Team17 Group Annual Report 2018

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FY2018 Annual Report · Team17 Group

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Annual Report and Accounts 2018

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Team17 Digital Limited
Castleview House
Calder Island Way
Wakefield
West Yorkshire
WF2 7AW
United Kingdom

www.team17.com

Registered in England No: 02621976

Strong portfolio of
games driving growth

Team17 is a leading video games label and creative
partner for independent (“indie”) developers. The
team plays and makes games, helping independent
developers from all backgrounds to bring quality
gaming experiences to all players globally.

The Group supports award winning owned first party and
third-party IP – through partnering with indie developers
globally – in the development and publishing of games
across multiple platforms typically for a fixed revenue share.

Team17 is a highly successful games publisher, focussed on
maximising a game's commercial success and creating long
term game franchises.

The Group focuses on premium, rather than free to play games,
and its portfolio comprises over 100 games, including the iconic
and well-established Worms franchise, as well as Overcooked
and The Escapists.

Contents

STRATEGIC REPORT

Highlights of the year
At a glance
Our portfolio
Case study
Chairman and Chief Executive's Review
Chief Financial Officer's Review
Principal Risks and Uncertainties

CORPORATE GOVERNANCE

Board of Directors
Corporate governance
Audit Committee report
Remuneration Committee report
Directors’ report

GROUP FINANCIAL STATEMENTS

Independent auditor's report to the
members of Team17 Group Plc
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the consolidated financial statements

COMPANY FINANCIAL STATEMENTS

Independent auditors’ report to the
members of Team17 Group Plc
Company Statement of Financial Position
Company Statement of Changes in Equity
Notes to the Company financial statements

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53
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Registered office
Castleview House, Calder Islay Way, Calder Island, Wakefield WF2 7AW

Independent Auditors
PricewaterhouseCoopers LLP, Chartered Accountants and Statutory Auditors, Central Square, 29 Wellington Street, Leeds LS1 4DL

Nominated Advisor
GCA Altium, 3rd Floor, 1 Southampton Street, London WC2R 0LR

Broker
Joh. Berenberg, Gossler & Co. KG (London Branch), 60 Threadneedle Street, London EC2R 8HP

Financial PR/Investor Relations
Vigo Communications, Sackville House, 40 Piccadilly, London W1J 0DR

Designed & Produced by KW Partners (www.kwpartners.co.uk)

Highlights of the year

STRATEGIC REPORT

+46%

Group revenue
was £43.2m

+18%

Gross profit
was £19.8m

+18%

Adjusted EBITDA
was £15.3m

46%

Strong margin, driven
by third party sales

Published a number of major
titles during the period, including
Yoku’s Island Express and
Overcooked 2, which successfully
launched in August 2018 to
critical acclaim and was awarded
Best Family Game at The Game
Awards in December 2018.

Successfully completed the
Company’s listing on AIM in
May 2018, raising £107.5m and
enabling Team17 to enhance its
profile whilst providing the ability
to invest to drive future growth.

Team17’s sizeable back catalogue
continues to perform strongly
and underpin revenues, with
key titles such as Worms and
The Escapists continuing to
launch new content, further
demonstrating Team17’s life
cycle management expertise.

Revenue (£)

Gross profit (£)

As well as developing games
in-house, Team17 also partners
with developers across the globe
to bring games to market, having
undertaken a comprehensive due
diligence process. Team17 is then
able to deploy its expertise and
skill set to maximise the potential
success of games upon launch.

43.2m

29.6m

10.4m

13.5m

2015

2016

2017

2018

19.8m

16.9m

7.9m

5.3m

2015

2016

2017

2018

Adjusted EBITDA (£)

Profit before tax (£)

15.3m

12.9m

6.1m

3.9m

2015

2016

2017

2018

8.7m

5.4m

3.8m

2.8m

2015

2016

2017

2018

TEAM17 PLC ❘ ANNUAL REPORT 2018At a glance

Product
acquisiton

IP & product
incubation

Go-to-market
execution

Lifecycle
management

Identifying
games
As well as games submitted
by independent developers,
Team17 has a dedicated team
tasked with identifying
potential new partners.

100+

Team17 has now launched over
100 games, both developed
internally and with partners.

Team17

Uses the experience, skill-set and know-how of our commercial
teams to enhance consumer awareness and “discoverability”
on digital distribution platforms via bespoke marketing, public
relations, social media engagement and community marketing.

TEAM17 PLC ❘ ANNUAL REPORT 2018

Award nominations

140+

across Team17
portfolio in 2018.

Low risk model
All Team17 investment is
undertaken in a low risk
manner, typically using
milestone payments during
the development process,
alongside revenue share
agreements payable
post launch.

Quality Focussed

130+

employees in the internal creative development studio,
providing essential resources including additional code, art,
audio, design, quality assurance, usability, release management,
cross platform development and support services.

Overcooked 2

45.9m

YouTube views in 2018.

Maximising
Long term enhanced
revenue of games through
dynamic price management,
incremental downloadable
content, promotional
planning and strategic
additional platform releases.

1995

First Worms game was
launched and continues to
contribute to revenues today.

TEAM17 PLC ❘ ANNUAL REPORT 2018

Team17 is a premium indie games
developer and publisher focused on both
developing and discovering high quality,
genre defining games with mass market
appeal, such as Overcooked. This is a key
differentiator for our business with the
larger publishers typically focused on
fewer AAA titles, some of which are
sequels to existing proven franchises.

Below we give an overview of some
of Team17’s titles released since the
company was founded in 1990.

Our portfolio

Business model and games portfolio

Pre-2013

2013-2014

2015-2016

2017-2018

TEAM17 PLC ❘ ANNUAL REPORT 2018

Case Study

Greenlight process and Life Cycle Management

Submission

Curation

Commercial Analysis

Production Viability

Label IP signed

Titles sourced via direct
submission, relationships,
trade events and internal
research.

Process to review initial
pitches. Emphasis placed
on the game quality and
the value Team17 can add
to the quality and depth
of the game experience.

Commercial benchmarking
and forecasting. Emphasis
is placed on risk profiling
and breakeven levels for
all parties.

Production due diligence.
Emphasis on developer
capability to deliver
detailed analysis of
resources needed to bring
the game to market.

Development terms signed.

2016

Signed agreement with
our 3rd party partner
for development of
Overcooked

2016

Launch of Overcooked

2016

Introduction of
additional DLC

2017

Team17 agreed development
of Overcooked 2

2016

Awarded “Best Debut
Game” at TIGA

2018

Launch of
Overcooked 2

2018

Awarded “Best
Family Game” at
The Game Awards

2018

Introduced
Christmas DLC

2019

Bafta nominated and
continued development
of game and introduction
of additional DLC

TEAM17 PLC ❘ ANNUAL REPORT 2018Chairman and Chief Executive's Review

Debbie Bestwick MBE
Chief Executive Officer

Chris Bell
Non-Executive Chairman

Throughout the period we have continued to
build on our strong track record, delivering
record revenues of £43.2m up 46% and
record gross profit up 18% to £19.8m.

Introduction
We are delighted to report our maiden full
year results for the year ended 31 December
2018 following our admission to AIM in May
2018. Throughout the period we have
continued to build on our strong track record,
delivering record revenues of £43.2m up 46%
(2017: £29.6m) and record gross profit up 18%
to £19.8m (2017: £16.9m).

Team17 is a leading video games label and
creative partner for independent (“indie”)
developers, focused on the premium, rather
than free to play market, and creating games
for the PC home computer market, the video
games console market and the mobile and
tablet gaming markets. Alongside developing
the Company’s own games in house (“first-
party IP”), Team17 also partners with
independent developers across the globe to
add value to their games in all areas of
development and production alongside
bringing them to market across multiple
platforms for a fixed percentage share of
revenues (“third-party IP”). Since foundation
in 1990, we have launched over 100 games,
including the iconic Worms franchise, the
Overcooked franchise, The Escapists
franchise, Yooka-Laylee and Yoku’s Island
Express, making Team17 one of the most
prolific developers and partners of games
for the indie market.

We have delivered a solid performance in
2018 through a combination of strong sales
from both first-party and third-party IP (Note
3). Our internal studio were also the creators
of Overcooked 2, which was released in 2018,
and saw our resources fully utilised by a
third-party label partner to create a full
sequel of a franchise for the first time.
Importantly, our significant back catalogue
portfolio continues to underpin growth, with
£22.3m of revenues derived from this channel
in 2018 (2017: £15.7m) with the remainder
comprising of newly launched games.

Business Model
Founded in 1990, we announced our Games
Label in 2013 with the first game launched in
2014. Our Games Label focuses on premium,
high-quality games, continually striving for
innovation in gameplay and created by
talented partners from around the globe.
Through working with Team17, our partners
have access to our award-winning
development and commercial resources,
helping them to compete at a much higher
level than they would otherwise be able to do
alone with limited budgets and resource.

Our stock market listing last year was a key
milestone for the Company, and we were
delighted with the level of support seen from
investors throughout our successful IPO on
AIM in May 2018. The oversubscribed placing
raised £107.5m, of which £45.1m was used to
repay debt and the remainder distributed to
existing shareholders leaving Team17 in a
strong cash position. Our entry onto AIM has
allowed the Company to retain our
independence and enhance our profile whilst
also providing the ability to incentivise both
current and future employees.

On behalf of everyone at Team17 we’d
like to thank all of our label partners and
shareholders for their support and
contribution to our journey thus far.

We focus on the global independent gaming
market. The games market continues to
experience strong growth due to the adoption
of digital distribution and reduced barriers to
entry driven by middleware gaming engines
creating more accessible development tools
for smaller development teams. Additionally,
there is increased accessibility for customers
through digital distribution platforms such as
Steam, the Epic Games store, PlayStation,
Xbox, Nintendo, Google and Apple stores.

We have adopted a comprehensive process
for identifying creative ideas and talent via
our ‘greenlight process’. Games, sourced
across a number of channels (including desk
research, existing relationships, direct
submission and crowdfunding), are

TEAM17 PLC ❘ ANNUAL REPORT 2018

comprehensively evaluated for commercial
and product quality viability. Upon signing a
title, we provide funding and value-added
resources to our partners, with any payments
contingent on achieving mutually agreed
milestones to deliver the highest quality
games possible within budget.

The strength and depth of our skill set
enables us to support our partners through
all stages of game creation and franchise
building. We have long established credentials
in successfully building franchises and
bringing high quality games to market. We
have cultivated experienced teams across all
areas of the business and refined the best
approach across all disciplines required to
deliver quality games. As such, our expertise
is broad and includes:

• Market leading code, art, audio and design

capabilities – to ensure the game is
developed to the highest possible quality
for the broadest audience within budget
• Marketing, PR and community services

– leveraging our experience and network
to grow audiences and maximise visibility
across key influencers in target markets
• Sales and life cycle management – tactically

implementing promotions and events to
maximize sales revenues alongside retaining
value over the life cycle of the game

• Release management – we have one of
the highest multi-platform pass rates
in the industry

• Cross platform development – maximizing

revenues through coordinated development
and release of games across multiple
platforms to garner platform support and
increase return on investment

• QA, usability and localization – our internal

resource provides access to a robust quality
assurance team and usability suite whose
key focus is to broaden the audience for our
games as well as test to ensure we minimize
the chances of errors or glitches being
uncovered post-launch

Managing the life cycle of games ensures they
continue to contribute revenues to the
business as part of our back catalogue. The
back catalogue, which comprises of titles
released in previous financial years, is
continually supplemented by new game
releases. Successful games such as Worms,
The Escapists and Overcooked have continued
to contribute significant revenues to the
business long after their initial release and
have spawned successful sequels.

As the games industry has evolved with the
digital era, the lifecycle has also extended
significantly, with a game’s success no longer
pegged to boxed retail sales in the first week
of launch. Franchises can be built and grown

over a number of years in the digital world,
and we are proud of our success in creating
a number of leading franchises, and our
ability to maintain strong pricing of our
games in industry wide traditional
discount sales windows.

The access we and our partners have to
these core resources enables us to continue
to deliver high quality games. This is
independently recognised around the world
with over 140 nominations and awards across
our label in 2018. We are able to deliver an
end-to-end solution to our label partners and
support them all the way from concept to
launch, and post-launch through lifecycle
management and franchise building.

Market dynamics
The video games market continues to see
significant growth and opportunities, with a
recent report from gaming analytics firm,
Newzoo, estimating the market will be valued
in excess of $180bn by 2021. Advances in
technology – both for games developers and
players alike – have contributed to this overall
growth, along with the ability for indie
developers to realise ideas and launch games.

In late 2018, Epic announced the launch of the
Epic Games store, a new digital distribution
platform selling to PC gamers. The Epic
Games store offers significant opportunities
for developers with the platform offering 88%
of revenues derived from games sales.

Games development and launches
We continued to see strong momentum of
games launched across 2018. In September
2018, we announced the launch of PLANET
ALPHA, the 100th game we have launched
since founded in 1990.

The trend of gamers accessing games via
digital distribution platforms continues to gain
momentum. New games launched on the
leading PC digital distribution platform,
Steam, numbered 7,918 in 2018, versus
560 in 2013.

Our portfolio grew strongly in 2018 with 12
new launches comprising seven new IP
games alongside four additional platform
games to existing franchises and one sequel
game. Additionally, we continued to release
new paid and free downloadable content
(“PDLC”, “FDLC”) at optimum points during the
lifecycle to further enhance the value and
extend the life cycle of games that form part
of the back catalogue.

We have a solid pipeline of games scheduled
for release in 2019 and have already launched
three games in January: Genesis Alpha One,
launched on PlayStation 4, Xbox One and on
PC exclusively via the Epic Games store; My
Time at Portia, released on PC via Steam and
the Epic Games store; and The Escapists 2
Pocket breakout for mobile.

Across our internal studio and label partners
we are working on a number of additional
releases to be announced later in 2019. We
only announce games at the optimal time in
order to maximize awareness and commercial
success for the Group and the game, with
detail on some game launches planned for
2019 already in the public domain:

• My Time at Portia launched out of early

access in January 2019 on Epic’s Game store
and Valve’s Steam store, achieving number
one globally on Steam. The console versions
will launch in April 2019

• Hell Let Loose, the 100-person WW2

simulation shooter, will launch later in 2019
• Golf with your Friends franchise (“GWYF”),
joined the label in February 2019. Our team
and creative developers will be working to
grow this franchise further in 2019

Due to greater access to development tools,
we continue to see a large number of games
submitted by developers for assessment as
part of our greenlight process, but as ever
our focus is on quality over quantity.

Outlook
We are delighted with the progress the Group
has made in 2018, delivering record revenue
growth and completing a very successful IPO.
As stated at the time of listing, we have
invested in both commercial and creative
talent within the business as we seek to
capitalize on the strong demand for our
label resources.

We have made an encouraging start to 2019
and remain well placed for future growth,
both through new proprietary games
launches, as well as in supporting
independent developers through our
games label. We remain focused on
leveraging our back catalogue and
our life cycle management initiatives.

Therefore, the Group looks forward to
another successful year and is confident it can
continue to deliver shareholders value in 2019
and well beyond.

Debbie Bestwick MBE
Chief Executive Officer

Chris Bell
Non-Executive Chairman
4 April 2019

TEAM17 PLC ❘ ANNUAL REPORT 2018Chief Financial Officer's Review

Jo Jones
Chief Financial Officer

The financial results for 2018 reflect a year of
continued financial progress and an exciting
period of operational change for the Company.

Introduction
The financial results for 2018 reflect a year of
continued financial progress and an exciting
period of operational change for the Company.
We delivered our successful AIM IPO of the
business in addition to launching an array of
new titles during the year.

On 23 May 2018, Team17 successfully
completed its IPO on AIM, raising £107.5m.
As part of this transaction the Lloyds
Development Capital (“LDC”) private equity
and Directors loans were repaid in full leaving
the Group debt free. A new ultimate holding
company, Team17 Group Plc was incorporated
during the period and all activity within
Team17 Holdings Limited transferred to
this new company.

Results
Revenue growth in the year to 31 December
2018 was strong, increasing 46% to £43.2m
(2017: £29.6m) and building on the trend seen
in previous years. The mix of releases in 2018
was heavily weighted towards third-party IP,
driven by the particularly strong performance
from Overcooked 2, resulting in third-party
sales representing 74% of total revenues, a
greater proportion than ever before (2017:
50% of total revenue).

when we saw launches of The Escapists 2 and
a number of other first-party IP titles, which
carry a higher margin for Team17.

Reported operating profit grew by 11% to
£9.9m (2017: £8.9m) despite being impacted by
one-off costs relating to the IPO. Excluding
these one-off costs, operating expenses for
the year were £7.3m (2017: £5.9m) with the
increase in costs primarily due to the
normalisation of directors remuneration
which was previously heavily dividend based.

Adjusted EBITDA grew by 18% to £15.3m
(2017: £12.9m) illustrating the strong
underlying profit growth of the business
during the year. The adjusted EBITDA figure
includes add backs for exceptional costs of
£2.6m related to the IPO, £0.4m of share
based payment charges and a £0.3m catch-up
charge resulting from a revision in the basis
of calculating depreciation on capitalised
development costs.

Net Finance costs were £1.3m in the period
(2017: £3.6m) and relate to interest on the loan
notes previously held by the Directors of the
Company and LDC. These were repaid in full
at the IPO and hence will not be a cost to the
Company going forwards.

Gross profit also grew strongly in the period,
up 18% to £19.8m (2017: £16.9m). Gross
margins were 46%, 11pts lower than 2017

Treatment of IPO and acquisition costs
£3.3m of costs were borne in relation to the
IPO and raising of new finance. The

accounting of these costs is governed
by IFRS 3 and accordingly £0.7m was
charged to equity and £2.6m through
the income statement.

Corporation Tax
The effective tax rate for the company was
17% (2017: 18%). This has been impacted by
the non-deductible costs borne in relation to
the IPO and loan note interest offset by a
catch up in VGTR (Video Games Tax Relief)
accounting reflecting the fact the Group is
making use of the tax credits available to it.

Amortisation of capitalised
development costs
During the year the group has revised its
approach to the recognition of recoupable
costs within its Intellectual Property and its
amortisation of development costs – adopting
an 85% reducing balance approach in the
case of the latter (previously straight line) and
retaining the former within capitalised
development costs (previously derecognised
when ‘recovered’ from the third party) and
amortising in line with all other development
costs. This ensures the costs continue to be
written off over a two-year period but more
accurately reflects the sales curve of the
game. This revision in accounting estimate is
accounted for as at 31 December 2018 and
then prospectively. The net impact of this
adjustment was £0.3m. EBITDA does not
include an add back for amortisation of games

TEAM17 PLC ❘ ANNUAL REPORT 2018

ordinarily as this is booked as a cost of sale
item within the accounts, however, due to their
prior year and catch up nature these costs
have been reflected in the presentation of
adjusted EBITDA.

Balance Sheet and Cash
The balance sheet is dominated by the
intangible assets arising from the earlier LDC
transaction in 2016. These comprise net book
values of £21.1m and £17.8m for goodwill and
brands respectively which are subject to
regular review. The remaining £2.7m net book
value of intangible assets relates to
capitalised development costs on titles
launched within the last two years. As
mentioned above, these have been subject to
a revision in accounting estimation in this
financial year resulting in a £0.3m movement
to the carrying value at 31 December 2018.

Trade and other receivables were £8.1m (2017:
£6.8m) with the increase reflecting the higher
December 2018 revenue figures.

Current liabilities are £8.0m (2017: £7.4m), the
growth in accruals and deferred income
within this category is a function of revenue
growth and represents higher royalty
payments due to our third-party development
partners at the end of the year.

Non-current liabilities are £3.3m (2017:
£45.2m) and predominantly relate to deferred
tax; the loan notes and interest thereon held

at 31 December 2017 (£38.0m and £3.5m
respectively) were repaid in full at the time
of the IPO.

Cash and cash equivalents closed at £23.5m
(2017: £8.4m). Operating cash conversion was
once again strong at 107% (2017: 107%) for the
year reflecting the ongoing cash generative
nature of the business model.

Share Issues
At the time of Team17’s IPO, Debbie Bestwick
was granted options over 972,272 shares and
141,892 options were granted to Jo Jones on
18 December 2018. These options are
exercisable on 23 May 2021 and 30 October
2021 respectively. The Group is in the process
of implementing a Deferred Bonus Share Plan
for its senior management team and an All
Employee Share Incentive Plan. Both will be
funded via the Employee Benefit Trust and
will not represent a dilution of shares.

Dividend
As laid out in the Company’s strategy at the
time of the IPO, it is the Group’s intention to
utilise the cash it generates to further invest
in the business and its future growth. As
such, Directors do not propose a dividend
at this time.

Jo Jones
Chief Financial Officer
4 April 2019

The below table highlights the strong financial performance of the Group:

£m

Revenue

Gross profit

Gross profit margin

Operating profit

Adjusted EBITDA*

Profit before tax

Profit after tax

Basic and diluted EPS**

Basic and diluted adjusted EPS***

Operating cash conversion****

FY18

43.2

19.8

46%

9.9

15.3

8.7

7.2

FY17

29.6

16.9

57%

8.9

12.9

5.4

4.4

6.1 pence

8.1 pence

107%

4.3 pence

4.9 pence

107%

Growth

46%

18%

(11pts)

11%

18%

62%

64%

42%

65%

0pts

* Adjusted EBITDA is defined as operating profit adjusted to add back depreciation of property, plant and equipment, amortisation of brands and impairment of
intangible assets (excluding capitalised development costs), exceptional items, share based payment costs and one-off amortisation accounting estimation change
relating to prior periods. Exceptional items are those items believed to be exceptional in nature by virtue of their size and or incidence. Exceptional items are
detailed in note 6 and adjusted EBITDA in note 12 to the consolidated financial statements.

** The calculation of the basic earnings per share is based on the profits attributable to the shareholders of Team17 Group plc divided by the weighted average
number of shares in issue (Note 11 to the consolidated financial statements). The weighted average number of shares takes into account treasury shares held by
the Team17 Employee Benefit Trust.

*** Adjusted earnings per share is calculated by dividing the adjusted profit after tax by the weighted average number of ordinary shares in issue since listing on
AIM adjusted for the dilutive effect of share options (Note 11 to the consolidated financial statements).

**** Operating cash conversion is defined as cash generated from operating activities as per the statement of cash flows, divided by EBITDA including the add back
of amortisation of development costs (not normally included in EBITDA).

TEAM17 PLC ❘ ANNUAL REPORT 2018Principal Risks and Uncertainties

Effectively managing our risks
Team17 Group plc is operating in a competitive and dynamic growth
market and as such faces a number of strategic and operational risks.
Senior management actively manage the Group’s risk register which is
regularly reviewed by the Board. The identified risks are up-to-date
with the Company’s operations and wider environment. The risks are
appropriately scored and the mitigations are evaluated and tested.

The key business and financial risks for the Group are set out below:

Strategic
Market growth and disruption – the Group operates in a dynamic
industry that has seen consistent growth over many years and
increasing levels of competition as the number of new games released
grows year on year. This competition is multifaceted, ranging in size,
sophistication and capability from large competitors to independent
games developers who choose to self-publish. Slower than expected
market growth or a failure to remain competitive would adversely
affect the Group’s performance.

• The Company has longevity and an entrenched position in the

industry today. Its portfolio approach, rigorous greenlight process
and active lifecycle management of its games provide the Company
with confidence that it will continue to release popular games and
optimise their commercial success.

Technological change – the industry has seen some major shifts over
the past few years with the shift to digital distribution along with the
development of middleware such as Unity and Unreal. Ongoing
technological change in both the development and distribution of
games is to be expected and the Group will need to adapt quickly to
these changes in order to remain competitive.

Operational
The ability to recruit and retain key and skilled personnel – The
achievement of the Group’s business plan is dependent on the
availability of key skills and experience across its workforce. Loss of
key personnel could adversely affect and impact the Group’s ability to
meet its strategic ambitions.

• Although there will inevitably be some level of staff turnover, the

Board believes that the variety of work available for staff along with
its strong collaborative environment, high quality leadership and
competitive benefits packages make Team17 a place where talented
individuals want to build their careers. The Group also has a
proactive approach to recruitment and is particularly focussed on
partnering with a number of academic institutions providing a
graduate intake each year. The Group is proud of how it continues to
successfully develop staff internally and also maintains a succession
plan to mitigate the impact should any key personnel choose to leave.

IT security – The business is dependent on the security, integrity
and operational performance of the system and products it offers.
A security breach could significantly impact the business and its
ability to execute on its plans.

• The Group regularly reviews its IT and security provisions

and invests to ensure they are industry leading and in line with
best practice.

Intellectual property – The core assets of the Group are the
intellectual property it owns and that of the third-party developers
on whose behalf it publishes. Any infringement to this intellectual
property by unauthorised third parties may prove damaging and
adversely impact the Group’s performance.

• The Group has a track record of being one of the first to market

• The Group legally protects its own- and third-party partner

across new platforms and distribution channels. The Group invests in
upskilling its workforce to be at the forefront of technological
developments. It is therefore able to anticipate changes in technology
and delivery and be agile and adaptable in order that it can react
swiftly to changes as they emerge and exploit these as opportunities.

Dependence on concentrated customer base – the Group serves a
small number of customers who utilise their proprietary distribution
platforms to provide the Group’s games to end consumers. Any
adverse changes in the status of the Group’s relationship with its
customers could negatively impact financial performance.

• As a result of developing a commercially successful games portfolio

over a long period, the Group has developed heavily entrenched
partnerships with its customers over more than 20 years that deliver
commercial value on both sides. The Group will continue to invest in
these relationships to ensure enduring partnerships that grow and
prosper.

Dependence on key titles to generate significant share of Group
revenue – The Group has historically been reliant on a subset of
successful titles to generate a large share of its revenues. Should the
Group fail to competently manage the lifecycle of its core games this
may adversely affect it financial results.

• The Group has expanded its portfolio of successful titles over recent
years and a core part of its strategy is focussed on continuing to do
this in the future. It has a track record of developing franchises with
long lifecycles and multiple follow on titles – its greenlight process is
directed at identifying future titles with this same potential.

intellectual property. It also proactively scans for any potential
infringements and rigorously challenges these where appropriate.

Financial / Economic
Currency risk – The Group’s cost base is predominantly in Pounds
Sterling (GBP) whilst its revenue is generated globally, with the largest
share being received in US Dollars (USD). As such there is a risk that
the Group’s financial performance could be adversely affected by
unfavourable movements in foreign exchange.

• While the longer-term risks of transacting globally cannot be avoided,

the Group continually reviews its foreign exchange exposure and
where appropriate puts in place forward contracts to minimise
exposure where possible. Pricing in different markets can also be
flexed if required to minimise margin pressure.

Brexit – There is significant uncertainty around the impact of the UK’s
decision to leave the European Union but it is likely to result in change
to the UK’s economic relationships with other countries and may
impact the Group’s ability to hire new staff from European Union
countries which may deplete the available talent resource pool.

• The Group remains proactive in monitoring legislative changes to

its industry and is preparing accordingly for any detrimental impact
of Brexit.

TEAM17 PLC ❘ ANNUAL REPORT 2018Board of Directors

CORPORATE GOVERNANCE

Debbie Bestwick MBE
Chief Executive Officer
Debbie Bestwick is an industry leader with
over 30 years in the games industry and is
one of the founding members of Team17.
Initially leading Team17’s Sales and Marketing
department, Debbie went on to become
responsible for all of the commercial and
legal aspects of the business, working
globally with top tier games distributors,
publishers, developers, and licence partners.
Debbie became joint CEO in 2009 and sole
CEO in 2010, leading the company through its
2011 management buy-out and subsequent
sale of a minority stake to LDC in 2016. Debbie
was awarded an MBE for services to the video
games industry in 2016, joint winner of the
Entrepreneur of the Year UK Disruptor
category in 2017 and was awarded the
inaugural Outstanding Contribution to the UK
Games Industry at the 2017 Golden Joystick
Awards. Previously Debbie has been
honoured with the Hall of Fame award at the
European Women in Games Conference 2015
and MCV Person of the Year award in 2015.
Debbie was central to establishing the games
and incubator model which has become a key
growth driver for Team17.

Chris Bell
Non-Executive Chairman
Chris joined the Board of Directors in 2018,
prior to Team17’s IPO on AIM. Since 2015,
Chris has been Senior Independent Director
for The Rank Group Plc, where he also serves
on both the Audit Committee and the
Nominations Committee. Chris is Non-
Executive Chairman of three AIM-listed
companies: XL Media plc, TechFinancials, Inc
and OnTheMarket plc, all of which he took to
market and on which he serves on key
governance committees. He is also a
Non-Executive Director at AIM-listed Gaming
Realms plc. Chris joined Ladbroke Group plc
in 1991, becoming Managing Director of its
Racing Division in 1995. In 2000, he became
Chief Executive of Ladbrokes Worldwide and
joined the Board of the rebranded Hilton
Group plc, becoming Chief Executive of
Ladbrokes plc, following the sale of the Hilton
International Hotel division, until 2010. He has
also served as Non-Executive Director at
Spirit Pub Company plc (from 2011 to 2015)
and as Senior Independent Director at
Quintain Estates and Development plc (from
2010 to 2015). Prior to joining Ladbrokes plc
(formerly Hilton Group plc and Ladbrokes
Group plc), Chris held senior marketing
positions at Allied Lyons plc.

TEAM17 PLC ❘ ANNUAL REPORT 2018Board of Directors continued

Jo Jones
Chief Financial Officer
Jo joined Team17 as Chief Financial Officer in
October 2018. Prior to her appointment, Jo
worked for 10 years at Experian plc, across a
number of senior finance roles. Jo’s most
recent role at Experian was Finance Director
of Service, Solutions, Technology &
Transformation where she worked closely
with Experian's UK Chief Information Officer
and Chief Transformation Officer. Prior to that
Jo was Finance Director of Decision Analytics
& Marketing Services and Commercial
Finance Director for UK and Ireland. Jo has
also held a number of finance roles with The
Sytner Group Ltd, including Divisional
Financial Controller for Daimler Chrysler and
Lexus. She qualified as a chartered
accountant with KPMG.

Penny Judd
Non-Executive Director
Penny joined the Team17 Board in 2018 in
advance of the successful IPO on AIM. Penny
has over 30 years of experience in
Compliance, Regulation, Corporate Finance
and Audit and is currently Chair of AIM-listed
Plus500 Ltd. Penny is also a Non-Executive
Director of Alpha Financial Markets
Consulting plc and AIM-listed TruFin plc,
(which she took to market), where she serves
as Chairman of the Audit Committee of both
companies. Penny was, until June 2016, a
Managing Director and EMEA Head of
Compliance at Nomura International plc, a
position she held for three years. Prior to this,
Penny worked at UBS Investment Bank for
nine years and held the position of Managing
Director, EMEA Head of Compliance. Penny
also acted as Head of Equity Markets at the
London Stock Exchange and qualified as a
Chartered Accountant.

Jennifer Lawrence
Non-Executive Director
Jen was appointed Non-Executive Director in
February 2019. Jen has a wealth of
experience, having held the role of HR
Director with Costcutter Supermarkets Group
since August 2016, working with the executive
team responsible for the successful financial
and operational running of the business. With
over 900 people employed nationwide, Jen is
responsible for ensuring the employment
base is aligned with delivering strategic
objectives. Prior to joining Costcutter, Jen
held HR roles with TDX Group, Boots and
Boots Opticians. Jen is chair of Team17’s
remuneration committee.

TEAM17 PLC ❘ ANNUAL REPORT 2018Corporate governance

The Board is committed to effective and robust corporate
governance and has progressed the Company’s corporate
governance since Admission.

The Board has agreed to apply the QCA Code. The disclosures
required by the QCA Code can be found at https://www.team17group.
com/aim-rule-26/corporate-governance. A copy of the QCA Code is
available from the QCA website www.theqca.com

The Board
Full biographies of the Directors can be found on pages 11 to 12. At the
date of this report, the Board comprises two Executive Directors and
three independent Non-Executive Directors, one of which is the
Non-Executive Chairman.

Debbie Bestwick was appointed as a Director under a service contract
dated 17 May 2018. This contract may be terminated by 6 months’
notice by either party.

Jo Jones was appointed as a Director under a service contract dated
23 October 2018. This contract may be terminated by 6 months’ notice
by either party.

Christopher Bell was appointed as Chairman under a letter of
appointment dated 1 May 2018. Such appointment may be terminated
by 3 months’ notice by either party.

The Chairman and the CEO have separate and clearly defined roles.
The Chairman is responsible for overseeing the Board and the CEO is
responsible for implementing the stated strategy of the Company and
for its operational performance.

The Chairman is committed to ensuring that the Board comprises
sufficient Non-Executive Directors to establish an independent
oversight which is challenging and constructive in its operation. The
Board believes that all of the Non-Executive Directors are of sufficient
experience and quality to bring an expert and objective dimension to
the Board. The Company ensures that the Non-Executive Directors are
enabled to call on specialist external advice where necessary.

Directors are expected to attend Board and Committee meetings and
to devote enough time to the Company and its business in order to
fulfil their duties as Directors.

Board meetings
The Board meets on a regular basis throughout the calendar year and
as required on an ad hoc basis with a mandate to consider strategy,
operational and financial performance and internal controls. In
advance of each meeting, the Chairman sets the agenda, with the
assistance of the Company Secretary. Directors are provided with
appropriate and timely information, including board papers distributed
in advance of the meetings. Those papers include reports from the
executive team and other operational heads.

Penny Judd was appointed as a Non-Executive Director under a letter
of appointment dated 1 May 2018. Such appointment may be
terminated by 3 months’ notice by either party.

The Company Secretary produces full minutes of each meeting,
including a log of actions to be taken. The Chairman then follows up on
each action at the next meeting, or before if appropriate.

Jennifer Lawrence was appointed as a Non-Executive Director under a
letter of appointment dated 24 February 2019. Such appointment may
be terminated by 3 months’ notice by either party.

The Board committees are comprised solely of Non–Executive
Directors with the CEO and CFO invited to attend committee meetings
as considered appropriate by the chair of the committee.

Paul Bray stepped down as Chief Financial Officer and Chief Operating
Officer on 23 October 2018.

Board and committee attendance

Director

Chris Bell

Debbie Bestwick

Jo Jones

Penny Judd

Jennifer Lawrence

Paul Bray*

(*Paul Bray resigned on 23 October 2018)

Board

Committee

Max possible
attendance

Meetings
attended

Nominations

Audit and Risk

Remuneration

Independence

–

JL appointed on 24 February 2019

–

✓

Position

NED/
Chairman

CEO

CFO

NED

CFO

TEAM17 PLC ❘ ANNUAL REPORT 2018
Corporate governance continued

Matters reserved for the Board
Matters reserved for the decision of the Board include:

• approving the Group’s strategic aims and objectives;
• reviewing performance against the Group’s strategic aims, objectives

and business plans;

• overseeing the Group’s operations;
• approving changes to the Group’s capital, corporate, management or

control structures;

• approving results announcements and the annual report and

financial statements;

• approving the dividend policy;
• declaring the interim dividend and recommending the final dividend

and any special dividend;

• approving any significant changes in accounting policies;
• approving the treasury policy;
• approving the Group’s risk appetite and principal risk statements;
• reviewing the effectiveness of the Group’s risk and control processes;
• approving major capital projects and material contracts or

arrangements;

• approving all circulars, prospectuses and admission documents;
• ensuring a satisfactory dialogue with shareholders;
• establishing Board committees and approving their terms of

reference;

• approving delegated levels of authority;
• approving changes to the Board and its committees;
• determining the remuneration policy for the Directors and other

senior executives;

• providing a robust review of the Group’s corporate governance

arrangements; and

• approving all Board mandated policies.

Committees
In line with the policy stated in the Admission Document, the Board
has in place Audit, Nomination and Remuneration Committees, which
comply with the stated terms of reference for each committee. The
reports of the Audit and Remuneration Committees can be found on
pages 15 to 16.

Nomination Committee
The Nomination Committee leads the process for board appointments
and makes recommendations to the Board. The Nomination Committee
shall evaluate the balance of skills, experience, independence and
knowledge on the board and, in the light of this evaluation, prepare a
description of the role and capabilities required for a particular
appointment. The Nomination Committee meets as and when necessary,
but at least once a year. The Nomination Committee comprises Debbie
Bestwick, Chris Bell, Penny Judd and Jennifer Lawrence (since
appointment on 24 February 2019) and is chaired by Chris Bell.

Election and re-election of the Directors
As the Annual General Meeting will be the first since Admission, each of
the Directors will retire and stand for re-election (or election for Jennifer
Lawrence and Jo Jones who have been appointed since Admission).

Support for Directors
Each Director has access to the advice and support of the Company
Secretary, who ensures compliance with the Board’s procedures and
advice as to applicable rules and regulations. The Company also
provides professional training for the Directors where necessary (at
the Company’s expense).

Internal control
The Board is ultimately responsible for maintaining the Company’s
risk framework system of internal control and for reviewing the
effectiveness of such system. No system can be perfect but the Board
considers the Company’s systems manage risks appropriately in order
that the Company can achieve its business objectives.

Board evaluation
The Board considers it important to evaluate its performance and at
each meeting of the Board includes an agenda item to evaluate
whether the meeting was successful.

The Board will seek more formal evaluation of its operations and
practices, whether by a formal internal process or with the support of
external advisers. The Board has not yet done so since Admission,
given the busy board calendar and short time since Admission.

Corporate Culture
The Board places significant importance on the promotion of ethical
values and good behaviour within the Company and takes ultimate
responsibility for ensuring that these are promoted and maintained
throughout the organisation and that they guide the Company’s
business objectives and strategy.

The central role that sound ethical values and behaviour plays within
the Company is enshrined in the Employee Handbook, which promotes
this culture through all aspects of the business, from initial
recruitment and hiring to career advancement. The Employee
Handbook also sets out the Company’s requirements and policies on
such matters as whistleblowing, communication and general conduct
of employees.

Relations with shareholders
The Board considers it important to maintain an open dialogue with the
Company’s shareholders and to keep those shareholders fully
informed of the strategy, operational developments and prospects.

The Company keeps investors informed of its progress through
announcements and updates as to financial and operational progress.

The executive Board met formally with shareholders at conferences in
November 2018 and February 2019 and formal investor roadshows
around the interim results and release of final results.

Annual General Meeting
The AGM will be held at 10.30am on 8 May at Park Plaza, Nottingham,
41 Maid Marian Way Nottingham NG1 6GD United Kingdom. The Notice
of AGM, setting out the resolutions proposed, is contained in a separate
document and is available on the Company’s website https://www.
team17group.com.

TEAM17 PLC ❘ ANNUAL REPORT 2018Audit Committee report

Members of the Committee
• Penny Judd (Chair)
• Christopher Bell
• Jennifer Lawrence since appointment on 24 February 2019

Dear Shareholder

I am pleased to present the report of the Audit Committee for the
year ended 31 December 2018. The Terms of Reference for the
Committee were created at admission and are reviewed annually.

Role of the committee
The Audit Committee has the primary responsibility of
monitoring the quality of internal controls to ensure that the
financial performance of the Group is properly measured and
reported on. It receives and reviews reports from the Group’s
management and external auditors relating to the interim and
annual accounts and the accounting and internal control systems
in use throughout the Group. The Audit Committee meets at least
twice each financial year and will have unrestricted access to the
Group’s external auditors.

External audit
The Audit Committee approves the appointment and
remuneration of the Group’s external auditors. They also ensure
that they are satisfied with the external auditors’ independence
in relation to any other non-audit work undertaken by them.

Significant issues considered in relation
to the financial statements
The Audit Committee assesses whether suitable accounting
policies have been adopted and whether appropriate estimates
and judgements have been made by management. The
Committee also reviews accounting papers prepared by
management, and reviews reports by the external auditors.
The specific areas reviewed by the Committee in respect of
the year were:

• appropriateness of revenue recognition in the preparation

of the Group financial statements

• appropriateness of capitalised development costs and their

useful economic life

• appropriateness of the treatment of IPO related costs and

the presentation in the Group financial statements

• appropriateness of the accounting for share based payments

and their disclosure within the Group financial statements

• appropriateness of the calculation and disclosure of earnings

per share in the Group financial statements

TEAM17 PLC ❘ ANNUAL REPORT 2018Remuneration Committee report

Members of the Committee
• Jennifer Lawrence (Chair) since appointment on 24 February 2019
• Christopher Bell
• Penny Judd

Dear Shareholder

I am pleased to present the report of the Remuneration Committee for
the year ended 31 December 2018. The Terms of Reference for the
Committee were created at Admission and are reviewed annually.

Independence of the Remuneration Committee
All of the members of the Committee are independent Non-Executive
Directors. The Chief Financial Officer and Chief Executive Officer are
invited to meetings of the Committee where required but are not
present for any business relating directly to their own positions or
remuneration.

Activities of the Committee
The Long-Term Incentive Plan operated by the Company was approved
at Admission and described in detail in the Admission Document.

The Company is committed to a remuneration policy with the objective
of aligning business performance with executive remuneration. It is
vital for the Company that it is able to encourage and reward the right
behaviours, values and culture, thereby attracting, retaining and
motivating its team.

During the year, the Company has made the following awards:

Debbie Bestwick – award of 972,727 plan shares
Jo Jones – award of 141, 892 plan shares
Appointment of new NED – Jennifer Lawrence on 24 Feb 2019

Role of the Committee
The primary role for the Committee is to review and set the
remuneration of the Executive Directors and senior management
(including salary levels, discretionary variable remuneration and
terms and conditions of service).

The Committee also determines the headline remuneration policy of
the Company including the apportionment between fixed and variable
remuneration and the method of centralisation. The Committee is
enabled to seek external professional advice as it requires from time
to time.

During the year, the committee has considered and approved the
proposed remuneration for Jo Jones.

Remuneration policy
The Committee is focused on setting a remuneration policy to take into
account the importance of talent to the success of the Company in an
industry where talented and resourceful individuals are in high
demand and are relatively mobile. The Company promotes a culture
based on sound ethical values and rewards behaviours that support
such values.

The Company compensates its employees through both fixed and
variable remuneration.

Directors’ remuneration

Director

Executive Directors

Debbie Bestwick

Jo Jones*

Paul Bray**

Non-Executive Directors

Christopher Bell

Penny Judd

Jennifer Lawrence

Base
salary/fees

IPO
Bonus

Annual
performance
award 2018

Benefits
2018

options

Total
2018

201,049

35,808

131,744

66,667

36,667

–

621,174

321,000

–

155,294

–

27,249

3,615

41,567

–

318,601***

1,489,073

–****

–

39,423

328,605

66,667

36,667

–

(*Jo Jones appointed on 23 October 2018, **Paul Bray resigned on 23 October 2018)

All figures included are solely post listing of the Company on 23 May 2018. Any costs prior to this were borne by Team17 Holdings Limited

*** The share options figure represents the accounting fair value of the share options apportioned from the grant date to the vesting date

**** No charge has been included in the 2018 Team17 Group financial statements due to the immateriality of the balance at 31 December 2018

TEAM17 PLC ❘ ANNUAL REPORT 2018Directors’ report

For the Year Ended 31 December 2018

The directors present their report and the audited financial statements
of Team17 Group Plc (the “Company”) and its subsidiaries (together the
“Group”) for the year ended 31 December 2018.

Principal activity
The principal activity of the Company is that of a holding company.

The principal activity of the Group is the development and publishing of
computer games for the digital market.

Future developments
Trading for the period from 31 December 2018 to the date of this
document has been positive and is consistent with the Board’s
expectations and profitability and cash generation remain encouraging.
The Group has recently released a number of games, with further
releases planned during the rest of 2019. Through its greenlight
process the Group continues to review and sign new titles to its games
label, in addition to maximising the revenue opportunity provided by its
substantial back catalogue.

Results and dividends
The profit for the year, after taxation, amounted to £7,203,000
(Year ended 31 December 2017:£4,395,000).

The directors have not recommended the payment of a dividend
(2017: £Nil).

Directors
The directors who served the Company during the year and up to
the date of signing the financial statements:

D J Bestwick
P Judd (appointed 4 May 2018)
J Jones (appointed 23 October 2018)
C Bell (appointed 4 May 2018)
J Lawrence (appointed 24 February 2019)
J P Bray (resigned 23 October 2018)
J Haxby (resigned 30 April 2018)

Squire Patton Boggs Directors Limited (appointed on
14 February 2018 and resigned on 30 April 2018)

Going concern
Management has produced forecasts which have been reviewed by the
Directors. These demonstrate the Group is forecast to generate profits
and cash in the year ending 31 December 2019 and beyond and that the
Group has sufficient cash reserves to enable the Group to meet its
obligations as they fall due for a period of at least 12 months from when
these financial statements have been signed.

As such, the Directors are satisfied that the Company and Group have
adequate resources to continue to operate for the foreseeable future.
For this reason they continue to adopt the going concern basis for
preparing these financial statements.

Directors' responsibilities statement
The directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.

Company law requires the directors to prepare financial statements for
each financial year. Under that law the directors have prepared the
group financial statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union and
company financial statements in accordance with United Kingdom

Generally Accepted Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 102 and applicable law). 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 group and company and of the profit or loss of the group and
company for that period. In preparing the financial statements, the
directors are required to:

• select suitable accounting policies and then apply them consistently;
• state whether applicable IFRSs as adopted by the European Union
have been followed for the group financial statements and United
Kingdom Accounting Standards, comprising FRS 102, have been
followed for the Company financial statements, subject to any material
departures disclosed and explained in the financial statements;

• make judgements and accounting estimates that are reasonable and

prudent; and

• prepare the financial statements on the going concern basis unless

it is inappropriate to presume that the Group and Company will
continue in business.

The directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Group and Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and Company and enable them to ensure
that the financial statements comply with the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS Regulation.

The directors are also responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the
company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.

Financial risk management
See Principal Risks and Uncertainties on page 10.

Statement of disclosure of information to Auditors
In so far as each of the directors is aware, the directors confirm that:

• there is no relevant audit information of which the company’s auditors

are unaware; and

• the directors have taken all steps that they ought to have taken to
make themselves aware of any relevant audit information and to
establish that the auditors are aware of that information.

The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company’s website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.

Independent Auditors
PricewaterhouseCoopers LLP were reappointed as auditors for the year
to 31 December 2018. PricewaterhouseCoopers LLP offer themselves
for reappointment in accordance with the Companies Act 2006.

The Group and Company financial statements on pages 22 to 60
were approved by the Board of Directors on 4 April 2019 and
signed on its behalf by:

J Jones
Director

TEAM17 PLC ❘ ANNUAL REPORT 2018Independent auditor's report to the
members of Team17 Group Plc

Report on the audit of the group financial statements

Opinion
In our opinion, Team 17 Group Plc’s Group financial statements (the “financial statements”):

• give a true and fair view of the state of the Group’s affairs as at 31 December 2018 and of its profit and cash flows for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements, included within the Annual Report and Accounts 2018 (the “Annual Report”), which comprise: the
Consolidated Statement of Financial Position as at 31 December 2018; the Consolidated Statement of Comprehensive Income, the Consolidated
Statement of Cash Flows, and the Consolidated Statement of Changes in Equity for the year then ended; and the notes to the financial statements,
which include a description of the significant accounting policies.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.

Our audit approach
Overview

Materiality

Audit scope

Key audit matters

• Overall group materiality: £560,000 (2017: £370,000), based on 5% of profit before tax and

exceptional items.

• The group engagement team has performed a full scope audit of all components within the
group. The audited components therefore accounted for 100% of consolidated revenue and
100% of consolidated profit before tax.

• Valuation of capitalised development costs.
• IPO transactions.

The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. 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. As in all of our audits we also addressed the risk of
management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk
of material misstatement due to fraud.

Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the 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) identified
by the auditors, 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, and any comments we make on the results of our procedures thereon, 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. This is not a complete list of all risks identified by our audit.

TEAM17 PLC ❘ ANNUAL REPORT 2018GROUP FINANCIAL
STATEMENTS

Key audit matter
Valuation of capitalised development costs
There is a risk that capitalised development costs are, to a material
level, incorrectly valued on the closing balance sheet. This could be a
result of unrecognised impairment losses and/or incorrect writing
off of capitalised recoupable costs.

The Group incurred £3.9 million of capitalised product development
costs during the year ended 31 December 2018, relating to games
the Group develops to sell through its various channels. The net
book value of such capitalised costs as at 31 December 2018 was
£2.7 million.

We focused on this area due to the inherent level of judgement
around whether costs capitalised meet the recognition criteria of IAS
38 'Intangible assets' as determination of that involves management
judgment. Furthermore, there is a risk that capitalised costs will
not be supported by the future cash inflows generated from
product sales.

How our audit addressed the key audit matter
We assessed whether the costs capitalised relating to product
development met the criteria set within IAS 38 'Intangible assets'
noting no exceptions.

We agreed a sample of capitalised product development costs to
source documentation, including invoices and timesheets, and
determined that they had been allocated to the correct project.

We have considered the impairment judgements taken by
management and concur that the games involved have either
been discontinued (and are therefore clearly impaired) or are not
generating the level of return to support the full carrying value.
We are satisfied that the total level of provisioning across the
relevant titles is materially correct.

We have challenged the management to ensure that the method
used to amortise recoupable costs is consistent with industry
practice.

IPO transactions
The Group financial statements have been presented under IFRS
after an Initial Public Offering during the year. There is a potential
risk therefore over the completeness and accuracy of the
adjustments to reflect the IPO transactions.

The engagement team reviewed the IPO adjustments provided to
us by management. We performed an independent completeness
assessment to verify that all adjustments have been identified; and

We validated IPO adjustments to supporting documentation, and
verified these have been appropriately accounted for in the financial
statements. We have also assessed the appropriateness of the
disclosures included in notes to the financial statements to reflect
these changes during the year.

How we tailored the audit scope
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, the accounting processes and controls, and the industry in which it operates.

There are four statutory entities including one significant trading component within the Group. We have performed full scope audit over all four
entities which gave us the evidence we needed for our opinion on the Group financial statements as a whole.

We gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it operates, and considered
the risk of acts by the Group which were contrary to applicable laws and regulations, including fraud. We designed audit procedures to respond
to the risk, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. We
focused on laws and regulations that could give rise to material misstatement in the Group financial statements, including, but not limited to
Companies Act 2006, the Listing Rules and UK tax legislation. Our tests included, but were not limited to, review of legal correspondence and
enquires of management. There are inherent limitations in the audit procedures described above and the further removed non-compliance with
laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it

We did not identify any key audit matters relating to irregularities, including fraud. As in all our audits we also addressed the risk of management
override of internal controls, including testing journals and evaluating whether there was evidence of bias by the directors that represented a
risk of material misstatement due to fraud.

Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the
financial statements as a whole.

TEAM17 PLC ❘ ANNUAL REPORT 2018Independent auditor's report to the
members of Team17 Group Plc
continued

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall group materiality

£560,000 (2017: £370,000).

How we determined it

5% of profit before tax and exceptional items.

Rationale for benchmark applied

The key objective of the group is to deliver underlying profitable growth to increase
long-term shareholder value. As a result, we believe profit before tax and exceptional items
is the primary measure used by the shareholders in assessing the performance of the group
and is therefore the appropriate benchmark to use in assessing materiality.

For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of
materiality allocated across components was between £90,000 and £504,000. Certain components were audited to a local statutory audit
materiality that was also less than our overall group materiality.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £28,000 (2017: £20,500) as
well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Conclusions relating to going concern
ISAs (UK) require us to report to you when:

group’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.

We have nothing to report in respect of the above matters.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group’s ability to continue as a
going concern. For example, the terms on which the United Kingdom may withdraw from the European Union are not clear, and it is difficult to
evaluate all of the potential implications on the group’s trade, customers, suppliers and the wider economy.

Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance 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 an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of 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 based on these responsibilities.

With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006
have been included.

Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report certain
opinions and matters as described below.

Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report for
the year ended 31 December 2018 is consistent with the financial statements and has been prepared in accordance with applicable legal
requirements.

In light of the knowledge and understanding of the group and its environment obtained in the course of the audit, we did not identify any material
misstatements in the Strategic Report and Directors’ Report.

TEAM17 PLC ❘ ANNUAL REPORT 2018Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Responsibilities Statement set out on page 17, the directors are responsible for the preparation of the
financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are
also responsible for such internal control as they 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 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 to cease operations, or have no realistic alternative but to do so.

Auditors’ 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 auditors’ 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 FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.

Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16
of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent
in writing.

Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or
• certain disclosures of directors’ remuneration specified by law are not made.

We have no exceptions to report arising from this responsibility.

Other matter
We have reported separately on the company financial statements of Team 17 Group Plc for the period ended 31 December 2018.

Andy Ward
(Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Leeds
4 April 2019

TEAM17 PLC ❘ ANNUAL REPORT 2018Consolidated Statement of
Comprehensive Income

For the Year Ended 31 December 2018

Revenue

Cost of sales

Gross profit

Administrative expenses

Exceptional costs

Total administrative expenses

Operating profit

Finance income

Finance costs

Profit before tax

Taxation

Profit and total comprehensive income attributable to owners of the parent for the period

Earnings per share – Basic (pence)
– Diluted (pence)

All amounts relate to continuing operations.

Year ended
31 December
2018
£'000

Year ended
31 December
2017
£'000

43,201

(23,399)

19,802

(7,264)

(2,597)

(9,861)

29,634

(12,782)

16,852

(5,933)

(1,988)

(7,921)

9,941

8,931

(1,323)

(3,581)

8,697

5,358

(1,494)

(963)

7,203

6.1
6.1

4,395

4.3
4.3

Note

11
11

There were no other comprehensive income transactions in the period and therefore a Statement of Other Comprehensive Income has not
been presented.

The notes on pages 26 to 47 are an integral part of these consolidated financial statements.

TEAM17 PLC ❘ ANNUAL REPORT 2018
Consolidated Statement of
Financial Position

For the Year Ended 31 December 2018

Assets

Non-current assets

Intangible fixed assets

Property, plant and equipment

Deferred tax asset

Total non-current assets

Current assets

Trade and other receivables

Cash and cash equivalents

Total current assets

Total assets

Equity and liabilities

Equity attributable to owners of the parent

Share capital

Share premium

Merger reserve

Other reserves

Retained earnings

Total equity

Non-current liabilities

Interest bearing loans and borrowings

Accruals and deferred income

Provisions

Deferred tax liabilities

Total non-current liabilities

Current liabilities

Trade and other payables

Interest bearing loans and borrowings

Total current liabilities

Total liabilities

Total equity and liabilities

As at
31 December
2018
£'000

As at
31 December
2017
£'000

Note

41,598

43,793

640

–

634

335

42,238

44,762

8,145

23,512

31,657

6,817

8,440

15,257

73,895

60,019

1,313

44,084

(153,822)

158,864

12,170

377

–

644

6,413

62,609

7,444

–

140

3,142

3,282

8,004

–

8,004

37,970

3,520

3,674

45,214

6,016

1,345

7,361

11,286

52,575

73,895

60,019

The notes on pages 26 to 47 are an integral part of these financial statements.

The financial statements were approved by the board of directors and authorised for issue on 4 April 2019, and were signed on its behalf by:

J Jones
Director

TEAM17 PLC ❘ ANNUAL REPORT 2018Consolidated Statement of
Changes in Equity

For the Year Ended 31 December 2018

Equity attributable to shareholders of the company

At 1 January 2017

Profit and total comprehensive
income for the period

Share based compensation

Total transactions with owners

At 31 December 2017

Profit and total comprehensive
income for the year

Capital reorganisation

New shares issued on IPO

Transaction costs of new
equity instruments

Treasury shares

Sale of shares by
Employment Benefit Trust

Share based compensation

Note

Share
capital
£'000

Share premium
account
£'000

377

Merger
reserve
£'000

–

Other
reserves
£'000

644

Retained
Earnings
£'000

254

Total
Equity
£'000

1,285

–

4,395

1,764

644

6,413

7,444

–

7,203

–

377

–

1,030

(377)

(153,822)

153,169

273

44,814

–

(730)

–

45,087

(730)

–

3,616

(1,808)

1,808

1,435

–

362

1,435

362

Total transactions with owners

1,303

43,707

(153,822)

158,220

(1,446)

47,962

At 31 December 2018

1,313

44,084

(153,822)

158,864

12,170

62,609

TEAM17 PLC ❘ ANNUAL REPORT 2018Consolidated Statement of Cash Flows

For the Year Ended 31 December 2018

Cash generated from operations

Tax paid

Net cash inflow from operations

Cash flow from investing activities

Purchase of property, plant and equipment

Sale of property, plant and equipment

Capitalisation of development costs

Net cash outflow from investing activities

Cash flows from financing activities

Interest received

Interest paid

Repayment of directors loans

Repayment of loan notes

Proceeds of issue of ordinary shares

Sale of shares by Employment Benefit Trust

Capitalised transaction costs of new equity instruments

Net cash inflow/(outflow) from financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Year ended
31 December
2018
£'000

Year ended
31 December
2017
£'000

17,514

(1,316)

16,198

(327)

(3,908)

(4,219)

(5,015)

(1,345)

(38,226)

45,087

3,243

(730)

3,093

15,072

8,440

23,512

13,227

(1,504)

11,723

(453)

–

(1,686)

(2,139)

(921)

(2,596)

(4,828)

–

(8,337)

1,247

7,193

8,440

Note

TEAM17 PLC ❘ ANNUAL REPORT 2018Notes to the consolidated
financial statements

For the Year Ended 31 December 2018

1. General information
The principal activity of Team17 Group Plc (the “Company”) is that of a holding company and the principal activity of the Company and its
subsidiaries (together, the “Group”) is the development and publishing of computer games for the digital and physical market. The Company
was incorporated on 14 February 2018 and is a public company limited by shares incorporated and domiciled in United Kingdom. The address
of its registered office is Castleview House, Calder Island Way, Wakefield, WF2 7AW. The registered number of the Company is 11205116.

2. Significant accounting policies
Basis of preparation
The Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), International
Financial Reporting Interpretations Committee (IFRIC) interpretations endorsed by the European Union and those parts of the Companies
Act 2006 that remain applicable to companies reporting under IFRS. The Company financial statements have been prepared under FRS102.
Both financial statements have been prepared on the historical cost basis with the exception of certain items which are measured at fair value
as disclosed in the principal accounting policies set out below. These policies have been consistently applied to all years presented unless
otherwise stated.

In connection with the admission to AIM, the Group undertook a reorganisation of its corporate structure which resulted in the Company
becoming the ultimate holding company of the Group. Prior to the reorganisation the ultimate holding company was Team17 Holdings Limited.

The transaction was accounted for as a capital reorganisation rather than a reverse acquisition since it did not meet the definition of a business
combination under IFRS 3. In a capital reorganisation, the consolidated financial statements of the Group reflect the predecessor carrying
amounts of Team17 Holdings Limited with comparative information of Team17 Holdings Limited presented for all periods since no substantive
economic changes have occurred.

The consolidated financial information has been prepared on a going concern basis and under the historical cost convention. The principal
accounting policies adopted are set out below.

The consolidated financial information is presented in sterling and has been rounded to the nearest thousand (£’000).

Going concern
Management has produced forecasts which have been reviewed by the directors. These demonstrate the Group is forecast to generate profits
and cash in the year ending 31 December 2019 and beyond and that the Group has sufficient cash reserves to enable the Group to meet its
obligations as they fall due for a period of at least 12 months from when these financial statements have been signed.

As such, the directors are satisfied that the Company and Group have adequate resources to continue to operate for the foreseeable future.
For this reason they continue to adopt the going concern basis for preparing these financial statements.

Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its
subsidiaries). Control is achieved where the Company has the power over the investee, is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to use its power to affect its return. The financial statements of the subsidiaries are prepared
for the same reporting period as the parent company, using consistent accounting policies.

All transactions and balances between group companies are eliminated on consolidation, including unrealised gains and losses on transactions
between group companies. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or
disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of loss of control, as applicable.

Business combinations and goodwill
The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the Group to obtain control
of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued
by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are
expensed as incurred. Assets acquired and liabilities assumed are measured at their acquisition-date fair values.

Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately
recognised. Goodwill is initially measured at cost, being the excess of the consideration transferred over the fair value of the Group’s share of the
identifiable net assets acquired. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the
difference is recognised directly in the Statement of Comprehensive Income.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. At each year end date goodwill is reviewed for
impairment using a discounted cash flow method applied to business forecasts. If this review demonstrates that impairment has occurred, this is
expensed to the income statement. Goodwill is allocated to cash generating units for the purpose of impairment testing, with the allocation being
made to those cash generating units that are expected to benefit from the business combination in which the goodwill arose.

TEAM17 PLC ❘ ANNUAL REPORT 2018Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

2. Significant accounting policies (continued)
Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination
is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortisation
and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalised development costs, are not capitalised
and expenditure is recognised in the Statement of Comprehensive Income when it is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite and at the year end date no intangible assets are accorded an
indefinite life.

Intangible assets with finite lives are amortised over their useful economic lives and assessed for impairment whenever there is an indication
that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life
are reviewed at least at the end of each reporting period.

Amortisation is calculated over the estimated useful lives of the assets as follows:

• Brands – 10-13 years straight line
• Development costs – 2 years reducing balance

Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for
by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on
intangible assets with finite lives is recognised in the Statement of Comprehensive Income in cost of sales for development costs and
administrative expenses for brand costs.

During the year the Group has revised its approach to the recognition of recoupable costs within its Intellectual Property and its amortisation of
development costs – adopting an 85% reducing balance approach in the case of the latter (previously straight line) and retaining the former
within capitalised development costs (previously derecognised when 'recovered' from the third party) and amortising in line with all other
development costs. This ensures the costs continue to be written off over a two-year period but more accurately reflects the sales curve of the
game. This revision in accounting estimate is accounted for as at 31 December 2018 and then prospectively. The net impact of this adjustment
was £0.3m. EBITDA does not include an add back for amortisation of games ordinarily as this is booked as a cost of sale item within the accounts,
however, due to their prior year and catch up nature these costs have been reflected in the presentation of adjusted EBITDA.

An internally generated intangible asset arising from the Group’s development activities is recognised only if all of the following conditions
are met:

• completion of the intangible asset is technically feasible so that it will be available to sell as a completed game
• the Group intends to complete the intangible asset and has the ability to use or license it as indicated above, thus generating probable future

economic benefits;

• the expenditure attributable to the intangible asset during its development, mainly salary and third party developer costs, can be measured

reliably; and

• the Group has adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.

Until completion, the assets are subject to annual impairment testing. Amortisation commences upon completion of the asset.

Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it
is incurred.

Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual
impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of
an asset’s or CGU’s fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or
CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market
transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.

The Group bases its impairment calculation on detailed budgets and forecasts which are prepared separately for each of the Group’s CGUs to
which the individual assets are allocated, which is usually taken to be each individual branch store. These budgets and forecast calculations are
generally covering a period of five years.

Impairment losses of continuing operations are recognised in the Statement of Comprehensive Income in those expense categories consistent
with the function of the impaired asset.

TEAM17 PLC ❘ ANNUAL REPORT 2018Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

2. Significant accounting policies (continued)
Impairment of non-financial assets (continued)
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised
impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable
amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s
recoverable amount since the last impairment loss was recognised.

The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation or amortisation, had no impairment loss been recognised for the asset in prior years. Such
reversal is recognised in the Statement of Comprehensive Income unless the asset is carried at a revalued amount, in which case the reversal is
treated as a revaluation increase.

Revenue recognition
Revenue includes income from the release of full games and early access versions of self-published games.

The group designs, produces and sells computer games based on its own and third party intelectual property to digital and physical distributors,
who are considered to be the Group’s customers when assessing revenue recognition. The majority of the Group’s sales are earned in the form
of royalties received from third party distributors who have a license to sell the Group's games to consumers. Revenue is recognised at the point
at which the distributor sells the content to the consumer.

The transaction price is the amount the group is entitled to in accordance with the contractual arrangement with the third party.

Operating lease agreements
Rentals applicable to operating leases, where substantially all of the risks and benefits or ownership remains with the lessor, are charged to the
Statement of Comprehensive Income on a straight line basis over the period of the lease.

Lease incentives are spread over the period of the lease on a straight line basis.

Pensions
The Group operates a defined contribution pension scheme. The assets of the scheme are held and administered separately from those of the
Group. Contributions payable for the year are charged in the Statement of Comprehensive Income. Differences between contributions payable in
the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet. The Group has no further payment
obligations once contributions have been paid.

Taxation
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Consolidated Statement
of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates and laws that have been enacted or
substantively enacted by the period end date.

Deferred tax
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 computation of taxable profit, and is accounted for using the statement of
financial position 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 the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the
accounting profit.

The carrying amount of deferred tax assets is reviewed at each period end date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates and laws that are expected to apply in the period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the Consolidated Statement of Comprehensive Income, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities
when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a
net basis.

TEAM17 PLC ❘ ANNUAL REPORT 2018Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

2. Significant accounting policies (continued)
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value. The cost includes the original price
of the asset and the cost attributable to bringing the asset to its current working condition for its intended use. Depreciation, down to residual
value, is calculated on a straight-line basis over the estimated useful life of the asset which is reviewed on an annual basis.

Depreciation is calculated over the estimated useful lives of the assets as follows:

• Leasehold property – straight line over the life of the lease
• Plant and equipment – 3 years straight line
– 6 years straight line
• Fixtures & fittings
– 5 years straight line
• Motor vehicles

An item of property, plant and equipment is de-recognised upon disposal or when no future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds
and the carrying amount of the item) is included in the Statement of Comprehensive Income in the year the item is de-recognised.

Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets
Initial recognition and measurement
In accordance with IFRS9, ‘Financial Instruments’ the Group has classified its financial assets as ‘Financial assets at amortised cost’. The Group
determines the classification of its financial assets at initial recognition.

All financial assets are recognised initially at fair value plus, in the case of assets not at fair value through the Statement of Comprehensive
Income, transaction costs that are attributable to the acquisition of the financial asset.

Subsequent measurement
The subsequent measurement of financial assets depends on their classification as described below:

Financial assets carried at amortised cost
This category applies to trade and other receivables due from customers in the normal course of business. All amounts which are not interest
bearing are stated at their recoverable amount, being invoice value less provision for any expected credit losses. These assets are held at
amortised cost.

The group classifies its financial assets as at amortised cost only if both of the following criteria are met:

the asset is held within a business model with the objective of collecting the contractual cash flows; and

(i)
(ii) the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal

outstanding.

Financial assets at amortised cost comprise current trade and other receivables due from customers in the normal course of business and cash
and cash equivalents.

The Group does not hold any material financial assets at fair value through other comprehensive income or at fair value through the Statement of
Comprehensive Income. The Group does not hold any derivatives and does not undertake any hedging activities.

Trade receivables are initially recognised at their transaction price. The group does not expect to have any contracts where the period between
the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the group
does not adjust any of the transaction prices for the time value of money. Other financial assets are recognised initially at fair value plus
transaction costs that are directly attributable to the acquisition of the financial asset.

Trade and other receivables are measured at amortised cost less provision for expected credit losses.

Cash and cash equivalents
Cash and short-term deposits in the Statement of Financial Position comprise cash at banks and on hand and short term deposits held with
banks with a maturity of three months or less from inception.

For the purpose of the Consolidated Statement of Cash Flows, cash and cash equivalents consist of cash and short-term deposits as defined
above, net of outstanding bank overdrafts as they are considered an integral part of the Group’s cash management.

Included within cash and cash equivalents is cash owned by the EBT. The EBT cash is not readily available for use by the Group to meet its
everyday operating costs but can be spent for the benefit of the employees and as such is an appropriate cash equivalent.

TEAM17 PLC ❘ ANNUAL REPORT 2018Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

2. Significant accounting policies (continued)
Financial instruments (continued)
Impairment of financial assets
The Group assesses on a forward looking basis the expected credit losses associated with its financial assets measured at amortised cost. The
Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected
loss provision for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk
characteristics and the days past due. For other financial assets at amortised cost, the Group determines whether there has been a significant
increase in credit risk since initial recognition. The Group recognises twelve month expected credit losses if there has not been a significant
increase in credit risk and lifetime expected credit losses if there has been a significant increase in credit risk.

Expected credit losses incorporate forward looking information, take into account the time value of money when there is a significant financing
component and are based on days past due; the external credit ratings of its customers; and significant changes in the expected performance
and behaviour of the borrower.

Financial assets are written off when there is no reasonable expectation of recovery. Where receivables have been written off, the Group
continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognised in
the Statement of Comprehensive Income.

Financial liabilities
Initial recognition and measurement
All financial liabilities are recognised initially at fair value net of directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables and previously included loans and other borrowings including directors loans.

Subsequent measurement
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate
method (EIR). Gains and losses are recognised in the Statement of Comprehensive Income when the liabilities are derecognised as well as
through the (EIR) amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR.
The EIR amortisation is included in finance costs in the Statement of Comprehensive Income.

This category generally applies to interest-bearing loans and borrowings.

Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

• The rights to receive cash flows from the asset have expired, or
• The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full

without material delay to a third party under a ‘pass-through’ arrangement, and either (a) the Group has transferred substantially all the risks
and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the assets.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability
is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such
an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference in the
respective carrying amounts is recognised in the Statement of Comprehensive Income.

Offsetting of financial instruments
Financial assets and financial liabilities are offset with the net amount reported in the Statement of Financial Position only if there is a current
enforceable legal right to offset the recognised amounts and intent to settle on a net basis, or to realise the assets and settle the liabilities
simultaneously.

Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount
of the obligation. Provisions are measured using the directors’ best estimate of the expenditure required to settle the obligation at the period
end date.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the
risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

TEAM17 PLC ❘ ANNUAL REPORT 2018Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

2. Significant accounting policies (continued)
Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief
operating decision maker has been identified as the Board of Directors. The Group supplies a single product range into a single marketplace and
so there is considered to be only one segment. On transition to IFRS the chief operating decision maker has begun to utilise IFRS based measures
to monitor performance. No differences exist between the basis of preparation of the performance measures used by the Board of Directors and
the figures in the Group financial information.

Share capital
Share capital represents the nominal value of the shares that have been issued.

Share premium
Share premium includes any premiums received on the issue of share capital. Any transaction costs associated with the issuing of shares are
deducted from share premium, net of any related income tax benefits.

Merger relief reserve
Merger relief reserve which has been included in other reserves, includes any premiums received on the issue of share capital in a share for
share exchange.

Merger reserve
During the year the Company became the ultimate parent company of the Group. The merger reserve was created during the year as a result
of the share for share exchange under which Team17 Group plc became the parent undertaking prior to the IPO. Under merger accounting
principles, the assets and liabilities of the subsidiaries were consolidated at book value in the Group financial statements and the consolidated
reserves of the Group were adjusted to reflect the statutory share capital, share premium and other reserves of the Company as if it had always
existed, with the difference presented as the merger reserve.

Retained earnings
Retained current and prior period losses.

Foreign currency
Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange rates prevailing at
the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and
from the remeasurement of monetary items denominated in foreign currency at year-end exchange rates are recognised in the Statement of
Comprehensive Income.

Employee Benefit Trust
As the Company is deemed to have control of its Employee Benefit Trust (“EBT”), it is treated as a subsidiary and consolidated for the purposes of
the combined and consolidated financial statements. The EBT’s assets (other than investments in the company’s shares), liabilities, income and
expenses are included on a line-by-line basis in the consolidated financial statements. The EBT’s investment in the Company’s shares is deducted
from equity in the Consolidated Statement of Financial Position as if they were treasury shares. The gain or loss on transfer of the shares from
the EBT to employees is recognised within equity.

Adoption of new and revised standards
At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRSs that have been issued
but are not yet effective:

IFRS 16 'Leases' is a replacement for IAS 17 'Leases' and will be effective for the period ending 31 December 2019 onwards. IFRS 16 required
lessees to recognise a lease liability reflecting future lease payments and a right-of-use asset for lease contracts. The Group’s activities as a
lessee are not material and hence the group does not expect any significant impact on the financial statements. The impact of this will depend
upon the facts and circumstances as at the time of adoption and the transition choices adopted. The impact is expected to be an increase in the
assets and liabilities of the Group, in a similar quantum to the operating lease commitments noted in the statutory accounts.

The directors have considered the likely impact of the above standards on the financial statements of the Group in future periods. The directors
do not consider that the standards will have a material impact on the financial statements in future periods.

TEAM17 PLC ❘ ANNUAL REPORT 2018Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

3. Key sources of estimation, uncertainty and significant accounting judgements
The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent
liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying
amount of assets or liabilities affected in future periods.

In the process of applying the Group’s accounting policies, management has made the following judgements, which have the most significant
effect on the amounts recognised in the consolidated financial statements:

Development costs capitalisation
The Group invests heavily in research and development. The identification of development costs that meet the criteria for capitalisation is
dependent on management’s judgement and knowledge of the work done together with any agreements made with the rights holders of a
specific game. Judgements are based on the information available at each period end. Economic success of any development is assessed on
a reasonable basis and a review for indicators of impairment is completed by product at each period-end date. The net book values of the
development intangible assets including rights acquired at 31 December 2018 are £2,693,000 (2017: £3,104,000). Intangible assets are subject
to amortisation and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable, for example, a decision to suspend a self-published title under development. An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less
costs to sell and value in use. For the purposes of assessing impairment, assets are reviewed by project for which there are separately
identifiable cashflows.

Goodwill impairment
The carrying value of goodwill is reviewed for impairment at least annually. In determining whether goodwill is impaired an estimation of the fair
value and/or the value in use of the cash generating unit (CGU) to which the goodwill has been allocated is required. This calculation of value in
use requires estimates to be made relating to the timing and amount of future cash flows expected from the CGU, and suitable discount rates
based on the Group’s weighted average cost of capital adjusted to reflect the specific economic environment of the relevant CGU. The calculation
of fair value requires estimates of the market value of the Group by reference to existing market data for the Group or for similar entities.

Exceptional items
IAS 1 requires material items to be disclosed separately in a way that enables users to assess the quality of a Group’s profitability. In practice,
these are commonly referred to as “exceptional” items, but this is not a concept defined by IFRS and therefore there is a level of judgement
involved in determining what to include in underlying profit. We consider items which are non-recurring and significant in size or in nature to be
suitable for separate presentation (see note 6).

Share based compensation
The Company has granted share options to directors and the fair value of these options has been estimated using a Monte Carlo Simulation
model to estimate the fair value of the awards. These valuations were calculated by external experts and reviewed by the Company.

The fair value of these options are recognised as an expense in the Statement of Comprehensive Income over the vesting period of the options
with a corresponding credit included within retained earnings.

4 Segmental analysis
For management purposes the Group is considered to comprise only one segment for reporting to the chief operating decision maker, that of the
development and publishing of computer games for the digital and physical market.

Four (2017: Five) customers each contributed over 10% of the total revenue in 2018 with total revenue derived from these customers being
£35,365,000 (2017: £22,820,000).

All non-current assets are located in the UK.

5. Revenue
All revenue was generated by the sale of goods.

The Group does not provide any information on the geographical location of sales as the majority of revenue is through third party distribution
platforms which are responsible for the sales data of consumers.

TEAM17 PLC ❘ ANNUAL REPORT 2018Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

5. Revenue (continued)
Whilst the chief operating decision maker considers there to be only one segment, the Company’s portfolio of games is split between those based
on IP owned by the Group and IP owned by a third party and hence to aid the readers understanding of our results, the split of revenue from
these two categories are shown below:

Internal IP

Third Party

6. Exceptional costs
Exceptional costs are made up of the following:

IPO related costs

Share based compensation charge for former chairman

Year ended
31 December
2018
£'000

Year ended
31 December
2017
£'000

32,100

11,101

43,201

14,802

14,832

29,634

Year ended
31 December
2018
£'000

Year ended
31 December
2017
£'000

2,597

–

2,597

–

1,988

Exceptional items in the year ending 31 December 2018 relate to significant one-off costs, which have not been deducted from equity, associated
with the Group’s admission onto AIM in May 2018. The costs comprise advisors fees (£1,323,000), the write off of unamortised loan note fees
(£258,000), stock exchange listing fees (£43,000), other IPO costs (£56,000) and bonuses payable to Directors which were contingent on admission
to AIM (£917,000). Costs totalling £730,000 incurred in association with the IPO which met IAS 32 definition of transaction costs (being incremental
and directly related to the issuance of new equity instruments and which would have been avoided had the instruments not been issued) have
been deducted from share premium.

Exceptional items in 2017 relate to the estimated fair value of shares issued by the company during 2018 to the former chairman in respect of the
settlement of a claim that arose in 2017. The charge of £1,988,000 included £224,000 of associated employment taxes.

TEAM17 PLC ❘ ANNUAL REPORT 2018Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

7. Operating Profit

The following items are included in profit before tax:

Depreciation of property, plant and equipment (note 14)

Amortisation of development costs – cost of sales (note 13)

Amortisation of brands – administrative expenses (note 13)

Exceptional costs (note 6)

Amortisation of financing fees

Profit on foreign exchange

Operating lease rentals

– other operating leases

Auditor's remuneration:

Fees payable to the Company’s auditor for the audit of Team 17 Group Plc

Fees payable to the Company’s auditor in respect of:

Audit of Company’s subsidiaries

Deal related costs

Tax compliance

8. Staff numbers and costs
The average number of persons employed by the Group (including directors) during the year, was as follows:

Staff and directors

The aggregate payroll costs of these persons were as follows:

Wages and salaries

Social security costs

Other pension costs

Share based compensation

Year ended
31 December
2018
£'000

Year ended
31 December
2017
£'000

305

4,319

1,784

2,597

258

(155)

580

214

1,387

1,783

1,988

(160)

125

–

Group

Year ended
31 December
2018
No.

Year ended
31 December
2017
No.

152

Group

Year ended
31 December
2018
No.

Year ended
31 December
2017
No.

6,515

602

177

319

7,613

4,329

715

123

1,764

6,931

TEAM17 PLC ❘ ANNUAL REPORT 2018

Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

8. Staff numbers and costs (continued)
The following tables sets out the Directors' remuneration:

Aggregate emoluments

Company contributions to money purchase scheme

Share based compensation

Retirement benefits are accruing to 2 directors (2017: 2) under money purchase schemes.

The remuneration of the highest paid Director were:

Aggregate emoluments

Share based compensation

9. Finance costs

Interest payable on other loans

Interest payable on loan notes

10. Taxation

Current tax:

Current year tax

Video Games Tax Relief claim

Adjustments in respect of prior period:

Video Games Tax Relief claim

Other

Deferred tax:

Origination and reversal of temporary differences

Year ended
31 December
2018
£'000

Year ended
31 December
2017
£'000

1,571

319

1,941

578

–

619

Year ended
31 December
2018
£'000

Year ended
31 December
2017
£'000

1,143

319

1,462

427

–

427

Year ended
31 December
2018
£'000

Year ended
31 December
2017
£'000

1,297

1,323

3,507

3,581

Year ended
31 December
2018
£'000

Year ended
31 December
2017
£'000

2,694

(444)

(391)

(168)

1,691

(197)

2,547

–

(525)

–

2,022

(1,059)

Total tax charge

1,494

963

TEAM17 PLC ❘ ANNUAL REPORT 2018

Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

10. Taxation (continued)
The other adjustment in respect of prior period relates to additional tax credits claimed on finalisation of the tax computations.

Reconciliation of total tax charge:

Profit before tax

Taxation using the UK Corporation Tax rate of 19%
(2017: 19.25%)

Effects of:

Expenses not deductible for tax purposes

Video Games Tax Relief

Adjustment in respect of prior periods

Total tax charge

Year ended
31 December
2018
£'000

Year ended
31 December
2017
£'000

8,697

1,652

845

(444)

(559)

1,494

5,358

1,031

457

–

(525)

963

As a result of changes to the UK corporation tax rates that were substantively enacted as part of the Finance Bill 2016 on 6 September 2016 the
main rate will reduce to 17% from 1 April 2020. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and
reflected in these consolidated financial statements.

11. Earnings per share
The calculation of the basic earnings per share is based on the profits attributable to the shareholders of Team17 Group plc divided by the
weighted average number of shares in issue. The weighted average number of shares takes into account treasury shares held by the Team17
Employee Benefit Trust.

At 31 December 2018 the performance criteria for issuing the share options had not been met and therefore there is no dilutive effect.

Profit attributable to shareholders £’000

Weighted average number of shares

Basic and diluted earnings per share (pence)

Year ended
31 December
2018

Year ended
31 December
2017

7,203

4,395

118,356,852

101,200,548

6.1

4.3

The calculation of adjusted earnings per share is based on the profit attributable to shareholders as shown in the Statement of Comprehensive
Income plus additional costs added back during the year as shown in note 12. The weighted average number of shares uses the number of
shares in issue post listing on AIM on 23 May. This has been applied retrospectively to the number of shares in issue at 31 December 2017 and the
metric has been restated to ensure that the adjusted earnings per share figures are comparable over the two periods.

Adjusted earnings (note 12) £’000

Weighted average number of shares

Adjusted basic and diluted earnings per share (pence)

Year ended
31 December
2018

Year ended
31 December
2017

10,425

6,383

129,246,382

8.1

4.9

TEAM17 PLC ❘ ANNUAL REPORT 2018Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

12. Adjusted EBITDA

Profit attributable to shareholders

Exceptional costs (note 6)

Share based compensation (note 21)

Revision of accounting estimate (note 13)

Adjusted earnings

Taxation

Finance income

Finance cost

Amortisation

Depreciation

Adjusted EBITDA

Year ended
31 December
2018
£'000

Year ended
31 December
2017
£'000

7,203

2,597

362

263

10,425

1,494

(79)

1,323

1,784

305

15,252

4,395

1,988

–

6,383

963

(8)

3,581

1,783

214

12,916

TEAM17 PLC ❘ ANNUAL REPORT 2018
Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

13. Intangible Fixed Assets

Cost

At 1 January 2017

Additions

At 31 December 2017

Additions

At 31 December 2018

Amortisation

At 1 January 2017

Charge for the period

At 31 December 2017

Charge for the year

At 31 December 2018

Net carrying amount

At 31 December 2018

At 31 December 2017

Development
costs
£’000

5,021

1,686

6,707

3,908

10,615

2,216

1,387

3,603

4,319

7,922

Brands
£’000

21,983

–

21,983

–

21,983

594

1,783

2,377

1,784

4,161

Goodwill
£'000

21,083

–

21,083

–

21,083

–

Total
£’000

48,087

1,686

49,773

3,908

53,681

2,810

3,170

5,980

6,103

12,083

2,693

17,822

21,083

41,598

3,104

19,606

21,083

43,793

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

The recoverable amount of the cash generating unit (“CGU”) at 31 December 2018 is determined from the fair value less costs of disposal of the
underlying business units. No impairment is considered necessary at 31 December 2018. The key assumption in calculating the fair value was the
expected future cashflows at 31 December 2018.

When estimating the fair value of the Group the Directors took account of current market expectations and recent data from similar transactions.

Revision of accounting estimate
During the year the group has revised its approach to the recognition of recoupable costs within its Intellectual Property and its amortisation of
development costs – adopting an 85% reducing balance approach over 2 years in the case of the latter (previously straight line over 2 years) and
retaining the former within capitalised development costs (previously derecognised when recovered from the third party) and amortising over
the useful economic life of the game in line with all other costs. The impact of this revision of accounting estimate is an increase to capitalised
costs of £1,720,000 and a corresponding increase in amortisation of £1,983,000 giving an overall reduction in net book value of £263,000. This
revision in accounting estimate is accounted for as at 31 December 2018 and then prospectively.

TEAM17 PLC ❘ ANNUAL REPORT 2018Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

14 . Property, plant and equipment

Leasehold
Property
£'000

Plant and
machinery
£’000

Fixtures and
Fittings
£'000

Motor

vehicles
£'000

Cost

At 1 January 2017

Additions

Disposals

At 31 December 2017

Additions

Disposals

At 31 December 2018

Depreciation

At 1 January 2017

Charge for the year

Disposals

At 31 December 2017

Charge for the year

Disposals

At 31 December 2018

Net book value

At 31 December 2018

At 31 December 2017

–

125

–

562

331

(114)

779

190

(9)

960

308

171

(114)

365

235

(7)

593

367

414

–

104

–

133

–

151

(38)

182

–

(23)

130

112

Total
£’000

780

453

(114)

1,119

328

(47)

1,400

385

214

(114)

485

305

(30)

760

640

634

15. Trade and other receivables
Amounts falling due within one year

Year ended

Trade receivables

Other receivables

Prepayments

There are no impaired assets within trade and other receivables

16. Cash and cash equivalents

Cash at bank and in hand

31 December
2018
£,000

31 December
2017
£,000

6,741

948

456

8,145

5,628

990

199

6,817

31 December
2018
£'000

31 December
2017
£'000

23,512

8,440

Included within the balance above is £3,243,000 (2017: £Nil) of cash and cash equivalents is cash owned by the EBT. The EBT cash is not readily
available for use by the Group to meet its everyday operating costs but can be spent for the benefit of the employees and as such is an
appropriate cash equivalent.

TEAM17 PLC ❘ ANNUAL REPORT 2018
31 December
2018
£'000

31 December
2017
£'000

364

313

1,097

240

5,990

8,004

385

723

1,148

3,735

6,016

31 December
2018
£'000

31 December
2017
£'000

–

37,970

31 December
2018
£'000

31 December
2017
£'000

–

1,345

Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

17. Trade and other payables
Current:

Year ended

Trade payables

Other creditors

Current tax liabilities

Taxation and social security

Accruals and deferred income

18. Interest bearing loans and borrowings

Non-current:

Loan notes:

In more than two years but less than five years

Current:

Directors loans

TEAM17 PLC ❘ ANNUAL REPORT 2018
Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

19. Deferred taxation
Recognised deferred tax liabilities:

At 1 January 2017

Deferred tax recognised in profit or loss

At 31 December 2017

Deferred tax recognised in profit or loss

At 31 December 2018

Recognised deferred tax asset

At 1 January 2017

Deferred tax recognised in profit or loss

At 31 December 2017

Deferred tax recognised in profit or loss

At 31 December 2018

Accelerated
depreciation for
tax purposes
£’000

Other short
term timing
differences
£’000

Arising on
intangible fixed
assets
£’000

–

Total
£’000

4,398

3,756

(343)

(724)

3,413

3,674

(339)

(532)

588

(381)

207

(193)

3,074

3,142

Other short
term timing
differences
£'000

335

–

335

Total
£'000

335

–

335

(335)

–

TEAM17 PLC ❘ ANNUAL REPORT 2018
Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

20. Share capital

Authorised, allotted, called up and fully paid

334,536 A ordinary shares of 1p each

466,917 B ordinary shares of 1p each

116,729 C ordinary shares of 1p each

66,354 D ordinary shares of 1p each

46,392 E ordinary shares of 1p each

34,794 deferred shares of 1p each

131,288,276 ordinary shares of 1p each

31 December
2018
£'000

31 December
2017
£'000

–

1,313

–

During the year the group listed on AIM and Team17 Group Plc became the new holding company of the group.

The ordinary shares have voting, dividend and capital distribution rights. They are not redeemable.

Admission to AIM
This note should be read in conjunction with the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows.
The Group’s admission onto AIM involved a number of transactions which are explained below:

Capital re-organisation
Prior to Admission the Company acquired the entire share capital of Team17 Holdings Limited (comprising £0.01 nominal ordinary shares)
in exchange for issuing the same number of its own ordinary shares (of £1 nominal ordinary shares) to the existing shareholders of Team17
Holdings Limited. This transaction was under common control and treated as a capital restructuring and not a business combination. The
company recorded the investment at fair value and applied merger relief, leading to the creation of the other reserve of £153,169,000, being a
share premium created on reorganisation of £153,813,000 less the elimination of brought forward reserves of £644,000. On consolidation and the
application of predecessor (merger) accounting, the merger reserve of £153,822,000 was also created. The impact of this transaction on the
consolidated financial statements is disclosed as a ‘Capital reorganisation’ in the Statement of Changes in Equity.

Subsequently (but prior to admission), the Company sub-divided its £1 ordinary shares into £0.01 nominal shares. The impact of this share split
has been taken into account in the calculation of basic earnings per share in accordance with IAS 33. The sub-division of shares has been
retrospectively applied from the first day of the comparative financial period, leading to an increase in the weighted average number of shares
in issue across all periods. Basic EPS for the year ending 31 December 2017 has been restated as a result.

New share issue
Prior to the listing the Company had in issue 103,962,794 £0.01 ordinary shares. As part of the IPO the Company issued a further 27,325,482 £0.01
ordinary shares, at £1.65 per share. This raised a total of £45,087,045. A further 37,849,200 existing shares were placed on sale, at £1.65, by the
existing shareholders. Following admission, the Company had in issue 131,288,276 ordinary £0.01 shares of which 65,174,682 were placed on AIM
and 2,041,900 were held within the Group as treasury shares within the Employee Benefit Trust.

The £45,087,000 proceeds of the share issue were utilised by the Company to: repay shareholder loan notes (£38,226,000); repay director loans
(£1,345,000); repay accrued interest on shareholder loan notes (£4,630,000); repay accrued interest on directors loans (£198,000); and settle
transaction costs associated with the listing.

Shares held by subsidiaries
In November 2017, an Employee Benefit Trust (the "Trust") was set up. As part of the IPO transaction, the Trust was gifted shares creating a £3.6m
capital contribution reserve (included in other reserves). Subsequently the EBT sold half of its shareholding (in line with all other shareholders)
creating a gain of £1,435,000 included within other reserves. At 31 December 2018, and included in these consolidated financial statements, the
Trust holds 2,014,900 (2017: £Nil) shares in Team17 Group plc with a nominal value of £20,419 (2017: £Nil).

Share premium reserve
Includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from the
share premium.

Retained earnings
Includes all current and previous retained profits and losses.

TEAM17 PLC ❘ ANNUAL REPORT 2018Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

20. Share capital (continued)
Merger reserve
During the year the Company became the ultimate parent company of the Group. The merger reserve was created during the year as a result
of the share for share exchange under which Team17 Group plc became the parent undertaking prior to the IPO. Under merger accounting
principles, the assets and liabilities of the subsidiaries were consolidated at book value in the Group financial statements and the consolidated
reserves of the Group were adjusted to reflect the statutory share capital, share premium and other reserves of the Company as if it had always
existed, with the difference presented as the merger reserve.

21. Share based compensation
The executive directors were granted share options during the year under the Team17 Group plc Long Term Incentive Plan. These options only
vest if certain performance criteria are met. The options are split into two parts with the amount of Part A options that will vest depending on the
Group’s Cumulative EPS targets whilst part B depends on annualised absolute total shareholder return. The maximum number of outstanding
share options at 31 December 2018 was 1,114,619 (2017: Nil).

Award date

23 May 2018

Vesting date

23 May 2021

18 December 2018

30 October 2021

Maximum number of
share options outstanding

Exercise price per
share option

972,727

141,892

£Nil

The fair value of services received in return for share options granted is calculated based on appropriate valuation models. The expense is
apportioned over the vesting period and is based on the number of financial instruments which are expected to vest and the fair value of those
financial instruments at the date of the grant. The assessed fair value of options granted during the year was £319,000 (2017: £Nil) based on the
following assumptions using the Monte-Carlo method for valuing share options. In addition there is £43,000 (2017: £Nil) of national insurance
included within social security costs accrued at 13.8% which creates a total charge for the year through retained earnings of £362,000
(2017: £Nil).

Underlying share price (£)

Grant price (£)

Exercise price (£)

Vesting period

Estimate of part A options vesting

Estimate of part B options vesting

Expected volatility of the share price

Dividends expected on the shares

Risk free rate

Fair value (£’000)

2.20

–

3 years

59%

65%

38%

319

In 2017 shares worth £1,764,000 were agreed to be provided to the ex-chairman for Nil consideration as part of a settlement agreement. These
were accrued for in the 2017 consolidated financial statements and the shares were granted in May 2018.

TEAM17 PLC ❘ ANNUAL REPORT 2018
Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

22. Cash generated from operations

Cash flow from operating activities

Profit before tax

Adjustments for:

Depreciation of property, plant and equipment

Amortisation of intangible fixed assets

Share based compensation

Finance income

Financial expenses

Financing fees written off

Operating cash flow before changes in working capital

Increase in trade and other receivables

Increase in provisions

Increase in trade and other payables

Cash generated from operations

23. Commitments and contingencies
(a) Operating leases

Year ended
31 December
2018
£'000

Year ended
31 December
2017
£'000

8,697

5,358

305

6,103

362

(79)

1,323

258

16,969

(1,328)

1,784

17,514

214

3,170

1,764

(8)

3,581

14,133

(3,401)

2,485

13,227

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases,
which fall due as follows:

31 December
2018
Land & Buildings
£’000

142

–

196

31 December
2017
Land & Buildings
£’000

288

–

360

Within one year

Within two to five years

After five years

Within one year

Within two to five years

After five years

(b) Capital commitments

The Group had no contracted capital commitments at 31 December 2018

TEAM17 PLC ❘ ANNUAL REPORT 2018
Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

24. Related parties
Ultimate controlling party
At 31 December 2018 there was not considered to be a single ultimate controlling party of Team17 Group Plc.

Transactions with related parties
There are no loan notes outstanding with related parties at the 31 December 2018.

On 23 May 2018, the group repaid in full the outstanding loan notes to LDC V LLP (a shareholder of the company). The balance outstanding at
31 December 2017 was £13,908,000. Interest of £501,000 was charged during the year (2017: £1,278,000).

The Group also repaid loan notes owed to the shareholders of the Company, D A Bestwick and J P Bray, who were directors of Team17 Holdings
Limited during the year. The balance outstanding at 31 December 2017 was £21,026,000. Interest of £548,000 was charged on these loan notes
during the year (2017: £1,930,000).

Loan notes owed to the other directors/shareholders of Team17 Holdings Limited (who were K Aston, C Davies, C Van Der Kuyl and P Burns)
were also repaid. The balance outstanding at 31 December 2017 was £3,292,000. Interest of £86,000 was charged during the year
(2017: £299,000).

Transactions with key management personnel:
The key management personnel of the Group are deemed to be the board of directors and details of their aggregate remuneration can be found
in note 8.

25. Financial instruments
Trade and other receivables shown above comprises trade receivables and other receivables as disclosed in note 15.

Trade and other payables comprises of trade payables, other payables and accruals as disclosed in note 17.

Borrowings comprises of loan notes and other loans as disclosed in note 18.

Loans and receivables are non-derivatives financial assets carried at amortised cost which generate a fixed or variable interest income for the
Group. The carrying value may be affected by changes in the credit risk of the counterparties.

Management have assessed that for cash and short-term deposits, trade receivables, trade payables and other current liabilities their fair values
approximate to their carrying amounts largely due to the short-term maturities of these instruments. Book values are deemed to be a reasonable
approximation of fair values.

For the loan notes which are repayable in 2022 and bear a fixed rate of interest there is not, given the limited changes in interest rates since
issue, considered to be any material difference between the amortised cost and fair value of these financial liabilities.

Fair value
The fair value of all financial instruments is equivalent to their book value due to their short maturities.

Financial risks
The Group monitors and manages the financial risks relating to the financial instruments held. The principal risks include credit risk on financial
assets, and liquidity and interest rate risk on financial liability borrowings. The key risks are analysed below.

Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to
stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes the
borrowings, cash and cash equivalents and equity attributable to the equity holders of the parent, comprising issued capital, reserves and
retained earnings.

Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. In order
to minimise this risk the Group endeavours only to deal with companies which are demonstrably creditworthy and this, together with the
aggregate financial exposure, is continuously monitored. The maximum exposure to credit risk is the value of the outstanding amount. Supply
of products by the Group results in trade receivables which management consider to be of low risk, other receivables are likewise considered
to be low risk. However, certain customers comprise in excess of 10% of the revenue earned by the Group (see note 5). Credit risk on cash and
cash equivalents is considered to be small as the counterparties are all substantial banks with high credit ratings. The maximum exposure is
the amount of the deposit.

TEAM17 PLC ❘ ANNUAL REPORT 2018Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

25. Financial instruments (continued)
Financial assets
The Group is not exposed to significant interest rate risk on the financial assets, other than cash and cash equivalents.

Cash and cash equivalents are exposed to interest rate risk as they are held at floating rates, although the risk is not significant as the interest
receivable is not significant.

Liquidity risk
Cash and cash equivalents
Bank balances are held on short term / no notice terms to minimise liquidity risk.

Trade and other payables
Trade and other payables are non-interest bearing and are normally settled on 30 day terms.

Borrowings
The maturity analysis of the cash flows from the group’s borrowing arrangements that expose the group to liquidity risk are as follows;

Within one year
£000

Within one-two
years
£000

Within two-five
years
£000

Over five years
£000

–

Within one year
£000

Within one-two
years
£000

Within two-five
years
£000

Over five years
£000

826

1,345

2,171

859

–

859

57,690

–

57,690

–

Total
£’000

–

Total
£’000

59,375

1,345

60,720

Loans and
receivables
£'000

Financial
liabilities at
amortised cost
£'000

Book value
£'000

Fair value
£’000

7,689

23,512

31,201

–

31,201

–

(8,004)

7,689

23,512

31,201

(8,004)

23,197

7,689

23,512

31,201

(8,004)

23,197

31 December 2018

Loan notes

Interest bearing loans and borrowings

31 December 2017

Loan notes

Interest bearing loans and borrowings

At 31 December 2018

Financial assets

Trade and other receivables

Cash and cash equivalents

Financial liabilities

Trade and other payables

TEAM17 PLC ❘ ANNUAL REPORT 2018

Notes to the consolidated
financial statements continued

For the Year Ended 31 December 2018

25. Financial instruments (continued)
31 December 2017

Financial assets

Trade and other receivables

Cash and cash equivalents

Financial liabilities

Trade and other payables

Borrowings

Loans and
receivables
£'000

Financial
liabilities at
amortised cost
£'000

Book value
£'000

Fair value
£’000

6,618

8,440

15,058

–

15,058

–

(7,665)

(39,315)

(46,980)

6,618

8,440

15,058

(7,665)

(39,315)

(31,922)

6,618

8,440

15,058

(7,665)

(39,315)

(31,922)

26. Contingent liabilities
The long term nature, size and complexity of the Group contracts means that there may be, from time to time, disputes between the parties to the
contracts. The Group aims to resolve such disputes on a timely basis and at minimal cost.

27. Pensions
The Group operates a defined contribution scheme for its directors and employees. The assets of the scheme are held separately from those of
the Group in an independently administered fund.

The outstanding pension contributions at 31 December 2018 were £24,000 (31 December 2017: £38,000).

TEAM17 PLC ❘ ANNUAL REPORT 2018

The following pages are for Team17 Group Plc as a separate entity and are not consolidated

TEAM17 PLC ❘ ANNUAL REPORT 2018COMPANY FINANCIAL
STATEMENTS

Independent auditors’
report to the members
of Team17 Group Plc

Report on the audit of the company financial statements

Opinion
In our opinion, Team 17 Group Plc’s company financial statements (the “financial statements”):

• give a true and fair view of the state of the company’s affairs as at 31 December 2018;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law); and

• have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements, included within the Annual Report and Accounts 2018 (the “Annual Report”), which comprise: the
Company Statement of Financial position as at 31 December 2018; the Company Statement of Changes in Equity for the period then ended; and
the notes to the financial statements, which include a description of the significant accounting policies.

Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.

Our audit approach
Overview

Materiality

Audit scope

• Overall materiality: £504,000 based on 1% of total assets.

• This is the first financial period for the entity. We performed full scope audit procedures

over Team 17 Group Plc (the parent company of the group).

Key audit matters

• IPO transactions.

The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. 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. As in all of our audits we also addressed the risk
of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk
of material misstatement due to fraud.

Key audit matter
IPO transactions
The Company financial statements have been presented under
FRS 102 after an Initial Public Offering during the period. There
is a potential risk therefore over the completeness and accuracy
of the adjustments to reflect the IPO transactions.

How our audit addressed the key audit matter
The engagement team reviewed the IPO adjustments provided to
us by management. We performed an independent completeness
assessment to verify that all adjustments have been identified; and

TEAM17 PLC ❘ ANNUAL REPORT 2018Independent auditors’ report to the
members of Team17 Group Plc
continued

How we tailored the audit scope
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 Company, the accounting processes and controls, and the industry in which it operates.

We gained an understanding of the legal and regulatory framework applicable to the Company and the industry in which it operates, and
considered the risk of acts by the Company which were contrary to applicable laws and regulations, including fraud. We designed audit
procedures to respond to the risk, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or
through collusion. We focused on laws and regulations that could give rise to material misstatement in the Company financial statements,
including, but not limited to Companies Act 2006, the Listing Rule and UK tax legislation. Our tests included, but were not limited to, review of
legal correspondence and enquires of management. There are inherent limitations in the audit procedures described above and the further
removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we
would become aware of it

Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the
financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall materiality

£504,000.

How we determined it

1% of total assets.

Rationale for benchmark
applied

The company is a non-trading holding company. The entity's assets relate solely to their ownership of the
subsidiary trading companies and thus reflect the company's purpose. Company materiality has been
restricted to ensure it is not greater than 90% of the Group's financial statement materiality.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £25,200 as well as
misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Conclusions relating to going concern
ISAs (UK) require us to report to you when:

• 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
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.

We have nothing to report in respect of the above matters.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the company’s ability to continue as
a going concern. For example, the terms on which the United Kingdom may withdraw from the European Union are not clear, and it is difficult to
evaluate all of the potential implications on the company’s trade, customers, suppliers and the wider economy.

TEAM17 PLC ❘ ANNUAL REPORT 2018
Independent auditors’ report to the
members of Team17 Group Plc
continued

With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006
have been included.

Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report certain
opinions and matters as described below.

Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’ report
for the period ended 31 December 2018 is consistent with the financial statements and has been prepared in accordance with applicable
legal requirements.

In light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we did not identify any
material misstatements in the Strategic Report and Directors’ Report.

Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Responsibilities Statement set out on page 17, the directors are responsible for the preparation of the
financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are
also responsible for such internal control as they 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 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
company or to cease operations, or have no realistic alternative but to do so.

TEAM17 PLC ❘ ANNUAL REPORT 2018Independent auditors’ report to the
members of Team17 Group Plc
continued

Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not

visited by us; or

• certain disclosures of directors’ remuneration specified by law are not made; or
• the financial statements are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Other matter
We have reported separately on the group financial statements of Team 17 Group Plc for the year ended 31 December 2018.

Andy Ward
(Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Leeds
4 April 2019

TEAM17 PLC ❘ ANNUAL REPORT 2018Company Statement of
Financial Position

As at 31 December 2018

Fixed assets

Investments

Current assets

Debtors

Cash at bank and in hand

Creditors: amounts falling due within one year

Net current assets

Net assets

Capital and reserves

Called up share capital

Share premium account

Other reserve

Profit and loss account

As at
31 December
2018
£'000

Note

154,853

44,452

–

44,452

(461)

198,844

1,313

44,084

153,813

(366)

198,844

The company has taken advantage of the exemption permitted by section 408 of the Companies Act 2006 not to produce its own profit and loss
account. The loss for the year dealt within the accounts of the company was £728,000.

The notes on pages 55 to 60 are an integral part of these financial statements.

The financial statements were approved by the board of directors and authorised for issue on 4 April 2019, and were signed on its behalf by:

J Jones
Director

TEAM17 PLC ❘ ANNUAL REPORT 2018Company Statement of
Changes in Equity

For the period ended 31 December 2018

Equity attributable to shareholders of the company

On incorporation

Loss and total comprehensive expense for
the period

New shares issued at incorporation

Capital reorganisation

New shares issued on IPO

Transaction costs of new equity instruments

Share based compensation

Called
up share
capital
£’000

Share
premium
account
£’000

Other

reserve
£’000

–

1,030

273

–

44,814

(730)

–

153,813

–

Profit
and loss
account
£'000

–

Total
Equity
£'000

–

(728)

–

362

154,843

45,087

(730)

362

Note

At 31 December 2018

1,313

44,084

153,813

(366)

198,844

TEAM17 PLC ❘ ANNUAL REPORT 2018Notes to the Company
financial statements

For the Period Ended 31 December 2018

1. General information
The Company was incorporated on 14 February 2018 and the principal activity of Team17 Group Plc (the “Company”) is that of a holding company.
The Company is incorporated and domiciled in United Kingdom. The address of its registered office is Castleview House, Calder Island Way,
Wakefield, WF2 7AW. The registered number of the Company is 11205116.

2. Significant accounting policies
Basis of preparation
The Company financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting
policies and in accordance with FRS102, the Financial Reporting Standard applicable in the UK and Republic of Ireland and the Companies Act 2006.

The Company has taken advantage of Section 408 of the Companies Act 2006 and has not included its individual Statement of Comprehensive
Income in these financial statements. The Company’s overall result for the year is given in the Statement of Changes in Equity.

The financial information has been prepared on a going concern basis and under the historical cost convention. The principal accounting policies
adopted are set out below. These policies have been consistently applied to all years presented unless otherwise stated.

The financial information is presented in sterling and has been rounded to the nearest thousand (£’000).

The Company has presented a period from incorporation on 14 February 2018 to 31 December 2018.

Financial Reporting Standard 102 – reduced disclosure exemptions
The Company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by FRS 102:

• The requirements of section 7 Statement of Cash Flows;
• The requirements of section 3 Financial Statement Presentation paragraph 3.17 (d);
• The requirements of section 11 Financial Instruments paragraphs 11.41(b), 11.41(c), 11.41(e). 11.41(f), 11.42, 11.44 to 11.45, 11.48(a)(iii), 11.48(a)(iv),

11.48(b) and 11.48(c);

• The requirements of section 12 Other Financial Instruments paragraphs 12.26 to 12.27, 12.29(a), 12.29(b) and 12.w9A;
• The requirements of section 33 Related Party Disclosures paragraphs 33.7.

This information in included in the consolidated financial statements found earlier in this report.

Going concern
Management has produced forecasts which have been reviewed by the directors. These demonstrate the Group is forecast to generate
profits and cash in the year ending 31 December 2018 and beyond and that the Group has sufficient cash reserves to enable the Group to
meet its obligations as they fall due for a period of at least 12 months from when these financial statements have been signed.

Valuation of investments
Investments in subsidiaries are measured at cost less accumulated impairment.

Trade and other receivables
Short term debtors are measured at transaction price, less any impairment.

Cash and cash equivalents
Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash
equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible
to known amounts of cash with insignificant risk of change in value.

Financial instruments
The Company only enters into basic financial instruments transactions that result in the recognition of financial assets and liabilities like
trade and other debtors and creditors, loans from banks and other third parties, loans to related parties and investments in non-puttable
ordinary shares.

Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of
impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Statement of Comprehensive Income.

For financial assets measured at cost less impairment, the impairment loss is measured at the difference between an assets carrying amount
and best estimate of the recoverable amount, which is an approximation of the amount that the Company would receive for the asset if it were to
be sold at the reporting date.

TEAM17 PLC ❘ ANNUAL REPORT 2018Notes to the Company
financial statements continued

For the Period Ended 31 December 2018

2. Significant accounting policies (continued)
Trade and other payables
Short term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net
of transaction costs, and are measured subsequently at amortised cost using the effective interest method.

Revenue recognition
Revenue represents income from group management charges on a monthly basis.

Taxation
Current tax
The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the Statement of
Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The liability for current tax is calculated using tax rates and laws that have been enacted or
substantively enacted by the period end date.

Deferred tax
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 computation of taxable profit and is accounted for using the Statement of
Financial Position 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 the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the
accounting profit.

Share capital
Share capital represents the nominal value of the shares that have been issued.

Merger relief reserve
Merger relief reserve which has been included in other reserves, includes any premiums received on the issue of share capital in a share for
share exchange.

Retained earnings
Retained current and prior period losses.

TEAM17 PLC ❘ ANNUAL REPORT 2018Notes to the Company
financial statements continued

For the Period Ended 31 December 2018

3. Key sources of estimation, uncertainty and significant accounting judgements
The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities.
Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets
or liabilities affected in future periods.

The Company has issued share options during the year and the value of these options has been estimated using a Monte Carlo Simulation model
to estimate the fair value of the awards. These valuations were calculated by external experts and reviewed by the Company.

Investments in Group undertakings are stated at cost, unless their value has been impaired in which case they are valued at the lower of their
realisable value or value in use.

4. Revenue
All turnover was generated from group management charges.

All turnover was generated in the United Kingdom.

5. Operating Profit
Remuneration paid to our auditors is stated in note 7 of the consolidated financial statements and has not been included within the individual
entity accounts.

6. Staff numbers and costs
The average number of persons employed by the Company during the year was as follows:

Directors

The aggregate payroll costs of these persons were as follows:

Wages and salaries

Social security costs

Other pension costs

Share based compensation

The following tables sets out the Directors' remuneration:

Aggregate remuneration

Company contributions to money purchase scheme

Share based compensation

Period ended
31 December
2018
No.

Period ended
31 December
2018
£'000

1,453

246

319

2,064

Period ended
31 December
2018
£'000

1,453

319

1,818

Retirement benefits are accruing to 2 directors under money purchase schemes. In addition long term share incentive schemes are in place for
2 (2017: Nil) directors.

No directors exercised share options during the year. Directors remuneration was paid through the the previous Group holding Company
Team17 Holdings Limited until the listing on AIM on 23 May 2018 when Team17 Group Plc became the ultimate controlling party of the Group.

TEAM17 PLC ❘ ANNUAL REPORT 2018

Notes to the Company
financial statements continued

For the Period Ended 31 December 2018

6. Staff numbers and costs (continued)
The remuneration of the highest paid Director were:

Aggregate emoluments

Share based compensation

7. Taxation

Current tax:

Current year tax

Deferred tax:

Origination and reversal of temporary differences

Total tax charge

Reconciliation of total tax charge:

Loss before tax

Taxation using the UK Corporation Tax rate of 19%

Effects of:

Losses surrendered for group relief

Total tax charge

Period ended
31 December
2018
£'000

1,030

319

1,349

Period ended
31 December
2018
£'000

–

Period ended
31 December
2018
£'000

728

138

(138)

–

TEAM17 PLC ❘ ANNUAL REPORT 2018
Notes to the Company
financial statements continued

For the Period Ended 31 December 2018

8. Investments
Company:

Cost

Additions

At 31 December 2018

Net book value

At 31 December 2018

£'000

154,853

Name of company

Holding

Proportion of
voting rights
and shares held

Activity

Subsidiary undertakings

Team17 Holdings Limited

Team17 Software Limited

Team17 Digital Limited

Mouldy Toof Studios Limited

Ordinary Shares

100%

Intermediate holding company

Development and publishing of
computer games for the digital market

Dormant

The investment in Team17 Digital Limited is held via Team17 Software Limited.

The registered office of all subsidiaries is Castleview House, Calder Island Way, Wakefield, WF2 7AW.

9. Trade and other receivables
Amounts falling due within one year

Year ended

Amounts owed by group undertakings

10. Trade and other payables
Amounts falling due within one year

Year ended

Trade payables

Taxation and social security

Accruals and deferred income

31 December
2018

£’000

44,452

31 December
2018
£’000

365

461

TEAM17 PLC ❘ ANNUAL REPORT 2018

Notes to the Company
financial statements continued

For the Period Ended 31 December 2018

11. Share capital

Authorised, allotted, called up and fully paid

131,288,276 ordinary shares of 1p each

31 December
2018
£’000

1,313

The ordinary shares have voting, dividend and capital distribution rights. They are not redeemable.

12. Reserves
Admission to AIM
This note should be read in conjunction with the Statement of Changes in Equity. The Group’s admission onto AIM involved a number of
transactions for the Company which are explained below:

Capital re-organisation
Prior to Admission the Company acquired the entire share capital of Team17 Holdings Limited (comprising £0.01 nominal ordinary shares) in
exchange for issuing the same number of its own ordinary shares (of £1 nominal ordinary shares) to the existing shareholders of Team17
Holdings Limited. This transaction was under common control and treated as a capital restructuring and not a business combination. The
Company recorded the investment at fair value and applied group reconstruction relief, leading to the creation of the other reserves (merger
relief reserve) of £153,813,000. The impact of this transaction on the financial statements is disclosed as a ‘Capital reorganisation’ in the
Statement of Changes in Equity.

Subsequently (but prior to admission), the Company sub-divided its £1 ordinary shares into £0.01 nominal shares.

Share premium reserve
Includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from
share premium.

Retained Earnings
Includes all current and previous retained profits and losses.

Merger relief reserve
Merger relief reserve which has been included in other reserves, includes any premiums received on the issue of share capital in a share for
share exchange.

13. Share based compensation
Please see note 21 in the consolidated Team17 Group Plc consolidated financial statements for further information on the share based
compensation charge in the year.

14. Related parties
Ultimate controlling party
At 31 December 2018 there was not considered to be a single ultimate controlling party of Team17 Group Plc.

Transactions with key management personnel
The key management personnel of the Group are deemed to be the board of directors and details of their aggregate remuneration can be found
in note 6.

15. Pensions
The Company operates a defined contribution scheme for its directors and employees. The assets of the scheme are held separately from those
of the Company in an independently administered fund.

The outstanding pension contributions at 31 December 2018 were £2,000.

TEAM17 PLC ❘ ANNUAL REPORT 2018Strong portfolio of
games driving growth

Team17 is a highly successful games publisher, focussed on
maximising a game's commercial success and creating long
term game franchises.

Contents

STRATEGIC REPORT

Highlights of the year
At a glance
Our portfolio
Case study
Chairman and Chief Executive's Review
Chief Financial Officer's Review
Principal Risks and Uncertainties

CORPORATE GOVERNANCE

Board of Directors
Corporate governance
Audit Committee report
Remuneration Committee report
Directors’ report

GROUP FINANCIAL STATEMENTS

COMPANY FINANCIAL STATEMENTS

Independent auditors’ report to the
members of Team17 Group Plc
Company Statement of Financial Position
Company Statement of Changes in Equity
Notes to the Company financial statements

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Registered office
Castleview House, Calder Islay Way, Calder Island, Wakefield WF2 7AW

Independent Auditors
PricewaterhouseCoopers LLP, Chartered Accountants and Statutory Auditors, Central Square, 29 Wellington Street, Leeds LS1 4DL

Nominated Advisor
GCA Altium, 3rd Floor, 1 Southampton Street, London WC2R 0LR

Broker
Joh. Berenberg, Gossler & Co. KG (London Branch), 60 Threadneedle Street, London EC2R 8HP

Financial PR/Investor Relations
Vigo Communications, Sackville House, 40 Piccadilly, London W1J 0DR

Designed & Produced by KW Partners (www.kwpartners.co.uk)

Annual Report and Accounts 2018

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Team17 Digital Limited
Castleview House
Calder Island Way
Wakefield
West Yorkshire
WF2 7AW
United Kingdom

www.team17.com

Registered in England No: 02621976