3p) (2012: 3.7p)

·      Cash balance at £11.05m as of 30 November 2013

Operational highlights

·      Elite:Dangerous  Backers - to date over £2.31m raised from 43,537 backers

·      Key appointments - Jo Cooke, Head of Marketing 

·      The proportion the Group's staff working on self published and technology projects rose to 34% from 18%. The Group is investing in its own Technology and content as follows:

Man Months for the six months ended November	2013	2012	%
Self Published	373	157	138%
Technology	128	77	66%
Total	501	234	114%

Delivering on strategy

·      Elite: Dangerous Alpha successfully launched December 2013

·      Support for the Oculus Rift virtual reality headset

·      Coaster Crazy Deluxe released on WiiU, iOS and Kindle

·      Zoo Tycoon released as an Xbox One launch title

·      IPO and pre IPO raised £5.4m net

David Braben, Chief Executive of Frontier Developments, said:

"These are hugely exciting times for Frontier. We have entered an important investment phase of our business as we move to deliver high growth in the medium to long term through refocusing our business from a low margin cost plus business model to one of a significant revenue share.

"The self-funded investment we are making in Elite: Dangerous  will continue to bear fruit over the next six months as we make further releases such as the recent Alpha 2.0 multiplayer build and beyond, in parallel with developing new projects with strategic publisher partners."

Enquiries:

Frontier Developments	[phone]
David Braben, CEO
David Walsh, COO
Neil Armstrong, CFO
Canaccord Genuity	[phone]
Simon Bridges/Cameron Duncan
Instinctif Partners	[phone]
Kay Larsen/Adrian Duffield

Overview:

Frontier Developments is a leading developer of video games with studios in Cambridge, UK and Halifax, Canada. Frontier has a proven track record of software technology development and innovation spanning several decades of rapid technological change.  The Group has leveraged its technology to develop innovative video games across a wide variety of different game genres and platforms, and has established relationships with globally renowned partners.

Frontier's proprietary Cobra software technology supports multi-core CPU and GPU architectures of PC, console, tablet and smartphone with a modular, high performance system offering of state of the art efficiency and visual fidelity that is applicable across a wide range of game genres.  

The year to 31 May 2013 and the current financial year are transitional years for Frontier, as the Group continues to evolve from being primarily a developer of video games for major external publishers into a business which develops and licenses technology to support games for major external publishers, other developers and Frontier's own self-published game titles.

Elite: Dangerous will be sold directly to customers through Frontier's own e-commerce platform and through third parties.

Frontier expects Elite: Dangerous revenues to grow gradually in a similar way to other PC online games, but also that it will hit a quality resonance at which point revenues would increase significantly, as it did for those other titles.

The Group is pleased to report significant progress in executing the transition of the business to its next stage.

The key pillars of the Group's strategy are:

·      Focus strongly on the development and launch of Elite: Dangerous

·      Invest significant resources in the development of the Group's technology for third party use

·      Maintain publisher funded project work.

To fund this transition, Frontier completed a £2.71m pre-IPO fundraising in May and June, and followed this up with the IPO in July, raising a further £4.03m from institutional investors. In addition, the Group put in place a £3.00m revolving credit facility with Barclays, which has not been drawn down as at 30 November 2013. These three tranches provided the Group with a total of £9.74m to execute its strategy. In August 2013 the 'Atlantic Canada Opportunities Agency' approved an interest free loan of up to CD$0.50m, which was not drawn upon as at 30 November 2013.

 Business development

Elite: Dangerous

Frontier has continued to generate substantial interest in the Elite: Dangerous project, with the game being cited as one of the most anticipated titles of 2014 by several media outlets.

In December 2013 the Group launched the first phase of the Alpha test of Elite: Dangerous.  This tested out the flight controls for the game's spaceships in different combat scenarios, and included support for the Oculus Rift virtual reality headset and other 3D display technologies. The alpha version of Elite: Dangerous is accessed via Frontier's own retail channel, the capabilities of which continue to be developed.

At the time of writing Frontier has received backing from 43,537 people generating over £2.31m of pledges and pre orders.

Further Cobra technology developments

After further investment in Frontier's in-house Cobra technology the Group can now take full advantage of 64 bit multi-core processor systems as used in key new hardware target platforms such as the Xbox One, PlayStation 4, iPhone 5S and iPad Air, as well as having enhanced the Group's networking technology.  Both of these aspects of Cobra were used in Frontier's successful development and release of Zoo Tycoon on Xbox One in November 2013.

Coaster Crazy

The Group completed development and released a new version of its game, Coaster Crazy Deluxe on both iOS and Nintendo WiiU.  The game was based on the Group's cross-platform Cobra technology including a shared cloud-based server backend.  This allows content to be shared between the different gaming devices.

Zoo Tycoon

The Group completed development and released Zoo Tycoon with Microsoft Studios as publisher.  This was an XboxOne launch title, and was also developed and released simultaneously on Xbox360. This development allowed Frontier to make an early entry into the new console generation released around 'Holiday 2013', and illustrated the high quality and efficiency that can be achieved using the Group's Cobra technology.

Key industry partnerships

As well as continuing a close working relationship with Microsoft with the release of Zoo Tycoon Frontier also announced an extended relationship with Atari, whereby the Group now has non-exclusive rights to distribute Atari PC games to accelerate the e-commerce strategy, as well as the publishing rights to Frontier's  RollerCoasterTycoon 3 game on new platforms.

Operating and financial review

Group trading performance

The Group is using the investment secured in 2013 to facilitate a transition phase taking it to the full launch of Elite: Dangerous and associated technology development and licensing.  As expected, revenues have seen a temporary decline and costs are higher, predominantly as a result of the investment required to deliver the Company's strategy but in part due to the costs associated with the Company's IPO.

Looking at the financial performance in the first six months of the financial year to 31 May 2014, there was an underlying decrease in revenue of 20% and adjusted EBITDA was £0.04m, £1.91m lower than the comparative six months.  The Group reported an operating loss of £1.56m set against an operating profit of £0.92m in the prior comparative period.

Revenue

Frontier recorded a 20% decline in underlying revenue after excluding sub contract costs recharged to customers at nil margin, reconciled as follows:

Underlying revenue £'000 For the six months ended November	2013	2012	%
Headline revenue	5,047	5,968	(15%)
Sub contract pass through	(296)	(10)
Underlying revenue	4,751	5,958	(20)%

The timings of Game releases impacted on Self Published revenues. The launch of Coaster Crazy Deluxe towards the end of November and only small recognition of Elite: Dangerous revenues meant that self published revenues dipped by 36% in the six month period. The first release of the Elite: Dangerous Alpha in December is expected to reverse this trend in the second half of the financial year as the Group recognises a portion of the deferred revenue.  

Publishing revenue was lower, as proportionally more work was undertaken on the self-published Elite: Dangerous  reducing the Group's capacity to earn more income from publishing work. Royalty income improved with Atari Interactive Inc. (Atari), the distributor of RollerCoasterTycoon 3 on PC and Mac computes, coming out of Chapter 11 in December 2013.

Revenue mix £'000 For the six months ended November	2013	2012	%
Publishing	4,619	5,570	(17%)
Self published	137	215	(36%)
Royalties	291	183	59%
Headline Revenue	5,047	5,968	(15%)

Intangible assets and research & development expenditure

Investment in the Group's own IP capitalised in the period was up 95% at £1.63m reflecting Frontier's commitment to a strategic software development programme in respect of Cobra technology and self published titles.

Frontier expensed £0.13m of costs within software development projects. Frontier took an impairment charge of £0.28m on the Coaster Crazy franchise. The Group gained valuable experience and proved its technology with the game, but the monetization level of the free to play game has not been as quick and successful as had been expected and subsequent versions were released later than planned.

Gross margin and contribution

The overall gross margin fell to 5% from 37%. The main causes of this were a lower margin on the published contracts partly as a result of pass through costs, and a continuing cautious approach on capitalisation and amortisation for the Group's self published games.

Profitability and adjusted EBITDA

The Board monitors performance on an adjusted EBITDA basis. The adjusting items were primarily Share Based Compensation and funding costs associated with the IPO.

There was an operating loss of £1.56m compared to an operating profit of £0.92m. EBITDA was also negative at (£0.35m) against a comparative of £1.63m.

Adjusted EBITDA was £0.04m against £1.93m, the reconciliation is as follows:

For the six months ended November	2013	2012	%
	£'000	£'000
Operating result before interest and tax	(1,557)	920	(269%)
Depreciation	104	69
Amortisation and impairment	1,099	645
EBITDA	(354)	1,634	(122%)
Share based compensation	178	170
Funding costs	195	96
Dilapidations provision	18	18
Canada set up fees	-	10
EBITDA adjusted	37	1,928	(98)%

Interest and tax

Net interest payable in the period was £0.01m. Interest payable was incurred in respect to the Convertible Loan Notes in issue of £0.02m. Interest receivable from the Group's cash resources was £0.01m and remains at low levels due to the current interest rate environment worldwide.

The tax charge in the period comprised of a deferred tax liability of £0.01m for overseas tax due to the timing difference over which local Digital media tax credits operate, offset by an over provision in the prior year. The UK trading company continues to hold unused tax losses of nearly £4.00m to set against future taxable profits generated in the UK.

Earnings per share and dividend

The basic Earnings per share reduced from 3.7 pence per share to (5.3) pence based on a weighted average number of shares of 29.7m (2012: 24.8m).

The adjusted earnings per share dropped to (3.0) pence from 4.6 pence per share on an undiluted basis.

The Directors are not paying a dividend (2012: £nil).

Share issues

As part of a pre IPO raise, 131,580 shares were issued in June 2013 for £0.013m. A Convertible loan was issued granting shares at a discount of 15% to the IPO flotation price, the amount received was £1.57m.

Upon flotation Convertible loans valued at £2.71m were converted at £1.0795 into 2,509,504 shares. 3,169,292 of new shares were issued at £1.27, being gross proceeds of £4.03m

.

Employees converted 112,470 share options into ordinary shares during the period to November 2013 the exercise proceeds were £0.08m.  The Group did not grant any share options in the period.

Cash and cashflow

The Group generated £0.12m from continuing operations, invested £1.87m and raised from financing activities £5.78m net resulting in a net increase in cash of £3.89m to £11.05m at the period end.

Key Performance Indicators

In addition to the adjusted Revenue and EBITDA measures mentioned previously as a key indicator of growth and profitability, the Group is looking to invest in its own content to produce a balanced spread of income streams:

% of Revenue by Segment for the six months ending November	2013	2012
Publishing	91%	93%
Self published	3%	4%
Royalties & Other income	6%	3%
Total	100%	100%

The proportion the Group's staff working on self published and technology projects rose to 34% from 18%. The Group is investing in its own Technology and content as follows:

Man Months 6 months ending November	2013	2012	%
Self Published	373	157	138%
Technology	128	77	66%
Total	501	234	114%

Risk and uncertainties

The Board continuously monitors and assesses the key risks of the business. The key risks that could affect the Group's financial performance and their associated mitigating factors, have not significantly changed from those set out on pages 12 and 13 of the Group's Annual Report for 2013, a copy of which is available from the Frontier Developments website 

http://www.frontier.co.uk/docs/files/Annual_report_and_accounts_2013-Frontier_Developments_plc.pdf

Current trading and outlook

In the year ended 31 May 2014 the Group expects to further execute its plans to continue with publisher funded projects, focus strongly on the development and promotion of Elite: Dangerous, and continue to invest significant resources in the development of its technology, as it evolves to become a business which develops and licenses technology to support games for major external publishers, other developers and Frontier's own self-published game titles.

Consolidated Income Statement

		Unaudited 6 months ended		Audited 12 months to
	Notes	30/11/13 £'000	30/11/12 £'000	31/5/13 £'000
Revenue	7	5,047	5,968	12,072
Cost of sales		(4,798)	(3,770)	(8,375)
Gross profit		249	2,198	3,697
Administrative expenses		(1,806)	(1,278)	(2,645)
Operating (loss)/profit		(1,557)	920	1,052
Finance expense		(21)	-	-
Finance income		9	1	19
(Loss)/profit before tax		(1,569)	921	1,071
Income tax		-	-	(26)
(Loss)/profit for the period		(1,569)	921	1,045

All the activities of the Group are classified as continuing.

Earnings per share	8
Basic earnings per share		(5.3p)	3.7p	4.2
Diluted earnings per share		(5.3p)	3.6p	4.1

      Statement of Comprehensive Income

	Unaudited 6 months ended		Audited 12 months to
	30/11/13 £'000	30/11/12 £'000	31/5/13 £'000
(Loss)/Profit for the period	(1,569)	921	1,045
Items that will be reclassified to the profit and loss Exchange differences on translation of foreign operations	2	(5)	3
Total comprehensive income for the period attributable to the owners of the Group	(1,567)	916	1,048

The accompanying accounting policies and notes form part of this financial information

Consolidated Statement of Financial Position

		Unaudited		Audited
	Notes	30 Nov 2013 £'000	30 Nov 2012 £'000	31 May 2013 £'000
Non-current assets
Intangible assets	9	4,073	3,517	3,450
Property, plant and equipment		345	317	299
Total non-current assets		4,418	3,834	3,749
Current assets
Inventories		102	286	-
Trade and other receivables		1,313	1,972	2,082
Current tax assets		9	-	-
Cash and cash equivalents		11,045	3,803	7,155
Current assets		12,469	6,061	9,237
Total assets		16,887	9,895	12,986
Equity and liabilities
Equity
Share capital	10	156	13	127
Share premium account		8,483	1,961	1,847
Option reserve		775	422	643
Foreign exchange reserve		5	(5)	3
Retained earnings		4,252	5,626	5,775
Total equity		13,671	8,017	8,395
Liabilities
Current
Trade and other payables		1,405	1,709	3,060
Current tax liabilities		-	1	33
Deferred income		1,563	-	-
		2,968	1,710	3,093
Non-current
Provisions		205	168	187
Deferred income		-	-	1,283
Deferred tax		43	-	28
		248	168	1,498
Total liabilities		3,216	1,878	4,591
Total equity and liabilities		16,887	9,895	12,986

The accompanying accounting policies and notes form part of this financial information

Consolidated Statement of Cash Flows

		Unaudited 6 months ended		Audited 12 months to
		Nov 2013 £'000	Nov 2012 £'000	May 2013 £'000
Operating activities
(Loss) /profit after tax		(1,569)	921	1,045
Adjustments		1,287	886	2,198
Net changes in working capital		454	1,182	2,923
Taxes paid		(47)	-	(5)
Cash flow from operating activities		125	2,989	6,161
Investing Activities
Purchase of property, plant and equipment		(158)	(189)	(251)
Expenditure on intangible assets		(1,738)	(845)	(1,783)
Proceeds from disposal of other long-term financial assets		21	-	-
Interest received		9	1	19
Cash flow from investing activities		(1,866)	(1,033)	(2,015)
Financing activities
Proceeds from convertible loan notes		1,570	-	1,129
Interest paid		(22)	-	-
Proceeds from issue of share capital		4,233	168	168
Cash flow from financing activities		5,781	168	1,297
Net change in cash and cash equivalents from continuing operations		4,040	2,124	5,443
Cash and cash equivalents at beginning of period		7,155	1,686	1,686
Exchange differences on cash and cash equivalents		(150)	(7)	26
Cash and cash equivalents at end of period		11,045	3,803	7,155

The accompanying accounting policies and notes form part of this financial information

Consolidated Statement of Changes In Equity

	Share capital	Share premium account	Option reserve	Foreign exchange reserve	Retained earnings	Total Equity
	£'000	£'000	£'000	£'000	£'000	£'000
At 31 May 2012	12	1,794	263	-	4,694	6,763
Increase in equity in relation to options issued	-	-	416	-	-	416
Share based payment transfer	-	-	(36)	-	36	-
Issue of share capital	1	167	-	-	-	168
Re-denomination of share capital	114	(114)		-	-	-
Transactions with owners	115	53	380	-	36	584
Profit for the year	-	-	-	-	1,045	1,045
Other comprehensive income:
Exchange differences on translation of foreign operations	-	-	-	3	-	3
Total comprehensive income for the year	-	-	-	3	1,045	1,048
At 31 May 2013	127	1,847	643	3	5,775	8,395
At 1 June 2012	12	1,794	263	-	4,694	6,763
Increase in equity in relation to options issued	-	-	170	-	-	170
Share based payment transfer	-	-	(11)	-	11	-
Issue of share capital	1	167	-	-	-	168
Transactions with owners	1	167	159	-	11	338
Profit for the period	-	-	-	-	921	921
Other comprehensive income:
Exchange differences on translation of foreign operations	-	-	-	(5)	-	(5)
Total comprehensive income for the period	-	-	-	(5)	921	916
At 30 Nov 2012 - Unaudited	13	1,961	422	(5)	5,626	8,017
At 1 June 2013	127	1,847	643	3	5,775	8,395
Increase in equity in relation to options issued	-	-	178	-	-	178
Share based payment transfer	-	-	(46)	-	46	-
Issue of share capital	29	6,636	-	-	-	6,665
Transactions with owners	29	6,636	132	-	46	6,843
Loss for the period	-	-	-	-	(1,569)	(1,569)
Other comprehensive income: Exchange differences on translation of foreign operations	-	-	-	2	-	2
Total comprehensive income for the period	-	-	-	2	(1,569)	(1,567)
At 30 Nov 2013 - Unaudited	156	8,483	775	5	4,252	13,671

The accompanying accounting policies and notes form part of this financial information

Notes to the financial statements

1.    Financial Information

The financial information set out below of the Group and its subsidiary undertaking for the six months ended 30 November 2013 and 30 November 2012 has been prepared by the Directors of the Group on the basis set out in note 3.

2.    Corporate Information

Frontier Developments plc ("the Group") develops non-game applications and video games for the interactive entertainment sector. The Company is a public limited company and is incorporated and domiciled in the United Kingdom. The address of its registered office is 306 Science Park, Milton Road, Cambridge CB4 0WG.

The Group's operations are based in the UK and a subsidiary, Frontier Developments Inc, in Canada.

The condensed consolidated interim financial statements were approved by the Board of Directors for issue on 11 February 2014.

The condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 May 2013 were approved by the Board of Directors on 13 November 2013 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

The condensed consolidated interim financial statements have been reviewed, not audited.

3.    Basis of Preparation and Statement of Compliance

The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements of the group and are prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and the Companies Act 2006 applicable to companies reporting under IFRS.

Going concern basis

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, support the conclusion that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, a period of not less than twelve months from the date of this financial information. The Group therefore continues to adopt the going concern basis in preparing its financial statements.

4.    Accounting Policies

The accounting policies adopted in the preparation of the condensed consolidated interim financial statements are unchanged from those set out in the Group's consolidated financial statements for the year ended 31 May 2013. These policies have been consistently applied to all the periods presented.

The operations of the Group are not subject to significant seasonality.

5.    Significant Accounting Estimates and Key Judgements

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation and uncertainty were the same as those applied to the consolidated financial statements for the year ended 31 May 2013.

6.    Risks and uncertainties

An outline of the key risks and uncertainties of the Group was described in the 2013 financial statements, including strategic, execution and financial risks associated with the Group's transition as it seeks to diversify its business base. Risk is an inherent part of doing business and the strong cash position and interest in the Elite:Dangerous offering and new contracts leads the Directors to believe that the Group is well placed to manage business risks successfully.

7.       Segment Information

The Group identifies reportable operating segments based on internal management reporting that is regularly reviewed by the chief operating decision maker and reported to the board.  The chief operating decision maker is the Chief Executive Officer.

Management information is reported as a single operating segment being the design and production of computer software irrespective of platform or route to market. Resources are managed on the basis of the Group as a whole.

The Group's revenues from external customers are divided into the following geographical areas:

	Unaudited 6 months ended		Audited year ended
	30/11/13 £'000	30/11/12 £'000	31/5/13 £'000
United Kingdom (country of domicile)	1,228	22	113
United States of America	3,709	5,831	11,684
Rest of the World	110	115	275
	5,047	5,968	12,072

At November 2013 £67,086 (2012: £88,647) of non-current assets are based in Canada, with the remainder in the UK. At May 2013 £72,574 of non-current assets were based in Canada, with the remainder in the UK.

All revenue is categorised as either 'self published', 'publishing' royalties or other. The majority of the revenue is services provided, a small proportion, defined as other, is for goods provided.

	Unaudited 6 months ended		Audited year ended
	30/11/13 £'000	30/11/12 £'000	31/5/13 £'000
Publishing	4,619	5,570	11,355
Self published	137	215	511
Royalties	291	183	203
Other	-	-	3
	5,047	5,968	12,072

EBITDA before material exceptional items is a key performance indicator for the Group and is also used by the CEO and is calculated as follows:

	Unaudited 6 months ended		Audited year ended
	30/11/13 £'000	30/11/12 £'000	31/5/13 £'000
Operating (loss)/profit before interest and tax	(1,557)	920	1,052
Depreciation	104	69	151
Amortisation and impairment	1,099	645	1,650
EBITDA	(354)	1,634	2,853
Share based compensation	178	170	416
Funding costs	195	96	308
Dilapidation provision	18	18	37
Canada set up fees	-	10	10
EBITDA adjusted	37	1,928	3,624

8.       Earnings per Share

The calculation of the basic earnings per share is based on the profits attributable to the shareholders of Frontier Developments plc divided by the weighted average number of shares in issue during the period. Separate calculations have been performed to a profit taking out the adjusted items in note 7 Adjusted EBITDA computation.

	November 2013	November  2012	May 2013
(Loss)/Profit attributable to shareholders (£'000)	(1,569)	921	1,045
Weighted average number of shares	29,726,900	24,795,243	25,014,043
Basic earnings per share (pence)	(5.3)	3.7	4.2

The calculation of the diluted earnings per share is based on the profits attributable to the shareholders of Frontier Developments plc divided by the weighted average number of shares in issue during the year as adjusted for diluted share options. For November 2013 as the effect of options and convertible loan notes would reduce the loss per share, the diluted loss per share is the same as the basic loss per share.

	November  2013	November  2012	May 2013
(Loss)/profit attributable to shareholders (£'000)	(1,569)	921	1,045
Weighted average number of shares	29,726,900	25,538,576	25,495,040
Diluted Basic earnings per share (pence)	(5.3)	3.6	4.1

The reconciliation of average number of ordinary shares used for basic and diluted earnings per share is as follows:

Weighted average number of ordinary shares	November  2013	November  2012	May 2013
Ordinary shares	29,726,900	24,795,243	25,014,043
Under option	-	743,333	480,997
Diluted average number of shares	29,726,900	25,538,576	25,495,040

The calculation of the adjusted earnings per share, as calculated by external analysts, is based on the profit after tax. Separate calculations have been performed to a profit taking out adjusted items:

	November  2013	November  2012	May 2013
Adjusted (Loss)/profit attributable to shareholders (£'000)	(902)	1,136	1,816
Weighted average number of shares	29,726,900	24,795,243	25,014,043
Adjusted Basic earnings per share (pence)	(3.0)	4.6	7.3
Weighted average number of shares (diluted)	29,726,900	25,538,576	25,495,040
Adjusted diluted earnings per share (pence)	(3.0)	4.5	7.1

Adjusted profit	November 2013	November  2012	May 2013
	£'000	£'000	£'000
(Loss)/profit attributable to shareholders	(1,569)	921	1,045
Share based compensation	178	170	416
Funding costs	195	17	308
Impairment of Intangible	276	-	-
Dilapidations provision	18	18	37
Set up of Canadian Subsidiary	-	10	10
Adjusted (loss)/profit	(902)	1,136	1,816

9.       Intangible assets

The Group's Intangible assets comprise capitalised development tools and acquired software licences and self published software games. The carrying amounts for the reporting periods under review can be analysed as follows:

	Development tools & licences	Self published software	Third party software	Total
	£'000	£'000	£'000	£'000
Cost
At 31 May 2012	5,023	854	737	6,614
Additions	290	535	20	845
Transfer from intangibles	-	-	(17)	(17)
Transfer to intangibles	-	-	14	14
At  30 Nov 2012 - Unaudited	5,313	1,389	754	7,456
Additions	405	478	55	938
Disposals	(768)	-	-	(768)
Adjustment	-	(78)	-	(78)
At 31 May 2013	4,950	1,789	809	7,548
Additions	545	1,082	111	1,738
Disposals	-	(16)	-	(16)
At  30 Nov 2013 - Unaudited	5,495	2,855	920	9,270
Amortisation and impairment
At 31 May 2012	2,454	292	537	3,283
Charge for the period	547	62	36	645
Transfer from intangibles	-	-	(1)	(1)
Transfer to intangibles	-	-	12	12
At  30 Nov 2012 - Unaudited	3,001	354	584	3,939
Charge for the period	546	384	75	1,005
Disposals	(768)	-	-	(768)
Adjustment	-	(78)	-	(78)
At 31 May 2013	2,779	660	659	4,098
Charge for the period	471	280	72	823
Impairment	-	276	-	276
At  30 Nov 2013 - Unaudited	3,250	1,216	731	5,197
Net Book Value at 30 Nov 2013 - Unaudited	2,245	1,639	189	4,073
Net Book Value at 31 May 2013	2,171	1,129	150	3,450
Net Book Value at 30 Nov 2012 - Unaudited	2,312	1,035	170	3,517
Net Book Value at 31 May 2012	2,569	562	200	3,331

All amortisation charges, impairments (or reversals if any) are included within cost of sales.

In November 2013 Coaster Crazy was impaired by £276k. No impairment loss was recognised for 2012.

10. Equity

10.1     Share Capital

	Unaudited		Audited
	30 November 2013	30 November 2012*	31 May 2013
	£'000	£'000	£'000
Called up, allotted and fully paid	£0.005 each	£0.001 each	£0.005 each
Ordinary shares	156	13	127

*On 21 December 2012 the company re-organised into a plc and bonus shares were issued on a 9 to 1 basis out of share premium, on the same day the Ordinary shares were re-denominated to 0.5p per share. The combined effect of these changes resulted in the addition of 12,617,023 shares and a transfer from share premium of £113,553.

10.2     Movements in share capital

	Unaudited 6 months ended		Audited year ended
Movements in number of Ordinary Shares	30 November 2013	30 November 2012	31 May 2013
Number of shares at beginning of period	25,234,046	12,364,332	12,364,332
Issued on share option exercises	112,470	252,691	252,691
Issue of shares	131,580	-	-
Issued on listing to AIM	3,169,292	-	-
Issued on exercise of convertible loan note	2,509,504	-	-
Shares re-denominated to 0.5p	-	-	12,617,023
At the end of the period	31,156,892	12,617,023	25,234,046

During the period to 30 November 2013:

112,470 Ordinary shares of £0.005 were allotted as fully paid as a result of options exercise, with a weighted average exercise price of £0.739 per share for a total cash consideration of £80,298.   

131,580 Ordinary shares of £0.005 were allotted as fully paid for a cash consideration of £0.95 per share being a total cash consideration of £125,001. 

3,169,292 Ordinary shares of £0.005 were allotted as fully paid upon the Group's listing on AIM for a cash consideration of £1.27 per share being a total of £4,025,001.  

2,509,504 Ordinary shares of £0.005 were allotted as fully paid upon the Group's listing on AIM being convertible loan notes of £2,709,000 at a price of £1.0795.   

11. Cautionary statement

Sections of this Interim Financial report contain certain forward-looking statements with respect of the Group's financial condition, results, operations and business. These forward-looking statements involve risk and uncertainties because they relate to events that may or may not occur in the future. There are a number of factors that could cause the actual results of developments to differ materially from those expressed or implied by these forward-looking statements. Nothing in this document should be construed as a profit forecast.

 

END

 

 

IR LLFSTFSILLIS