Gfinity plc
Annual Report &
Financial Statements
2019
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GFINITY plc | Annual Report & Financial Statements 2019 2
GFINITY plc | Annual Report & Financial Statements 2019 Contents
STRATEGIC REPORT
Directors, Secretary and Advisers
Period Highlights
Gfinity At A Glance
Executive Chairman’s Report
Chief Financial Officer’s Report
Principal Risks and Uncertainties
GOVERNANCE
Corporate Governance Report
Board of Directors
Board Composition and Performance
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
FINANCIAL STATEMENTS
Independent Auditor’s Report
Group Statement of Profit and Loss
Group Statement of Comprehensive Income
Group Statement of Financial Position
Company Statement of Financial Position
Group Statement of Changes in Equity
Company Statement of Changes in Equity
Group Statement of Cash Flows
Company Statement of Cash Flows
Notes to the Financial Statements
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GFINITY plc | Annual Report & Financial Statements 2019
Annual Report & Financial Statements 2019
STRATEGIC REPORT
GFINITY plc | Annual Report & Financial Statements 2019
STRATEGIC REPORT
Directors, Secretary and Advisers
The Board of Directors
Garry Cook
(Executive Chairman)
Legal Advisers
Corporate
Fladgates
Graham Wallace
(Global Chief Operating Officer)
16 Great Queen Street
London WC2B 5DG
Commercial
Onside Law
642A Kings Road
Fulham
London SW6 2DU
Registrars
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Financial Public Relations
Teneo
5th Floor, 6 More London Place
London SE1 2DA
Registered Number
08232509
Neville Upton
(Founder)
Jonathan Hall
(Chief Financial Officer)
John Clarke
(Global Brand and Marcomms Officer)
Preeti Mardia
(Non-Executive Director)
Andy MacLeod
(Non-Executive Director)
Company Secretary
Jonathan Hall
Registered Office
35 New Bridge Street
London EC4V 6BW
Nominated Adviser
and Broker
Allenby Capital Ltd
5 St Helen’s Place,
London EC3A 6AB
Independent Auditors
Rees Pollock
Chartered Accountants
35 New Bridge Street
London EC4V 6BW
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GFINITY plc | Annual Report & Financial Statements 2019 STRATEGIC REPORT
Period Highlights
“Strong revenue growth driven
by strategic partnerships and
new account wins”
£7.9m
Revenue
Financial highlights
■ Revenue growth of above 80% for the second
consecutive year
■ Gross profit of £1.0m (2018: loss of £3.4m), driven by
strategic focus on delivery of higher margin esports
solutions for key partners
■ Demonstration of good operating leverage with opex
relatively stable despite rapid growth in the business
■ Reduction of 30% in adjusted operating loss1 to £8.6m
with further reductions expected in 2019/20 financial year
■ Net cash of £0.6m at year end, supplemented by
completion of £5.25m capital raise in July
■ Robust pipeline of new opportunities
■ On track to reach breakeven Adjusted EBITDA2 target
by 2021
Business Highlights
■ Refocused business on Strategic Client Management
model
■ Strengthened leadership team bringing expertise to
maximise opportunities with all key stakeholder groups
■ Continued growth in strategic partnerships with largest
games publishers
– Appointed by Activision Blizzard to host Call of Duty
World League.
– Hosted five events for EA Sports as part of the EA
SPORTS FIFA 19 Global Series
– Renewed partnership with Formula 1 to deliver
Season 3 of the F1 New Balance Esports Series
■ Selected by new strategic partners cementing Gfinity’s
position as a leading provider of unique esports solutions
– Appointed by the Premier League to become the
Tournament Operator of the inaugural ePremier
League
–
Selected by TRUXTUN Capital to be the primary
consulting and programme management partner for
the Esports Wega World Cup 2022.
– HP’s gaming brand HP Omen selected Gfinity as
the production partner for esports show The Esports
Report, Season 2
– Engaged by IndyCar to provide strategic consultancy
in development of esports
82.3%
Revenue Growth
£1.0m
Gross Profit
30%
Reduction
in adjusted
operating loss
On track
to meet
targets
Post-Period Highlights
■ Continued selection of Gfinity by world’s biggest brands
to provide unique esports solutions
–
Selected to partner with Amazon to design, develop
and deliver The Twitch Prime Crown Cup, a global
celebrity gaming exhibition
– Reappointed by the Premier League as Tournament
Operator for the second ePL
–
Selected as production partner by Formula 1 to create
an online TV show “Making of an esports champion”
■ Rapid growth of Gfinity’s unique community organically
reaching more than 20 million gamers, generating new
recurring revenue streams
■ Successful completion of £5.25m capital raise in July to
fund future growth and strengthen commercial capabilities
1
2
Adjusted operating loss is before interest, tax, depreciation, amortisation, impairment and the share-based payment expense.
Adjusted EBITDA is earnings before interest, tax, depreciation, impairment, amortisation and the share-based payment expense.
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GFINITY plc | Annual Report & Financial Statements 2019 STRATEGIC REPORT
Gfinity At A Glance
About Gfinity
Gfinity 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
to provide both 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.
Partnerships 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 knock out competitions.
What we do
Esports Solutions
Creating long term, new business verticals in the virtual world
Our Approach
Strategic Client Management
Design; Develop; Deliver
What We Deliver
Online/offline
competitions
Tournament
Live &
ancillary
content
Competitive
gaming
entertainment
Build
community &
engagement
Advisory
services
Our Difference
Holistic
solution
development
Consumer
insights
Proprietary
tech platform
Tribe
World class
production
Long term
value creation
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GFINITY plc | Annual Report & Financial Statements 2019 Growth of esports
2.2 Billion
People globally who
play video games
395 Million
Global number of
players & enthusiasts
in 2018
737
The number of major
global Esports events
in 2018
$151 Million
Prize money broke $150
million mark for the
first time in 2018
$1.80 Billion
Projected Esport
revenue by 2022
32%
Global Esports revenue
increase duing 2018
Source: Newzoo Global Esports Market Report 2019
Uniquely positioned
Gfinity’s value is unparalleled in creating
compelling experiences for next generation of
digital consumers. The fragmented ecosystem
requires end-to-end esports solutions to build
large sustainable new revenue streams.
Publishers
Esports platform and expertise that
drives engagement and profitability
Media
Access to proven esports and
entertainment formats engaging
a young audience
Sports Rights Holders
Solutions that future proof franchise,
connecting with valuable and hard
to reach demographics
Consumers
Ability to play, compete, be part
of communities, and be entertained
by engaging content
Brands
Solutions that deliver memorable
experiences and connects hard to
reach younger consumers
Publishers
Media
Sports
Rights
Holders
Consumers
Brands
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GFINITY plc | Annual Report & Financial Statements 2019 STRATEGIC REPORT
Executive Chairman’s Report
“Gfinity is uniquely
positioned in the gaming
community and has proven
itself to be a trusted partner”
In the past 12 months we have confirmed
Gfinity’s position as a leading international
esports business and trusted independent
partner of some of the world’s leading
publishers, rights holders and brands. The
esports and competitive gaming sector
has continued to grow. Its complexity and
fragmented nature mean it is a consumer
market like no other. Gfinity is uniquely
positioned in the gaming community and
has proven itself to be a trusted provider
in the fragmented esports ecosystem,
designing, developing and delivering
tailored esports solutions that are helping
to create long-term, new business verticals
in the virtual world for its clients and
partners.
During the year the Company’s leadership
team has refocused the business around
a Strategic Client Management model
which has helped build a robust pipeline
of new commercial opportunities, whilst
at the same time enabling us to deepen
relationships with a number of our strategic
partners. This revamped growth strategy
has delivered a solid financial performance
with revenue growth of over 80% for the
second year in a row and the focus on
higher margin business and discipline
on costs, has contributed to a 30%
improvement in the adjusted operating
loss.
In what has been an incredibly busy
year, we have performed in line with our
expectations and remain confident that the
Company is well on the way to its stated
target of breakeven Adjusted EBITDA
by 2021.
The consumer always decides
There are currently 2.2 billion gamers
globally. Roughly 900 million of them are
what we call engaged gamers. These are
male and female players, predominantly
under the age of 35 and who love esports
and competitive gaming. This is not a
homogenous group. They have different
aspirations and motivations. They play and
consume content at a level that surpasses
anything seen before in traditional sports.
In recent months we have invested in
and deepened our understanding of
this young and typically hard to reach
group, developing proprietary gamer
segmentation profiles. In the hands of our
in-house gamer experts this is enabling
us to deliver insight led and targeted
solutions for our partners and clients.
The hard to reach young gamer
We have seen the next wave of investment
into the gaming segment coming from
non-endemic brands. Global, household
names who see competitive gaming as
the answer to their business need to
find a younger consumer base and give
themselves a platform for future growth.
They are looking for a trusted partner to
help them navigate this new and exciting
opportunity. Gfinity’s value is unparalleled
in creating compelling experiences for this
next generation of digital consumers. The
fragmented esports ecosystem creates
an opportunity for end-to-end esports
solutions that can build large sustainable
Garry Cook
Executive Chairman
19 October 2019
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GFINITY plc | Annual Report & Financial Statements 2019 new revenue streams. Gfinity’s unique
position at the centre of this means that
we are ideally placed to provide these
solutions.
Our evolving business model
Over the last year we started to evolve
our financial model from one dominated
by service provision, where Gfinity is
contracted to create a solution which
the business client then monetises, to a
broader Partnership Model. This is where
Gfinity and partners own or co-own a
solution, create IP and then monetise it,
sharing the commercial rights. Over time
this model will become a key offering and
contribution to the group. We have also
seen a significant increase in the demand
for Gfinity’s advisory services and the
growth in our community building is also
going to open up multiple new, recurring
revenue streams.
Growth in strategic partnerships
We have deepened the relationships
we have built over a number of years
and delivered some memorable events.
Activision Blizzard brought Call of Duty
World League back to London and hired
Gfinity to deliver what turned out to be
one of the most talked about esports
events the UK has ever seen, with sold
out signs at the Copper Box Arena, epic
game play and an electric atmosphere
generated by thousands of fans. EA Sports
chose Gfinity to host five events as part of
EA SPORTS FIFA 19 Global Series. While
for Formula 1 we completed Season 2 of
the Formula 1 Esports Series and we have
been reappointed for Season 3.
Adding new strategic partners
Gfinity’s uniquely strong reputation
has led to us securing a number of
new partnerships. The Premier League
appointed Gfinity as Tournament Operator
of the inaugural ePremier League. It
proved to be a major success, helped
by the first ever final in March being
contested by Liverpool and Manchester
United. We also entered into a partnership
with TRUXTUN Capital to be the primary
consulting and programme management
partner for the Qatar Esports WEGA
Global Games. This promises to be an
amazing series of events that is going
to further extend the reach of top-level
gaming across the globe. We were also
appointed by HP Omen as production
partner for The Esports Report Season
2, which spanned six episodes and has a
worldwide reach.
Gfinity’s growing gamer
community and media assets
To deliver smart and effective esports
solutions it was clear that we would benefit
from building a robust community. In April
2018 Gfinity acquired RealSport101, a
dynamic news portal covering multiple
sports, traditional and virtual. During the
year we refocused the RealSport101 web
and social channels 100% on esports news
and features, adding writers, broadening
the games covered and serving content
at optimum times for both the UK and US
markets. Concurrently we have expanded
the reach of gfinityesports.com and its
social channels. Gfinity now has a large and
growing community and features in the
daily news and entertainment gathering
habits of millions of esports fans. It is now
a credible and valuable Media Distribution
Channel, reaching over 20 million gamers,
creating new, scalable and recurring
revenue streams. From ad serving to site
takeovers and content sponsorships,
publishers and brands now have a dynamic
route to reach and engage with young
gamers. In addition, our gamer community
enables us to continually stay on top of
trends, allowing us to create even more
focused solutions for our clients and
partners.
Elite Series
Over the last few months we took the
decision to review the Elite Series, to
relook, reimagine and relaunch it when
we have a model that delivers on the
strict financial metrics that we have set
ourselves. The Elite Series delivered
significant value to the business,
showcasing our tournament and content
creation abilities and driving multiple new
commercial relationships. It also became a
creative hot house that allowed us to trial
formats that had never been seen before,
a number of which have now become
common practice for publisher-driven
global esports programmes. We plan to
re-launch the Elite Series with a new format
when we have finalised the proposition
that works for all stakeholders.
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GFINITY plc | Annual Report & Financial Statements 2019 Investing in talent
Gfinity has an outstanding team of gaming
experts and professionals. In the last year
we complemented the existing team
with the appointment of two seasoned
professionals in Graham Wallace as
Global Chief Operating Officer and John
Clarke as Global Brand and Marcomms
Officer. We have continued to add talent
that now gives us a unique blend of
capabilities across gaming, technology,
production, marketing, community
building, commercial and operations.
This broad skill set makes us invaluable to
any organisation looking to connect with
young gamers. In April we brought the
Gfinity family under one roof, moving to
an open plan office in Hammersmith that
facilitates collaboration and co-creation.
We see the benefits of this move on a
daily basis.
CSR
We are delighted to have been able
to once again support the Digital
Schoolhouse Esports Tournament initiative.
It is inspiring to see young people come
together around gaming, to compete,
to socialise and to grow. Negative
stereotypes continue to exist around
gaming but when you see young people
taking part in this project you can see
how gaming can be a force of good in our
communities. We are exploring ways to
take our partnership to another level and
utilise gaming to assist those children who
are currently underachieving at school.
Outlook
We made good progress in the last year
and the Company’s strategic plan is now
well embedded in the business. Our
focus on a Strategic Client Management
model has enabled us to deepen existing
relationships and build a robust pipeline
of exciting new opportunities. We are on
the pathway to breakeven on an Adjusted
EBITDA3 basis within the next two years
and continue to target a long-term group
gross margin of 30-40% and an Adjusted
EBITDA margin in the range of 15-25% on
a normalised basis.
In closing
Gaming is an integral part of the way
young people now live their lives.
Digitisation has changed the way they
socialise and engage. They have said
no to passive entertainment and yes to
interactive entertainment. I am excited
about what the future holds and the
positive role that Gfinity is playing, and
will continue to play, in igniting an esports
revolution. Our business is at an inflection
point. We are at the epicentre of the
fragmented esports ecosystem, trusted to
deliver high impact esports solutions to an
ever-growing list of organisations looking
to connect with young gamers. After a
year of great progress and with exciting
opportunities ahead, I would like to say
thank you to our partners for their support
and to all the Gfinity team for their passion
for what they do. I am inspired daily.
“We are at the epicentre of the
fragmented esports ecosystem, trusted
to deliver high impact esports solutions
to an ever-growing list of organisations
looking to connect with young gamers”
3
Adjusted EBITDA is earnings before interest, tax, depreciation, impairment, amortisation and the share-based payment expense.
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GFINITY plc | Annual Report & Financial Statements 2019 13
GFINITY plc | Annual Report & Financial Statements 2019 STRATEGIC REPORT
Chief Financial Officer’s Report
“Revenue of £7.9m represented a
year on year increase of over 80%
for a second consecutive year”
Summary
The year to 30 June 2019 was a period
of strong growth for the business. I am
pleased to be able to report on an 82%
increase in revenue, a move to a gross
profit position and good cost discipline.
Overall this has enabled us to deliver
a 30% improvement in the adjusted
operating losses.
Revenue of £7.9m (2018: £4.3m)
represented a year-on-year increase
of over 80% for a second consecutive
year, reflecting both the value of our
investments in people, products and
technology in recent years and the
strength of our strategic account
relationships with a blue chip client base,
who continue to look to Gfinity for their
esports solutions.
Revenue growth and an improved product
mix delivered a gross profit of £1.0m
(2018: loss of £3.4m), driven by the growth
in strategic partnership solutions, coupled
with a reduced investment in Gfinity
owned content. Notwithstanding the 82%
revenue growth and a £4.5m improvement
at a gross profit level, administrative
expenses (adjusted to remove the impact
of certain non-cash items, specifically
the share option charge, depreciation,
amortisation and impairment of intangible
assets) increased by 10%, to £9.6m. This
increase reflected the full year impact of
cost increases during the previous financial
year, with expenses remaining flat on a
month on month basis throughout the year
to 30 June 2019. This demonstrates the
strong operating leverage capability in the
business.
Year-end cash of £0.6m (2018: £3.7m) was
in-line with expectations and was boosted
by strong cash collection following the
year end. This was supplemented at the
end of July 2019 by the completion of an
oversubscribed fundraise, raising a further
£5.25m (gross) with strong support from
both new and existing investors, leaving
the business well positioned as it moves
into the 2019/20 financial year.
Revenue and cost of sales
Revenue of £7.9m represented another
year of strong growth, driven principally
by growth in both the size and number
of Gfinity’s strategic client relationships.
While relationships with existing major
partners, including Microsoft, EA Sports
and F1 continued to build, we were also
delighted to commence new programmes
with Premier League, IndyCar and
TRUXTUN Capital. The new programmes
with IndyCar and TRUXTUN Capital
demonstrate Gfinity’s capability to deliver
strategic consultancy programmes around
the esports sector. The consultancy
programme is a higher margin revenue
stream, which we expect to grow
significantly through the 2019/20 financial
year and in the medium-term and we
expect it to contribute approximately 10%
of group revenues over time.
Revenue from Gfinity Elite Series grew 89%
to £1.5m, with the net investment required
reducing significantly to £0.4m, reflecting
Jonathan Hall
Chief Financial Officer
19 October 2019
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GFINITY plc | Annual Report & Financial Statements 2019 (gross) with strong support from both new
and existing investors, leaving the business
well positioned going into the 2019/20
financial year.
Financial outlook
Our results represent a significant step
along the path towards the Company’s
target of reaching our breakeven Adjusted
EBITDA target by 2021..
Strong revenue growth at an improving
gross margin is expected to continue,
driven by:
■ The development of the Company’s
strategic consultancy programme;
■ Sponsorship and advertising relating
to Gfinity’s rapidly growing gamer
community;
■ Continuing growth in the esports
solutions business with major strategic
accounts; and
■ Growth in the value of shared
commercial rights attached to these
esports programmes, as more and
more brands, rights holders, publishers
and media companies seek to reach
the growing audience of esports
consumers.
Administrative expenses will remain tightly
controlled, meaning that this improving
gross profit will pass through to the bottom
line.
The Company continues to target a long-
term group gross margin of 30-40% and an
Adjusted EBITDA margin in the range of
15-25% on a normalised basis.
both the increase in revenue and the fact
that only one season was delivered during
the year, compared to three in the prior
year. This product has gained significant
traction in the industry, however, over the
past two years it has also drawn on a lot
of resources from Gfinity’s business. We
are currently looking at restructuring this
property, with a view to relaunching it in a
revised format, with stronger commercial
performance.
Revenue from esports programmes with
our strategic partnerships also grew
strongly in the year, increasing 81% to
£6.4m, delivering gross profit of £1.4m
at a margin of 21.9%. This margin was
strengthened during the year through
the inclusion of Gfinity’s first strategic
consultancy projects. It also included an
increasing proportion of programmes
in which Gfinity retained a share of the
commercial rights to the programmes,
alongside a simple delivery fee.
Over the next two years we expect gross
margins to strengthen significantly, driven
by the growth in strategic consultancy
income, a strengthening of the margins
across our service delivery work, growth
in value of the commercial rights for our
esports programmes and the increase in
advertising and sponsorship income for
access to the rapidly growing Gfinity and
RealSport communities. In the medium-
term, we expect gross margins to achieve a
target blended level of 35%-40%.
Administrative Expenses
Administrative expenses, excluding non-
cash items4, amounted to £9.6m (2018:
£8.8m). This 10% year-on-year increase
is relatively low in the context of revenue
growth of 82%, demonstrating the
scalability of the current business and also
a reprioritisation of resources throughout
the year to the areas driving the greatest
value. The small increase reflects the
full year impact of the uplift seen during
2017/18, which itself was driven by the
targeted recruitment of certain high
calibre individuals. Actual underlying
administrative expenses on a month-
on-month basis have remained constant
throughout the year.
Full administrative expenses for the year
include an impairment charge of £0.4m
(2018: £0), in respect of revenues attached
to specific account relationships held
in CEVO. While overall revenue across
the group has grown strongly, in line
with expectations, the intangible asset
created on acquisition of CEVO related
to a specific company relationship from
which revenues declined on a year on
year basis. In line with IFRS requirements
an impairment charge was therefore
recognised in respect of this relationship.
Operating loss
Adjusted operating loss5 for the full year
was £8.6m (2018: £12.2m), representing
a year-on-year improvement of 30%.
We expect to see a further significant
improvement in 2019/20, before we reach
our breakeven Adjusted EBITDA target
by 2021.
Share of loss in associates
Esports Awards Ltd, in which Gfinity
holds a 33% investment, continues to
make strong progress as it builds an
industry leading awards event for the
esports sector. The November 2018 event
attracted a global audience of over three
million viewers, with more than 300,000
people registered and casting 3.3 million
votes between them over the respective
award categories. This provides a strong
base from which to drive content and
sponsorship revenues in the medium-term,
which we believe will create an investment
property of real value for the group.
Gfinity’s share of loss in Esports Awards Ltd
in the year was £0.1m (2018: £0.1m).
Gfinity Australia achieved some good
early traction in terms of audience and
commercial partners. However, the net
cost required to deliver the programme
remained high in relation to the size of the
local market. As a result, in August 2019,
both Gfinity and the majority shareholder
(HT&E plc) announced that the venture
would be wound down, ceasing all
operations by December 2019. The net
loss from this venture during the year was
£0.9m (2018: £0.3m).
Cash and cash equivalents
Year-end cash of £0.6m (2018: £3.7m)
was in line with expectations. This figure
was impacted by the phasing of invoicing
on certain key projects, which resulted
in a trade and other receivables balance
of £2.3m at year end. A total of £1.8m
of this balance was collected in the
first three weeks of July 2019. This was
supplemented at the end of the month
by the completion of an oversubscribed
equity fundraise, raising a further £5.25m
4
5
Administrative expenses include £2.5m of non-cash items; depreciation £0.4m (2018: £0.4m), amortisation and impairment of intangibles £1.0m (2018: £0.4m) and share option charge £1.1m (2018: £0.4m).
Per note 4
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GFINITY plc | Annual Report & Financial Statements 2019 STRATEGIC REPORT
Principal Risks and Uncertainties
Introduction
Gfinity’s long-term success will depend
in large part on its ability to manage the
key risks affecting the Company. Gfinity
is an innovative business in a young and
rapidly growing sector. In that context, the
risks facing Gfinity can change quickly and
the board recognises the importance of
identifying key risks and ensuring that the
right mitigation strategies are in place for
managing them.
“Gfinity is an
innovative
business in a
young and rapidly
growing sector.”
Ultimate responsibility for managing
risk lies with the board. Executive
responsibility for retaining the register of
risks and reporting on these to the board
lies with the Chief Financial Officer and
Company Secretary. Responsibility for the
management of risks lies with different
members of the Executive leadership team
depending on the nature of the risk.
Gfinity distinguishes between strategic
risks and operating risks. Strategic risks
represent macro level matters, which may
impact on the strategy of the Company.
Operating risks reflect the ongoing
challenges that the business may face in
delivering on that strategy.
On a day to day basis, responsibility for
managing strategic risks lies with the
Executive Chairman. Mitigation strategies
and the emergence of new strategic
risks are considered through the weekly
strategic leadership team meetings, which
he chairs.
Operational risks are the responsibility of
the Global Chief Operating Officer and
are considered at the weekly Operational
Leadership team meeting, including
the Chief Financial Officer and heads of
respective operational and commercial
departments.
In assessing its attitude to risk, directors
aim to strike a balance between ensuring
comprehensive processes and monitoring
frameworks are in place, as would be
expected of a publicly listed Company,
while retaining the dynamism and
innovation required to grow quickly within
a rapidly developing and changing sector.
The directors believe the principal risks
currently affecting the business are as
outlined below:
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GFINITY plc | Annual Report & Financial Statements 2019 STRATEGIC RISKS
Risk
Description
Mitigating Actions
Economic and Political Uncertainty
Intellectual property risk
Perception of video gaming
Uncertainty over the United Kingdom’s exit
from the European Union, and what future
trading arrangements may be put in place,
have created a climate of economic and
political uncertainty, which creates risks at
both a strategic and operational level for
Gfinity. At a strategic level, the uncertainty
could create challenges with regards to
capital availability and the desire of global
publishers, rights holders and brands to
deliver programmes in the UK.
Esports involves the use of intellectual
property, typically owned by the publishers
of the respective game titles.
Gfinity must consider the risk of changes
in strategy of the intellectual property
owners, resulting in certain games not being
available for use by Gfinity in its esports
properties, or fees being required for the
use of intellectual property, which may
present a challenge to Gfinity’s business
model.
Some people view video gaming negatively,
as something that promotes an unhealthy
lifestyle and lack of social interaction. There
is a risk that this perception will provide a
barrier to entry to commercial partners and
broadcasters, presenting a risk to Gfinity’s
business model.
Gfinity completed a fundraise shortly
following the 2019/20 financial year end
leaving the business well capitalised for
the year ahead and in particular, providing
financial certainty around the time currently
scheduled for the United Kingdom’s
departure from the European Union.
Gfinity has also diversified its service offering
and the geographical base of its clients,
providing services ranging from strategic
consultancy to providing written and video
content direct to a global community of
esports fans. This has created a much
smaller reliance on the delivery of global
partner events from the UK.
Gfinity’s brand and technology platform,
together with the audience consuming
Gfinity content, has been developed
across multiple titles, ensuring there is no
dependence on any single title.
Gfinity maintains strong relationships
with multiple game publishers and has
demonstrated the value it can bring to
them in building communities and driving
engagement around their games, which
in turn drives revenues for the publishers
through sales of the games themselves and
in-game content. As a result, a number of
the major game publishers have become key
clients of Gfinity.
Gfinity seeks to educate partners and the
wider industry on the positive impact of
gaming. Esports provides a social platform
for people to play and interact, in a highly
accessible way. Even at the top level,
where teams and players are practicing
for many hours per day, this will frequently
be supplemented by fitness and nutrition
programmes to keep players healthy.
17
GFINITY plc | Annual Report & Financial Statements 2019 STRATEGIC RISKS Continued...
Risk
Competition risk
Speed of revenue growth
Description
Mitigating Actions
There are currently very few companies
globally that can deliver full end to end
esports solutions and Gfinity has established
a first mover advantage. As the market
develops, however, there is a risk of new
entrants coming into the market, or game
publishers looking to bring the capability in
house.
Gfinity’s unique capability comes from a
combination of its proprietary platform,
the cumulative knowledge and breadth
of relationships of its experienced team,
its deep understanding of the esports
community, and the investment in its esports
studio.
Gfinity continues to invest in these
capabilities to retain a lead in the
marketplace and to position itself such
that any major new entrant to the esports
market, or any major publisher looking to
expand their esports offering, would be able
to move more quickly by acquiring Gfinity
than by trying to replicate these capabilities
in house.
Gfinity operates in a pioneering sector.
Directors believe, supported by market
research, that the value of that sector is
significantly below the level it should
reach, given the size and level of
engagement of the audience and the
attractiveness of that demographic to
broadcasters and commercial partners.
Nonetheless, that growth may not be linear
and that may present a risk to the speed of
revenue growth.
The directors of Gfinity firmly believe that
establishing a market leading position in the
fast-growing esports sector is the best route
to delivering significant long-term value
to shareholders. Nonetheless, in setting
budgets and financial commitments, the
board considers the short to medium-term
pipeline of work available and continues to
liaise with key shareholders on an ongoing
basis to ensure the availability of further
funding if required.
18
GFINITY plc | Annual Report & Financial Statements 2019 OPERATIONAL RISKS
Risk
Description
Mitigating Actions
Economic and Political Uncertainty
Alongside the strategic risks that this
uncertainty creates, it also presents a
number of risks at an operational level,
including access to equipment, attendance
of players and talent at Gfinity events and
matters of cross border billing and taxation.
Liquidity risk
Gfinity is currently a loss-making Company
and as such, must ensure that it has sufficient
capital available to deliver on its strategy.
While the future trading relationship
between the United Kingdom and
the European Union is undetermined,
each department has undertaken a risk
assessment, reviewing the potential impact
of a worst case scenario ‘no deal’ Brexit.
Should this event occur, the business will
therefore be in a position to continue
to deliver its services without a material
disruption to operations.
Gfinity maintains a strong core group of
investors but has also sought over recent
fundraises to broaden this shareholder base,
expanding its investment roadshows to new
geographies and investigating opportunities
with strategic investors, as well as financial
institutions and private individuals.
Access to key skills
Data security risk
Esports is a new sector and as such, the
number of people with deep experience in
developing and delivering esports solutions
is limited. Without access to this expertise,
Gfinity would not be able to provide the
depth of solutions to its client base, or build
its own Gfinity “tribe”.
Gfinity places a high importance on
succession planning within the business,
ensuring that skills are not vested in a
single individual. This is built through
development of existing staff, recruitment of
certain key personnel and where appropriate
through targeted acquisitions.
Senior individuals are also incentivised
through an employee option scheme,
driving loyalty to the business.
Gfinity has undertaken an in-depth review
of its data policies and procedures, in
conjunction with lawyers and data protection
experts in response to recent data
protection legislation.
All user data held is in a secure and
encrypted manner and is only used in
compliance with all relevant legislation.
Gfinity has built a large community
of esports fans playing, watching and
socialising through its own platform and
those of CEVO and RealSport.
Increasing levels of data protection
regulation, including GDPR legislation,
and ongoing cyber security risks, make it
imperative that any data gathered through
these platforms is collected, handled and
protected in accordance with all relevant
regulations. Any failure to do so would
significantly erode trust, both among
the esports community and prospective
commercial partners.
This report was approved by the board and signed on its behalf.
Garry Cook
Executive Chairman
19 October 2019
19
GFINITY plc | Annual Report & Financial Statements 2019 Annual Report & Financial Statements 2019
GOVERNANCE
GFINITY plc | Annual Report & Financial Statements 2019
GOVERNANCE
Corporate Governance Report
The board retains overall responsibility for
ensuring strong corporate governance and
is supported by the Audit, Nominations
and Remuneration Committees. This
section provides further detail on the
composition and conduct of business of
the board and its respective committees,
together with information on how they
discharge their responsibilities.
Board of directors:
The Gfinity plc board is responsible for:
■ Setting the strategy across all Gfinity
group companies;
■ Defining the business model and the
financial framework within which the
business must operate;
■ Setting and ensuring the
implementation of the culture, to
deliver success;
■ Designing and implementing controls
and the risk management framework;
■ Ensuring communication with
key stakeholders, including staff,
shareholders, suppliers and customers;
■ Appointing a senior Executive Team,
capable of delivering on the defined
strategy;
■ Monitoring performance against the
above areas and taking remedial
actions as appropriate;
■ Ensuring availability of capital to deliver
on the chosen strategy.
Chair’s statement
on corporate governance:
“The Directors recognise the
fundamental importance of
good corporate governance
in providing an efficient,
effective and dynamic
management framework to
ensure that the Company is
managed in the right way for
the benefit of all shareholders
over the medium to long-
term. In view of this, the board
of Gfinity plc has chosen to
apply the QCA Corporate
Governance Code (the ‘QCA
Code’) published by Quoted
Companies Alliance. The
QCA Code is a pragmatic and
practical tool, which adopts a
principles-based approach to
corporate governance, which
the directors of Gfinity believe
is correct for Gfinity in its
current stage of growth.
This section of the report
provides further details on
how Gfinity complies with
these principles of good
corporate governance.
Further information can also
be found on our investor
website gfinityplc.com.”
Garry Cook
Executive Chairman
22
GFINITY plc | Annual Report & Financial Statements 2019 GOVERNANCE
Board of Directors
GARRY COOK, EXECUTIVE CHAIRMAN
Appointed: 23rd November 2017
A leading sports executive, Garry has worked in a number of high-profile roles, including as CEO for Manchester City Football Club, President
of Nike’s “Brand Jordan” and most recently as Head of Global Brand and International Market Development for the mixed martial arts
organisation the Ultimate Fighting Championship (‘UFC’). In July 2016 it was announced that UFC had been sold to a consortium led by
WME-IMG for a reported $4 billion. Garry joined the Gfinity board in November 2017 and became the Executive Chairman in May 2018.
GRAHAM WALLACE, GLOBAL CHIEF OPERATING OFFICER
Appointed: 12 July 2018
Graham, a Chartered Accountant, has held senior executive positions with leading sports and entertainment companies including Viacom Inc,
MTV Networks Europe and IMG Media. He was Chief Financial Officer and latterly Chief Operating Officer at Manchester City FC, where he
led the business transformation programme between 2009 and 2013. He joined Rangers FC as Chief Executive, where he helped to lead the
rebuilding of the club following its exit from administration. Recently Graham has worked with several leading investment groups advising on
strategic, operational and financial matters in a range of sports and media properties. Graham joined the Gfinity board in July 2018.
JOHN CLARKE, GLOBAL BRAND AND MARCOMMS OFFICER
Appointed: 18 September 2018
John Clarke is a business professional with more than 25 years of international experience gained working in and with leading global
companies. John has worked for HEINEKEN N.V. where he held the positions of Head of Global Communications and Senior Commercial
Director within Lagunitas Brewing Company, a 100% owned subsidiary of HEINEKEN N.V. Previously he held senior leadership, corporate
affairs and marketing positions within The American Express Company and Burson-Marsteller Public Relations. John joined the board as a
Non-Executive Director in September 2018 and was appointed Global Brand and Marcomms Officer in May 2019.
JONATHAN HALL, CHIEF FINANCIAL OFFICER
Appointed: 1 September 2014
Jon qualified as a Chartered Accountant with Arthur Andersen followed by a period of six years specialising in organisation and business
process design with PA Consulting, a leading London based management consultancy firm. He subsequently spent five years as a Finance
Director of Saracens Ltd and the wider Premier Team Holdings Group, before joining Gfinity in August 2014 where he led the process of the
Company’s admission to AIM. As Chief Financial Officer Jon has responsibility for all aspects of finance and accounting, including financial
planning, reporting and accessing capital to fund growth.
NEVILLE UPTON, FOUNDER
Appointed: 15 January 2014
After graduating at the London school of Economics, Neville joined Coopers & Lybrand where he qualified as a Chartered Accountant.
Neville’s formative years were at Euromoney where he gained experience in Finance, M&A and various commercial projects. After a brief
spell at The Decisions Group as Finance and Operations Director, in 1998 he established a call centre business, The Listening Company, which
specialised in multichannel communication applications and high quality customer service solutions. The business was sold in 2011 to Serco
for a sum in excess of £60 million, at which time it had a turnover of £82 million and employed 4,000 people. Neville co-founded Gfinity
in 2012.
ANDY MACLEOD, INDEPENDENT NON-EXECUTIVE DIRECTOR
Appointed: 23 November 2017
Andy has extensive communications industry experience from a variety of senior roles with major carriers and technology vendors. Until
recently he spent eleven years at Vodafone Group, firstly as Group Chief Networks Officer responsible for the operation of Vodafone’s
telecoms networks world-wide, then as Chief Technology Officer for Verizon Wireless in the USA and finally as the Regional CTO for the
thirteen Vodafone Operating Companies outside Europe. He has recently retired from corporate life and has a portfolio of NED and
consulting roles. Andy has served on the boards of Verizon Wireless Inc, Vodafone Italy Spa and Indus Towers Ltd, as Deputy Chair of Idex
ASA and is currently a Non-Executive Director of IQGeo, an AIM listed geolocation software Company. He holds a degree in Materials
Science from Oxford University, an MBA from Warwick Business School and is a Fellow of the Royal Academy of Engineering. Andy joined the
Gfinity board in November 2017.
PREETI MARDIA, INDEPENDENT NON-EXECUTIVE DIRECTOR
Appointed: 23 November 2017
Preeti Mardia has diverse end-to-end operational management and commercial expertise across Electronics, Telecoms, Aerospace and FMCG
sectors. Preeti is a Board Director with ThinFilm Electronics ASA, a global leader in printed electronics technology, and a Non-Executive
Director of Maistro plc. Prior to the position of Senior Vice President Operations held at IDEX ASA, she was Vice President Operations for
Axxcss Wireless UK and Operations Director at Filtronic Plc. She also has FMCG experience in operations with Cadbury Schweppes Plc. Preeti
Mardia has a Master’s degree in Management from Ashridge. Preeti joined the Gfinity board in November 2017.
23
GFINITY plc | Annual Report & Financial Statements 2019 Board Composition and
Performance:
The composition of the Gfinity board
is structured to contain the range of
skills and personal qualities required to
effectively discharge its duties. The board
recognises that as Gfinity develops, within
a rapidly growing sector the, precise
composition required shall change from
time to time. Responsibility for reviewing
the composition of the board and making
recommendations for appointment
and removal of directors rests with the
Nominations Committee. Further details
of this are provided below. Any such
recommendations are subject to formal
approval of the full board.
The board recognises the importance
of diversity of skills and approach in
effectively conducting its duties, and
as such, has sought to appoint high
calibre individuals from a wide range of
backgrounds and sectors.
ATTENDANCE RECORD:
Role of Chair:
The primary responsibility of the Chair is to
lead the board effectively and to oversee
the adoption, delivery and communication
of the Company’s corporate governance
model. As Executive Chairman, Garry
Cook also retains responsibility for
the development and delivery of the
Company’s strategy, supported by the
other Executive Directors.
The Chair ensures that the board considers
the key issues affecting the Group, both
operationally and financially, and together
with the Company Secretary ensures the
correct information flows between the
board, its respective committees and
between the Independent Directors and
senior management.
Role of Company Secretary:
The Company Secretary acts as a trusted
adviser to the Chair and the board and
plays a vital role in relation to both legal
and regulatory compliance. The Company
Secretary supports the work of the
respective board committees and also acts
as a confidential sounding board to the
chairs of those committees.
Board Conduct of Business:
Full board meetings were previously
monthly, but are now held on a quarterly
basis, with a minimum of four meetings per
annum to conduct the regular business of
the board. Further full board meetings shall
be held as required to provide approval on
specific matters.
In months where there is no full formal
board meeting, a board call still takes
place, in order to keep all directors
informed on the progress of the business.
The quorum for a board meeting to be
considered valid is two.
Director
Garry Cook
Graham Wallace
Neville Upton
Jonathan Hall
John Clarke
Preeti Mardia
Andy MacLeod
Number of Meetings Attended
Total Meetings in Period in Office
8
8
8
8
6
8
8
8
8
8
8
6
8
8
The Audit Committee comprises:
■ Preeti Mardia (Chair)
■ Andy MacLeod
■ Graham Wallace
The Chief Financial Officer is invited
to attend Audit Committee meetings
but does not formally form part of the
Committee.
Board Review and Performance:
The board monitors its performance and
composition on an ongoing basis and
recognises that as the Company grows
in a rapidly developing sector, the mix of
skills required to best discharge its duties
may change from time to time. It was
in that context that, during the year, the
board appointed two new directors, both
with significant leadership experience in
relevant sectors.
Performance of the board is assessed on
an annual basis. This process is led by
the Chair of the Nominations Committee,
supported by the Financial Director, and
assesses the board’s performance against
its stated terms of reference, both in
terms of the process by which business is
conducted and the results achieved.
Following the appointment of John
Clarke to an Executive Director position,
the board is now seeking to redress the
balance between Executive and Non-
Executive Directors and will be looking
to make further Non-Executive Director
appointments during the 2019-20 financial
year.
Audit Committee:
The role of the Audit Committee is to
provide confidence to shareholders on
the integrity of the financial results of the
Company, expressed in this annual report
and accounts, and other relevant public
announcements made by the Company.
The Audit Committee also has a key
role in the oversight of the effectiveness
of the risk management and internal
control systems of the Company, and to
make recommendations to the board for
improvements in this regard.
24
GFINITY plc | Annual Report & Financial Statements 2019 ATTENDANCE RECORD:
Director
Preeti Mardia
Andy MacLeod
Graham Wallace
Nominations Committee
The Nominations Committee ensures there
is a robust process for the appointment
of new board directors. The committee
works closely with the board and the Chair
to identify the skills, experience, personal
qualities and capabilities required for the
next stage in the Company’s development,
linking the Company’s strategy to
future changes on the board. Only the
Nominations Committee is able to formally
submit a recommendation to the board for
ATTENDANCE RECORD:
Director
Andy MacLeod
Preeti Mardia
Graham Wallace
Remuneration Committee:
The Remuneration Committee is
responsible for outlining the principles of
remuneration strategy to be applied across
the Gfinity Group. It also directly approves
the remuneration of all directors, together
with the grant of any option over shares in
Gfinity plc.
Compensation is based on an expectation
that the director will spend a minimum of
30 days a year on work for the Company.
This will include attendance at a minimum
of six board meetings per annum, each
general meeting, plus other activities as
agreed with the Executive team from time
to time, including membership of board
committees.
ATTENDANCE RECORD:
Director
Andy MacLeod
Preeti Mardia
Number of Meetings Attended
Total Meetings in Period in Office
3
2
3
3
3
3
the appointment of a new director. All such
recommendations are still subject to the
approval of the board.
A separate Gfinity plc Nominations
Committee was constituted following the
appointment of an Executive Chairman in
May 2018. Prior to this appointment, the
role of the Nominations Committee was
undertaken by the full board, under the
guidance of a Non-Executive Chairman.
■ Andy MacLeod (Chair)
■ Preeti Mardia
■ Graham Wallace
Number of Meetings Attended
Total Meetings in Period in Office
1
1
1
1
1
1
Non-Executive Directors may support
additional projects over and above their
role as Non-Executive Directors and may
be remunerated at or below market rate for
those services. The extent of such services
must not, however, compromise their
status as Non-Executives, independent of
the Executive team.
The Remuneration Committee consists of
Andy MacLeod and Preeti Mardia.
Number of Meetings Attended
Total Meetings in Period in Office
3
3
3
3
Full disclosure of director remuneration is provided within the Directors Remuneration Report.
25
GFINITY plc | Annual Report & Financial Statements 2019 GOVERNANCE
Directors’ Remuneration Report
As the Company is AIM
listed, the directors are not
required, under Section
420(1) of the Companies Act
2006, to prepare a directors’
remuneration report for
each financial year of the
Company and so Gfinity
plc makes the following
disclosures voluntarily, which
are not intended to, and
indeed do not, comply with
the requirements of the
Companies Act 2006.
The Remuneration
Committee is responsible
for recommending the
remuneration and other
terms of employment for
the Executive Directors of
Gfinity plc. In determining
remuneration for the
year, the committee has
given consideration to the
requirements of the UK
Corporate Governance Code.
All directors hold either shares or share
options in the company. The board of
Gfinity believes it to be an essential part
of attracting high calibre individuals to
the board of directors, while preserving
cash, in the interests of all shareholders,
that Non-Executive Directors are offered
options in the Company at a price and
level that aligns them with the interests of
the wider shareholder base.
Service contracts
All existing directors at the time of the
Company’s admission to AIM entered
into new service contracts on 16
December 2014, immediately prior to that
admission. All new directors since this
date have entered into comprehensive
director service contracts at the time, or
immediately in advance of commencing
their roles.
All directors’ appointments are subject
to three months’ notice on either side,
with the exception of Mr Upton, whose
appointment is subject to six months’
notice on either side.
All directors are subject to pre and post
termination restrictive covenants with
the Company, including those relating to
non-competition and non-solicitation of
customers and staff.
No compensation is payable for loss
of office and all appointments may be
terminated immediately if, among other
things, a director is found to be in material
breach of the terms of the appointment.
Remuneration policy
The remuneration of Executive Directors
is determined by the committee and the
remuneration of Non-Executive Directors
is approved by the full board of directors.
The remuneration of the Chairman is
determined by the Independent Non-
Executive Directors, in conjunction with
the Global Chief Operating Officer and the
Chief Financial Officer.
The remuneration packages of Executive
Directors comprise the following elements:
Basic salary and benefits
Basic salaries for Executive Directors
are reviewed annually having regard to
individual performance, market practice
and the financial position of the Company.
In most cases salaries paid to Executive
Directors are currently towards the low
end of the market rate for their respective
roles and relative to the experience of the
individuals in question. Executive Directors
are eligible for pension contributions and
participation in the Company’s health
insurance and life assurance schemes.
Annual bonuses
Bonuses awarded to Executive Directors
are included in the Directors’ Emoluments
table on page 28. Bonuses form part of the
overall remuneration of Executive Directors
and are aligned to the achievement of
financial and strategic milestones which are
designed to promote long-term value for
all shareholders.
Share options
The Company believes that share
ownership by Executive Directors and
employees strengthens the link between
their personal interests and those of the
Company and the shareholders.
The Company has an executive share
option scheme, which is designed to
promote long-term improvement in the
performance of the Company, sustained
increase in shareholder value, and clear
linkage between executive reward and the
Company’s performance.
26
GFINITY plc | Annual Report & Financial Statements 2019 DIRECTORS’ INTERESTS IN SHARES
The interests of the Directors at 30 June 2019 in the shares of the Company were:
Director
Neville Upton
Garry Cook
Graham Wallace
Andrew MacLeod
SHARE OPTIONS
Number of Ordinary Shares
Percentage of issued share capital
14,877,245
1,990,741
312,500
78,704
17,259,190
4.10%
0.55%
0.09%
0.02%
4.76%
Directors’ interests in options over the ordinary shares in the company were as follows:
Director
Garry Cook
Graham Wallace
Neville Upton
John Clarke
Jonathan Hall
Andy MacLeod
Preeti Mardia
As at 30 June 2018
Options Granted
Options Lapsed
As at 30 June 2019
1,000,000
-
7,870,670
-
1,548,571
1,000,000
1,000,000
8,590,446
8,590,446
-
3,000,000
-
-
-
12,419,241
20,180,892
-
-
-
-
-
-
-
-
9,590,446
8,590,446
7,870,670
3,000,000
1,548,571
1,000,000
1,000,000
32,600,133
27
GFINITY plc | Annual Report & Financial Statements 2019 GOVERNANCE
Audited Information
DIRECTORS’ EMOLUMENTS
Emoluments of the directors for the year ended 30 June 2019 are shown below.
Director
Salary & Fees
Bonus
Pension
Total
Remuneration
Total
Remuneration
Year ended 30 June 2019
Year ended 30 June 2018
Garry Cook
Graham Wallace
Neville Upton
Jonathan Hall
Preeti Mardia
Andrew MacLeod
John Clarke
292,400
289,875
150,000
140,000
25,000
25,000
172,500
120,000
80,000
-
30,400
-
-
20,800
-
-
-
548
236
-
548
412,400
369,875
150,000
170,948
25,236
25,000
193,848
1,094,775
251,200
1,332
1,347,307
This report was approved by the board and signed on its behalf.
80,000
-
150,000
125,000
15,278
15,278
-
385,5566
Garry Cook
Executive Chairman
19 October 2019
6
This figure does not include remuneration for former directors
28
GFINITY plc | Annual Report & Financial Statements 2019 GOVERNANCE
Directors’ Report
The directors present their
annual report on the affairs of
the Company, together with
the financial statements and
auditor’s report, for the year
ended 30 June 2019.
Principal activities
Capital structure
Gfinity is a world leading esports company.
As a trusted independent esports provider
it designs, develops and delivers esports
solutions to publishers, sports rights
holders, brands and media companies
that connects them with hundreds of
millions of young gamers. Gfinity is also
becoming a standalone media distribution
channel, organically engaging with 20
million gamers each month and providing
them with compelling news and innovative
content formats.
An overview of Gfinity’s strategy and
business model is provided within the
Gfinity At A Glance section of this Strategic
report.
Future development
Our development objectives for 2019–20
and beyond are disclosed in the Strategic
Report.
The capital structure is intended to
ensure and maintain strong credit ratings
and healthy capital ratios, to support
the Company’s business and maximise
shareholder value. It includes the
monitoring of cash balances, available
bank facilities and cash flows.
No changes were made to these
objectives, policies or processes during the
year ended 30 June 2019.
Results and dividends
The consolidated income statement is set
out on page 41.
The Company’s loss after taxation
amounted to £12.0m (2018: £13.6m).
The directors do not recommend the
payment of a dividend for the year ended
30 June 2019.
29
GFINITY plc | Annual Report & Financial Statements 2019 Events since the balance
sheet date
On 15 July 2019 Gfinity plc announced its
intention to raise up to £5.25m by way of a
placing to new and existing shareholders.
On 31 July 2019 this placing was approved
at an Extraordinary General Meeting of
the Company and the new shares were
admitted to AIM on 1 August 2019.
Research and development
The Company undertakes development
activities which involve a planned
investment in the building and
enhancement of Gfinity products.
Development expenditure is capitalised
as an intangible asset, only if the
development costs can be measured
reliably and it is anticipated that the
product being built will be completed and
will generate future economic benefits in
the form of cash flows to the Company.
Further information on development
activities are provided in the Strategic
Report.
Risk Management
Information on Gfinity’s approach to
risk management is provided within the
Principal Risks and Uncertainties section of
this report.
Directors
Directors’ indemnities
The following directors held office as
indicated below for the year ended 30
June 2019 and up to the date of signing
the consolidated financial statements
except where otherwise shown.
The Company has made qualifying third
party indemnity provisions for the benefit
of its directors, which were made during
the year and remain in force at the date of
this report.
Garry Cook
Executive Chairman
Graham Wallace
Global Chief Operating Officer*
Neville Upton
Founder
Jonathan Hall
Chief Financial Officer
John Clarke†
Global Brand and Marcomms Officer†
Preeti Mardia
Non-Executive Director
Andy MacLeod
Non-Executive Director
*Graham Wallace was appointed to the board on 12 July 2018
†John Clarke was appointed to the board as a Non-Executive
Director on 18 September 2018 and assumed the Executive
role of Global Brand and Marcomms Officer on 3 May 2019.
30
GFINITY plc | Annual Report & Financial Statements 2019 GOVERNANCE
Statement of Directors’ responsibilities
The directors are responsible
for preparing the annual
report and the financial
statements in accordance
with applicable law and
regulations. Company law
requires the directors to
prepare financial statements
for each financial year. Under
that law the directors have
elected to prepare company
financial statements in
accordance with International
Financial Reporting Standards
(“IFRSs”) as adopted by the
European Union.
Under company law the directors must not
approve the financial statements unless
they are satisfied that they give a true
and fair view of the state of affairs of the
Company and of the profit or loss of the
Company for the period. The directors
are also required to prepare financial
statements in accordance with the rules of
the London Stock Exchange for companies
trading securities on AIM. In preparing
these financial statements, the directors are
required to:
■ present fairly the financial position,
financial performance and cashflows of
the Company;
■ select suitable accounting policies in
accordance with IAS 8 Accounting
Policies, Changes in Accounting
Estimates and Errors and then apply
them consistently;
■ make judgements and estimates that
are reasonable and prudent;
■ state whether applicable IFRSs have
been followed, subject to any material
departures disclosed and explained in
the financial statements; and
■ prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
The directors are responsible for keeping
adequate accounting records that
are sufficient to show and explain the
Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Company and
enable them to ensure that the financial
statements comply with the Companies
Act 2006.
They are also responsible for safeguarding
the assets of the Company and hence for
taking reasonable steps for the prevention
and detection of fraud and other
irregularities.
The directors are responsible for ensuring
the annual report and the financial
statements are made available on the
corporate website. Financial statements
are published on the Company’s website in
accordance with legislation in the United
Kingdom governing the preparation and
dissemination of financial statements,
which may vary from legislation in other
jurisdictions. The directors are responsible
for the maintenance and integrity of
the corporate and financial information
included on the Company’s website.
Auditors
Each of the persons who is a director at
the date of approval of this annual report
confirms that:
■ so far as the director is aware, there is
no relevant audit information of which
the Company’s auditors are unaware;
and
■ the director has taken all the steps
that he/she ought to have taken as
a director in order to make himself/
herself aware of any relevant audit
information and to establish that the
Company’s auditors are aware of that
information.
This confirmation is given and should
be interpreted in accordance with
the provisions of Section 418 of the
Companies Act 2006.
The trade and assets of the incumbent
auditor, Rees Pollock, were acquired by
Blick Rothenberg LLP on 30 September
2019 and Rees Pollock ceased to be
regulated to perform statutory audits from
that date. The directors appointed Blick
Rothenberg LLP, trading under the Rees
Pollock brand, to fill the casual vacancy
arising and a resolution to reappoint
them will be proposed at the forthcoming
Annual General Meeting.
By order of the board:
Garry Cook
Executive Chairman
19 October 2019
31
GFINITY plc | Annual Report & Financial Statements 2019 Annual Report & Financial Statements 2019
FINANCIAL STATEMENTS
GFINITY plc | Annual Report & Financial Statements 2019
FINANCIAL STATEMENTS
Independent Auditor’s Report to the members of
Gfinity PLC for the year ended 30 June 2019
Opinion
We have audited the financial
statements of Gfinity PLC
(‘the parent company’) and
its subsidiaries (the ‘group’)
for the year ended 30 June
2019 which comprise the
group statement of profit or
loss, the group statement
of comprehensive income,
the group and company
statements of financial
position, the group and
company statements of
changes in equity, the group
and company statements of
cash flows and notes to the
financial statements, including
a summary of significant
accounting policies. The
financial reporting framework
that has been applied in their
preparation is applicable law
and International Financial
Reporting Standards (IFRSs)
as adopted by the European
Union and, as regards the
parent company financial
statements, as applied
in accordance with the
Companies Act 2006.
In our opinion:
■ the financial statements give a true and
fair view of the state of the group’s and
of the parent company’s affairs as at 30
June 2019 and of the group’s loss for
the year then ended;
■ the group financial statements have
been properly prepared in accordance
with IFRSs as adopted by the European
Union;
■ the parent company financial
statements have been properly
prepared in accordance with IFRSs
as adopted by the European Union
and as applied in accordance with the
provisions of the Companies Act 2006;
and
■ the financial statements have been
prepared in accordance with the
requirements of the Companies Act
2006.
Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(UK) (ISAs (UK) and applicable law. Our
responsibilities under those standards
are further described in the Auditor’s
responsibilities for the audit of the
financial statements section of our report.
We are independent of the company in
accordance with the ethical requirements
that are relevant to our audit of the
financial statements in the UK, including
the FRC’s Ethical Standard as applied to
SME listed entities, and we have fulfilled
our other ethical responsibilities in
accordance with these requirements. We
believe that the audit evidence we have
obtained is sufficient and appropriate to
provide a basis for our opinion.
Conclusions relating to
going concern
We have nothing to report in respect of the
following matters in relation to which the
ISAs (UK) require us to report to you where:
■ the directors’ use of the going concern
basis of accounting in the preparation
of the financial statements is not
appropriate; or
■ the directors have not disclosed in
the financial statements any identified
material uncertainties that may cast
significant doubt about the group’s
or the parent company’s ability to
continue to adopt the going concern
basis of accounting for a period of
at least twelve months from the date
when the financial statements are
authorised for issue.
Key audit matters
Key audit matters are those matters
that, in our professional judgment, were
of most significance in our audit of the
financial statements of the current period
and include the most significant assessed
risks of material misstatement (whether or
not due to fraud) we identified, including
those which had the greatest effect on:
the overall audit strategy, the allocation of
resources in the audit; and directing the
efforts of the engagement team. These
matters were addressed in the context of
our audit of the financial statements as a
whole, and in forming our opinion thereon,
and we do not provide a separate opinion
on these matters.
34
GFINITY plc | Annual Report & Financial Statements 2019 Key audit matter
How the scope of our audit addressed the risk
Going concern assessment (Group and parent company)
The group has reported a post-tax loss for the year of £12.5m
and at the balance sheet date had net current liabilities of £0.1m,
a net decrease for the year of £3.6m, which includes cash and
cash equivalents of £0.6m, a net decrease for the year of £3.1m.
Continued losses of this magnitude would increase the net
current liability and further reduce cash reserves. Accordingly, the
going concern assumption has been identified as a key audit risk.
If the going concern assumption were not appropriate this would
have a pervasive effect which could impact on the group’s ability
to realise assets in the normal course of business.
The appropriateness of applying the going concern basis has
been referenced in note 2 of the financial statements.
We evaluated the directors’ assessment of going concern by
reviewing cash flow forecasts prepared by management and
considering the impact of events that had taken place subsequent
to the balance sheet date but prior to the date of approval of the
accounts. In particular we have assessed the impact of the share
placing that took place on 1 August 2019 which resulted in a further
£5.0m of funding (net of placing costs).
We challenged the significant inputs and assumptions used in the
forecast model and evaluated the feasibility of options available to
management in the event that the projected cash flows fall below
forecast figures.
We considered the judgements made by management in applying
the going concern assumption to be reasonable in light of the
evidence available to the date of this report.
Furthermore, we considered the disclosure in note 2 to the financial
statements to be appropriate having given specific regard to this
being an area of critical accounting estimate and judgement.
Goodwill impairment assessment (Group)
The group had goodwill of £2.5m (note 12) with an indefinite life
as at 30 June 2019, which is required to be tested for impairment
on an annual basis.
Management have performed a full impairment review to
compare the carrying amount of goodwill to its recoverable
value, being the higher of value-in-use and fair value less costs
to dispose. The directors have allocated goodwill to individual
cash generating units (‘CGUs’) and the determination of the
recoverable amount of the CGUs requires significant estimation
and judgement, as disclosed in note 3. Accordingly, the carrying
value of goodwill has been identified as a key audit risk.
We evaluated Management’s assessment of the carrying value of
goodwill by reviewing the cash flow and profit forecasts included in
the directors’ value-in-use calculations for respective CGUs.
We challenged the significant inputs and assumptions used in the
calculations and performed sensitivity analysis to the forecasts to
ascertain the extent to which reasonable adverse changes would,
either individually or in aggregate, require the impairment of
goodwill.
Based on our procedures and the evidence available to the date
of this report we concur with Management’s conclusion that no
impairment to the carrying value of goodwill is necessary.
35
GFINITY plc | Annual Report & Financial Statements 2019 FINANCIAL STATEMENTS
Independent Auditor’s Report to the members of
Gfinity PLC for the year ended 30 June 2019(continued)
Key audit matter
How the scope of our audit addressed the risk
Valuation of intangible assets (Group)
The group had intangible assets of £1.0m (note 11) with
remaining useful economic lives of between 2 and 3 years as at
30 June 2019. Management are required to conduct impairment
reviews where there is an indication of impairment of an asset.
Management identified an impairment indicator for the
Customer relationship asset and therefore performed a full
impairment review to compare the carrying amount of asset to its
recoverable value, being the higher of value-in-use and fair value
less costs to dispose. This resulted in an impairment charge of
£0.4m being recognised in the year.
The assessment of whether there are impairment indicators
and, where indicators are identified, the determination of the
recoverable amount of the asset requires significant estimation
and judgement, as disclosed in note 3. Accordingly, the carrying
value of intangible assets has been identified as a key audit risk.
We evaluated Management’s assessment of whether impairment
indicators exist for respective assets by reviewing the internal and
external factors that were considered in making their assessment in
each case.
Where impairment indicators were identified and a full impairment
review performed, we evaluated Management’s assessment of the
carrying value of the asset by reviewing the cash flow forecasts
included in Management’s value-in-use calculations for the relevant
asset.
We challenged the significant inputs and assumptions used in the
calculations and performed sensitivity analysis to the forecasts to
ascertain the extent to which reasonable adverse changes would,
either individually or in aggregate, require the impairment of the
intangible assets.
Based on our procedures and the evidence available to the date
of this report we concur with Management’s conclusion that the
carrying value of intangible assets, as disclosed in note 3, represents
the recoverable amount and therefore that no adjustment to the
carrying value of investments is necessary.
For the purposes of this assessment, the value-in-use assessment is
calculated on the same basis as that applied to the assessment of
goodwill referred to above, and was therefore subject to the same
audit procedures.
Based on our procedures and the evidence available to the date
of this report we concur with Management’s conclusion that no
impairment to the carrying value of investments is necessary.
Valuation of investments (Parent company)
The company had investments in its subsidiaries of £4.5m (note
14) with an indefinite life as at 30 June 2019, which is required to
be tested for impairment on an annual basis.
Management assess the valuation of these investments with
reference to their recoverable amount, being the higher of
the assets’ fair value less costs to sell and value-in-use. The
determination of the recoverable amount of the investments
requires significant estimation and judgement, as disclosed
in note 3. Accordingly, the valuation of investments has been
identified as a key audit risk.
This is not a complete list of all risks identified by our audit.
36
GFINITY plc | Annual Report & Financial Statements 2019 Our application of materiality
In planning and performing our audit
we applied the concept of materiality.
An item is considered material if it could
reasonably be expected to change the
economic decisions of a user of the
financial statements. We used the concept
of materiality to both focus our testing
and evaluate the impact of misstatements
identified. In particular, we looked at where
the directors made subjective judgements,
for example in respect of significant
accounting estimates that involved making
assumptions and considering future events
that are inherently uncertain.
Based on our professional judgement, we
determined overall materiality for both the
parent company’s and the group’s financial
statements as a whole to be £700,000
(2018: £600,000). In determining this, we
considered a range of benchmarks with
specific focus on the loss for the year, total
revenue for the year and total assets as at
the balance sheet date. This materiality
level represents 5.8% (2018: 4.5%) of loss
before tax, 8.9% (2018: 13.9%) of revenue
and 10.0% (2018: 5.2%) of total assets.
We report to the Audit Committee all
identified unadjusted errors in excess
of £70,000. Errors below that threshold
would also be reported if, in our opinion
as auditor, disclosure was required on
qualitative grounds.
An overview of the scope
of our audit
We tailored the scope of our audit to
ensure that we performed enough work to
be able to give an opinion on the financial
statements as a whole, taking into account
the structure of the group and the parent
company, the accounting processes and
controls, and the industry in which they
operate.
The group is comprised of the parent
company and its two subsidiaries, one of
which is based in the UK with the other
operating in the US. The parent company
was subject to a full scope audit based
on the materiality set out above and the
two subsidiaries were subject to specified
audit procedures where the extent of our
testing was based on our assessment of
the risks of material misstatement and of
the materiality of the group.
All audit work to respond to the risks of
material misstatement of both the group
and the parent company was performed
directly by the audit engagement team.
Other information
The directors are responsible for the
other information. The other information
comprises the information included in
the annual report, other than the financial
statements and our auditor’s report
thereon. Our opinion on the financial
statements does not cover the other
information and, except to the extent
otherwise explicitly stated in our report,
we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial
statements, our responsibility is to read
the other information and, in doing so,
consider whether the other information is
materially inconsistent with the financial
statements or our knowledge obtained
in the audit or otherwise appears to be
materially misstated. If we identify such
material inconsistencies or apparent
material misstatements, we are required
to determine whether there is a material
misstatement in the financial statements
or a material misstatement of the other
information. If, based on the work we
have performed, we conclude that there
is a material misstatement of this other
information, we are required to report that
fact. We have nothing to report in this
regard.
37
GFINITY plc | Annual Report & Financial Statements 2019 FINANCIAL STATEMENTS
Independent Auditor’s Report to the members of
Gfinity PLC for the year ended 30 June 2019(continued)
Use of this report
This report is made solely to the company’s
members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken
so that we might state to the company’s
members those matters we are required
to state to them in an Auditors’ report and
for no other purpose. To the fullest extent
permitted by law, we do not accept or
assume responsibility to anyone other than
the company and the company’s members
as a body, for our audit work, for this
report, or for the opinions we have formed.
Philip Vipond
Senior Statutory Auditor
for and on behalf of
Rees Pollock,
Chartered Accountants
Statutory Auditor
35 New Bridge Street
London
EC4V 6BW
19 October 2019
Responsibilities of directors
As explained more fully in the directors’
responsibilities statement, the directors
are responsible for the preparation of the
financial statements and for being satisfied
that they give a true and fair view, and
for such internal control as the directors
determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the
directors are responsible for assessing the
group’s and the parent company’s ability
to continue as a going concern, disclosing,
as applicable, matters related to going
concern and using the going concern basis
of accounting unless the directors either
intend to liquidate the group or the parent
company or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities for the
audit of the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level of
assurance, but is not a guarantee that
an audit conducted in accordance with
ISAs (UK) will always detect a material
misstatement when it exists. Misstatements
can arise from fraud or error and are
considered material if, individually or in
the aggregate, they could reasonably
be expected to influence the economic
decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities
for the audit of the financial statements
is located on the Financial Reporting
Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description
forms part of our auditor’s report.
Opinions on other matters
prescribed by the Companies
Act 2006
In our opinion the part of the directors’
remuneration report to be audited has
been properly prepared in accordance with
the Companies Act 2006.
In our opinion, based on the work
undertaken in the course of the audit:
■ the information given in the strategic
report and the directors’ report for the
financial year for which the financial
statements are prepared is consistent
with the financial statements; and
■ the strategic report and the directors’
report have been prepared in
accordance with applicable legal
requirements.
Matters on which we are required
to report by exception
In the light of the knowledge and
understanding of the group and the parent
company and its environment obtained
in the course of the audit, we have not
identified material misstatements in the
strategic report or the directors’ report.
We have nothing to report in respect of the
following matters in relation to which the
Companies Act 2006 requires us to report
to you if, in our opinion:
■ adequate accounting records have not
been kept by the parent company, or
returns adequate for our audit have
not been received from branches not
visited by us; or
■ the parent company financial
statements and the part of the
directors’ remuneration report to be
audited are not in agreement with the
accounting records and returns; or
■ certain disclosures of directors’
remuneration specified by law are not
made; or
■ we have not received all the
information and explanations we
require for our audit.
38
GFINITY plc | Annual Report & Financial Statements 2019 GFINITY plc | Annual Report & Financial Statements 2019
3939
GFINITY plc | Annual Report & Financial Statements 2019 FINANCIAL STATEMENTS
Group Statement of Profit or Loss
Director
Notes
1 July 2018 to 30 June 2019
1 July 2017 to 30 June 2018
£
£
CONTINUING OPERATIONS
Revenue
Cost of sales
Gross Profit / (Loss)
Administrative expenses
Operating loss
Finance income
Finance costs
Share of net loss of associates &
impairment of associates
Loss on ordinary activities before tax
Taxation
Retained loss from continuing
operations
Profit from discontinued operations
Earnings per share
4
6
8
8
9
27
20
7,870,166
(6,832,652)
1,037,514
(12,106,612)
(11,069,098)
6,481
(1,583)
(991,951)
(12,056,151)
-
59,832
(11,996,319)
1,911
(11,994,408)
(0.04)
4,317,325
(7,732,767)
(3,415,442)
(10,033,326)
(13,448,768)
1,432
(1,333)
(347,237)
(13,795,906)
-
222,356
(13,573,550)
-
(13,573,550)
(0.06)
40
GFINITY plc | Annual Report & Financial Statements 2019 FINANCIAL STATEMENTS
Group Statement of Comprehensive Income
Director
Notes
1 July 2018 to 30 June 2019
1 July 2017 to 30 June 2018
£
£
GROUP STATEMENT OF COMPREHENSIVE INCOME
Loss for the period
(11,994,408)
(13,573,550)
Other comprehensive income
Items reclassified to profit or loss
Changes in the fair value of derivatives
recognised at fair value
18
58,083
108,421
Items that will not be reclassified to
profit or loss
Derivatives settled during the period
reclassified to profit and loss
Foreign exchange loss on retranslation
of foreign subsidiaries
Other comprehensive income for the
period
Total comprehensive income for the
period
(166,504)
2,221
(1,717)
(106,200)
(106,704)
(12,100,609)
(13,466,846)
41
GFINITY plc | Annual Report & Financial Statements 2019
FINANCIAL STATEMENTS
Group Statement of Financial Position
Director
Note
30 June 2019
£
30 June 2018
£
NON CURRENT ASSETS
Property, plant and equipment
Goodwill
Intangible fixed assets
Investment in Associate
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
Current tax assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Ordinary shares
Share premium account
Other reserves
Retained earnings
Total equity
Non-current Liabilities
Deferred tax liabilities
Current liabilities
Trade and other payables
Derivative financial instruments
Total liabilities
10
12
11
14
15
16
19
26
17
18
483,133
2,544,525
1,033,993
-
4,061,631
2,322,379
648,454
-
2,970,833
7,032,465
362,897
37,455,838
1,637,763
(35,731,794)
3,724,704
322,718
2,985,042
-
3,307,760
758,861
2,544,525
2,070,156
264,464
5,638,006
2,159,869
3,679,288
153,000
5,992,157
11,630,163
286,348
31,565,734
585,539
(23,628,965)
8,808,656
366,245
2,238,420
216,842
2,821,507
TOTAL EQUITY AND LIABILITIES
7,032,465
11,630,163
The notes on pages 50 to 83 form an integral part of these financial statements.
Garry Cook
Executive Chairman
19 October 2019
42
Jonathan Hall
Chief Financial Officer
19 October 2019
GFINITY plc | Annual Report & Financial Statements 2019 FINANCIAL STATEMENTS
Company Statement of Financial Position
Director
Note
30 June 2019
£
30 June 2018
£
NON CURRENT ASSETS
Property, plant and equipment
Investment in Subsidiaries
Intangible fixed assets
Investment in Associate
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
Current tax assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Ordinary shares
Share premium account
Other reserves
Retained earnings
Total equity
Current Liabilities
Trade and other payables
Derivative financial instruments
Total liabilities
10
13
11
14
15
16
19
17
18
459,103
4,466,134
-
-
4,925,236
3,760,364
603,076
-
4,363,440
9,288,676
362,897
37,445,838
1,637,259
(33,107,935)
6,348,059
2,940,616
-
2,940,616
739,855
4,466,134
23,807
264,464
5,494,260
2,584,689
3,563,217
153,000
6,300,906
11,795,166
286,348
31,565,734
587,257
(23,028,794)
9,410,545
2,167,778
216,843
2,384,621
TOTAL EQUITY AND LIABILITIES
9,288,676
11,795,166
The notes on pages 50 to 83 form an integral part of these financial statements.
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Company is not presented as part of these
financial statements. The parent Company’s loss for the year amounts to £9,970,720 (2018: loss of £12,973,380).
Signed on behalf of the board on 19 October 2019:
Garry Cook
Executive Chairman
19 October 2019
Jonathan Hall
Chief Financial Officer
19 October 2019
43
GFINITY plc | Annual Report & Financial Statements 2019 FINANCIAL STATEMENTS
Group Statement of Changes in Equity
Director
Ordinary
shares
£
Share
premium
Share option
reserve
£
£
Retained
earnings
£
At 30 June 2017
188,664
15,254,085
154,217
(10,163,836)
Forex
Total equity
£
-
£
5,433,130
Loss for the period
Other Comprehensive
Income
Total comprehensive
income
Proceeds of Shares
Issued
Shares as
Consideration
Share issue costs
Share options
expensed
Total transactions
with owners,
recognised directly
in equity
-
-
-
-
-
-
81,763
13,618,704
15,921
3,050,663
-
-
(357,717)
-
-
-
-
-
-
-
433,039
97,684
16,311,650
433,039
(13,573,550)
-
(13,573,550)
108,421
(1,717)
106,704
(13,465,129)
(1,717)
(13,466,846)
-
-
-
-
-
-
-
-
-
-
13,700,467
3,066,584
(357,717)
433,039
16,842,373
At 30 June 2018
286,348
31,565,735
587,256
(23,628,965)
(1,717)
8,808,657
44
GFINITY plc | Annual Report & Financial Statements 2019
FINANCIAL STATEMENTS
Group Statement of Changes in Equity(Continued)
Director
Ordinary
shares
£
Share
premium
Share option
reserve
£
£
Retained
earnings
£
Forex
Total equity
£
£
At 30 June 2018
286,348
31,565,735
587,256
(23,628,965)
(1,717)
8,808,657
Loss for the period
Other Comprehensive
Income
Total comprehensive
income
Proceeds of Shares
Issued
Shares as
consideration
Share issue costs
Share options
expensed
Foreign exchange
on retranslation of
foreign subsidiaries
Total transactions
with owners,
recognised directly
in equity
-
-
-
-
-
-
75,000
5,925,000
1,549
157,211
-
-
(192,107)
-
-
-
-
-
-
-
1,050,002
-
76,549
5,890,104
1,050,002
(11,994,408)
-
(11,994,408)
(108,421)
2,221
(106,200)
(12,102,830)
2,221
(12,100,609)
-
-
-
-
-
0
-
-
-
-
-
6,000,000
158,760
(192,107)
1,050,002
-
0
7,016,656
At 30 June 2019
362,897
37,455,839
1,637,258
(35,731,795)
504
3,724,704
45
GFINITY plc | Annual Report & Financial Statements 2019
FINANCIAL STATEMENTS
Company Statement of Changes in Equity(Continued)
Director
Ordinary shares
Share premium
Share option reserve
Retained earnings
Total equity
£
£
£
£
£
At 30 June 2017
188,664
15,254,085
154,217
(10,163,836)
5,433,130
Loss for the period
Other Comprehensive
Income
Total comprehensive
income
Proceeds of Shares
Issued
Share issue costs
Shares as consideration
Share options
expensed
Total transactions with
owners, recognised
directly in equity
-
-
-
-
-
-
81,763
13,618,703
-
15,921
-
(357,717)
3,050,663
-
-
-
-
-
-
433,039
97,684
16,311,649
433,039
(12,973,379)
(12,973,379)
108,421
108,421
(12,864,958)
(12,864,958)
-
-
-
-
-
13,700,466
(357,717)
3,066,584
433,039
16,842,372
At 30 June 2018
286,348
31,565,734
587,256
(23,028,794)
9,410,544
Loss for the period
Other comprehensive
income
Total comprehensive
income
Proceeds of Shares
Issued
-
-
-
-
75,000
5,925,000
Shares as Consideration
1,549
157,211
-
-
-
-
-
(9,970,720)
(9,970,720)
(108,421)
(108,421)
(10,079,141)
(10,079,141)
-
-
-
-
-
6,000,000
158,760
(192,107)
1,050,002
7,016,656
-
-
(192,107)
-
1,050,002
76,549
5,890,104
1,050,002
362,897
37,455,838
1,637,258
(33,107,935)
6,348,048
Share issue costs
Share options
expensed
Total transactions with
owners, recognised
directly in equity
At 30 June 2019
46
GFINITY plc | Annual Report & Financial Statements 2019
GFINITY plc | Annual Report & Financial Statements 2019
4747
GFINITY plc | Annual Report & Financial Statements 2019 FINANCIAL STATEMENTS
Group Statement of Cash Flows
Director
Note
30-Jun-19
£
30-Jun-18
£
(8,470,887)
(12,505,936)
6,481
(123,558)
-
(270,661)
17,678
(370,061)
6,000,000
(192,107)
5,807,893
(3,033,055)
2,221
3,679,288
648,454
1,432
(312,342)
(1,049,924)
(315,713)
-
(1,676,547)
13,700,466
(357,717)
13,342,749
(839,736)
-
4,519,024
3,679,288
24
8
10
Cash flow used in operating activities
Net cash used in operating activities
Cash flow from / (used in) investing
activities
Interest received
Additions to property, plant and
equipment
Acquisition of subsidiaries, net of cash
acquired
Investment in Associate
Proceeds from sale of discontinued
operations
Net cash used in investing activities
Cash flow from / (used in) financing
activities
Issue of equity share capital
Share Issue Costs
Net cash from financing activities
Net increase in cash and cash equivalents
Effect of Currency translation on cash
Opening cash and cash equivalents
Closing cash and cash equivalents
48
GFINITY plc | Annual Report & Financial Statements 2019
FINANCIAL STATEMENTS
Company Statement of Cash Flows
Director
Note
30-Jun-19
£
30-Jun-18
£
24
8
10
Cash flow used in operating activities
Net cash used in operating activities
Cash flow from/(used in) investing
activities
Interest received
Additions to property, plant and
equipment
Acquisition/Disposal of subsidiaries, net
of cash acquired
Investment in Associate
Inter-company loans
Net cash used in investing activities
Cash flow from / (used in) financing
activities
Issue of equity share capital
Share Issue Costs
Net cash from financing activities
Net increase in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
(7,579,304)
(11,928,671)
6,481
(115,256)
45,000
(270,661)
(854,293)
(1,188,730)
6,000,000
(192,107)
5,807,893
(2,960,141)
3,563,216
603,075
1,432
(298,059)
(1,066,500)
(315,713)
(691,046)
(2,369,886)
13,700,466
(357,717)
13,342,749
(955,808)
4,519,024
3,563,216
49
GFINITY plc | Annual Report & Financial Statements 2019
FINANCIAL STATEMENTS
Notes to the Financial Statements
1. General Information
Gfinity plc (“the Company”) is a public company limited by shares incorporated in
the United Kingdom under the Companies Act 2006, registered in England and
Wales and is AIM listed. The address of the registered office is given on page 6. The
registered number of the company is 08232509.
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. Principal activities are
discussed in the Strategic report.
Standards, interpretations
and amendments to published
standards that are not yet
effective
Certain new standards, amendments and
interpretations to existing standards have
been published that are mandatory for the
Company’s accounting periods beginning
on or after 1 July 2019 or later periods but
which the Company has not adopted early
are as follows:
■ IFRS 16 ‘Leases’ (effective for
accounting periods commencing on or
after 1 January 2019);
Management continues to monitor the
IASB’s on-going work on improvements
to financial reporting but does not
currently believe that the amendments
and interpretations listed above will have a
material effect on the Company’s reported
income or net assets. The impact of IFRS
has been considered in note 23.
Interpretations and amendments
to published standards effective in
the accounts
For the purposes of the preparation of
the accounts, the Group has applied all
standards and interpretations that will
be effective for the accounting periods
commencing on or after 1 July 2018.
The following standards and interpretations
have been adopted:
■ Amendments to IFRS 2, ‘Share based
payments’, on clarifying how to
account for certain types of share-
based payment transactions (effective
for accounting periods beginning on or
after 1 January 2018);
■ IFRS 9 ‘Financial instruments’ (effective
for accounting periods beginning on or
after 1 January 2018);
■ IFRS 15 ‘Revenue from contracts with
customers’ (effective for accounting
periods beginning on or after 1 January
2018);
■ IFRIC 22, ‘Foreign currency transactions
and advance consideration’ (effective
for accounting periods beginning on or
after 1 January 2018).
2. Accounting Policies
Basis of preparation
The Company has prepared the accounts
on the basis of all applicable International
Financial Reporting Standards (IFRS),
including all International Accounting
Standards (IAS), Standing Interpretations
Committee (SIC) and the International
Financial Reporting Interpretations
Committee (IFRIC) interpretations issued
by the International Accounting Standards
Board (IASB) with effective dates for
accounting periods beginning on or after
1 July 2018, together with those parts of
the Companies Act 2006 applicable to
companies reporting under IFRS.
The accounts have been prepared on the
historical cost basis, except for otherwise
stated below. The principal accounting
policies, which have been consistently
applied throughout the period presented,
are set out below.
The preparation of financial statements
in conformity with IFRS requires the use
of certain estimates. It also requires
management to exercise its judgement
in the process of applying the company’s
accounting policies. Estimates and
judgements are continually reviewed
and are based on historical experience
and other factors including expectations
of future events that are believed to be
reasonable under the circumstances.
50
GFINITY plc | Annual Report & Financial Statements 2019 Going concern
Gfinity has established itself as a market leader in the fast growing
esports sector. Having delivered strong revenue growth for the
second consecutive year, the Group is on track to achieve its
target of break even at an adjusted operating profit level in the
year to 30 June 2021.
At the end of the period the Group had cash and cash equivalents
amounting to £648,454 and the Company had cash and cash
equivalents amounting to £603,076. On 15 July 2019 the Group
announced its intention to raise a further £5.25 million (prior
to deduction of expenses) via a placing of shares on AIM. This
placing was oversubscribed, with strong support from both new
and existing shareholders. The transaction was approved by
shareholders on 31 July 2019, with shares being admitted to AIM
on 1 August 2019. The placing leaves the Group with a strong
cash position from which to pursue its objectives, while the strong
strategic client relations that Gfinity has built provide confidence
of continued revenue and margin growth. In common with any
growth business in a rapidly developing sector, however, it should
be noted that there is an inherent degree of uncertainty in the
forecasts.
Alongside the improved financial performance of the business, the
oversubscribed nature of the recent placing, the continued strong
support of existing shareholders and a growing investment market
for the esports sector gives the Directors confidence that should
there need to be a raise further funds, then the company would
be successful in doing so. Accordingly, the board do not believe
there to be a material uncertainty with regards to going concern,
hence these accounts have been prepared on a going
concern basis.
Basis of consolidation
The Group accounts consolidate those of the Company and all
of its subsidiary undertakings drawn up to 30 June each year.
Subsidiary undertakings are those entities over which the Group
has the ability to govern the financial and operating policies
through the exercise of voting rights. The results of subsidiaries
acquired or sold are consolidated for the periods from or to the
date on which control passed. Acquisitions are accounted for
under the acquisition method.
Goodwill arising on acquisition is recognised as an asset and
initially measured at cost, being the excess of the cost of the
business combination over the Group’s interest in the net fair
value of the identifiable assets, liabilities and contingent liabilities
recognised. If, after reassessment, the Group’s interest in the
net fair value of the acquiree’s identifiable assets, liabilities
and contingent liabilities exceeds the cost of the business
combination, the excess is recognised immediately in profit
or loss.
All intra group balances, transactions, income and expenses and
profit and losses on transactions between the Company and its
subsidiaries and between subsidiaries are eliminated.
Goodwill
Goodwill is initially recognised and measured as set out above.
Goodwill is not amortised but is reviewed for impairment at least
annually. For the purpose of impairment testing, goodwill is
allocated to each of the Group’s cash-generating units (‘CGUs’)
expected to benefit from the synergies of the combination. CGUs
to which goodwill has been allocated are tested for impairment
annually, or more frequently when there is an indication that the
unit may be impaired. If the recoverable amount of the CGU is
less than the carrying amount of the unit, the impairment loss
is allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro-
rata on the basis of the carrying amount of each asset in the unit.
An impairment loss recognised for goodwill is not reversed in a
subsequent period.
Investment in associates
An associate is an entity over which the Group has significant
influence and that is neither a subsidiary nor an interest in a joint
venture. Significant influence is the power to participate in the
financial and operating policy decisions of the investee but is not
control or join control over those policies.
The Group’s interests in jointly controlled entities are incorporated
in the financial information using the equity method of accounting.
Investments in joint ventures are carried in the balance sheet at
cost as adjusted by post acquisition changes in the Group’s share
of the net assets of the associate, less any impairment in the value
of the individual investments. The Group’s share of the net profit
or loss of the joint venture is shown as a single line item in the
Consolidated Statement of Comprehensive Income.
Where the Group transacts with a joint venture any profit or loss
arising is eliminated to the extent of the Group’s interest in the
relevant joint venture.
The carrying amount of equity-accounted investments is tested for
impairment at least annually.
Investment in Subsidiaries
Investments in subsidiaries are held in the Company balance sheet
at cost and reviewed annually for impairment.
51
GFINITY plc | Annual Report & Financial Statements 2019 FINANCIAL STATEMENTS
Notes to the Financial Statements (Continued)
Revenue
Revenue comprises the fair value of the consideration received
or receivable for the sale of services in the normal course of the
Group’s activities. Revenue is shown net of value added tax.
To determine whether to recognise revenue, the Group follows a
5-step process:
1. Identifying the contract with a customer
2. Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance obligations
5. Recognising revenue when/as performance obligation(s) are
satisfied.
Revenue is recognised either at a point in time or over time, when
(or as) the Group satisfies performance obligations by transferring
the promised goods or services to its customers. The Group bases
its estimates on historical results, taking into consideration the
type of customer, the type of transaction and the specifics of each
arrangement.
Revenue comprises of:
■ Partner event fees: Revenue recognised in line with the date at
which work is performed.
■ Sponsorship revenues: Revenue is recognised on the date
the relevant sponsored event takes place. In the event of
long-term sponsorship contracts, the revenue is released on
a straight-line basis across the term of the contract, except in
instances where a significant proportion of the revenue relates
to specific activation activities, in which case the revenue is
released in line with when that work is performed.
■ Advertising revenues: Fees are earned each time a user clicks
on one of the ads that are displayed on the website. Revenue
is recognised on a pay-per-click basis.
■ Ticket sales: Revenue is recognised on the date the relevant
event is delivered.
■ Broadcaster revenues: Rights fees are received from linear
broadcasters and online streaming platforms in return for
rights to access broadcast content. Revenue is recognised
once the relevant performance obligations are completed
which is typically at the point the broadcast occurs.
■ Website subscriptions: Revenue is invoiced in advance and
deferred on a straight-line basis over the subscription period.
Operating leases
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any
incentives received from the lessor) are charged to the income
52
statement on a straight-line basis over the period of the lease.
The impact of the introduction of IFRS 16, Leases, on future
accounting periods is discussed in note 23.
Foreign currencies
Transactions in foreign currencies are recorded at the rates of
exchange prevailing on the dates of the transactions. At each
balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates
prevailing on the balance sheet date.
Exchange differences arising on the settlement of monetary items,
and on the retranslation of monetary items, are included in the
income statement for the year.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group’s foreign operations are
translated at exchange rates prevailing on the balance sheet
date. Income and expense items are translated at the average
exchange rates for the period, unless exchange rates fluctuate
significantly during that period. Exchange differences arising from
the translation of the Group’s foreign operations are recognised in
other comprehensive income.
Taxation
The taxation expense represents the sum of the tax currently
payable and deferred tax.
The charge for current tax is based on the results for the period
as adjusted for items that are non-assessable or disallowed. It is
calculated using tax rates that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used
in the computations of taxable profit and is accounted for using
the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable
temporary differences, and deferred tax assets are recognised to
the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary
difference arises from goodwill (or any discount on acquisition) or
from the initial recognition (other than in a business combination)
of other assets and liabilities in a transaction that affects neither
the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that the directors
do not have a high degree of certainty that sufficient taxable
profits will be available in the medium-term to allow all or part of
the asset to be recovered.
GFINITY plc | Annual Report & Financial Statements 2019 Share Based Payments
The Company provides equity-settled share-based payments in
the form of share options. Equity-settled share-based payments
are measured at fair value (excluding the effect of non-market-
based vesting conditions) at the date of grant. The fair value
determined at the date of grant is expensed on a straight line
basis over the vesting period, based on the Company’s estimate
of shares which will eventually vest and adjusted for the effect
of non-market based vesting conditions. The Company uses
an appropriate valuation model utilising a Black-Scholes model
in order to arrive at a fair value at the date share options are
granted.
In instances when shares are used as consideration for goods or
services the shares are valued at the fair value of the goods or
services provided. The expense to the company is recognised at
the point the goods or services are received.
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.
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
3 years straight line
Computer equipment
3 years straight line
Production equipment
3 years straight line
Leasehold improvements
Over the period of the lease
or, where management have
reasonable grounds to believe
the property will be occupied
beyond the terms of the lease,
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.
53
GFINITY plc | Annual Report & Financial Statements 2019 FINANCIAL STATEMENTS
Notes to the Financial Statements (Continued)
Intangible fixed assets
Intangible assets other than goodwill are recognised where the purchase or internal development of such assets
are expected to directly contribute towards the company’s ability to generate revenues over a multiple years.
Intangible fixed assets are stated at historical cost less accumulated amortisation and impairment, if any. The
cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Where
the cost is not clearly identifiable discounted cash flows are utilised to estimate either the cost to develop the
resource or, where there are already profits attributable the asset, to estimate future cash inflows. Historical cost
includes expenditure that is directly attributable to the acquisition or development 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.
Amortisation is charged on a straight-line basis over the estimated useful economic life of the asset as follows:
Software development
3 years straight line
Web traffic acquired in business combination
3 years straight line
Technology Platform
3 years straight line
Customer Relationships
5 years
54
GFINITY plc | Annual Report & Financial Statements 2019 Research and development costs
Development expenditure is capitalised as an intangible asset,
only if the development costs can be measured reliably and it is
anticipated that the product being built will be completed and will
generate future economic benefits in the form of cash flows to the
Group.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held
at call with banks, and other short-term highly liquid investments
with original maturities of three months or less. These are readily
convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities are obligations to pay cash or other financial
instruments and are recognised when the company becomes a
party to the contractual provisions of the instrument. Financial
liabilities are classified according to the substance of the
contractual arrangements entered into. All interest-related charges
are recognised as an expense in the income statement.
Trade and other payables are not interest bearing and are
recorded initially at fair value net of transactions costs and
thereafter at amortised cost using the effective interest rate
method.
An equity instrument is any contract that evidence a residual
interest in the assets of the Company after deducting all of its
liabilities. Equity instruments issued by the Company are recorded
at the proceeds received, net of direct issue costs.
Financial assets
Financial assets are recognised in the balance sheet when the
Company becomes a party to the contractual provisions of the
instrument and are recognised in the balance sheet at the lower of
cost and net realisable value.
Provision is made for diminution in value where appropriate.
Income and expenditure arising on financial instruments is
recognised on the accruals basis and credited or charged to the
statement of comprehensive income in the financial period to
which it relates.
Trade receivables do not carry any interest and are initially
recognised at fair value, subsequently reduced by appropriate
allowances for estimated irrecoverable amounts.
Derivative Financial Instruments
Derivative financial assets and financial liabilities are recognised
on the Balance Sheet when the Group becomes a party to the
contractual provisions of the instrument. Derivatives are initially
recorded at fair value and are subsequently remeasured to fair
value based on mid-market prices, estimated future cash flows
and forward rates as appropriate. The fair value is re-assessed at
each period end with the movements recognised initially in the
statement of other comprehensive income before being recycled
to the income statement.
55
GFINITY plc | Annual Report & Financial Statements 2019 FINANCIAL STATEMENTS
Notes to the Financial Statements (Continued)
3. Critical Accounting
Judgements and Estimates
The preparation of financial statements
in conformity with IFRS requires the use
of certain estimates. It also requires
management to exercise its judgement
in the process of applying the company’s
accounting policies. Estimates and
judgements are continually reviewed
and are based on historical experience
and other factors including expectations
of future events that are believed to be
reasonable under the circumstances.
Revenue recognition:
The Group’s revenue recognition policy
is based on separating contracts into
discrete performance obligations with
revenue then recognised based on
the percentage completion of each
performance obligation. Where the value
of each distinct performance obligation
is not set out in a contract Management
estimate the value of each performance
obligation based on the level of resource
required to complete the performance
obligation in comparison to the overall
level of resource required to fulfil the
contract. For example, if a contract did
not stipulate the value by region of a
broadcast agreement Management
would use appropriate weighting (e.g.
audience size) to estimate the value of
each region, with each region viewed
as a separate performance obligation.
Revenue would then be recognised based
on the percentage completion of each
performance obligation. In instances where
there is no other readily available proxy
Management will estimate the value of
each performance obligation based on the
relative cost to deliver.
Revenue settled by means other than cash
(e.g. via equity in a associate) is recognised
based on the value stipulated in the
contract for goods or services, which would
be set at fair value, with the revenue then
recognised based performance obligations
in the manner described above.
Intangible assets recognised on business
combinations:
Intangible assets in business combinations
are recognised when the asset is
separately identifiable and based on the
probable future economic benefit that
arises owing to the Group’s control of the
asset. Typically, the Group will utilise a
discounted cash flow to establish the future
economic benefits and therefore the fair
value of the asset.
The Group identified three intangible
assets in relation to the two acquisitions
undertaken in the prior year. As these
assets have a finite economic life, in line
with IAS 36, they are only subject to further
testing for impairment when there are
either internal or external indicators of
impairment. Based on a review of these
assets it was concluded that there were
indicators of impairment in relation to the
Gaming Platform and CEVO customer
relationship. This followed a drop in
revenue from third parties as CEVO
focused on development in support of
Group projects requiring an exercise to
calculate the recoverable value of the
asset. This is discussed below. Following
further review it was concluded that there
was no impairment to the Gaming Platform
as the technology had underpinned the
successful delivery of a number of events
in the year. The further testing in relation
to the customer relationship is discussed
below.
56
GFINITY plc | Annual Report & Financial Statements 2019 Impairment testing:
The Group tests goodwill for impairment
annually. The recoverable amounts of cash
generating units have been determined
based on value-in-use calculations which
require the use of estimates. Management
has prepared discounted cash flows based
on the latest strategic plan. Discount rate
has been calculated using the Capital
Asset Pricing model with reference to the
value of UK 10 year gilts as a proxy for
a risk free rate and the volatility of Gfinity’s
share price relative to that of AIM
since listing.
Goodwill carried in relation to CEVO: The
key assumptions in evaluating whether
there was any impairment of the goodwill
in relation to CEVO was the discount
factor (13%) which was calculated in the
manner outlined above and the volume
of development work to be undertaken
on behalf of the group. The development
hours were based on the current pipeline
of work and the technology requirements
to deliver the strategic goals of the
business which are then assumed to
grow at a CAGR of 6% over a five year
period. This was then compared against
the cost to fulfil this work by paying a
third party as discussed below. The cost
savings established are a key determinant
in whether there was any evidence of
impairment. This was then evaluated over
a five year period using a discounted
cash flow.
The third-party cost for work was
determined with reference to CEVO’s
own charge out rates with an assumed
5% CAGR growth in the hourly rate. This
indicated a value of £1.8m higher than
the carrying value of goodwill in relation
to CEVO. Reducing development time by
10% has an impact of £0.2m.
Goodwill carried in relation to Real Sport:
The key assumptions in evaluating whether
there was any impairment of the goodwill
in relation to Real Sport was the discount
factor (13%) which was calculated in the
manner outlined above, the prospective
growth in users (15% CAGR over five
years, per Newzoo the esports industry
will grow 20% to FY22) and the timing and
successful execution of traffic monetisation
strategies. Key costs related to content
creation, staff, marketing and traffic
acquisition. Where assumptions could
not be validated based on historical data
they have been benchmarked based on
desk based research with a sensitivity
considered for the timing of cash flows
where monetisation had not yet occurred.
Owing to Real Sport’s pre-profit status the
discounted cash flow was undertaken for
a five year period with the terminal value
then being calculated based on the year
five cashflows with an assumed growth rate
of 0.5%.
Based on the above the value of Real
Sports was £3.0m higher than the carrying
value. Reducing the CAGR for traffic
growth by 5% has an impact of £0.7m
while a 10% reduction has an impact of
£1.4m. The impact of delaying certain
monetisation strategies with traffic growth
as per the base cost has had an adverse
impact of £0.1m.
CEVO customer relationships: As revenue
from third parties declined in the year
it was necessary to test the third-party
relationships for impairment. The test
was based on a discounted cash flow
covering the remaining useful economic
life of the asset (three years) with the key
assumptions being the discount rate (13%),
billable revenue per hour, the number of
hours work undertaken and the staffing
required to deliver the work. Based on the
analysis the recoverable value of the asset
was £0.3m requiring an impairment to the
carrying value of £0.4m.
Valuation of investments:
Investments held in the company
statement of financial position have
been tested in line with the goodwill
impairments described above
Deferred tax:
The Company has not recognised a
deferred tax asset in respect of its losses
given that there is no track record of
taxable profits at this time. Deferred
tax assets will be recognised when the
Company has established a track record
of expected future taxable profit. Detail
of the unrecognised asset as at the period
end are provided in note 9(c).
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.
This fair value is measured by use of a
Black-Scholes model.
The key assumptions used as inputs into
this model are outlined in note 21 on Share
Based Payments. In addition, the company
has issued share options as partial
consideration for services provided. The
cost of these has been recognised based
on the timing of the delivery of the service
and the fair value.
57
GFINITY plc | Annual Report & Financial Statements 2019 4. Revenue
The Group’s policy on revenue recognition is as outlined in note 2. The year ending June 2019 included £0.9m included in the contract
liability balance at the beginning of the period (2018: £nil).
The Group’s revenue disaggregated by primary geographical markets is as follows:
30 June 2019
30 June 2018
Gfinity
CEVO
Total
Gfinity
CEVO
Total
7,082,948
-
7,082,948
3,007,511
-
3,007,511
539,210
248,007
787,218
240,513
635,238
875,751
-
-
-
434,063
-
434,063
7,622,159
248,007
7,870,166
3,682,087
635,238
4,317,325
United
Kingdom
North
America
ROW
Total
The Group’s revenue disaggregated by pattern of revenue of revenue recognition is as follows:
30 June 2019
30 June 2018
Gfinity
CEVO
Total
Gfinity
CEVO
Total
5,251,702
27,778
5,279,480
3,133,484
204,153
3,337,638
2,370,457
220,230
2,590,686
548,602
431,085
979,687
Services
transferred
at a point
in time
Services
transferred
over time
Total
7,622,159
248,007
7,870,166
3,682,087
635,238
4,317,325
As at 30 June 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
June 2019
£1,085,158
£418, 286
£521,010
June 2018
£1,284,348
£ 447,849
£ 879,881
Trade Receivables
Contract Assets
Contract Liabilities
58
GFINITY plc | Annual Report & Financial Statements 2019 Trade receivables are non-interest bearing and are generally on 30 day terms.
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 £0.9m was recognised in the
year ending 30 June 2019 that was held as a contract liability as 30 June 2018. All of these amounts were held in Gfinity.
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.
30 June 2019
30 June 2018
Gfinity
CEVO
Group
Gfinity
CEVO
Group
Revenue
7,622,158
248,007
7,870,166
3,682,087
635,238
4,317,325
Loss
(11,481,149)
(513,259)
(11,994,408)
(13,420,753)
(152,797)
(13,573,550)
Gfinity principally operate in the UK and CEVO principally in the US.
The group has four single external customers which have revenue equal to or greater than 10% of the group’s revenue. The revenue
from each of these customers is: £1.5m, £1.3m, £1.1m and £1.1m. The customers are major game publishers, media companies and
sports rights holders. These revenues are attributed to the Gfinity segment.
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.
59
GFINITY plc | Annual Report & Financial Statements 2019 6. Operating Expenses
Operating loss is stated after charging:
Depreciation of property, plant and equipment
Amortisation & impairment of intangible fixed assets
Rentals under operating leases – land and buildings
Expensed development costs
Staff costs
Costs of inventories expensed
Auditors’ remuneration for auditing the accounts of the
company
Auditors’ remuneration for other non-audit services:
– Other services supplied pursuant to such
legislation
– Other services related to taxation
– All other services
Net foreign exchange (gains)/ losses
Year ended 30 June 2019
Year ended 30 June 2018
Group
399,307
1,036,163
613,861
190,308
5,648,905
-
47,500
-
2,500
8,975
24,546
442,221
418,797
609,373
190,517
4,567,202
1,308
21,000
-
1,500
8,250
(11,571)
7. Particulars Of Employees
Number of employees
The average number of people (including directors) employed by the Company during the financial period was:
Group
Company
Year ended
30 June 2019
Year ended
30 June 2018
Year ended
30 June 2019
Year ended
30 June 2018
62
61
53
58
60
GFINITY plc | Annual Report & Financial Statements 2019
The aggregate payroll costs of staff (including directors) were:
Wages and salaries
Social security costs
Pensions
Equity settled
transactions
Group
Company
Year ended 30 June
2019
Year ended 30 June
2018
Year ended 30 June
2019
Year ended 30 June
2018
4,081,674
474,358
42,871
1,050,002
3,775,231
380,569
22,769
388,633
3,723,272
445,557
41,744
1,050,002
3,400,923
351,450
21,642
388,633
5,648,905
4,567,202
5,260,575
4,162,648
Total remuneration for Directors during the year was £1,347,307 (2018: £572,910).
The board of directors comprise the only persons having authority and responsibility for
planning, directing and controlling the activities of the Group.
8. Finance Income/Costs
Interest income on bank deposits
Interest cost
Group
Year ended 30 June 2019
Year ended 30 June 2019
£
6,481
(1,583)
£
1,432
(1,333)
61
GFINITY plc | Annual Report & Financial Statements 2019
9. Taxation
(a) Major components of taxation expense for the period ended 30 June 2019 are:
Year ended 30 June 2019
Year ended 30 June 2019
Group
Income statement
Current tax
Corporation tax charge / (credit)
Total current tax
Deferred tax
Relating to origination and reversal of temporary
differences
Taxation charge / (credit) reported in the income
statement
£
-
-
(59,832)
(59,832)
(b) Factors affecting tax charge for the period
A reconciliation of taxation expense applicable to accounting profit before taxation at the
statutory tax rate of 19% (2017: 19%), to taxation expense at the Company’s effective tax
rate for the period is as follows:
£
(153,000)
(153,000)
(69,356)
(222,356)
Group
Loss on ordinary activities before taxation
Profit / (Loss) multiplied by rate of tax
Effects of:
Expenses not deductible for tax purposes
Amortisation and impairment of intangibles
Movement in unrecognised tax losses
Unrecognised deferred tax asset at 17%
Prior Year at 19%
Year ended 30 June 2019
Year ended 30 June 2019
£
(12,054,190)
(2,290,296)
-
401,150
196,678
1,632,636
(59,832)
5,615,448
2,578,032
£
(13,795,906)
(2,621,222)
-
103,345
10,644
(153,000)
-
2,437,877
(222,356)
(c) Unrecognised deferred tax asset
The Company has an unrecognised deferred tax asset arising from
trading losses carried forward of £6,338,036 (2018: £4,666,946)
calculated at the substantively enacted Corporation tax rate at
the balance sheet date of 19% (2018: 19%). These trading losses
will reverse against future taxable trading profits and no asset has
been recognised due to uncertainties over the timing and nature
of such gains in accordance with IAS 12.
62
GFINITY plc | Annual Report & Financial Statements 2019 10. Property Plant and Equipment
Group Property Plant and Equipment
Office equipment
£
Computer & production
equipment
Leasehold Improvement
£
Total
£
Cost
At 1 July 2017
Additions
Disposals
At 30 June 2018
Depreciation
At 1 July 2017
Charge for the period
Disposals
At 30 June 2018
Net book value
At 30 June 2018
At 30 June 2017
£
746,413
107,249
0
853,662
238,108
264,093
0
502,201
351,461
508,305
7,947
14,036
0
21,983
4,603
4,927
0
9,530
12,453
3,344
383,451
203,905
0
587,356
19,208
173,202
0
192,410
394,946
364,243
Group Property, Plant and Equipment Continued
Cost
At 1 July 2018
Additions
Disposals
Exchange differences
Office
equipment
Computer & production
equipment
Leasehold
Improvement
£
£
£
21,983
40,311
0
853,662
50,070
(1,847)
331
587,356
34,506
0
1,137,811
325,190
0
1,463,001
261,919
442,222
0
704,141
758,860
875,892
Total
£
1,463,001
124,887
(1,847)
331
At 30 June 2019
62,294
902,216
621,862
1,586,373
Depreciation
At 1 July 2018
Charge for the period
Disposals
Exchange Differences
At 30 June 2019
Net book value
At 30 June 2019
At 30 June 2018
9,530
5,536
0
-
15,066
47,228
12,453
502,201
238,830
(273)
85
192,410
154,940
0
-
704,141
399,307
(273)
85
740,843
347,350
1,103,260
161,373
274,513
483,113
351,461
394,946
758,860
63
GFINITY plc | Annual Report & Financial Statements 2019 Company Property, Plant and Equipment
Office equipment
£
7,947
5,070
0
Computer & production
equipment
Leasehold
Improvement
£
£
746,413
89,085
0
383,451
203,904
0
Total
£
1,137,811
298,059
0
Cost
At 1 July 2017
Additions
Disposals
At 30 June 2018
13,017
835,498
587,353
1,435,870
Depreciation
At 1 July 2017
Charge for the period
Disposals
At 30 June 2018
Net book value
At 30 June 2018
At 30 June 2017
4,603
2,365
0
6,968
6,049
3,344
238,108
258,531
0
19,208
173,202
0
261,919
434,098
0
496,639
192,410
696,017
338,859
394,945
739,853
508,305
364,243
875,892
64
GFINITY plc | Annual Report & Financial Statements 2019 Company Property, Plant and Equipment continued
Office equipment
£
Computer & production
equipment
Leasehold
Improvement
£
£
Cost
At 1 July 2018
Additions
Disposals
13,017
37,877
0
835,498
44,399
(1,797)
587,355
34,506
0
Total
£
1,435,870
116,782
(1,797)
At 30 June 2019
50,894
878,100
621,861
1,550,855
Depreciation
At 1 July 2018
Charge for the period
Disposals
6,968
5,536
0
496,639
235,532
(273)
192,410
154,940
0
696,017
396,008
(273)
At 30 June 2019
12,504
731,899
347,350
1,091,753
Net book value
At 30 June 2019
At 30 June 2018
38,389
6,049
146,202
338,859
274,511
394,945
459,102
739,853
65
GFINITY plc | Annual Report & Financial Statements 2019 11. Intangible Fixed Assets
Group Intangible Fixed Assets
Customer
Relationship
Real Sport
Web Platform
Gaming
Platform
Software
Development
Total
£
£
-
£
-
£
-
1,198,661
935,518
281,383
£
148,750
-
148,750
2,415,562
Cost
At 1 July 2017
Additions
At 30 June 2018
1,198,661
935,518
281,383
148,750
2,564,312
223,969
-
92,524
-
52,721
75,359
49,583
75,359
418,797
223,969
92,524
52,721
124,942
494,156
Amortisation
At 1 July 2017
Charge for the
period
At 30 June 2018
Net book value
At 30 June 2018
974,692
842,994
228,662
At 30 June 2017
-
-
-
23,808
73,391
2,070,156
73,391
Customer
Relationship
Real Sport
Web Platform
CEVO
Gaming Platform
Software
Development
£
£
£
£
Total
£
Cost
At 1 July 2018
Additions
1,198,661
935,518
281,383
148,750
2,564,312
-
-
-
-
-
At 30 June 2019
1,198,661
935,518
281,383
148,750
2,564,312
Amortisation
At 1 July 2018
Charge for the
period
Impairment
223,969
239,732
403,496
92,524
312,696
52,721
56,431
124,942
23,808
494,156
632,667
403,496
At 30 June 2019
867,197
405,220
109,152
148,750
1,530,319
331,464
974,692
530,298
842,994
172,231
228,662
-
1,033,393
23,808
2,070,156
Net book value
At 30 June 2019
At 30 June 2018
66
GFINITY plc | Annual Report & Financial Statements 2019
Company Intangible Fixed Assets
Cost
At 1 July 2017
Additions
At 30 June 2018
Amortisation
At 1 July 2017
Charge for the period
At 30 June 2018
Net book value
At 30 June 2018
At 30 June 2017
Cost
At 1 July 2018
Additions
At 30 June 2019
Amortisation
At 1 July 20178
Charge for the period
At 30 June 2019
Net book value
At 30 June 2019
At 30 June 2018
Software Development
£
148,750
-
148,750
75,359
49,583
124,942
73,391
23,808
Software Development
£
148,750
-
148,750
124,942
23,808
148,750
-
23,808
Total
£
148,750
-
148,750
75,359
49,583
124,942
73,391
23,808
Total
£
148,750
-
148,750
75,359
49,583
124,943
-
23,808
Software development costs refer to direct costs incurred in development of the Gfinity TV
Player media player. The valuation of the Real Sport web platform has been based on the
cost to Gfinity of acquiring Real Sport’s traffic
67
GFINITY plc | Annual Report & Financial Statements 2019 Goodwill
£
2,544,525
-
2,544,525
-
-
-
2,544,525
2,544,525
Total
£
2,544,525
-
2,544,525
-
-
-
2,544,525
2,544,525
The goodwill has arisen on the acquisitions of 100% of the share capital of CEVO Inc. and
RealSM Ltd in the prior year. The goodwill arising on the business combinations has been
tested for impairment based on the methods outlined in note 3 on accounting estimates
and judgements. In both instances the test indicated there was no impairment of
the goodwill.
12. Goodwill
Group
Cost
At 1 July 2018
Additions
At 30 June 2019
Impairment
At 1 July 2018
Charge for the period
At 30 June 2019
Net book value
At 30 June 2019
At 30 June 2018
68
GFINITY plc | Annual Report & Financial Statements 2019 13. Investment in subsidiaries
At 1 July
Investment in subsidiary
At 30 June
30 June 2019
£
4,466,134
-
4,466,134
Company
30 June 2018
£
-
4,466,134
4,466,134
The investments in subsidiaries represent the purchase of CEVO
and Real Sport on 24 July 2017 and 13 March 2018 respectively.
The fair value of consideration at acquisition for CEVO was
£2,158,498 for 100% of the share capital and the fair value at
acquisition of Real Sport was £2,307,634 for 100% of the share
capital. Both investments are held in Gfinity PLC.
Subsidiary undertaking
Country of incorporation
Holding
Proportion of voting
rights and capital held
Nature of business
CEVO Inc.
USA
Ordinary shares
100%
IT Development and
Tournament and event
operator
RealSM Ltd
England
Ordinary Shares
100%
Online media
RealSM Ltd registered offices are The Foundry, 77 Fulham Palace
Road, London, United Kingdom, W6 8JB. CEVO’s registered
address is 128 Maringo Rd, Ephrata, WA 98823.
69
GFINITY plc | Annual Report & Financial Statements 2019
14. Investment in Associates
Group
Company
30 June 2019
30 June 2018
30 June 2019
30 June 2018
£
£
£
£
At 1 July
Investment
Share of Losses
Impairment
At 30 June
264,464
727,487
(877,967)
(113,984)
50,000
561,701
(347,237)
264,464
727,487
(877,967)
(113,984)
50,000
561,701
(347,237)
-
264,464
-
264,464
The investment in associate relates to the acquisition of 33% of
the Esports Awards Limited on its incorporation in February 2017
and 30% of Gfinity Australia on its incorporation in August 2017.
On 14 August 2019 it was announced that Gfinity Australia would
close at the end if November 2019. As a result the carrying value
of the investment was written off in full. Subsequent investments
have maintained Gfinty’s investment at the same percentage
holding. Both investments are held in Gfinity plc.
Associate undertaking
Country of
incorporation
Holding
Proportion of voting
rights and capital held
Nature of business
Esports Awards Ltd
Gfinity Esports Australia
PTY Limited
England
Australia
Ordinary shares
Ordinary Shares
33%
30%
Event Operator
Tournament and event
operator
Esports Awards LTD’s registered offices are Belfry House, Champions Way, Hendon, London, England, NW4 1PX.
The registered office of Gfinity Esports Australia is Suite 5, Level 1, 100 William Street, Sydney, NSW 2011.
70
GFINITY plc | Annual Report & Financial Statements 2019 15. Trade and Other Receivables
Group
Company
30 June 2019
30 June 2018
30 June 2019
30 June 2018
£
£
£
£
Trade receivables
Provision for doubtful debts
1,085,268
(110)
1,504,006
(219,658)
1,054,816
(110)
1,389,124
(219,658)
Other receivables
Amounts due from group
undertakings
Amounts due from related
undertakings
Prepayments and accrued
income
Amounts due in less than one
year
Amounts due from group
undertakings
Prepayments and accrued
income
1,085,158
1,284,348
1,054,706
1,169,466
374,058
-
51,214
710,933
227,165
-
128,692
519,664
374,058
-
228,045
610,757
51,214
128,692
647,321
447,729
2,221,364
2,159,869
2,127,299
2,584,689
-
101,015
-
1,532,050
101,015
Total
2,322,379
2,159,869
3,760,364
2,584,689
Amount due from group undertakings of £1,532,050 are considered to be due in more than one year
(2018: £17,660) while prepayments include a rental deposit of £101,015 that is viewed as recoverable
at the expiration of the lease in 2021.
The directors consider that the carrying amount of trade and other receivables approximates to their
fair value due to the short-term nature of these financial assets.
71
GFINITY plc | Annual Report & Financial Statements 2019
16. Cash and Cash Equivalents
Cash at bank and in hand
Short term deposit
Group
Company
30 June 2019
30 June 2018
30 June 2019
30 June 2018
£
598,324
50,130
£
3,629,182
50,106
£
552,946
50,130
£
3,513,111
50,106
648,454
3,679,288
603,076
3,563,217
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. The fair value of cash and cash equivalents
does not differ from the carrying value.
17. Trade and Other Payables
Trade payables
Other taxation and social
security
Accrued expenditure and
deferred revenue
Group
Company
30 June 2019
30 June 2018
30 June 2019
30 June 2018
£
1,448,232
148,589
£
666,337
184,688
£
1,412,800
139,597
£
621,879
158,506
1,388,221
1,387,395
1,388,219
1,387,393
2,985,042
2,238,420
2,940,616
2,167,778
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The directors consider that
the carrying amount of trade payables approximates to their fair value due to their short-term nature.
72
GFINITY plc | Annual Report & Financial Statements 2019
18. Derivative Financial Instruments
Derivative financial liabilities
Deferred shares
Group & Company
30 June 2019
£
-
30 June 2018
£
216,843
Deferred shares relate to the acquisition of CEVO Inc.. These were
paid in full during the year. The value of the shares at acquisition
was £325,264 with a change in value of £108,421 recognised in
other comprehensive income at the June 2018 year end.
The shares were subsequently issued in September 2018 with the
£108,421 recycled to the income statement along with a further
£58,803 relating to the change in value between 30 June 2018
and the issue date.
19. Issued Capital
The Company has a single class of ordinary share with nominal
value of £0.001 each. Movements in the issued share capital of the
Company can be summarised as follows:
Issued and fully paid
Number
£
As at 30 June 2017
Issued on 24 July at £0.21
Issued 11 October 2017 at £0.27
Issued 13 March 2018 at £0.1875
Issued 28 March 2018 at £0.12
As at 30 June 2018
Issued on 17 September at £0.10
Issued on 9 November at £0.08
As at 30 June 2019
188,663,570
3,614,049
25,925,926
12,307,382
55,837,283
286,348,210
1,548,877
75,000,000
362,897,087
188,664
3,614
25,926
12,307
55,837
286,348
1,549
75,000
362,897
73
GFINITY plc | Annual Report & Financial Statements 2019 20. Earnings 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.
Group
Company
Year to 30 June 2019
Year to 30 June 2018
Year to 30 June 2019
Year to 30 June 2018
£
£
£
£
(12,102,520)
(13,466,846)
(9,970,720)
(12,863,650)
1,911
Number
000’s
Number
000’s
Number
000’s
Number
000’s
335,573
228,815
335,573
228,815
(0.04)
0.00
(0.06)
(0.03)
(0.06)
Loss attributable to
shareholders from
continuing operations
Profit attributable to
shareholders from
discontinued operations
Weighted average
number of ordinary
shares
Loss per ordinary share
for continuing operations
Profit per ordinary
share for discontinued
operations
74
GFINITY plc | Annual Report & Financial Statements 2019
GFINITY plc | Annual Report & Financial Statements 2019
757575
GFINITY plc | Annual Report & Financial Statements 2019 21. Share Based Payments
Equity-settled share option plans
Options
The Company has a share option scheme for all employees of the Group.
The tables below summarises the exercise terms of the various options over Ordinary shares of £0.001 each
which had been granted, and were still outstanding, as at 30 June 2019. A total of 21,002,651 were granted in
the year. No options were exercised during the year and 3,541,293 lapsed due to members of staff leaving. The
total number of outstanding options in issue at 30 June 2019 is 54,359,795 (2018: 36,898,437).
LTIP options
Shares Options as at 30 June 2017
Shares Options Granted
Share Options Forfeited
LTIP Share Options as at 30 June 2018
Number
Weighted average exercise price
£
22,766,711
6,967,440
(335,714)
29,398,437
0.1428
0.1964
(0.1962)
0.1549
Number
Weighted average exercise price
LTIP options
Shares Options as at 30 June 2018
Shares Options Granted
Share Options Forfeited
LTIP Share Options as at 30 June 2019
29,398,437
21,002,651
(3,541,293)
46,859,795
£
0.1549
0.1230
(0.1864)
0.1382
76
GFINITY plc | Annual Report & Financial Statements 2019 Options for non-employee services
Non-market condition shares
Number
Weighted average exercise price
Shares Options as at 30 June 2018
Shares Options Granted
Share Options Lapsed
Share Options as at 30 June 2019
7,500,000
-
-
7,500,000
£
n/a
-
-
n/a
Options vest over periods defined in the respective option
agreements and at the discretion of the board of directors.
10,726,129 options vested during the year (2018: 8,485,327).
Of the options outstanding 32,600,133 (2018: 12,429,241) are
held by directors. Full details of all options held by directors are
contained within the Directors’ Remuneration Report.
The principal assumptions input into the Black Scholes model to
calculate the value of LTIP share options issued for compliance
with IFRS 2 “Share Based Payments” are included below, where
applicable.
Weighted average exercise price
Average expected life
Expected volatility of options
granted in year
Risk free rate
Expected dividend yield
Year ended 30 June 2019
Year ended 30 June 2018
£0.1382
1.0 years
90.02%
1.11%
0%
£0.1549
1.8 years
111.11%
1.14%
0%
All options were granted at an exercise price equivalent to the
market price at the date of grant. The weighted average exercise
price of LTIP options outstanding at 30 June 2019 was £0.1382
(2018: £0.1549). The weighted average fair value of options issued
during the period was £0.1230 (2018: £0.1119).
The average expected life is based on directors’ best estimate
taking into account the vesting conditions of the options.
Expected volatility has been calculated with reference to the
actual volatility of the share price since the Company’s admission
to AIM in December 2014.
The fair value of the non-employee services options has been
based on the fair value of the services provided at the date the
services were provided. This equates to a fair value of options
issued in the year £nil (2018: £0.0111).
All options are held in Gfinity plc with no options held over any of
the subsidiaries.
77
GFINITY plc | Annual Report & Financial Statements 2019 22. Related Party Transactions
The Directors Remuneration Report provides details of share
options issued to certain directors in the period. Further
information on share options are provided in Note 21. In addition
to the share options granted in the year, Garry Cook and Graham
Wallace also participated in the October 2019 share placing
acquiring 100,000 and 25,000 shares respectively. These were
purchased at the price of £0.08 in line with the amount paid by all
other participants in the fund raise.
Transactions with Group subsidiaries in the year were inter-
company loans from Gfinity to CEVO (£476,208, FY18: £236,274),
Real Sport (£471,740 FY18: £347,843). The prior year included
an inter-company loan to Excel Interactive limited for £80,289,
which was written off in full in the year, and Gfinity undertook
transactions worth £18,989 with CEVO in the year ending
June 2018.
Transactions with associates in the year were £98,600 of revenue
from the Esports Awards LTD (£90,000 in the prior year) and
£379,848 with Gfinity Australia (£269,893 in the prior year) .
These were billable activities based on market rates for delivering
the services. At year end £51,214 remained outstanding from
the Esports Awards LTD. £332,548 of the revenue from Gfinity
Australia was settled via equity.
23. Commitments Under Non-Cancellable
Operating Leases
The Group and Company have the following total commitments
under non-cancellable operating leases expiring as follows:
LAND AND BUILDINGS
Group
Company
30 June 2019
30 June 2018
30 June 2019
30 June 2018
£
£
£
£
Less than one year
1 -2 Years
856,368
447,759
372,600
-
856,368
447,759
Total
1,304,127
372,600
1,304,127
372,600
-
372,600
In the year ending June 2020 the Group’s accounts will be
impacted by IFRS 16, Leases, which is effective for accounting
periods commcing on or after 1 January 2019. If this had been in
effect at the year ending 30 June 2019 both assets and liabilities
would have increased by £1.3m.
78
GFINITY plc | Annual Report & Financial Statements 2019 24. Notes To The Cash Flow Statement
Group
Company
30 June 2019
30 June 2018
30 June 2019
30 June 2018
(12,056,151)
(13,795,906)
(9,971,259)
(13,126,379)
399,307
1,036,163
(6,481)
1,050,002
(166,504)
991,951
(420,232)
-
28,925
442,221
418,797
(1,432)
433,039
-
347,237
(246,550)
-
125,191
396,008
23,807
(6,481)
1,050,002
(166,504)
991,951
(420.232)
(44,999)
28,925
434,097
49,583
(1,432)
433,039
-
347,237
(246,550)
-
207,198
-
-
-
-
(191,435)
(624,724)
(350,307)
(543,679)
710,028
153,539
243,191
153,000
736,244
153,539
365,215
153,000
(8,470,887)
(12,505,936)
(7,579,304)
(11,928,671)
–
–
-
-
(8,470,887)
(12,505,936)
(7,579,304)
(11,928,671)
Cash flows from
operating activities
Loss before taxation
Adjustments for:
Depreciation of property,
plant and equipment
Amortisation & impairment
of intangible fixed assets
Interest Received
Share based payments
Fair Value Adjustment on
Deferred Consideration
Share of Associate Losses
Revenue Settled Via Equity
Gain on disposal of
subsidiary
Bad Debt Charge
Changes in working capital:
Decrease/(Increase) in
Inventories
(Increase)/ decrease in
trade and other receivables
Increase in trade and other
payables*
Corporation tax (paid)/
received
Cash used by operating
activities
Interest paid
Net cash used by operating
activities
79
GFINITY plc | Annual Report & Financial Statements 2019
25. Financial Instruments And Risk Management
Credit risk
The Company uses a limited number of financial instruments,
comprising cash, short-term deposits, and various items such
as trade receivables and payables, which arise directly from
operations. The Company does not trade in financial instruments.
All of the Company’s financial instruments are measured at
amortised cost
The Company’s principal financial assets are bank balances and
cash, trade and other receivables.
Bank balances and cash are held by banks with high credit ratings
assigned by independent credit rating agencies. Management is
of the opinion that cash balances do not represent a significant
credit risk.
The Company’s activities expose it to a variety of financial risks:
market risk (including currency risk and interest rate risk), credit risk
and liquidity risk.
As the Group does not hold security against trade and other
receivables, its credit risk exposure is as follows:
Group
Company
30 June 2019
30 June 2018
30 June 2019
30 June 2018
£
£
£
£
1,243,834
1,292,320
2,745,432
1,788,425
The trade receivables balance represents amounts due from third
parties. At the balance sheet date, the Group’s trade receivables
totalled £1,085,268 less a provision of £110 (2018: £1,504,006
less a provision of £219,658). The Company’s receivables include
£1,532,050 of inter-company funding (2018: £610,757). The
Company’s trade receivables totalled £1,054,816 less a provision
for doubtful debt of £110 (2018: £1,389,124 less a provision for
doubtful debt of £219,658).
There are no significant overdue but not impaired trade
receivables at the balance sheet date. The Company balance
sheet includes inter-company receivables which are not
considered to be at risk as the Company retains control over the
debtor however it is not anticipated that the Group companies will
repay these amounts in the next 12 months.
At the balance sheet date amounts of £905,026 were due from
two customers representing a concentration of credit risk. All
amounts have been recovered since the balance sheet date.
Liquidity risk
All trade and other payables are due for settlement within one
year of the balance sheet date. The use of instant access deposits
ensures sufficient working capital is available at all times.
Foreign exchange risk
The Company operates in overseas markets by selling directly
from the UK, owns an overseas subsidiary and reports in GBP. It is
therefore subject to currency exposures on transactions while the
Group is subject to currency exposures on consolidation of the
overseas subsidiary.
80
GFINITY plc | Annual Report & Financial Statements 2019 Derivative Financial Instruments
The Group holds derivative financial instruments at their value
with the gain or loss on remeasurement of fair value immediately
in the statement of comprehensive income as outlined in Note 2.
The only financial instruments held on the balance sheet related to
deferred consideration for the purchase of CEVO with the liability
to be settled via shares in Gfinity.
Financial instruments held by the Company and their carrying
values were as follows:
Group
June 2019
June 2018
USD ($)
GBP (£)
USD ($)
AUSD ($)
GBP (£)
882,474
441,582
901,508
35,393
1,262,719
80,783
316,422
(102,803)
354,674
399,288
(1,367,280)
88,762
377,085
(101,644)
-
-
380,646
3,380,358
(1,164)
(2,160,794)
-
-
-
-
(216,843)
1,176,876
(171,736)
1,265,711
34,229
2,646,086
Company
June 2019
June 2018
USD ($)
GBP (£)
USD ($)
AUSD ($)
GBP (£)
843,801
441,582
780,150
35,393
1,168,665
265,100
(86,079)
354,674
394,324
(1,345,017)
321,783
(68,424)
-
-
380,646
3,319,590
(1,164)
(2,115,304)
-
-
-
-
(216,843)
1,022,822
(154,437)
1,033,509
(34,229)
2,536,754
Trade and other
receivables
Accured income
Cash
Trade and other
payables
Derivative Financial
Instruments
Net Current Assets/
Liabilities
Trade and other
receivables
Accured income
Cash
Trade and other
payables
Derivative Financial
Instruments
Net Current Assets/
Liabilities
Financial liabilities included in the balance sheet relate to the IAS
39 category of other financial liabilities held at amortised cost.
As cash is held at floating interest rates, its carrying value
approximates to fair value.
Assets relate to loans and receivables with the exception of other
receivables and prepayments which are classified as non-
financial assets.
Fair value estimation
The aggregate fair values of all financial assets and liabilities are
consistent with their carrying values due to the relatively short-
term maturity of these financial instruments.
Capital management
The Company is funded entirely through shareholders’ funds.
If financing is required, the board will consider whether debt or
equity financing is more appropriate and proceed accordingly.
The Company is not subject to any externally imposed capital
requirements.
81
GFINITY plc | Annual Report & Financial Statements 2019
26. Deferred tax
Group
At 1 July
Acquisition of subsidiary
Credited to profit or loss
At 30 June
The provision for deferred taxation is made up as follows:
Temporary timing differences on intangible
assets
At 30 June
2019
£
(366,245)
-
43,525
(322,718)
2019
£
322,718
322,718
2018
£
-
(435,601)
69,356
(366,245)
2018
£
366,245
366,245
82
GFINITY plc | Annual Report & Financial Statements 2019
27. Details of the sale of the subsidiary
Profit on sale of subsidiary
1 July 2018 to 30 June 2019
1 July 2017 to 30 June 2018
Consideration received or receivable:
Cash
Total disposal consideration
Carrying amount of net assets sold
Gain on sale before income tax
Tax expense on gain
Gain on sale after income tax
Losses of Subsidiary in the year
Revenue
Cost of Sales
Gross Profit / (Loss)
Administrative Expenses
Profit / (Loss)
45,000
45,000
(37,982)
82,982
(15,767)
67,215
-
-
-
-
1 July 2018
to 30 June 2019
1 July 2017
to 30 June 2018
-
(17,914)
(17,914)
(47,389)
(65,303)
33,845
(19,574)
14,271
27,321
27,321
83
GFINITY plc | Annual Report & Financial Statements 2019 APPENDIX
Image Credits
Photographer
Joe Brady
Photographer
Chris Dart Photography
Photographer
Ben Brotherton / F1
84
Page Credit
Cover Image 1
Cover Image 2
Cover Image 3
Page 7 image 2
Page 7 image 3
Page 4 image 4
Page 16
Page 22
Page 29
Page 30
Page Credit
Cover Image 4
Page 1
Page Credit
Page 2
Page 7 image 1
Page 11
Page 18
GFINITY plc | Annual Report & Financial Statements 2019 85
GFINITY plc | Annual Report & Financial Statements 2019 35 New Bridge Street,
London
EC4V 6BW
gfinityplc.com
86
GFINITY plc | Annual Report & Financial Statements 2019