Interim Results

RNS Number : 5966H

Gfinity PLC

17 March 2015

 



17 March 2015

Gfinity plc

("Gfinity" or the "Company")

Unaudited interim financial statements for the period ended 31 December 2014

Gfinity (AIM: GFIN), a leading eSports business, announces its interim financial results for the six month period ended 31 December 2014. This period mainly relates to the company's operations prior to its admission to AIM on 22 December 2014. 

Highlights

·     Successfully staged G3 at the Copperbox arena at the Queen Elizabeth Olympic Park, London, the third Gfinity branded off-line competition and the UK's largest ever eSports event:

o  Attracted a record UK crowd of almost 4,000 ticket paying spectators

o  8.7 million online views from 25 countries over a single weekend

·     Registered user base increased from 43,000 as at 30 June 2014 to over 300,000 on 31 December 2014;

·     Raised £3.5 million, before expenses, from AIM flotation at 17p per share;

·     Signed agreement with Pitch International, a leading sales and marketing agency and shareholder in the Company, to package and sell sponsorship and broadcasting rights on Gfinity's behalf;

·     Net cash as at 31 December amounted to £4.68 million.

Post-period highlights

·     Entered strategic collaboration agreement with Vue Cinema to open UK's first eSports arena for staging of Gfinity Championship series and other eSports events;

·     Staged  Call of Duty: Advanced Warfare European Championships on behalf of game publisher Activision;

·     Strong continued growth in registered users, currently approaching 350,000.

Neville Upton, Co-founder and Chief Executive of Gfinity plc, commented: "The Company crossed a number of major milestones during the first half as we ramp up our operations to take advantage of the booming global market for eSports.  During this period, Gfinity established a strong reputation for the quality of our events and production, achieved a 6-fold increase in registered users and made an excellent debut on AIM that provides us with a solid equity capital base to drive growth further.

"These steps have enabled us to consolidate on our early mover advantage in a sector that is growing rapidly. As a result, we remain on track to deliver strong growth in our user base this year and look to the future with great confidence."

Enquiries

Gfinity plc
Jonathan Hall, Finance Director Neville Upton, Chief Executive Officer	[phone]
Arden Partners plc - Nominated Adviser and Broker
Chris Hardie, Ciaran Walsh	[phone]
Luther Pendragon - Public Relations
Neil Thapar, Alexis Gore, Oliver Hibberd	[phone]

About Gfinity

Gfinity is a leading UK-based eSports company serving, in co-operation with games publishers, a rapidly-growing community of online gamers worldwide. Founded in September 2012, the Company has established a popular online brand, gfinity.net, where gamers can compete, socialise and enjoy a wide range of content relating to electronic games on a proprietary technology platform. This platform enables Gfinity to run a regular roster of online competitions, leagues and ladders with the opportunity for gamers to enter and potentially win substantial prize money and/or pit their skills against professional and widely-followed ''star'' players.

Gfinity registered users can enter these events and competitions either without charge or on a pay-to-enter basis. In addition Gfinity hosts live tournaments, based around several of the industry's best selling games such as Call of Duty: Advanced Warfare, FIFA 2015, CS:GO, StarCraft and Halo.

Gfinity has quickly become a widely-recognised "destination" for gamers in the UK and internationally, typically aged 18 - 34 years old. The growing user base and the demographic of Gfinity's audience, together with the sheer numbers who view Gfinity's events online, provide brand owners and advertisers with an attractive environment in which to promote their products and services, as well as offering Gfinity the opportunity to generate significant revenues over the long term. 

Gfinity websites:

Investor: www.gfinityplc.com 

Commercial: www.gfinity.net 

Overview

Gfinity is pleased to announce its maiden results since admission to AIM. Strong operational progress was made during the period which marked a step-change in the Company's development as a leading brand in the global eSports industry.

As an early mover in the eSports sector, the Company's strategy has focused on building its brand and delivering world-class online and offline eSports events to a global audience.  In the period Gfinity successfully organised and delivered the record breaking G3 event, the largest eSports event ever staged in the UK. G3 proved Gfinity's ability to deliver major events and highlighted the fast growing demand for eSports amongst players and spectators.

The immediate key goal remains to establish Gfinity as the leading 'go-to' destination for spectators and competitive players of electronic games. Having established a significant first mover advantage Gfinity is well positioned to exploit the rapid worldwide growth in eSports, and its increasing transition into a spectator sport.

In the longer term there is a large opportunity through its eSports events and widening audiences to draw in sponsors, advertisers and broadcasters who want access to a highly defined and targeted demographic of 18-34 year olds, predominantly male, that play and watch eSports.   

Growth of eSports

eSports viewership has increased almost eight-fold since 2000. Newzoo, an international market research firm focused on the games industry, recently released a report titled "The Global Growth of Esports: Trends, Revenues and Audience Towards 2017". According to the report the number of eSports enthusiasts will jump from 205 million in 2014 to 335 million in 2017 and between 2012-2017 the industry's audience and revenue is projected to grow at a CAGR+20% and CAGR+29% respectively. The report goes on to state that eSports revenue could surpass $1 billion within just a couple of years. Revenue opportunities will typically involve game publisher investment, sponsorships, online advertising merchandise, licensing and ticket sales.

Significantly in another indication of the transition of eSports to a spectator sport, of the 205 million people globally that currently watch eSports, 40% do not play any of the top eSports franchises, showing that competitive gaming has evolved to a spectator sport with a fan base comparable to that of other mainstream sports.

Operating review

Gfinity entered 2014 with a set of strategic goals to grow its brand and build a foundation for long term growth. In particularthe Company's focus in the six month period to 31 December 2014 was to:

·     Establish a reputation for staging off-line events that attract the best players in the world and high levels of online viewership

·     Increase the levels of participation in Gfinity's online events

·     Provide an outstanding user experience

Events

A key part of the Company's business strategy is to host live tournaments, attracting top players from around the world. The tournaments are streamed live via major web-streaming platforms and can even be broadcast. These events are based around several of the industry's best selling games such as Call of Duty: Advanced Warfare, FIFA 2015, CS:GO, StarCraft and Halo.

In August 2014, the Company hosted G3, its third Gfinity branded off-line competition and the biggest eSports event ever in the UK.  The event attracted almost 4,000 ticket paying spectators and achieved 8.7 million online views in approximately 25 countries over a single weekend with total prize money of $145,000. 

Improving the user experience

In June 2014 Gfinity launched its new proprietary technology platform. This platform enables Gfinity to run a regular roster of online competitions, leagues and ladders with the opportunity for gamers to enter and potentially win substantial prize money and/or pit their skills against professional and widely-followed ''star'' players. The eSport hub also enables fans of eSports to watch online tournaments featuring the world's top games such as Call of Duty, FIFA 2015 and League of Legends.

Since the launch of the new platform there has been a rapid increase in registered users from 43,000 as at 30 June 2014 to over 300,000 on 31 December 2014; and approaching 350,000 as of 17 March 2015. The Company holds up to 5,000 matches per week online and is gaining approximately 20,000 new registered users a month. In addition over the same period the company's Twitter and Facebook following has increased from 84,000 to 116,000 and 5,000 to 61,000 respectively, increasing the number of positive advocates within the on-line community. 

Sponsorship and marketing

On 11 December 2014, Gfinity entered into a two-year sales and marketing contract with Pitch International for Pitch to package and sell sponsorship and broadcasting rights on the Company's behalf. Pitch is a leading sports marketing agency and distributor of sports media rights worldwide.

Gfinity are currently engaged in discussions with a number of potential partners.  Management believe that the potential for sponsorship deals is considerable with Gfinity events attracting high numbers of views, exceeding many mainstream sports. The audience is predominantly male, aged 18-34, which provide a very specific and large demographic with which sponsors are keen to engage.  There remains, however, an education process to go through with a number of sponsors, who haven't engaged with the sector before and are only now starting to appreciate its potential.

Admission to AIM

Gfinity successfully completed an IPO on the London Stock Exchange's AIM market in late December, raising £3.5 million before expenses. The Directors of Gfinity believe that its listing on AIM will enhance the Company's credibility and profile and will assist the growth in its business. The proceeds are principally intended to provide the Company with working capital to invest in the Gfinity brand and support the 2015 Gfinity Championships extensive event schedule. Coupled with earlier private fund-raising rounds, a total of £5.8m (net of fees) was raised during the period.

Changes in Board

On 1 September 2014, the Company strengthened its board with the appointment of two further directors:

-     David Yarnton (Non-Executive) who has 18 years of experience in the games industry, including 9 years as Managing Director of Nintendo UK, joined the Company as a Non-Executive Director.

-     Jonathan Hall (Finance Director) ACA qualified chartered accountant, joined having spent the previous five years as the Finance Director at Saracens Rugby Club.

Post- period

UK's first dedicated eSports Arena 

In February 2015, Gfinity announced a strategic collaboration with Vue Cinema to create the UK's only dedicated eSports event arena at Fulham Broadway, London.  2015 will see Gfinity host approximately 25 live events at its new eSports venue, The Gfinity Arena. Live tournaments will be hosted every weekend and on selected weekday evenings, building on the huge success of last year's G3 event.

The new arena is a key part of the Company's long term growth strategy to organise and host major live eSports tournaments and also to stream events to a global audience of fans through its online platform.

By collaborating with Vue, the Company will be able to accelerate its plans to create a large and dedicated site in central London without incurring major upfront capital costs. In addition, Vue  and Gfinity will work together  to promote eSports events as well as explore the opportunity to roll-out other Vue locations - both in London and other city centres - in the future.

Financial Review

Revenue increased to £145,401 (H1 2014: £16,303), reflecting the staging of G3 in August 2014, which included ticket revenue of £70,000, together with income from industry sponsorship and premium subscriptions to Gfinity.net, a feature that was only launched in June 2014.

The loss for the period of £1,392,373 reflects the significant investment that the Company made in the staging of its events, the development of Gfinity.net and marketing activities to grow the brand and is in line with Directors expectations in the period. 

Following admission to AIM shortly prior to the end of the year, as at 31 December 2014, the company had cash in the bank of £4,680,120.

Outlook

The important steps taken in the first half to build the Gfinity brand and invest for future growth are already benefitting the Company.  Registered users continue to grow at approximately 20,000 a month and the number of competitions being hosted each week is significantly higher than last year. The Directors hope that Gfinity's new eSports arena, launched this month, will become a focal point for eSports in the UK, hosting up to 25 events in 2015.  

Since the AIM flotation, there has been increasing interest from prominent advertisers and sponsors in accessing Gfinity's audience, which due to its profile, is difficult to reach through traditional forms of media.

While the potential for sponsorship and broadcast income is large, Gfinity's primary focus for 2015 is to continue to maximise growth of its user base and consolidate its reputation for delivering the highest quality eSports events and expanding the size of the online community. The Board believe this approach will deliver the greatest long term value and looks to the future with great confidence.

Gfinity plc

Unaudited Statement of Comprehensive Income

Six months ended 31 December 2014

			6 months to 31 December 2014		6 months to 31 December 2013		6 months to 30 June 2014
			£		£		£
CONTINUING OPERATIONS
Revenue			145,401		16,303		197,147
Cost of sales			(791,003)		(391,508)		(193,302)
Gross profit/(loss)			(645,602)		(375,205)		3,845
Administrative expenses			(746,897)		(208,791)		(349,032)
Operating loss			(1,392,499)		(583,996)		(345,187)
Finance income			126		5		148
Loss on ordinary activities before tax			(1,392,373)		(583,991)		(345,039)
Taxation			-		-		-
Retained loss for the year			(1,392,373)		(583,991)		(345,039)
Loss and total comprehensive income for the period			(1,392,373)		(583,991)		(345,039)
Loss per share (basic and diluted)			(0.03)		(0.03)		(0.01)

Gfinity plc

Unaudited Interim statement of Financial Position

As at 31 December 2014

	Notes	31.Dec.14		30.Jun.14
		£		£
NON CURRENT ASSETS
Property, plant and equipment		76,989		14,730
CURRENT ASSETS
Trade and other receivables		576,861		140,802
Cash and cash equivalents		4,680,120		591,275
		5,256,981		732,077
TOTAL ASSETS		5,333,970		746,807
EQUITY AND LIABILITIES
Equity
Ordinary shares	5	77,845		32,367
Share premium account	5	4,679,538		1,330,263
Other reserves	3	35,515		8,014
Retained earnings		292,695		(1,064,932)
Total equity		5,085,593		305,712
Non-current liabilities
Borrowings		0		329,978
Current liabilities
Trade and other payables		248,377		111,117
Total liabilities		248,377		441,095
TOTAL EQUITY AND LIABILITIES		5,333,970		746,807

Gfinity plc

Unaudited Interim Statement of Cash Flows

Six months ended 31 December 2014

		6 months to 31 December 2014		6 months to 31 December 2013		6 months to 30 June 2014
	Note	£		£		£
Cash flow used in operating activities
Net cash used in operating activities	4	(1,656,954)		(428,586)		(371,602)
Cash flow from/(used in) investing activities
Interest received		126		5		148
Additions to property, plant and equipment		(69,144)		(562)		(12,402)
Net cash used in investing activities		(69,018)		(557)		(12,254)
Cash flow from/(used in) financing activities
Issue of equity share capital		5,814,817		664,802		675,520
Cash inflow from director's loan		-		21,817		-
Net cash from financing activities		5,814,817		686,619		675,520
Net increase  in cash and cash equivalents		4,088,845		257,476		291,664
Opening cash and cash equivalents		591,275		42,135		299,611
Closing cash and cash equivalents		4,680,120		299,611		591,275

Gfinity plc

Unaudited Statement of Changes in Equity

Six months ended 31 December 2014

	Ordinary shares		Share premium		Share option reserve		Retained earnings		Total equity
	£		£		£		£		£
At 30 June 2013	13,922		8,386		0		(135,902)		(113,594)
Loss for the period	-		-		-		(583,991)		(583,991)
New shares issued	10,939		653,863		-		-		664,802
Share options expensed	-		-		-		-		-
Total comprehensive income	10,939		653,863		-		(583,991)		80,811
At 31 December 2013	24,861		662,249		-		(719,893)		(32,783)
Loss for the period	-		-		-		(345,039)		(345,039)
New shares issued	7,506		668,014		-		-		675,520
Share options expensed	-		-		8,014		-		8,014
Total comprehensive income	7,506		668,014		8,014		(345,039)		338,495
At 30 June 2014	32,367		1,330,263		8,014		(1,064,932)		305,712
Loss for the period	-		-		-		(1,392,373)		(1,392,373)
Reduction in Capital	-		(2,750,000)		-		2,750,000		-
New shares issued	45,478		6,099,275		-		-		6,144,753
Share options expensed	-		-		27,501		-		27,501
Total comprehensive income	45,478		3,349,275		27,501		1,357,627		4,779,881
At 31 December 2014	77,845		4,679,538		35,515		292,695		5,085,593

Gfinity plc

Notes to the Unaudited Interim Financial Statements

Six months ended 31 December 2014

1.       ACCOUNTING POLICIES

Basis of preparation

The interim financial statements for the six months ended 31 December 2014 have been prepared using accounting policies that are consistent with those of the audited financial statements for the period ended 30 June 2014 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 six months ended 30 June 2014, which has been prepared in accordance with IFRSs 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 six months ended 30 June 2014 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.

The interim financial statements are unaudited and were approved by the Board of Directors on 16^th March 2015.

Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment, if any.  Historical cost includes expenditure that is directly attributable to the acquisition of the items.  Subsequent costs are included in the carrying amount of the asset or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and that the cost of the item can be measured reliably.  The carrying amount of parts that are replaced is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. Cost also comprises the initial estimate of dismantling and removing the asset and restoring the site on which it is located for which the Company are obligated to incur when the asset is acquired, if applicable.

Depreciation is calculated using the straight-line method to allocate the cost or revalued amounts of tangible fixed assets to their residual values over their useful economic lives, as follows:

Office equipment                     -    1 year straight line

Computer equipment                -    3 years straight line

Production equipment              -    3 years straight line

The residual values and useful economic lives of the assets are reviewed, and adjusted if appropriate, at each balance sheet date. The carrying amount of an asset is written down immediately to its recoverable amount if the carrying amount is greater than its estimated recoverable value.  Gains and losses on disposals are determined by comparing the proceeds with the carrying amount, and are recognised within other gains or losses in the income statement.

Share-based payments

The Company issues share options to its employees. The Company has applied the requirements of IFRS 2 Share-based Payments.

The Company issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value at the date of grant.

The fair value determined at the grant date of the equity-settled, share-based payments is expensed on a straight-line basis over the vesting period, based on the Company's estimate of shares that will eventually vest.

Fair value of the equity-settled share-based payments is measured by use of a Black-Scholes model.

          Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of value-added tax, from the proceeds.

Adoption of IFRS

IFRS was adopted for the first time in the financial statements for the six months ended 30 June 2014. The transition from United Kingdom Generally Accepted Accounting Practice (UK GAAP) to IFRS has had no effect on the reported financial position, financial performance and cash flows of the Company. 

There are no differences between the equity reported under UK GAAP and under IFRS, either at the date of transition to IFRSs or at 31 December 2013.  There is no difference between the total comprehensive income of the Company under IFRSs for the period ended 31 December 2013 and the total comprehensive income under UK GAAP.

2.       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.

		Six months ended 31 December 2014		Six months ended 31 December 2013		Six months ended 30 June 2014
		£		£		£
Profit/ (Loss) attributable to shareholders		(1,392,373)		(583,991)		(345,039)
		Number		Number		Number
		000's		000's		000's
Weighted average number of ordinary shares		42,238		17,989		31,786
		£		£		£
Loss per ordinary share		(0.03)		(0.03)		(0.01)

On 4 December 2014, the Company's shareholders passed a special resolution to subdivide each ordinary share of £1 into 1,000 ordinary shares of £0.001 each.  Prior period comparative figures have been adjusted to reflect this subdivision, as directors believe that this provides the most meaningful basis for comparison.

3.       SHARE BASED PAYMENTS

Equity-settled share option plans

Options and warrants

The Board has authority to grant share options over up to 10% of the number of shares in issue.

The table below summarises the exercise terms of the various options over Ordinary shares of 0.1p each which had been granted, and were still outstanding, as at 31 December 2014.  2,311 new options were granted in the period.  No options were exercised and/or lapsed during the period.  The total number of outstanding options in issue at 31 December 2014 is 2,987,000 (30 June 2014: 676,000, after adjusting for share split).

Of the options granted during the period, 920,000 options have an exercise price of 9p per share.  1,391,000 options have an exercise price of 9.187p.  A total of 1,118,000 options were granted to directors, who served during the period; 795,000 to Jonathan Hall at an exercise price of 9.187p and 323,000 to Tony Collyer at an exercise price of 9p.  Further to these, 199,000 options at an exercise price of 9.187p were granted to Equinox Talent Ltd, a company owned by David Yarnton.

The principal assumptions used to calculate the value of options issued for compliance with IFRS 2 "Share Based Payments" are included below where applicable.

	Option life	Weighted average share price	Ordinary shares of £1 each	Share price volatility	Dividend yield	Risk free rate of return
	Years	£	Number	%	%	%
Date of issue
2014 EMI scheme
4 July 2014 (exercise price £90)	1	90.87	323	30	0	2.85
21 July 2014 (exercise price £90)	1	90.87	113	30	0	2.66
21 July 2014 (exercise price £90)	1	90.87	161	30	0	2.66
28 July 2014 (exercise price £90)	1	90.87	323	30	0	2.66
1 September 2014 (exercise price £91.87)	1	90.87	994	30	0	2.38
1 October 2014 (exercise price £91.87)	1	90.87	397	30	0	2.38

The weighted average share price was based on the most recently issued ordinary shares.  The volatility was estimated from the volatility of other similar entities in an early growth phase.

The options noted above vest on exit or subject to the approval of the Board, provided proceeds exceed 21.6p per share.

4.       NET CASH USED IN OPERATING ACTIVITIES

	6 months to 31 December 2014		6 months to 31 December 2013		6 months to 30 June 2014
Cash flows from operating activities
Loss before taxation	(1,392,499)		(583,996)		(345,187)
Depreciation	6,839		973		2,436
Share based payments	27,501		-		8,014
(Increase) in trade and other receivables	(436,059)		104,713		(84,542)
Increase in trade and other payables	137,264		49,724		47,677
Cash used by operating activities	(1,656,954)		(428,586)		(371,602)
Interest paid	-		-		-
Net cash used by operating activities	(1,656,954)		(428,586)		(371,602)

5.       SHARE CAPITAL AND SHARE PREMIUM

		Share Capital	Share Premium		Total
As at 1 July 2014		32,367	1,330,263		1,362,630
New ordinary shares issued		45,478	6,845,087		6,890,565
Costs of fund raising:
Fee shares issued		-	(249,660)		(249,660)
Direct costs of fund raising		-	(496,152)		(496,152)
Reduction of capital		-	(2,750,000)		(2,750,000)
As at 31 December 2014		77,845	4,679,538		4,757,383

The company issued shares to a value of £6,890,565 during the period. The total cost of fundraising activities, including the company's admission to AIM in December 2014 was £745,812, of which £249,660 was settled by way of the issue of fee shares and £496,153 by payments out of funds received.

Of the above amounts, £329,936 related to the conversion of a loan due to Neville Upton and hence did not represent new funds coming into the business. Net funds received during the period therefore amounted to £5,814,817.

6.       RELATED PARTY TRANSACTIONS

On 28 November 2014, Neville Upton, a director and shareholder, converted a loan of £329,978 due to him from the company into ordinary share capital. This conversion took place at the prevailing market rate at the date of conversion of £153.53 per share, prior to the share split of 1,000 ordinary shares for 1 ordinary share on 4 December 2014.

Note 3 provides details of share options issued to certain directors in the period.

 

END

 

 

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