Half-year Results

RNS Number : 6393L

Team17 Group PLC

14 September 2021

 

14 September 2021

Team17 Group plc

("Team17", the "Group" or the "Company")

Half year results

Strengthened portfolio and lifecycle management underpins record H1 performance

Team17 , a global games label, creative partner and developer of independent ("indie") premium video games and developer of educational entertainment ("edutainment") apps for children, is pleased to announce its unaudited interim results for the six months ended 30 June 2021 ("H1 2021").

H1 2021 financial highlights:

· Record revenues up 3% to £40.1m (H1 2020: £38.8m)

· Record Gross profit up 10% to £20.2m (H1 2020: £18.3m)

· Gross profit margin up 3% points to 50% (H1 2020: 47%)

· Record profit before tax up 5% to £14.0m (H1 2020: £13.3m)

· Record adjusted EBITDA* up 9% to £16.2m (H1 2020: £14.9m)

· Earnings per share ("EPS") increased to 8.6 pence (H1 2020: 8.5 pence)

· Adjusted earnings per share** ("AEPS") increased to 9.0 pence (H1 2020: 8.9 pence)

· Operating cash conversion of 108% (H1 2020: 114%) ***

· Net cash and cash equivalents of £66.6m (H1 2020: £50.4m)

H1 2021 operational highlights:

· Solid performance across a strengthening portfolio delivering value through: 

o  Six new title releases across multiple platforms 

o  Existing titles Overcooked! All You Can Eat and Worms Rumble released on additional platforms in March and June respectively

o  Continued lifecycle management with 17 additional new downloadable content (DLC) packages released across 9 titles within the Games Label portfolio

o  Content portfolio now comprises over 500 digital revenue lines spanning across a broad range of genres and platforms

· Ongoing investment to build the team saw headcount increase to 262 from 250 at period end

· Acquired the rights and assets to Golf With Your Friends ("GWYF") in January 2021 for £12m, strengthening Team17's own IP portfolio and offering potential for future franchise development

· Team17 continues to be recognised as a leader in the industry with a number of nominations and awards received in the period including:

o  Queen's Award for Enterprise, International Trade awarded in April this year

o  Narita Boy awarded Best 2D visuals at the Unity Showcase Awards

o  Debbie Bestwick has been awarded the highly prestigious Develop Star Awardwhich will be formally presented later this year

Post Period End & Outlook:

· Acquired StoryToys, a world-class developer and publisher of edutainment apps for the initial cash consideration of US$26.5 million, with a further maximum US$22.5 million payable in cash on delivery of certain targets within three years, creating a new highly complementary edutainment vertical

· Appointment of Michael Pattison as CEO of Team 17's Games Label who joins on 18 October 2021 from Sony Interactive Entertainment where he held a number of Executive positions and brings over 25 years' video games industry experience in Global Brand and Marketing roles

· Strengthened the Group's senior leadership team through the creation of new CEO roles bringing Michael Pattison alongside Emmet O'Neill, CEO of the recently acquired StoryToys, both reporting directly to Debbie Bestwick, Group CEO

· Ongoing assessment of acquisition opportunities, seeking to further strengthen Team17's position as a leading games entertainment company, whilst delivering quality games to our target audiences

· Combination of a solid pipeline of releases and additional new content planned across H2 to maintain solid portfolio growth and lifecycle management, underpins confidence in the Games Label business model

Debbie Bestwick, Chief Executive Officer of Team17 Group, commented:

"Our performance during the first half of this year is a testament to the continued commitment and passion of our teamsters and label partners. I am delighted to report we've been able to continue the trend of delivering improved year on year results specifically considering the corresponding half record set the previous year, which benefitted from the one-off impact of the global pandemic and large swathes of global lockdowns.

"Alongside the acquisition of the GWYF IP in January, the recent acquisition of StoryToys improves the breadth of our offering across the gaming space and brings an exceptional team with additional skill sets into the Group.

"I'm very pleased to share today that we have further strengthened our Games Label team with a very high-profile executive hire in Michael Pattison who joins from Sony Interactive Entertainment as CEO of our Games Label from next month. Alongside Emmet O'Neill, CEO of StoryToys, we are building a truly remarkable senior leadership team to help deliver on our shared vision for the future of the Group.

"Sadly, earlier this year we said goodbye to one of our teamsters, Troy Horton who passed away suddenly and unexpectedly and we'd like to dedicate this year to him and the amazing legacy he leaves within each of us. He was a UK gaming legend but also an inspiration to each and every one of us here at Team17.

"I'd also like to thank our exceptional business partners who over the last 18 months have worked tirelessly to ensure we have delivered our games on time in very challenging times."

*Adjusted EBITDA is defined as operating profit adjusted to add back depreciation of property, plant and equipment, amortisation of brands and impairment of intangible assets (excluding capitalised development costs), share based payment costs (note 4).

** Adjusted EPS is calculated by dividing the adjusted profit after tax by the weighted average number of ordinary shares. This is adjusted for the effect of share options when calculating the diluted adjusted earnings per share (note 5).

*** Operating cash conversion is defined as cash generated from operating activities as per the statement of cash flows, divided by EBITDA.

Enquiries:

Team17 Group plc Debbie Bestwick MBE, Chief Executive Officer Mark Crawford, Chief Financial Officer	via Vigo Consulting
GCA Altium (Nominated Adviser) Adrian Reed / Paul Lines	[phone]
Berenberg (Broker) Chris Bowman / Toby Flaux / Marie Moy / Alix Mecklenburg-Solodkoff	[phone]
Vigo Consulting  (Financial Public Relations) Jeremy Garcia / Fiona Hetherington / Kate Kilgallen team17@vigocon sulting.com	[phone]

About Team17

Team17 is a leading games entertainment label and creative partner for independent ("indie") developers, focused on the premium, rather than free to play market, and creating games for the PC home computer market, the video games console market and the mobile and tablet gaming markets.

Alongside developing the Company's own games in house ("first party IP"), Team17 also partners with independent developers across the globe to add value to their games in all areas of development and production alongside bringing them to market across multiple platforms for fixed percentage royalties ("third party IP").

Since foundation in 1990, we have launched over 100 games, including the iconic Worms franchise, Overcooked and The Escapists franchises, Yooka-Laylee, Yoku's Island Express, My Time at Portia, Hell Let Loose, Blasphemous, Golf With Your Friends, Neon Abyss and Moving Out making Team17 one of the most prolific developers and diverse partners of games for the indie market.

About StoryToys

Team17's wholly owned subsidiary StoryToys, is a leading developer and publisher of educational apps, targeting the pre-school market of children aged two to seven years old.

StoryToys apps have been downloaded over 100 million times across 120 countries, and its edutainment apps are produced in 28 different languages. StoryToys' mission is to create apps for children that engage them in well-rounded activities designed to help them learn, play, and grow, with partners including The Walt Disney Company, The LEGO® Group, Penguin Books, Sesame Workshop, Apple, Amazon and Google. www.storytoys.com

Visit  www.team17.com  for more information

 

OPERATIONAL REVIEW

Introduction

The Group has maintained sales growth across its portfolio in the first half of 2021, surpassing an exceptional period of trading in H1 2020.  The Board is pleased to report that trading for the first six months of this year is in line with expectations, with the business continuing to see demand for games across our portfolio.

In H1 2021, the Group delivered both record revenues of £40.1m (H1 2020: £38.8m) and gross profit of £20.2m (H1 2020: £18.3m), ahead of the corresponding half year records set the previous year, which benefitted from the one-off impact of global lockdowns driving demand for video games as a result of the pandemic.

The back catalogue, with 17 additional new DLC released in the period, delivered revenues totalling £36.4m (H1 2020: £33.5m representing 91% of total revenues (H1 2020: 86%). This revenue was positively impacted by the titles released towards the back end of last year and supported by revenues from the six new titles released in H1 2021. Revenues from own IP rose to £11.4m (H1 2020: £5.4m) driven by the additional contribution from The Survivalists and Worms Rumble, titles launched in the latter part of H2 last year alongside the inclusion of Golf With Your Friends, an own IP title since January 2021.

The Group's portfolio continues to expand, with current digital revenue lines ("DRL") now totalling over 500. We continue to adopt a genre and platform agnostic approach to ensure Team17 is not over reliant on any title or distribution platform.

Adjusted EBITDA in the period increased by 9% to £16.2m (H1 2020: £14.9m), with the adjusted EBITDA margin at 40.3% (H1 2020: 38.4%). The increase in adjusted EBITDA margin was attributed to a higher weighting of own IP revenues.

The effective tax rate increased to 20.1% (H1 2020: 17.4%) which is the result of the effect on deferred tax balances of the announced changes in tax rate to 25% from 1 April 2023.

Moving into H2 2021, the Group has a solid pipeline of game launches scheduled and will also benefit from a full six-month contribution from StoryToys acquired post period end. The Group anticipates the overall revenue profile for 2021 to be second half weighted, reflecting the sales mix and impact of StoryToys.

Team17 remains focused on maintaining the core values of its business model that underpin the growth trajectory and are key to the ongoing success of the Group. To that end, the Group will continue to focus on the following priorities:

· Further expanding and developing our portfolio of titles, including the development and launch of both paid for and free DLC

· Leveraging technology, innovation and new platforms

· Capitalising on the strength of the Games Label model and the Group's unique Game Scouting  process which identifies, assesses, and contracts new IP

· Evaluating selective M&A opportunities that complement the Group's strategy and align with its values

· Continuing to invest in our people and infrastructure, while identifying new creative and commercial talent

The Company continually assesses acquisition opportunities and partnerships. In January 2021, we announced the £12 million acquisition of all rights and assets to GWYF. Team17 had initially announced a partnership with Blacklight Interactive, the developers of GWYF, in June 2019. The acquisition of all rights and assets enables Team17 to build on the success of the game and to explore opportunities to build a franchise with additional paid for and free DLC going forward.

Post-period end, the Group announced the acquisition of StoryToys, a world-class developer and publisher of edutainment apps for children under the age of eight, strengthening Team17's position as a leading games entertainment business. The initial consideration of US$26.5 million (with a further maximum US$22.5 million payable in cash on delivery of certain targets by the vendors within three years) will be funded from Team17's existing cash reserves. The multi-award winning StoryToys boasts over 100 million app downloads to date and has produced apps in partnership with many leading children's brands, including The LEGO® Group, Disney, Pixar, Penguin, Sesame Workshop, Dick Bruna, Warner Bros, Hasbro, and Nickelodeon. StoryToys will operate as a new label within the existing Group alongside the existing Team17 Games Label and, supported by Team17, aims to be the global number one children's edutainment brand for children aged eight and under.

We have also announced today a further strengthening of the Group's senior management team with the appointment of Michael Pattison, who will join as CEO of Team17's Games Label in October 2021. Michael has over 25 years' video games industry experience in a number of Global Brand and Marketing roles. He joins Team17 from Sony Interactive Entertainment where he held a number of Executive positions.

Emmet O'Neill, CEO of StoryToys will continue to head up the Group's edutainment vertical and alongside the recently appointed Michael Pattison, CEO of Team17's Games Label, both will report directly to Debbie Bestwick, Group CEO, creating an extremely talented and experienced leadership team across the Group.

The Group continues to evaluate other M&A opportunities, both to bolster the existing games label, and to establish additional verticals within the Group to further expand its customer reach and skillset, as keenly demonstrated through the acquisition of StoryToys.

In the first six months of 2021, we continued to recruit new team members to build and strengthen our skillset across all our sites. As a result, headcount across all three sites - Nottingham, Wakefield and Manchester - increased to 262 at the end of June 2021 from 250 at year end 2020.

Team17 remains a recognised leader in the industry as a business and through its people and titles, with a number of nominations and awards received during the period. These include the prestigious Queen's Award for Enterprise, International Trade awarded in April this year, Narita Boy, won Best 2D visuals at the Unity Showcase Awards and Debbie Bestwick, Group CEO will collect the highly prestigious Develop Star Awardlater this year.

Market dynamics

The global video games market continues to perform well. A recent report from Newzoo forecasts that the market will generate revenues of just over $175 billion in 2021 - flat when compared to 2020's exceptionally strong year - but will return to growth again to be worth in excess of $200 billion in 2023[1]. Newzoo states that a number of AAA releases have been delayed as a result of the Covid-19 pandemic, with launches initially pencilled for 2021 being pushed to Q1 2022, and a shortage of hardware due to limited stocks of chips and components. These factors have negatively impacted consumer spend, contributing to the flat growth rates in 2021.

Due to Team17's Games label focus on the indie games space, the Group is confident that despite the overall market's flat growth projections for 2021, it will continue to develop successful games, and additional DLC to engage and captivate our target audiences. Furthermore, the acquisition of StoryToys demonstrates that the Group is seeking to diversify and expand its customer base, and thereby reduce its dependence on any single vertical within the broader games market.

H1 2021 Releases

Team17 launched six new titles in the first half of the year, alongside additional DLC across multiple titles and platforms, including:

· Rogue Heroes launched in February on PC and Nintendo Switch™

· Narita Boy launched in March on PC, PlayStation® 4, Nintendo Switch™ and Xbox One

· Before We Leave launched in May on PC

· King of Seas launched in May on PC, Nintendo Switch™, PS4 and Xbox One

· Hokko Life launched in June into Early Access on Steam

· Super Magbot launched in June on PC and Nintendo Switch™ in June 2021

Alongside the new titles, Overcooked! All You Can Eat was launched in March across Nintendo Switch™, PlayStation® 4, Xbox One and Steam and Worms Rumble launched on Nintendo Switch™ in June.

H2 2021 Releases

The Group has announced a pipeline of new games tabled for launch in H2 2021, with Hell Let Loose already launched out of Early Access in July 2021 and will release on console in October on PlayStation® 5 and Xbox X/S. In addition, Greak: Memories of Azur launched in August on PC, Nintendo Switch™, Xbox X/S, PlayStation® 5 and the Group also plans to launch the following new title releases in H2:

· Honey I Joined a Cult - funky '70's inspired cult simulation

· Epic Chef- humorous, cook/craft story driven

· Sheltered 2 - survival management simulator set in a post-apocalyptic wasteland.

· The Unliving - rogue-lite action RPG game

· Thymesia - gruelling action RGP, intricate plague weapon system

· Age of Darkness - RTS colony management game

Alongside this ambitious pipeline of new IP launches, Team17 will also continue to develop additional DLC for its existing portfolio of titles. For example, the Company has already released additional DLC for Overcooked! All You Can Eat in August 2021, in time for the fifth anniversary of the launch of the highly successful Overcooked! franchise.

StoryToys will continue to support its existing content portfolio of key titles including LEGO® DUPLO® WORLD, Disney Colouring World and Hungry Caterpillar Play School with regular updates and also has an exciting line up of new content releases as well as opportunities for new IP licensing partnerships.

Current trading and outlook

The Group has entered H2 2021 with confidence from a solid start to the year driven by a strengthening portfolio benefitting from the launches of new titles towards the end of last year and complemented by the launch of new titles in H1 2021 alongside additional DLC released to support the back catalogue lifecycle management. Our first half performance has been a true testament to our teams, delivering against a backdrop of an exceptionally strong pandemic driven H1 2020, which gives the Board continued confidence for the remainder of the year and beyond.

Furthermore, the Group will benefit in H2 from the contribution following the recent acquisition of StoryToys. The acquisition represents an exciting new chapter for Team17, which significantly broadens the scope of the Group's existing portfolio and introduces an additional vertical, reinforcing the Group's position as a leading games entertainment business.

We look forward to continuing to support our global development partners as we deliver on our ambitious pipeline, and look forward to working alongside the StoryToys team to achieve our joint ambitions.  

Debbie Bestwick MBE

Chief Executive Officer

14 September 2021

 

Condensed Consolidated Statement of Comprehensive Income

		Unaudited Six months ended 30 June 2021	Unaudited Six months ended 30 June 2020	Audited Year ended 31 December 2020
	Note	£'000	£'000	£'000
Revenue	3	40,110	38,777	82,969
Cost of sales		(19,921)	(20,445)	(43,823)
Gross profit		20,189	18,332	39,146
Gross profit %		50.3%	47.3%	47.2%
Administrative expenses		(6,188)	(5,057)	(12,979)
Operating profit		14,001	13,275	26,167
Finance income		7	81	112
Finance cost		(20)	(22)	(43)
Profit before tax		13,988	13,334	26,236
Taxation		(2,808)	(2,317)	(4,292)
Profit and total comprehensive income attributable to shareholders		11,180	11,017	21,944
Basic earnings per share	5	8.6 Pence	8.5 Pence	17.0 Pence
Diluted earnings per share	5	8.6 Pence	8.5 Pence	16.8 Pence
Basic adjusted earnings per share	5	9.0 Pence	8.9 Pence	18.2 Pence
Diluted adjusted earnings per share	5	8.9 Pence	8.9 Pence	18.1 Pence

All results relate to continuing activities.

Condensed Consolidated Statement of Financial Position

		Unaudited 30 June 2021	Unaudited 30 June 2020	Audited 31 December 2020
	Note	£'000	£'000	£'000
ASSETS
Non-current assets
Goodwill	6	22,379	22,379	22,379
Brands	6	24,764	15,147	14,255
Development costs	6	7,207	5,895	6,287
Property, plant and equipment		1,432	1,457	1,353
Right of use assets		1,311	1,446	1,378
		57,093	46,324	45,652
Current assets
Trade and other receivables		11,400	12,111	16,430
Tax receivables		257	378	670
Cash and cash equivalents		66,591	50,375	61,470
		78,248	62,864	78,570
Total assets		135,341	109,188	124,222
EQUITY AND LIABILITIES
Equity
Share capital		1,315	1,315	1,315
Share premium		44,084	44,084	44,084
Merger reserve		(153,822)	(153,822)	(153,822)
Other reserves		159,296	159,296	159,296
Retained earnings		64,020	41,130	52,476
Total equity		114,893	92,003	103,349
Non-current liabilities
Lease liabilities		1,247	1,393	1,320
Provisions		91	41	76
Deferred tax liabilities		2,631	2,819	2,126
Total non-current liabilities		3,969	4,253	3,522
Current liabilities
Trade and other payables		16,334	12,789	17,206
Lease liabilities		145	142	145
Current tax liabilities		-	-	-
Total current liabilities		16,479	12,931	17,351
Total liabilities		20,448	17,185	20,873
Total equity and liabilities		135,341	109,188	124,222

Condensed Consolidated Statement of Changes in Equity

		Share capital	Share premium	Merger reserve	Other reserves	Retained earnings	Total
Six months to 30 June 2020	Note	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2020 (audited)		1,313	44,084	(153,822)	158,864	29,710	80,149
Share based compensation		-	-	-	-	403	403
Issue of shares on acquisition of subsidiaries		2	-	-	432	-	434
Total transactions with owners recognised directly within equity		2	-	-	432	403	837
Profit and total comprehensive expense for the period		-	-	-	-	11,017	11,017
Balance at 30 June 2020 (unaudited)		1,315	44,084	(153,822)	159,296	41,130	92,003
Six months to 31 December 2020
Balance at 1 July 2020 (unaudited)		1,315	44,084	(153,822)	159,296	41,130	92,003
Share based compensation		-	-	-	-	419	419
Total transactions with owners recognised directly within equity		-	-	-	-	419	419
Profit and total comprehensive income for the period		-	-	-	-	10,927	10,927
Balance at 31 December 2020 (audited)		1,315	44,084	(153,822)	159,296	52,476	103,349

Six months to 30 June 2021
Balance at 1 January 2021 (audited)		1,315	44,084	(153,822)	159,296	52,476	103,349
Share based compensation		-	-	-	-	364	364
Total transactions with owners recognised directly within equity		-	-	-	-	364	364
Profit and total comprehensive income for the period		-	-	-	-	11,180	11,180
Balance at 30 June 2021 (unaudited)		1,315	44,084	(153,822)	159,296	64,020	114,893

Condensed Consolidated Statement of Cash Flows

		Unaudited Six months ended 30 June 2021	Unaudited Six months ended 30 June 2020	Audited Year ended 31 December 2020
	Note	£'000	£'000	£'000
Operating activities
Profit before tax		13,988	13,334	26,236
Adjustments for:
Depreciation of property, plant and equipment		198	203	404
Depreciation of right-of-use assets		68	67	135
Amortisation of intangible fixed assets	6	4,236	1,636	5,812
(Profit)/loss on disposal of fixed assets		(10)	-	24
Share-based compensation		364	403	822
Finance income		(7)	(81)	(112)
Financial expenses		20	22	43
Decrease/(increase) in trade and other receivables		5,030	(588)	(4,908)
(Decrease)/increase in trade and other payables		(3,872)	2,340	6,908
Increase in provisions		16	15	50
Cash generated from operating activities		20,031	17,351	35,414
Tax paid		(1,890)	(4,164)	(7,125)
Net cash inflow from operating activities		18,141	13,187	28,289
Cash flow from investing activities
Acquisition of subsidiaries (net of cash acquired)		-	(664)	(813)
Purchase of property, plant and equipment		(280)	(173)	(338)
Purchase of Intellectual Property	6	(9,000)	-	-
Sale of property, plant and equipment		10	-	43
Capitalisation of development costs	6	(3,665)	(3,836)	(7,512)
Interest received		7	81	112
Net cash outflow from investing activities		(12,928)	(4,592)	(8,508)
Cash flow from financing activities
Interest paid		(20)	(22)	(43)
Repayment of lease liabilities		(72)	(51)	(121)
Net cash outflow from financing activities		(92)	(73)	(164)
Net increase in cash and cash equivalents		5,121	8,522	19,617
Cash and cash equivalents at beginning of period		61,470	41,853	41,853
Cash and cash equivalents at end of period		66,591	50,375	61,470

Notes to the Condensed Consolidated Interim Financial Statements

1. Nature of operations and general information

Team17 Group PLC and its subsidiaries (The Group) are a global games label, creative partner and developer of independent ("indie"), premium video games.

2. Basis of preparation

These condensed consolidated interim financial statements have been prepared in accordance with the AIM rules and UK adopted IAS 34 "Interim Financial Reporting". The condensed consolidated interim financial statements for the 6 months ended 30 June 2021 should be read in conjunction with the financial statements of Team17 Group Plc for the year ended 31 December 2020 (the "Prior year financial statements") which includes the financial results of the group prepared in accordance with International Financial Reporting Standards (IFRSs) in conformity with the requirements of the Companies Act 2006 and IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. In the year to 31 December 2021 the annual financial statements will be prepared in accordance with IFRS as adopted by the UK Endorsement Board and that this change in basis of preparation is required by UK company law for the purposes of financial reporting as a result of the UK's exit from the EU on 31 January 2020 and the cessation of the transition period on 31 December 2020. This change in basis does not have any impact on recognition, measurement or disclosure between the two frameworks and does not constitute a change in accounting policy but rather a change in framework which is required to ground the use of IFRS in company law.

The report of the auditors for the prior year financial statements for the year ended 31 December 2020 was unqualified, did not contain an emphasis of matter paragraph and did not include a statement under Section 498 of the Companies Act 2006. The Group's condensed consolidated interim financial statements is not audited and does not constitute statutory financial statements as defined in Section 434 of the Companies Act 2006. These condensed consolidated interim financial statements were approved for issue on 14 September 2021.

Going concern

Management has produced forecasts that have also been sensitised to reflect plausible downside scenarios as a result of the COVID-19 pandemic and its impact on the global economy, which have been reviewed by the directors. These demonstrate the Group is forecast to generate profits and cash in the year ending 31 December 2022 and beyond and that the Group has sufficient cash reserves to enable the Group to meet its obligations as they fall due for a period of at least 12 months from the release of these results.

As such, the directors are satisfied that the Group has adequate resources to continue to operate for the foreseeable future. For this reason they continue to adopt the going concern basis for preparing this interim report. 

Accounting policies

The Group's principal accounting policies used in preparing this information are as stated on pages 51 to 59 of the prior year financial statements. There has been no change to any accounting policy from the date of the prior year financial statements. A review of the capitalisation and amortisation accounting policies is currently underway recognising the changing nature of the games sector.

3. Segmental information

For management purposes the Group is considered to comprise only one segment for reporting to the chief operating decision maker, that of the development and publishing of video games for the digital and physical market. However the following information is voluntarily disclosed.

Revenue by Third Party/Own IP:

	Unaudited Six months ended 30 June 2021	Unaudited Six months ended 30 June 2020	Audited Year ended 31 December 2020
	£'000	£'000	'000
Own IP	11,338	5,431	17,310
Third Party IP	28,772	33,346	65,659
	40,110	38,777	82,969

4. Adjusted EBITDA calculation

		Unaudited Six months ended 30 June 2021 £'000	Unaudited Six months ended 30 June 2020 £'000	Audited Year ended 31 December 2020 £'000
Profit attributable to shareholders		11,180	11,017	21,944
Share based compensation		433	459	1,662
Adjusted earnings		11,613	11,476	23,606
Taxation		2,808	2,317	4,292
Finance income		(7)	(81)	(112)
Finance cost		20	22	43
Amortisation of brands intangible asset		1,491	892	1,784
Depreciation		266	270	535
Adjusted EBITDA		16,191	14,896	30,148

5. Earnings per share

The calculation of the basic earnings per share is based on the profits attributable to the shareholders of Team17 Group plc divided by the weighted average number of shares in issue. The weighted average number of shares takes into account treasury shares held by the Team17 Employee Benefit Trust. The diluted earnings per share uses the same calculation however the number of shares in issue are adjusted to include shares considered to be dilutive under the treasury stock method. An option is considered to be dilutive when the total proceeds per option is less than the average share price for the period. At 30 June 2021, 972,727 (30 June 2020: 243,182, 31 December 2020: 972,727) outstanding share options had met the required performance criteria.

		Unaudited Six months ended 30 June 2021	Unaudited Six months ended 30 June 2020	Audited Year ended 31 December 2020
Profit attributable to shareholders £'000		11,180	11,017	21,944
Weighted average number of shares		129,431,328	129,360,382	129,398,375
Weighted average diluted number of shares		130,404,055	129,431,178	130,607,624
Basic earnings per share (pence)		8.6	8.5	17.0
Diluted earnings per share (pence)		8.6	8.5	16.8

The calculation of adjusted earnings per share is based on the profit attributable to shareholders as shown in the Statement of Comprehensive Income plus additional costs added back during the year as shown in note 4. The weighted average diluted number of shares includes share options considered to be dilutive under the treasury stock method as described above.

		Unaudited Six months ended 30 June 2021	Unaudited Six months ended 30 June 2020	Audited Year ended 31 December 2020
Adjusted earnings £'000		11,613	11,476	23,606
Weighted average number of shares		129,431,328	129,360,382	129,398,375
Weighted average diluted number of shares		130,404,055	129,431,178	130,607,624
Adjusted basic earnings per share (pence)		9.0	8.9	18.2
Adjusted diluted earnings per share (pence)		8.9	8.9	18.1

6. Intangibles

		Development costs £'000	Brands £'000	Goodwill £'000	Total £'000
Cost
At 1 January 2020 (audited)		13,830	21,983	21,083	56,896
Additions		3,836	-	1,296	5,132
At 30 June 2020 (unaudited)		17,666	21,983	22,379	62,028
Additions		3,676	-	-	3,676
At 31 December 2020 (audited)		21,342	21,983	22,379	65,704
Additions		3,665	12,000	-	15,665
At 30 June 2021 (unaudited)		25,007	33,983	22,379	81,369
Amortisation
At 1 January 2020 (audited)		11,027	5,944	-	16,971
Additions		744	892	-	1,636
At 30 June 2020 (unaudited)		11,771	6,836	-	18,607
Additions		3,284	892	-	4,176
At 31 December 2020 (audited)		15,055	7,728	-	22,783
Additions		2,745	1,491	-	4,236
At 30 June 2021 (unaudited)		17,800	9,219	-	27,019
Net Carrying Amount
At 30 June 2021 (unaudited)		7,207	24,764	22,379	54,350
At 31 December 2020 (audited)		6,287	14,255	22,379	42,921
At 30 June 2020 (unaudited)		5,895	15,147	22,379	43,421
At 1 January 2020 (audited)		2,803	16,039	21,083	39,925

Acquisition of Golf With Your Friends

On 4 January 2021, Team 17 Digital acquired the Golf With Your Friends IP from Entertainment Holdings Pty Ltd a company incorporated in Australia for £12m. This consideration is made up of an initial cash payment of £9m and deferred cash consideration of £3m due within 12 months of the acquisition date. The purchase is not being accounted for as a business combination under IFRS 3 due to the assets being acquired comprising a single group of assets under the concentration test as set out in "Definition of a Business (Amendments to IFRS 3)" by the IASB issued in October 2018. As such the acquisition is considered an asset purchase under "Intangible Assets" IAS 38.

Goodwill
The Group tests for impairment every six months, or more frequently if there are indicators that goodwill might be impaired.

7. Post Balance Sheet Events

On 2 July 2021 Team17 Group Plc acquired 100% of the issued shares in Touch Press Inc. trading as StoryToys for an initial consideration of $26.5m, (£22.8m) with a further maximum $22.5m payable in cash on delivery of certain targets being met within three years following completion of the Acquisition.

StoryToys is a world-class developer and publisher of edutainment apps for children, and the Acquisition establishes a new highly complementary and fast growing edutainment vertical for Team17, strengthening the enlarged Group's position as a leading games entertainment business.

Following the acquisition the Group are assessing the accounting under IFRS3 'Business Combinations' and hence the fair values of assets acquired have not been disclosed and the details will be presented in the December 2021 financial statements.

 

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[1]https://newzoo.com/insights/articles/global-games-market-to-generate-175-8-billion-in-2021-despite-a-slight-decline-the-market-is-on-track-to-surpass-200-billion-in-2023/

 

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