Annual Report and Accounts 2019 Strategic Report
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ANNUAL REPORT AND ACCOUNTS 2019 STRATEGIC REPORT Team17 is a leading video The Group creates award winning owned HIGHLIGHTS OF THE YEAR first party and third party IP – through games label and creative partnering with indie developers globally partner for independent – in the development and publishing of (“indie”) developers. games across multiple platforms typically for a fixed revenue share. + 43% + 44% The team develops and Revenue £61.8m (2018 £43.2m) Adjusted EBITDA* £22.1m (2018: £15.3m) publishes games, helping Team17 is a highly successful games publisher, focussed on maximising independent developers a game’s commercial success and from all backgrounds creating long term game franchises. + 49% £ 41.9m to bring quality gaming The Group focuses on premium, rather Gross profit £29.5m (2018: £19.8m) Cash and cash equivalents (2018: £23.5m) experiences to all than free to play games, and has launched players globally. over 100 games, including the iconic and well-established Worms franchise, as well as Overcooked and The Escapists. 48% 13.6p Gross profit margin (2018: 46%) Adjusted Earnings per share** (2018: 8.1p) *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. **Adjusted earnings per share is calculated by dividing the adjusted profit after tax by the weighted average number of ordinary shares in issue since admission STRATEGIC to trading on AIM as adjusted for the dilutive effect of share options REPORT 01 Highlights of the year Revenue (£) Gross profit (£) Adjusted EBITDA (£) Profit before tax (£) 02 30 years of Team17 04 Chairman and Chief 80 30 29.5m 30 20 19.2m Executive’s Review 06 Team17 portfolio 61.8m 08 The market opportunity 60 22.1m 15 19.8m 10 Our people 20 20 12 Chief Financial Officer’s Review 43.2m 16.9m 15.3m 14 Principal Risks and Uncertainties 40 10 12.9m 8.7m 29.6m 10 10 CORPORATE 7.9m 5.4m 20 6.1m 5 13.5m GOVERNANCE 2.8m 16 Board of directors 18 Corporate governance 0 0 0 0 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 YEARS AND 20 Audit committee report 21 Remuneration committee report 30 STRONGER 22 Directors’ report THAN EVER GROUP FINANCIAL ■ Portfolio continued ■ Headcount ■ Solid 2020 pipeline of the Year) and STATEMENTS to grow strongly in increased 20% to 200 of game launches numerous nominations 23 Independent auditor’s report to the members 2019 with 7 new game at the end of the year planned with 10 titles across the portfolio of Team17 Group Plc launches and growing (2018: 167) reflecting already announced during 2019. 27 Consolidated Statement of Comprehensive Income back catalogue with further investment including Moving Out, 28 Consolidated Statement over 300 Digital across all areas of Main Assembly and a of Financial Position 29 Consolidated Statement Revenue Lines. the business. new Worms title. of Changes in Equity 30 Consolidated Statement of Cash Flows ■ Development studio ■ Board strengthened ■ Continued industry 31 Notes to the consolidated moved to new with the appointment recognition, with wins financial statements Wakefield premises in of Jennifer Lawrence for Yoku’s Island COMPANY FINANCIAL November with and Martin Hellawell Express (Bafta: Best STATEMENTS significantly improved as Non-Executive Debut Game) and 53 Independent auditors’ working environment Directors. Overcooked! 2 report to the members of Team17 Group Plc and medium-term (Develop: Star Game 57 Company Statement of expansion capacity. Financial Position 58 Company Statement of Changes in Equity 59 Notes to the Company financial statements TEAM17 GROUP PLC ANNUAL REPORT 2019 01 STRATEGIC REPORT 30 YEARS OF TEAM17 1990 – 2020 1990 Debbie co-founds Team17 START 1990 1995 1991 Debbie co-founds Team17 Worms released Team17 launches first game 1995 Worms released 1990 2006 2011 2006 Lemmings launched Management buy out led by Debbie Bestwick Lemmings launched 2011 Management buy out led by Debbie Bestwick 2014 Games label launched 2018 The Escapists launched 2014 Stock market listing Games label launched Overcooked 2 launch 2016 Overcooked launched 2017 The Escapists 2 launched 2020 2014 Yippee acquisition The Escapists launched 2018 Stock market listing Overcooked 2 launched My Time at Portia launched Market 2020 2020 future Yippee acquisition 10 new titles announced for release 02 TEAM17 GROUP PLC ANNUAL REPORT 2019 TEAM17 GROUP PLC ANNUAL REPORT 2019 03 STRATEGIC REPORT CHAIRMAN AND CHIEF EXECUTIVE’S REVIEW 10 titles have been announced so far, In November 2019, we moved our COVID-19 is already having a major impact Debbie Bestwick MBE including Moving Out launching 28 April Development Studio to new premises in on a global scale to the way people live Chief Executive Officer 2020, a new Worms title, Hammerting, Wakefield, which has significantly improved their lives and how businesses operate. At Neon Abyss, Going Under, Rogue Heroes: the working environment and will allow us the time of this report, Team17 have already Chris Bell Ruins of Talos, Main Assembly, The to expand in the medium term. This tested and initiated “working from Non-Executive Chairman Survivalists, Ageless and Golf With continuous investment in our people and home capability” across all three of our Your Friends on console. facilities is fundamental to the culture we operational sites, to facilitate that secure have created and will remain at the remote working can continue to support Revenues in 2020 are expected to be more forefront as we continue to grow. the development and promotion of our heavily weighted to H2 compared with 2019 existing back catalogue and planned due to the impact of new releases. Release new releases. dates will be announced at the time that is We look forward to best for the games and the business. “ Our HR team and management teams are another year of continued working together to support our Teamsters The pedigree of Team17 has continued to growth with a solid pipeline to ensure that they are ready and prepared be recognised within the video games for the challenges of working at home and sector over the course of 2019, with a of new game launches and in isolation and we continue to monitor number of nominations and awards for consistent performance the impact of the imposed containment games within its portfolio, including, Yoku’s measures. Many of our 3rd party Island Express being awarded the BAFTA from the back catalogue developers are small operations working in for Best Debut Game in April 2019, and ” isolation already and any that were part of Overcooked! 2 being awarded Game of bigger operations have now all moved to Post year end, we were delighted to the Year at the Develop: Star Awards in working remotely. 91% of our business is We are delighted to announce the acquisition of Yippee July 2019. generated through digital sales which “ Entertainment Limited (“Yippee”), for a report another record means that they are not impacted by any total consideration of circa £1.4m. Yippee is 30 years of Team17 physical supply chain issues related to performance in 2019, a UK based, multi-award-winning software This year, we’ll celebrate 30 years in the COVID-19. We will continue to monitor developer, and its integration into the underpinned by positive games industry; an achievement that can the situation on a daily basis as the Group will enable Team17 to establish a only come in the fast paced and constantly containment measures impact the way we second UK studio, therefore accelerating momentum across our evolving games industry by investing in a operate and will keep our shareholders our recruitment plans in the North West. portfolio of games process of continual innovation and updated with any significant changes. improvement and reacting in an agile Manchester offers us a ready-made studio ” manner to technological change. Since infrastructure within MediaCityUK that can We remain focused on utilising our existing, formation in 1990, we have demonstrated tap into a surrounding population of very efficient business model to identify, an impressive track-record of developing experienced development talent, with develop and publish new titles and have Introduction the remainder comprising of newly • Genesis Alpha One – launched on the 400,000 students within an hour. We are delighted to report another record launched games. Epic Game store in January and on and successfully bringing video games to utilised our cash position by further market across a wide range of platforms. investing across our business, as evidenced performance in 2019, underpinned by PlayStation 4 and Xbox One Market dynamics Central to this is ensuring our games in our new Wakefield facility, the acquisition positive momentum across our portfolio of Our vision for the business remains clear, • – the 100-person WW2 The video games market continues to see Hell Let Loose remain relevant through utilising of Yippee and investment in people. We games. The strength of our portfolio model guided by the following key growth simulation shooter, launched into early significant growth and opportunities, with downloadable content and sequels, further continue to evaluate a number of further is central to our business as we continue to priorities: access on the Valve’s Steam store in a recent report from gaming analytics firm, extending the lifecycle of key titles across growth initiatives. build on our strong track record, delivering June 2019, achieving number 1 globally Newzoo, estimating the market will grow • Continue to leverage our ‘greenlight’ many transition periods in hardware and another record financial performance in within 3 hours of launch to $196bn by 2022 with a CAGR of 9.0%5.