Half Year Results

RNS Number : 2782I

Gfinity PLC

31 March 2020

 

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

31 March 2020

Gfinity plc

("Gfinity" or the "Group")

Half Year Results

Gfinity (AIM: GFIN), a world-leading esports solutions provider, announces its unaudited results for the six-month period ended 31 December 2019.

Financial Highlights:

· Gross profit of £2.0m, up 300% on same period in prior year (H1 FY19: £0.5m)

· Adjusted operating loss[1] for the period of £2.4m, 45% improvement vs. prior year (H1 FY19: £4.4m)

· Revenue of £3.5m, down 20% on same period in the prior year (H1 FY19: £4.4m)

· Adjusted administrative expenses[2] of £4.5m, down 9% on prior year (H1 FY19: £4.9m)

· Period end cash of £2.4m

Operational Highlights:

·   Continued growth in Gfinity Owned Community, with Gfinity's owned websites, GfinityEsports.com and RealSport101.com and their supporting social channels reaching more than 45 million gamers in February 2020

o  New programmatic advertising and brand partnership driving additional revenue streams

· Delivery of third season of F1 Esports Series with all 10 F1 teams taking part. 109,000 gamers entered; 5.8 million people watch the live shows and 79% were under the age of 34

· Following period end, Gfinity selected to deliver the new F1 Esports Virtual Grand Prix series to enable fans to continue watching Formula 1 races virtually, in light of the ongoing COVID-19 situation that has impacted live events

· Growth in competitive gaming entertainment content offering, including:

o  Creation and broadcast of Twitch Prime Crown Cup for Amazon

o  Season 2 of the Esports Report magazine show for HP Omen

· Further contract renewals and wins:

o  Creation of a 'Play Book' and business case for a global esports competition to be hosted in the Middle East

o  Reappointed by Premier League to deliver season 2 of ePremier League

o  Delivery of 2k League invitational event, a first event in partnership with NBA

Strategic review to reposition Gfinity for future growth:

·     Company has undertaken a strategic review of the business and has begun a series of broader cost reduction initiatives with immediate effect

· Implemented Board and senior leadership changes

· Sharpened strategic focus on three core areas where the Company has a competitive advantage: Motorsports; own community franchise; building community for others (publishers, of our own community, building communities for others and majoring on motorsport, particularly F1)

· Adopted a flexible, agile and variable operating model, aimed at reducing the annual cost base by 60% by 2021

COVID-19 and guidance

The Group believes the business can withstand the anticipated operational disruption caused by the COVID-19 virus. While physical events have been postponed at the Gfinity Arena we have seen a significant increase in the number of sports rights holders and media companies in particular looking for virtual gaming solutions and content. The Gfinity Arena is still being used for limited broadcast events, in line with all Government social distancing guidelines. This is being monitored daily.

We are already seeing increased levels of engagement with our digital platforms due to the restrictions placed on the movement of people across the globe. They are looking for gaming related content and are turning to Gfinityesports and RealSport101.  We are seeing increased demand for virtual gaming solutions that utilise Gfinity's production expertise, its ability to connect players in remote locations and its online tournament and content management platform.

The economy is in the midst of a period of significant uncertainty; therefore, the Group is not in a position to update financial guidance at this time. The Group is currently in discussions to secure a further £2m of funding, which if completed will provide a further supplement to our year end cash position. The Group is aiming to announce further details as soon as possible.

John Clarke, CEO, said:

"There has been significant positive momentum in the business especially in the areas of motorsport through our relationship with F1, our fast-growing Own Community franchise and our online tournament platform that successfully delivered the ePremier League.  However, the business also encountered significant headwinds during the period with commercial contracts and strategic partnership conversations taking longer than expected to conclude. These headwinds have been compounded by the unprecedented impact of COVID-19. To realise the significant opportunity that exists for the business it was clear that we needed to make structural changes, significantly reduce our cost base and sharpen our focus on those areas where we are already enjoying success. This is what we have done, and we are now on a pathway to breakeven".

Enquiries:

Gfinity plc John Clarke, CEO	www.gfinityplc.com Via Teneo
Investor relations	[e-mail]
Allenby Capital Limited - Nominated Adviser and Broker	Tel: [phone]
Jeremy Porter / Nicholas Chambers
Teneo - Media	Tel: [phone]
Camilla Cunningham	[e-mail]

About Gfinity

Gfinity (AIM: GFIN) is a world leading esports business. Created by gamers for the world's 2.2 billion gamers, Gfinity has a unique understanding of this fast-growing global community.  It uses this expertise both to provide advisory services and to design, develop and deliver unparalleled experiences and winning strategies for game publishers, sports rights holders, commercial partners and media companies.

Gfinity connects its partners with the esports community in authentic and innovative ways. This consists of on‑ and off-line competitions and industry‑leading content production. Relationships include EA SPORTS, Activision Blizzard, F1 Esports Series and the Forza Racing Championship.

Gfinity connects directly with competitive gaming consumers through its growing community of gamers on its own platforms: Gfinity esports and RealSport101.

All Gfinity services are underpinned by the Company's proprietary technology platform delivering a level playing field for all competitors and supporting scalable multi-format leagues, ladders and knockout competitions.

Operational Review

The six-month period to 31 December 2019 was one in which Gfinity made significant progress in a number of areas of key strategic importance for the business:

Motorsport

Gfinity is now an established global leader in the provision of eMotorsport solutions.  The Group has several years of experience in designing, developing and delivering esports programmes and providing strategic consulting services for the biggest racing games and brands in the world, utilising the Company's own proprietary adjudication and esports management software, Race Control.

During the first half of FY20, Gfinity delivered the third season of the F1 Esports Series, which had over 27 million online video views, a 35% increase year-on-year, and 79% of the viewers being below 34 years old.  Further to the core esports work, Gfinity also expanded its scope of services with F1, being appointed to produce a behind the scenes content series, Making an Esports Champion, alongside the live tournament production and broadcast.

Each of these appointments provides further validation of the belief in eMotorsport as a major area of growth and one in which Gfinity has a real competitive advantage.

Gfinity and Real Sport Community

By the end of December 2019, across Gfinity's owned platforms, GfinityEsports.com and RealSport101.com, more than three million unique users per month were viewing more than 14 million pages, an increase of more than 300% in traffic since the start of the year.  Including social platforms, Gfinity is now reaching more than 40 million gamers every month.

This has created new revenue streams, through programmatic advertising, bespoke video and audio content and brand partnerships, with game publishers, including Codemasters which is now using Gfinity's owned platforms in order to reach gaming fans.  Gfinity is now able to inform conversations with publishers and brands with real time data on what gamers are watching and care about. This makes the Company an even more attractive business partner as it can bring large audiences to gaming solutions that it creates.

Gaming entertainment content

The global esports community is estimated to consist of a fan base of 400 million. These are gamers who aspire to be a professional, follow the esports franchises and leagues and watch esports competitions on a regular weekly basis. There are an additional 500 million gaming fans who like to compete, enjoy a gaming ritual with friends but are still to embrace professional esports. These are social gamers and present a significant opportunity for the creation of entertainment based programming, centred around video gaming. 

In the six months to 31 December 2019, Gfinity created and broadcast the Twitch Prime Crown Cup, a celebrity based FIFA20 competition, on behalf of Amazon and season 2 of the Esports Report magazine show for HP Omen.

States / Global Cities

There is an increasing trend of cities, regions and states all looking to enter the esports market, using the sector as a way to promote themselves to a new audience, but also investing in competitions, content and infrastructure projects to provide entertainment experiences for their citizens.  During the six months to 31 December 2019, Gfinity delivered the strategy and playbook for a major global competition, leading towards a final programme in Qatar, ahead of the 2022 World Cup. It is also in conversations with a number of other states and state funded organisations about supporting their movement into the sector.

Building communities for Sports Rights Holders

During the period, Gfinity announced that it had renewed the contract with the Premier League, to deliver the second series of the ePL competition, working together with all the Premiership Clubs.  The online component of this was delivered during the period, with club-based competitions commencing from January 2020 ahead of the final at the Gfinity Arena in March 2020.

In addition, during the period Gfinity delivered the 2k League invitational event, a first collaboration with NBA. 

This is further evidence of the growing network of sports rights holders who are looking to esports, and to Gfinity in particular, as a way to connect with a new generation of fans and create new revenue streams in a digital world.

Technology

Over the course of H1 FY20, Gfinity completed the build of a significantly upgraded, next generation tournament platform which is now powering online programmes for clients, including the Premier League and NBC. This positions Gfinity well to more flexibly and efficiently support the growth of similar programmes for a range of clients moving forward. 

Strategic review

On 16 March 2020, the Company announced that it had initiated a comprehensive strategic review to ensure that Gfinity remains well positioned for future growth. As part of the review the Board has taken the decision to exit areas that are having a negative impact on cash, such as responding to global publisher Request for Proposals that have a significant focus on the US market; Tournament Operations where there is not the opportunity for sharing commercial rights; and trying to acquire esports rights of leading Sports Rights Holders.  

The Company will focus its growth strategy on fewer, core areas where Gfinity has good momentum and strong competitive advantage, such as Motorsports, with a particular focus on F1; its own community franchise; and building community for others based on virtual gaming and content.

Board and leadership changes

As part of the strategic review, we announced changes to the Board and Senior leadership team with Graham Wallace, CEO, and Garry Cook, Chairman, stepping down from their roles. Graham and Garry's relationship with Gfinity will continue and we look forward to continuing to work with them on several ongoing investment and commercial opportunities. Their positions have been filled internally with John Clarke and Neville Upton stepping into the roles of CEO and Chairman respectively.

Financial Review

The six-month period to December 2019 has been characterised by both challenges in revenue and a marked improvement in margins compared to the same period in the prior year. This resulted in the adjusted operating loss[1] reducing by £2.0m despite a £0.9m decline in revenue (21%). The reduced operating loss follows from an increase in higher margin revenue (consultancy and community building) and a reduced focus on lower margin publisher tournament operations along with ending the Elite Series in its historical format. Overall, we believe that while the group has performed below expectations from a total revenue perspective the underlying financial performance in the period was strong with reduced operating losses and improvements in gross margin. 

The change in sales mix towards higher margin revenue streams is a continuation of the strategy we began in H2 FY19. Furthermore, administrative costs in the current period benefited from the restructuring undertaken in H2 FY19 reducing the adjusted administrative costs[2] by £0.4m. The savings were principally in staff and third-party marketing and development spend as the restructuring allowed the Group to further integrate the skills and resources of the teams at Cevo and Real Sport. This has resulted in the Group now owning an improved tournament platform for hosting white label events and significant growth in the web traffic across all of consumer facing sites. Both of these assets are key to executing our community building and online monetisation strategy.

Consistent with this strategy we have undertaken further restructuring after the period end to better align our cost base and address the challenges presented by the ongoing coronavirus pandemic. This has meant focusing on reducing fixed costs, which had not been sufficiently utilised following the reduction in the volume of live tournaments over the last twelve months, and reducing the overhead associated with the senior leadership team. Following a period of intense investment, we are also reducing ongoing development costs. By June 2021 the monthly cost base is forecast to equate to £2.4m per annum.

These changes will allow the group to shift to a variable cost model, based on establishing strategic supply relationships with key partners, rather than carrying the cost to support all activities inhouse. It is anticipated that this will both improve operating results and increase our ability to respond to differing customer demands by drawing on external expertise as required. The revised operating model coupled with a focus on higher margin and scalable revenue streams have positioned the business to continue its trajectory towards breakeven. This view is supported by commercial analysis[3] that predicts game publisher fees, which underpin many LAN tournaments, will be the sole esport revenue stream to reduce while both the esports audience and level of participation are forecast to continue to grow.

Group Statement of Profit or Loss

		6 Months to 31 December 2019 Unaudited		6 Months to 31 December 2018 Unaudited		Year to 30 June 2019 Audited
		£		£		£
CONTINUING OPERATIONS
Revenue		3,520,558		4,440,793		7,870,166
Cost of sales		(1,457,657)		(3,924,966)		(6,832,652)
Gross profit/(loss)		2,062,901		515,827		1,037,514
Administrative expenses		(5,444,808)		(5,972,717)		(12,106,612)
Operating loss		(3,381,907)		(5,456,890)		(11,069,098)
Share of Associate Profit / (Loss)		(296,415)		(314,616)		(991,951)
Finance income		2,552		2,893		6,481
Finance Costs		(23,043)		-		(1,583)
Loss on ordinary activities before tax		(3,698,813)		(5,768,613)		(12,056,151)
Taxation		57,757		55,895		59,832
Loss from continuing operations		(3,641,056)		(5,712,718)		(11,996,319)
Profit from discontinued operations		-		1,911		1,911
Retained loss for the period		(3,641,056)		(5,710,807)		(11,994,408)
Loss per share (basic and diluted)		-£0.01		-£0.02		-£0.04

Group statement of comprehensive income

	6 Months to 31 December 2019 Unaudited		6 Months to 31 December 2018 Unaudited		Year to 30 June 2019 Audited
	£		£		£
Loss for the period	(3,641,056)		(5,710,807)		(11,994,408)
Other comprehensive income
Items that will be reclassified to profit or loss
Changes in the fair value of derivatives recognised at fair value	-		58,083		58,083
Derivatives settled during the period that have been reclassified to profit or loss	-		(166,504)		(166,504)
Foreign exchange loss on retranslation of foreign subsidiaries	20,228		(8,724)		2,221
Other comprehensive income for the period	20,228		(117,145)		(106,200)
Total comprehensive income for the period	(3,620,828)		(5,827,952)		(12,100,609)

Group Statement of Financial Position

		As at 31 December 2019 Unaudited		As at 30 June 2019 Audited
		£		£
NON-CURRENT ASSETS
Property, plant and equipment		328,553		483,113
Right of use assets		713,842		-
Goodwill		2,544,525		2,544,525
Intangible fixed assets		793,853		1,033,993
		4,380,774		4,061,631
CURRENT ASSETS
Trade and other receivables		1,449,927		2,322,379
Cash and cash equivalents		2,447,876		648,454
Current Tax Assets		-		-
		3,897,802		2,970,833
TOTAL ASSETS		8,278,576		7,032,465
EQUITY AND LIABILITIES
Equity
Ordinary shares		479,564		362,897
Share premium account		42,338,222		37,455,838
Other reserves		2,185,209		1,637,763
Retained earnings		(39,372,850)		(35,731,794)
Total equity		5,630,145		3,724,704
Non-current liabilities
Deferred Tax Liabilities		264,961		322,718
Lease Obligations		155,506		-
Total non-current liabilities		420,467		322,718
Current liabilities
Trade and other payables		1,660,479		2,985,042
Lease obligations		567,485		-
Total current liabilities		2,227,964		2,985,042
Total liabilities		2,648,431		3,307,760
TOTAL EQUITY AND LIABILITIES		8,278,576		7,032,465

Group Cash Flow Statement

		6 months to 31		6 months to 31		Year to 30
		December 2019 Unaudited		December 2018 Unaudited		June 2018 Audited
		£		£		£
Cash flow used in operating activities
Net cash used in operating activities		(2,580,987)		(2,786,309)		(8,470,887)
Cash flow from/(used in) investing activities
Interest received		2,552		-		6,481
Interest Paid		(23,043)		-		-
Additions to property, plant and equipment		(45,575)		(18,151)		(123,558)
Investment in Associate		(296,415)		(263,598)		(270,661)
Proceeds from Sale of Discontinued Operations		-		15,047		17,678
Net cash used in investing activities		(362,481)		(266,702)		(370,061)
Cash flow from/(used in) financing activities
Issue of equity share capital		5,250,000		6,000,000		6,000,000
Share Issue Costs		(250,949)		(192,106)		(192,107)
Repayment of lease liabilities		(276,387)		-		-
Net cash from financing activities		4,722,664		5,807,895		5,807,893
Net increase/(decrease) in cash and cash equivalents		1,779,196		2,754,884		(3,033,055)
Effect of Currency Translation on cash		20,225		(8,723)		2,221
Opening cash and cash equivalents		648,454		3,679,288		3,679,288
Closing cash and cash equivalents		2,447,876		6,425,449		648,454

Statement of Changes in Equity

	Ordinary shares		Share premium		Share Option Reserves		Retained earnings		Forex		Total equity
	£		£		£		£		£		£
At 30 June 2018	286,348		31,565,734		587,256		(23,628,965)		(1,717)		8,808,656
Loss for the period	-		-		-		(5,710,807)		-		(5,710,807)
Other Comprehensive Income	-		-		-		(108,421)		(8,724)		(117,145)
Total Comprehensive Income	-		-		-		(5,819,228)		(8,724)		(5,827,952)
New Shares Issued	75,000		5,925,000		-		-		-		6,000,000
Shares as Consideration	1,549		157,211		-		-		-		158,760
Share Issue Costs	-		(192,107)		-		-		-		(192,107)
Share Options Expensed	-		-		523,430		-		-		523,430
Total transactions with owners, recognised directly in equity	76,549		5,890,104		523,430		-		-		6,490,083
At 31 December 2018	362,897		37,455,839		1,110,686		(29,448,193)		(10,441)		9,470,787
Loss for the Period							(6,283,601)				(6,283,601)
Total comprehensive Income	--		--		--		(6,283,601)				(6,283,601)
Share options expense	-		-		526,572		-		-		526,572
Other comprehensive income	-		-		-		-		10,945		10,945
Total transactions with owners, recognised directly in equity	-		-		526,572		-		10,945		537,517
At 30 June 2019	362,897		37,455,838		1,637,258		(35,731,794)		504		3,724,703
Loss for the period	-		-		-		(3,641,056)		-		(3,641,056)
Other comprehensive income									20,228		20,228
Total Comprehensive Income	-		-		-		(3,641,056)		20,228		(3,620,828)
New Shares Issued	116,667		5,133,333		-		-		-		5,250,000
Share Issue Costs	-		(250,949)		-		-		-		(250,949)
Share Options Expensed	-		-		527,219		-		-		527,219
Total transactions with owners, recognised directly in equity	116,667		4,882,384		527,219		-		-		5,526,270
At 31 December 2019	479,564		42,338,222		2,164,477		(39,372,850)		20,732		5,630,145

Notes to the interim financial statements

1.  General Information

Gfinity plc is a company limited by shares, incorporated and domiciled in the United Kingdom under the Companies Act 2006. Its registered office is 35 New Bridge Street, London, EC4V 6BW. Its shares are quoted on the AIM market of London Stock Exchange.

The functional and presentational currency is £ sterling because that is the currency of the primary economic environment in which the group operates. Foreign operations are included in accordance with the policies set out in note 2.

These condensed interim financial statements were approved for issue on [TBC].

The financial statements have been reviewed by the Group's auditors but not audited.

2.  Accounting Policies and Basis of Preparation

Basis of Preparation

The interim financial statements for the six months ended 31 December 2019 have been prepared using accounting policies that are consistent with those of the audited financial statements for the period ended 30 June 2019 and in accordance with IAS 34, "Interim Financial Reporting" as adopted by the European Union. The interim financial information should be read in conjunction with the Group's Annual Report and Accounts for the year ended 30 June 2019, which has been prepared in accordance with IFRS as adopted by the European Union.

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

The Annual Report and Accounts for the year ended 30 June 2019 has been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under s498(2) or s498(3) of the Companies Act 2006.

Significant Accounting Policies

The critical accounting policies and presentation followed in the preparation of this interim report have been consistently applied to all periods in these financial statements and are the same as those applied in the company's annual accounts for the year ended 30 June 2019 with the exception of new accounting standards that came into force during the year. These new areas are considered below.

Lease accounting is inline with IFRS 16 which is effective for all accounting periods beginning on or after 1 January 2019. Gfinity have opted to use the definition of a lease as per IAS 17 and utilise the exemptions for low value leases and those with less than 12 months remaining at the start of the accounting period. Furthermore the option to recognise the right of use asset at the value as at 1 July 2019, rather than at the value it would hold if IFRS 16 had been in place when the lease was signed, was also taken meaning there is no need to restate prior years.

The assumed incremental borrowing rate for the lease was 5% resulting in a value at recognition of £1.0m. The asset has subsequently been depreciated over the remaining lease term. The impact of this change at 31 December was to increase fixed assets by £713,842 and liabilities by £722,991. This also impacted the income statement with a depreciation charge of £285,537 and interest charge of £22,119 compared to a rental charge of £298,507 under IAS 17. The rental charge is equal to the associated cash outflow.

A copy of the accounts to 30 June 2019 can be obtained from the company's website: www.gfinityplc.com .

Critical Accounting Judgements

The preparation of financial statements in conforming with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and assumptions are based on historical experience and other factors considered reasonable at the time, but actual results may differ from those estimates. Revisions to these estimates are made in the period in which they are recognised.

In the context of the revenue challenges in the period and the global pandemic post period end we have assessed the intangible assets for evidence of impairment and concluded there is no evidence of impairment. Web traffic from Real Sport has continued to grow in the period, our gaming platform continues to underpin various white label online tournaments and customer relationships continue as expected. Furthermore, as a group, we continue to achieve savings on development costs compared to using third parties and have started to monetise web traffic and leverage our community building expertise in commercial negotiations.  On this basis we have concluded there is no need for further testing outside of the annual review prescribed in IAS 36. 

The critical accounting judgements made in preparing this interim report are the same as those in preparing the annual accounts for the Company for the year ended 30 June 2019 which can be obtained from the company's website www.gfinityplc.com .

Going Concern

Gfinity has established itself as a leader in the fast growing esports sector, working on behalf of some of the most recognisable brands in the world and serving content to an ever growing community of competitive gaming enthusiasts via its owned platforms: RealSport101 and GfinityEsports.com. 

Notwithstanding this, the profile of revenues for the past 12 months has been uneven.  The results announced in this interim report show a reduction in revenue on the equivalent period in the prior year, albeit, with a significantly improved level of gross profit and reduction in the underlying loss.  The company has also been impacted by the economic uncertainty relating to the Covid-19 pandemic, with several anticipated events for the second half of the year being deferred.

While the Covid-19 outbreak has caused delays in the delivery of committed events, it has also increased demand for some areas of strength for Gfinity.  With more people at home there has been a sharp increase in web traffic to our owned platforms, while the cancellation of major sporting events has created a gap in the schedules for major broadcasters and rights holders which they are looking to gaming to fill. In the short term this has created an opportunity for esports companies to further engage with these parties and, in the medium term, may accelerate esport's shift into the mainstream by increasing exposure to an audience that still consumes content via more traditional distribution channels.

On 16 March 2020, the company announced a major restructuring exercise to deliver a c.60% reduction in underlying operating expenditure.  This will enable Gfinity to apply a much more variable cost model, reducing fixed overheads, allowing the business to move into a cash flow positive position on much lower revenue than previously required and giving it greater flexibility to manage through periods of variability in revenue.  Following this restructuring directors now expect the company to be cash flow positive on a month on month basis within the short term.

The company is currently in discussions with investors with regards to the completion of a further round of investment funding and expects these discussions to be successful.  On this basis, coupled with the restructuring announced and the ongoing demand for Gfinity's services, the directors believe that the going concern basis for the preparation of these accounts is appropriate.  Directors note, however that until further funding is contractually secured, there is a material uncertainty in this regard and if funding negotiations were unsuccessful, the going concern basis of preparation would no longer be appropriate. Directors also note that, even following completion of the successful fundraising, bringing the business to profitability on a month on month basis within the short term is contingent on securing of revenue streams that are not yet contracted and hence cannot be guaranteed, despite the strong commercial pipeline and outlook, relative to the reduced cost base noted above.

3.  Loss per share

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

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

On 1 August 2019 Gfinty issued 116,666,666 shares at a value of £0.045 raising gross proceeds of £5.25m.

		6 months ended 31 December 2019		6 months ended 31 December 2018		Year ended 30 June 2019
Profit/ (Loss) attributable to shareholders		(3,620,828)		(5,827,952)		(12,102,520)
		Number		Number		Number
		000's		000's		000's
Weighted average number of ordinary shares		459,801		308,515		335,573
Loss per ordinary share		-£0.01		-£0.02		-£0.04

4.  Notes to the Cash Flow Statement

		6 months to 31		6 months to 31		Year to 30
		December 2019		December 2018		June 2019
		£		£		£
Cash flows from operating activities
Loss before taxation		(3,698,813)		(5,642,874)		(12,056,151)
Depreciation		485,671		206,778		399,307
Amortisation & impairment of intangible fixed assets		240,140		326,906		1,036,163
Interest received		(2,552)		-		(6,481)
Interest Paid		23,043		-		-
Share of Associate Losses		296,415		314,616		991,951
Revenue Settled Via Equity		-		-		(420,232)
Bad Debt Charge		(1,719)				28,925
Share based payments		527,219		523,430		1,050,002
Gain on disposal of discontinued Operations				(67,214)		(65,303)
Fair value (gains)/losses on financial assets at fair value through profit or loss		-		(166,504)		-
(Increase) in trade and other receivables		874,172		689,881		(191,435)
Increase in trade and other payables		(1,324,563)		931,028		710,028
Corporation tax paid/ received		-		97,644		153,539
Cash used by operating activities		(2,580,987)		(2,786,309)		(8,470,887)

5.  Segmental Information

The Group manage the business based on two segments: Gfinity and CEVO. The two reportable segments operate as follows:

Gfinity: This segment is the largest part of the business and encompasses the majority of esports  related activities and broadcast and production capabilities.

CEVO: The in-house development capabilities which are key to delivering both Gfinity PLC's strategy and online esports solutions for third parties. This segment also includes several US based technology revenue streams.

	6 months to 31 Dec-2019			6 months to 31 Dec 2019			30 June 2019
	Gfinity	CEVO	Group	Gfintiy	Cevo	Group	Gfinity	CEVO	Group
Revenue	3,419,032	101,526	3,520,558	4,274,396	166,397	4,440,793	7,622,158	248,007	7,870,166
Loss	(3,417,262)	(223,794)	(3,641,056)	(5,445,151)	(265,656)	(5,710,807)	(11,481,149)	(513,259)	(11,994,408)

Gfinity principally operate in the UK and CEVO principally in the US.

Segmental information for the statement of financial position has not been presented as management do not view this information on a segmental basis. Intra-group recharges are not considered when monitoring performance with central charges (such as senior management costs) retained in Gfinity PLC rather than being apportioned across segments.

6.  Revenue

The Group's policy on revenue recognition is as outlined in note 2 of of the financial statements for the year ending June 2019. The period ending December 2019 included £0.5m included in the contract liability balance at the beginning of the period (December 2018 and year ending June 2019: £0.9m).

The Group's revenue disaggregated by primary geographical markets is as follows:

	6 months ended 31 Dec 2019			6 months ended 31 Dec 2018			30 Jun 2019
	Gfinity	CEVO	Total	Gfinity	CEVO	Total	Gfinity	CEVO	Total
United Kingdom	3,419,032	-	3,419,032	4,011,286	-	4,011,286	7,082,948	-	7,082,948
North America	-	101,526	101,526	263,110	166,397	429,507	539,210	248,007	787,218
Total	3,419,032	101,526	3,520,558	4,274,396	166,397	4,440,793	7,622,159	248,007	7,870,166

The Group's revenue disaggregated by pattern of revenue of revenue recognition is as follows:

	6 months ended 31 Dec 2019			6 months ended 31 Dec 2018			30 Jun 2019
	Gfinity	CEVO	Total	Gfinity	CEVO	Total	Gfinity	CEVO	Total
Services at a point in time	2,417,482	5,824	2,423,306	2,915,682	5,155	2,920,837	5,251,702	27,778	5,279,480
Services over time	1,001,550	95,702	1,097,252	1,358,713	161,242	1,519,956	2,370,457	220,230	2,590,686
Total	3,419,032	101,526	3,520,558	4,274,396	166,397	4,440,793	7,622,159	248,007	7,870,166

As at 31 December 2019 the Group had the amounts shown below held on the consolidated statement of financial position in relation to contracts either performed in full during the year or ongoing as at the year end. All amounts were either due within one year or, in the case of contract liabilities, the work was to be performed within one year of the balance sheet date.

		Dec-19		Jun-19
Trade Receivables		£ 820,073		£ 1,085,158
Contract Assets		£ 203,088		£ 418,286
Contract Liabilities		£ 128,375		£ 521,010

Trade receivables are non-interest bearing and are generally on 30 day terms. Credit risk of customers is low with many being large multinational corporations. Of the amounts outstanding at the period end £250,000 is with a single customer with the amount under dispute. We remain confident that the amounts will be recoverable in full.

Contract assets are initially recognised for revenue earned while the services are delivered over time or when billing is subject to final agreement on completion of the milestone. Once the amounts are billed the contract asset is transferred to trade receivables.

Contract liabilities arise when amounts are paid in advance of the delivery of the service. These are then transferred to the statement of comprehensive income as either milestones are completed or work is completed overtime. Revenue of £0.5m was recognised in the period ending 31 December 2019 that was held as a contract liability as 30 June 2019. All of these amounts were held in Gfinity.

7.  Events Post Period end

Post period end Gfinity's executive team undertook a strategic review of the business to ensure the operating structure remained appropriate. Following the review, the business underwent a restructuring with Graham Wallace and Garry Cook (CEO and Chairman respectively) stepping down from their positions and being replaced by John Clarke and Neville Upton. Alongside the change in the leadership team the business implemented a significant cost reduction programme geared towards reducing the fixed cost base and shifting towards a variable cost model that will allow the business to be more agile in scaling to changes in demand. This change was announced to the market on 16 March 2020.

 

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[1]Adjusted operating loss before interest, tax, depreciation, amortisation, impairment and the share-based payment expense.  It does, however, include operating lease expenditure reclassified as capital spend in line with the requirements of IFRS 16 to ensure consistency with prior years.

[2]Adjusted administrative expenses show the underlying operating expenditure of the company, adjusting for the same items as with the adjusted operating loss.

[1]Adjusted operating loss before interest, tax, depreciation, amortisation, impairment and the share-based payment expense.  It does, however, include operating lease expenditure reclassified as capital spend in line with the requirements of IFRS 16 to ensure consistency with prior years.

[2]Adjusted administrative expenses show the underlying operating expenditure of the company, adjusting for the same items as with the adjusted operating loss.

[3] Newzoo Global Market Data June 2019

 

END

 

 

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