Company Note

Finals and reinitiation 21 October2019

Corporate Gfinity plc (GFIN.L)

Current price 3.625p Strong FY19; major global growth opportunity Sector TMT

Code GFIN.L Finals from Gfinity, the leading international business, demonstrate further significant commercial progress with revenue +82% to £7.9m and adj. operating loss AIM AIM reducing 30% to £8.6m – ahead of expectations. During FY19, under new management, Gfinity has refocused the business around a Strategic Client Management model where Share Performance it acts as the trusted independent partner to games publishers, sports rights holders, brands and media companies. Demand for Gfinity’s advisory services has increased as organisations look to capitalise on the global esports opportunity and recognise Gfinity’s expertise and experience. The shift in model also provides the opportunity for Gfinity to share in the commercial rights of the programmes that it helps to create. The new model should increase gross margin further and combined with revenue growth and operating cost control, means Gfinity is on track to achieve its target of adj. EBITDA break even in FY21. We reintroduce forecasts with a 11.5p/share fair value.

1m 3m 12m – FY19 performance – Revenue +82% to £7.9m with growth across all revenue lines (consultancy, partner service delivery, owned content/shared rights and community). — GFIN.L -1.6% -23.3% -57.3% The change in the business model resulted in a lower investment in the Elite Series and

Source: Thomson Reuters, Allenby Capital there was a £4.5m positive swing in gross profit to £1.0m (13.2% GM) and we expect gross margin will continue to expand. Operating costs increased 10% to £9.6m and the Share Data combination of revenue growth, positive gross margin and operating cost control resulted in adj. EBITDA loss reducing 30% to £8.6m. Year end cash of £0.6m (FY18: Market Cap (£m) 18.2 £3.7m) has since been bolstered by July’s £5.25m placing and a working capital unwind. Shares in issue (m) 479.6

52 weeks High Low – Strategic relationships – During FY19, Gfinity has deepened its relationships with existing clients (e.g. Blizzard for ; EA Sports - FIFA 19 Global Series; 9.1p 3.5p – Forza Racing Championship and Halo Championship; and Formula 1 -

Financial year end 30 June Formula 1 Esports Series) and added new (e.g. The for the inaugural ePremier League, TRUXTUN Capital for November’s Qatar Esports Wega Global Games, Source: Company Data, Allenby Capital HP Omen - The Esports Report: Season 2; - The Twitch Prime Crown Cup; and IndyCar for strategic consultancy). The profile of these partners is testament to Gfinity’s Key Shareholders experience and expertise in delivering high quality esports programmes and its standing Charles Street International 23.6% in the global esports industry.

Nigel Wray 7.4% – Media distribution channel – Gfinity has built a large community of esports enthusiasts Alden AS 3.7% (20.6m) and it continues to invest in its offering and developing customer insights. Gamers are regularly engaging with gfinityesports.com and RealSport101 to access Neville Upton 3.1% esports content and this media distribution channel has created additional revenue Ion Israel Fund 2.6%% streams (e.g. ad serving and site take overs) and there is scope for further monetisation and it supports the Strategic Client Management model. Source: Company Data, Allenby Capital

Year End: 30 June (£'000) 2017A 2018A 2019A 2020E 2021E REVENUE 2,372 4,317 7,870 14,312 26,039 ADJ. EBITDA (4,988) (12,199) (8,584) (5,339) 508 David Johnson ADJ. PBT (5,233) (13,407) (11,006) (6,539) (292)

0203 394 2977 ADJ. EPS (p) -3.33 -5.93 -3.57 -1.70 -0.28 NET CASH 4,519 3,679 648 416 1,332 [email protected] EV/REVENUE (x) 5.4 3.2 2.1 1.2 0.6 www.allenbycapital.com EV/EBITDA (x) na na na na 31.6

Allenby Capital acts as Nomad & Broker to Gfinity plc (GFIN.L).

Please refer to the last page of this communication for all required disclosures and risk Equity Research warnings.

Allenby Capital

Investment summary

Gfinity is a leading international esports solutions provider, with an expert understanding of the rapidly growing but fragmented and complex esports industry. Gfinity uses its expertise to provide advisory services and to design, develop and deliver end to end

esports programmes, including bespoke and ancillary content, tournaments and events, 21 October 201921 October

via its online platform and dedicated studio in and third-party venues. | )

Global esports industry The global esports industry is large and continues to expand rapidly as it taps into the

GFIN.L ( engaged community of 900m people who are fans of esports and/or play/watch competitive gaming. The global esports market is forecast to exceed $1bn in 2019 and be worth $1.8bn in 2022. Prize money exceeded $150m for the first time in 2019 and there

were more than 700 major esports events. plc Gfinity

Esports enthusiasts are typically younger and represent a demographic that sports rights holders and brands are struggling to reach. This demographic engages less with traditional media that represent the main sources of income for sports rights holders and the main advertising platforms for brands. Gfinity connects the esports community with its partners: games publishers, sports rights holders, brands and media companies.

Strategic Client Management model During FY19, under its new management, Gfinity has refocused on a Strategic Client Management model and transitioned from the historic model of ‘cost-plus’ service provision and operating its own esports programmes to programmes where risks and rewards are shared with its clients. Gfinity acts as the trusted independent partner to publishers, rights holders, brands and media companies looking to access the highly engaged audience of esports enthusiasts and there has been a considerable increase in demand for Gfinity’s advisory services and its proprietary technology stack. As part of this refocus, management is reviewing the Elite Series with a plan to relaunch with a revised model.

Exhibit 1: Evolution of Gfinity’s commercial model

Source: Company

Gfinity’s key revenue streams are:

– Consultancy fees: Development of esports programmes and strategies

2

Allenby Capital

– Service delivery fees: Execution of end-to-end esports programmes (online tournament broadcast)

– Content partnerships/rights: Monetise commercial rights of owned/co-owned IP

– Sponsorship & advertising: Commercial brands looking to reach the 201921 October | |

competitive gaming audience )

GFIN.L ( – Community: Access to a large and growing engaged community via ad-serving and site takeovers

Commercial rights The share in the commercial rights and monetisation of the programmes that it helps to Gfinity plc Gfinity create will provide an ongoing high margin revenue stream. Meanwhile the expansion of the Gfinity community is creating additional complementary revenue streams and supports the Strategic Client Management initiative.

FY19 performance Adj. EBITDA breakeven in FY21. This evolution of the commercial model has delivered strong revenue growth (+82% to £7.9m), a £4.5m positive swing in gross profit to £1.0m and a 30% reduction in adj. operating loss to £8.6m. Operating costs (excluding non-cash items) increased 10% to £9.6m but remained stable throughout the year. The change in revenue mix should help to drive gross margin further and combined with revenue growth and operating cost control means Gfinity remains on track to achieve its target of adj. EBITDA breakeven in FY21.

Year-end cash was in line with expectation at £0.6m (FY18: £3.7m) and was supplemented by July’s £5.25m placing. As a result, the company should be funded through to profitability. This assumes no material investment is made in securing esports media rights.

Second year of >80% revenue growth The growth in FY19 revenue (consultancy, partner service delivery, owned content/shared rights and community) has been driven by a growth both in business with Gfinity’s existing games publisher, sports rights holder and brand clients and new strategic relationships. It is the second year of >80% revenue growth.

Existing: – : appointed to host Call of Duty World League: London at the Copper Box Arena. Europe’s largest ever CoD event.

– EA Sports: hosted five events as part of the EA SPORTS FIFA 19 Global Series.

– Formula 1: completed season two of the Formula 1 Esports Series and re- appointed for season three. Production partner for ‘Making an Esports Champion’ TV series.

– Microsoft: tournament operator for the Forza Racing Championship global esports programme and the European leg of the Halo Championship Series.

New: – Premier League: tournament operator of the inaugural ePremier League. Incremental services provided to a number of clubs.

– TRUXTUN Capital: primary consulting and programme management partner for the Qatar Esports Wega Global Games in conjunction with the State of Qatar.

3

Allenby Capital

– HP Omen: production partner for The Esports Report, Season 2.

– Amazon: designed, developed and delivered The Twitch Prime Crown Cup.

– IndyCar: strategic consultancy in development of esports strategy.

Gfinity selected The quality of the agreements demonstrates that higher profile organisations (endemic 201921 October | | and non-endemic brands and sports rights holders) are being drawn to the growth )

opportunity afforded by the global esports market but also Gfinity’s proven experience

GFIN.L (

and expertise in designing, developing and delivering esports programmes.

Gfinity’s offering Trusted partner Exhibit 2: Gfinity's offering plc Gfinity

Source: Company; Allenby Capital

Gfinity brings different value add to each of its client bases:

– Publishers – esports platform and expertise that raises profile, drives engagement and profitability through higher in-game purchase volumes

– Sports rights holders – solutions to futureproof franchise, connecting with valuable and hard to reach younger demographic and additional revenue streams

– Media – access to proven esports and entertainment formats engaging a younger demographic

– Consumers – ability to play, compete, be part of communities and be entertained by engaging content

– Brands – solutions that deliver memorable experiences, connects with hard to reach younger consumers

Early access; gameplay innovation Games publishers have provided Gfinity with early access to new releases and Gfinity has introduced gaming modes to esports tournaments. For example, Gfinity’s Elite Series was the first tournament to use FIFA 19 from EA SPORTS and Gfinity was the first to introduce 2v2 contests in competitive FIFA. This demonstrates Gfinity’s standing in the video gaming industry. For games publishers, Gfinity is able to help extend the reach and lifetime of titles, raise the profile, create new revenue streams and help to drive in-game purchases.

With sports rights holders, Gfinity is able to assist in creating a new digital business that sits alongside the rights holder’s traditional physical business. This represents not only a new revenue stream but also enables sports rights holders to access the next generation of audiences and in some instances draw them towards their core offering. There is an ongoing shift away among younger viewers from traditional linear television, the source of the bulk of sponsorship and media rights revenue, that rights holders need to address.

4

Allenby Capital

Gfinity has a proven ability to design, develop and deliver successful end-to-end esports

programmes using its proprietary technology stack. Sports rights holders have chosen to work with Gfinity in conjunction with their traditional media partners. For example, with the F1 Esports Series, has broadcast Gfinity’s esports content on its F1 channel alongside its own coverage of physical races. There is also a recognition that Gfinity understands the specific challenges associated with esports programmes and can deliver

broadcast quality content. 201921 October

| | )

Consumers

GFIN.L (

Substantial community Gfinity has created a substantial community of esports enthusiasts with more than 20m gamers via its online channels, RealSport101 (casual gamers) and Gfinityesports.com (enthusiasts) and their associated social media channels. These compete with popular

gaming news sites and broader sports titles such as SportBible and GiveMeSport. The Gfinity plc Gfinity community provides members with access to competitions, together with written, audio and video esports content.

Exhibit 3: Gfinity community

Source: Company

RealSport101.com has seen an organic 2.5x increase in page views since April, reaching 300,000 hits every day, and is on track to achieve 9m per month by the end of November. 4.5m people are regularly engaging via its Facebook page. Gfinityesports.com attracted two million visitors in September up from 14,000 in April.

In October, exclusive content, such as podcasts and video shows, has been launched and Gfinity will also trial content in multiple languages. For example, RealSport101 has partnered with YouTube footballers Hashtag United for FIFA-based content creation in a ten-week campaign. Gfinity has invested in developing proprietary gamer segmentation profiles in order to provide better targeted programmes for its clients.

Additional revenue opportunities; These enthusiasts represent a commercially attractive audience for Gfinity’s commercial complementary to Strategic Client partners (games publishers, rights holders, and brands). The growth of the community has Management model created additional revenue opportunities through ad serving and publisher and brand site takeovers, where a site or sections of it are sponsored by individual companies (e.g. the takeover deal of the RealSport101 web site and social channels by Codemasters around the launch of its new GRID game). The community is also complementary to Gfinity’s Strategic Client Management model as it can leverage the community for its esports programmes.

Gfinity expects community-related streams will account for c. 10% of group revenue in the medium term. The three-year ambition is to have 100m gamers per month with 25 publishers and brand partners.

Content creation

5

Allenby Capital

Shoulder content; gaming-based Gfinity has identified ancillary or ‘shoulder content’ (news, player profiles, playing tips and entertainment content other demographic-relevant content) is important for driving engagement in esports programmes as well as representing a separate revenue stream. It is also creating gaming- based entertainment content. This is sold to content buyers and distribution platforms such as Facebook, Twitch, Microsoft and traditional TV. Gfinity has traditionally charged rights holders on a cost-plus basis but is also looking towards a revenue share through

rights ownership/co-ownership. 201921 October

| | )

HP Omen

GFIN.L (

Gfinity was selected by HP’s gaming brand ‘HP Omen’ as the production partner for the esports show ‘The Esports Report – Season 2’ that comprises six episodes, covering the latest news from across the world of exports and gaming, broadcast live from the Gfinity

Arena. Gfinity plc Gfinity

The contract runs until the end of November and Gfinity is responsible for content production, sourcing relent, securing games and gaming footage, scripting the shows and co-ordinating the filming. Each episode will be distributed directly via nominated HP Open channels including Twitch, and Facebook. The episodes will also be distributed through Game Sport, a premium esports digital magazine.

The Twitch Prime Crown Cup Amazon Gfinity provided services to Amazon in connection with designing, developing and delivering The Twitch Prime Crown Cup, a global celebrity gaming exhibition on 13 July, created to celebrate Amazon Prime Day.

Gfinity was responsible for the end-to-end delivery of the event, from the production and broadcasting, to the event management, to the graphic design and the provision of the Gfinity Arena. The tournament featured sixteen celebrities (sport and entertainment) competing in teams of four on FIFA.

Forecast assumptions >80% revenue growth for the past two Gfinity has achieved >80% revenue growth for the past two years and we expect this rate years of growth to continue for the next two years given the scale of the global opportunity. Within this, management expects that strategic consultancy programmes, such as those for IndyCar and TRUXTUN Capital, and community related income will account for c. 15% and 10% of group revenue respectively over the medium term.

Gross margin expansion; operating cost Gross margin should increase significantly over the forecast period with contribution from control consultancy, advertising and sponsorship and improved service delivery. The medium target for gross margins is 35%-40%. Annual operating expenditure is expected to reach and remain relatively stable at £10m to £12m p.a. in the medium term. As a result, management has reiterated its target of moving into adj. EBITDA profit in FY21 and is targeting a long-term adj. EBITDA margin of 15% to 25%.

Fair value of 11.5p/share Applying and EV/Revenue of 2.0x FY21 suggests a fair value of 11.5p/share.

6

Allenby Capital

Traditional sports as esports

Competitions created to exist alongside traditional sports leagues and events represent a growing segment within esports and Gfinity has a proven capability.

Sports rights holders including FIFA (FIFA eWorld Cup), NBA (NBA 2K League), ONE

Championship (ONE Esports) and Formula 1 (F1 Esports Series) have started to create

21 October 201921 October | |

competitions and leagues around their sports. The structures vary e.g. qualifying FIFA ) events attached to regional leagues (La Liga, MLS, English Premier League) that feed into

the Global Series for the FIFA World Cup or existing NBA teams acquiring franchise slots GFIN.L ( to participate in the NBA 2K League.

More familiar environment for non- Traditional sports as esports also offers brands an alternative to more established esports endemic brands genres. They represent a more familiar environment for non-endemic brands as many of plc Gfinity the advertising/sponsorship opportunities mirror the physical environment.

Motorsports Gfinity has designed, developed and delivered three seasons of the Formula 1 Esports New Balance Pro series. This comprises Qualifying, a Pro Draft and the Pro Series.

Exhibit 4: Formula 1 Esports New Balance Pro series case study 2017 – Season 1 2018 – Season 2 Number of entrants 60k Number of entrants 66k Number of broadcasters 20 Viewers <34 years old 70% Number of countries 123 Professional teams 9 Online video views 6m Online video views 20m Two live events: semi-finals at Gfinity Arena; finals One pro draft event at Silverstone and three live in Abu Dhabi (November 2017) events ending December 2018

Source: Company

Formula 1 Esports New Balance Pro Gfinity is responsible for delivering a dedicated account management team, a full league Series operations solution that includes writing all tournament rules governing the drivers’ participation in the tournament; player and team logistics; marketing and media support; strategy and delivery of all broadcast components of the live events; and the use of the Gfinity arena for live events. The series is operated in partnership with Codemasters, the developer and publisher of the official Formula 1 franchise.

Younger audience base The series has helped connect a younger audience base to the Formula 1 brand, important as the traditional grand prix series has a TV viewership with an average age of c. 50 years old. The second season had 20m online video views with 70% of viewers under the age of 34.

Expanded in 2019 The 2019 season, renewed in April, has been expanded in each segment. A longer qualifying window has enabled more gamers to compete for a place in the Pro Draft. The entrants compete in F1 2018, the official game of the FIA Formula One World Championship on the PS4 and family of devices including the Xbox One X and PC. There are also four live events, compared with three in the 2018 season.

Prize pool more than doubled The Pro Draft took place in July where the official F1 teams selected drivers with a series of race-offs between the drivers that had qualified to identify the pool of fastest drivers. Season three was important in that it included all ten official F1 teams. These will compete in twelve races over four live events culminating in the grand final that will take place on December 4 broadcast live from the Gfinity Arena. The total prize pool has also been increased to $500k, more than double Season 2.

In September, Gfinity hosted the first live show of the 2019 F1 New Balance Esports Pro Series at the Gfinity arena. The second event in October, based on F1 2019, involved races on the Circuit Gilles Villeneuve (Canada), the Red Bull Ring (Austria) and Silverstone. The

7

Allenby Capital

live show was streamed online via Facebook, YouTube, Twitch and Huya as well as

broadcast by the likes of Sky (UK), Ziggo (Netherlands), MTV (Finland) and Fox (Australia).

Expanded content Gfinity has demonstrated the ability to expand the content that it provides to its customers. In October, it announced that it had been selected by F1 Esports as the production partner for its esports online TV series, ‘Making an Esports Champion’. This

new and exclusive content focused on the back stories of the drivers competing in the F1 201921 October | |

Esports New Balance Pro Series. )

GFIN.L (

Under the terms of the contract, Gfinity will create four, ten-minute episodes that will be released ahead of each F1 Esports Pro Series live event and will be available via FI

Esports.com, Twitch and YouTube. Gfinity plc Gfinity Football Multi-year relationship with EA SPORT Gfinity has had a multi-year relationship with EA SPORTS around its FIFA football game. For example, it has hosted five events of the EA SPORTS FIFA 19 Global Series at the Gfinity Arena. Each of the events formed part of the qualifying process for the FIFA eWorld Cup 2019 that took place at The O2 in London in August. The FUT Champions Cup featured 64 of the world’s best FIFA 19 players who had qualified through in-game online competitions. The Licensed Qualifiers had the same format but featured 32 players across the PlayStation 4 and Xbox One.

Gfinity has used its experience of delivering events to design, develop and deliver solutions for a growing number of football rights holders as clubs and leagues look to attract the next generation fan.

In October, it was reappointed as the Tournament Operator for the second season of the ePremier League (ePL) tournament that starts in December and is based on EA SPORTS FIFA 20. Those playing will earn the bonus of season-long Global Series Points used to qualify for the FIFA Global Series Playoffs.

Final had c. 14m views The inaugural ePL tournament culminated in March in the final between Liverpool and Manchester United that had c. 14m views across Sky Sports, the Premier League’s Facebook Watch channel and the EA Sports FIFA Twitch channel. It featured UK-based esports players from each of the twenty Premier League clubs with online qualifications, followed by individual club tournaments. It has also provided incremental services to a number of clubs including Liverpool, Tottenham Hotspur and Chelsea.

Gfinity has been appointed to develop and execute online qualification for the tournament via its proprietary tournament management platform. It will also develop and execute online club play-offs in the weeks leading up to the finals, scheduled for March 2020 at the Gfinity Arena.

Qatar Esports Wega Global Games 2022 FIFA World Cup finals In May, Gfinity was appointed by TRUXTUN Capital to be the primary consulting and programme management partner for the inaugural Qatar Esports Wega Global Games that will include a number of popular games and will run alongside the 2022 FIFA World Cup finals in Qatar.

The tournament will be presented by Wega in conjunction with Aspire Zone Foundation. Wega is the official Acoustic Contactless Secured Payment Card of Manchester City FC and FC and was developed by TRUXTUN Capital, a Swiss financial technology provider.

Online qualifying rounds are scheduled to run for the next four years, with the first edition of the eSports World Cup scheduled for the end of this year. The tournament will lead to

8

Allenby Capital

a live final competition in Doha in 2022. In addition, Wega and Aspire Zone will organise a

40-day eSports Festival at Aspire Zone for the next four years

Gfinity is designing the programme, developing marketing materials for pre-sales, engaging with publishers across a wide range of genres and local stakeholders. The initial

contact is substantial and there is scope for a number of major follow up projects.

21 October 201921 October | |

)

GFIN.L

(

Gfinity plc Gfinity

9

Allenby Capital

Elite and Challenger Series

Key business enabler Gfinity’s Elite and Challenger Series has been a key business enabler and has significantly raised the company’s profile in the esports industry. Gfinity has been able to demonstrate it can design and operate online and offline tournaments that involve amateur and professional players, create broadcast quality content and attract broadcasters and other

distribution channels (e.g. Facebook for streaming rights), secure advertisers (e.g.

21 October 201921 October | |

Domino’s and Lynx) and introduce a number of innovations. The Elite Series has also )

helped to build Gfinity’s substantial gaming community.

GFIN.L ( Features adopted for other esports Many of these features have been adopted for Gfinity’s other global esports programmes programmes such as F1 and the Premier League. In particular, the model that comprises an online tournament open to all players (Challenger Series) where the top ranked players progress to a draft to be selected by professional teams to compete in online and arena events plc Gfinity (Elite Series) has been replicated in both the F1 eSports Championship and esports Premier League (ePL).

Audience numbers, the number of entrants to the Challenger Series and the profile of the professional teams participating in the Elite Series has consistently improved over the four seasons to date. However, the Elite Series has consumed considerable amounts of resource, both cash and time and commercialisation of the competition has been slower than originally anticipated.

Currently suspended; partner discussions As part of the refocus on Strategic Client Management, leadership has decided to suspend ongoing the Elite Series with a view to launching a revised competition in the future. Discussions are ongoing with potential partners.

Elite Series Australia At the same time, Gfinity’s Australian JV, Gfinity Esports Australia, is scheduled to close at the end of November. This decision was taken in conjunction with local partner and major shareholder, HT&E (ASX: HT1).

Gfinity Esports Australia was launched in 2017 and introduced the Gfinity Elite Series into Australia. The JV achieved significant partnerships, solid revenue performance and market leading audience figures. That said, the JV failed to reach the required level of profitability and further significant additional capital investment was required to make it commercially viable.

All costs relating to Gfinity’s investment in the JV have been expensed as incurred. As such, there is no material financial write off required.

10

Allenby Capital

Global esports market

Esports has a large and growing global audience tapping into the 2.2bn global video gamers. According to the most recent study by industry analysts Newzoo, there is an Exhibit 5: Global esports market ($m) estimated audience of 454m (253m occasional viewers and 201m esports enthusiasts) in 2,000 1,790 2019 (+15%) and this is expected to grow to 645m in 2022, a five-year CAGR of 14.0%. This 1,566 would put esports on a par with traditional sports such as baseball, American football, 1,340 201921 October

1,500 |

rugby and golf. ) 1,096 1,000 865

The global esports market is expected to be worth $1.1bn in 2019 (+27%) and within this GFIN.L ( brand investment revenue (media rights, advertising and sponsorship) will account for the 500 largest proportion (82%). Although this represents significant growth, esports remains much less monetised than traditional sports – the global average revenue per esports - enthusiast is expected to be $5.45 (+9%) – even though esports sponsorship generates a plc Gfinity 2018 2019 2020 2021 2022 2-3x ROI compared with traditional sports sponsorship (Source: Nielsen). Source: Newzoo This differential appears unsustainable and a number of KPIs suggest that this will narrow over time: the increase in total prize money and the number of major events, the entrance of endemic and non-endemic brands and the growing awareness of esports.

Exhibit 6: 2019 revenue by type For example, July’s Fortnite World Cup gained considerable mainstream media coverage after Kyle Giersdorf (16) won $3m in the solo event and Jaden Ashman (15) won almost £1m for coming second in the duos event. The total prize pool of $30m was the largest in esports history to date and 40m players attempted to qualify over ten weeks of online competition. The finals were held at the Arthur Ashe stadium in New York, home to the US Open Tennis where the top prize was $3.85m.

The past 18 months has seen the arrival of a number of non-endemic brands (e.g. State Farm, Mastercard, Unilever, Mars, Audi, DHL, Nike, Puma, Vodafone and Domino’s). For example, season one of the Overwatch League included two endemic brands (Intel and OMEN by HP) and Toyota, Sour Patch Kids and T-Mobile as partners and Dolby, Spotify Sponsorship and Cheez-It were brought on as incremental sponsors. Season two added Coke and State Advertising Farm. Nielsen estimates more than 600 esports sponsorship agreements have been signed Media Rights Games Publisher Fees since the start of 2016. Merchandise & ticketing Most brands are still wary of esports, given concerns about computer game addiction, Source: Newzoo bullying and market fragmentation. Hence they look to the likes of Gfinity to provide the necessary experience and expertise to develop a successful esports programme in order to reach a large and growing audience.

Esports demographic Harder to reach audience The esports demographic is younger than for traditional sports and represents a much harder to reach audience that engages less with traditional media. For example, a study of esports viewers on the Twitch streaming platform found that 61% of respondents did not watch TV on a weekly basis, 70% spent more time engaging with esports than traditional sports and 90% can name at least one non-gaming related sponsor in esports (Source: Nielsen).

In general, esports fans are more active in physical sports and have a higher than average disposable income. The esports community is not homogenous, however, similar to the traditional sports community. Esports fans will favour game genres and particular titles – typically two or three genres and five different games. Most consumers of esports are players but there is an increasing number of non-playing viewers.

Some games attract a very different mix of male and female fans – CS:GO is 90:10 male- oriented whereas FIFA is 68:32. And different esports attract viewers with different gaming profiles – Overwatch viewers on average spend more than twelve hours a week gaming, whereas FIFA fans spend less than half that time gaming. 11

Allenby Capital

FY19 performance

FY19 performance was slightly ahead of market expectations with revenue +82% to Exhibit 7: Revenue & adj. EBITDA (£000s) £7.9m, a £4.5m positive swing in gross profit to £1.0m and a 30% reduction in EBITDA loss 10,000 to £8.6m. Year end cash was in line with expectation at £0.6m (FY18: £3.7m). 5,000 Revenue growth was driven primarily by growth in the size and number of engagements

- 201921 October | |

with both existing (e.g. Microsoft, EA Sports and Formula 1) and new (e.g. Premier League, ) (5,000) IndyCar and TRUXTUN Capital) clients. Strategic consultancy programmes, such as those

(10,000) for IndyCar and TRUXTUN Capital, represent a core focus for growth with a medium-term GFIN.L ( of c. 15% of group revenue. As previously noted, management expects that (15,000) 2017A 2018A 2019A community related income will account for 10% in the medium term. Revenue Adj. EBITDA

plc Gfinity

Source: Company; Allenby Capital Exhibit 8: Revenue progression (£000s) 30,000

25,000

20,000

15,000

10,000

5,000

- 2017A 2018A 2019A 2020E 2021E Partner Service Delivery Owned content/shared rights Consulting fees Community income Other

Source: Allenby Capital

Gross margin benefited from a much lower gross loss on the Elite Series and the inclusion

Exhibit 9: Gross margin progress of the first consultancy programmes. Gross margin should increase significantly over the next two years with further growth in consultancy revenue, advertising and sponsorship 60.0% revenue related to Gfinity’s community offering and improved service delivery margins. 40.0% The medium target for gross margins is 35%-40%. 20.0% 0.0% Operating costs (excluding non-cash items around depreciation (£0.4m), amortisation -20.0% (£0.6m) and share option charges (£1.1m)) increased 10% to £9.6m. This reflects the full -40.0% year effect of investments made in during FY18 – operating expenses remained flat on a -60.0% monthly basis during FY19. Internal resource was also redeployed away from the Elite -80.0% Series during the year and the average number of employees was essentially flat (62 vs -100.0% 61). 2017A 2018A 2019A 2020E 2021E

Annual operating expenditure is expected to reach and remain relatively stable at £10m Source: Allenby Capital to £12m p.a. in the medium term as the bulk of the investment required in the esports solution platform, commercial delivery capability and content production is completed. Increasing value of esports content through a growing audience along with stable operating expenditure is expected to drive material operational gearing. As a result, management has reiterated its target of moving into adj. EBITDA profit in FY21 and is targeting a long-term adj. EBITDA margin of 15% to 25%.

The share of losses from associates of £1.0m (FY18: £0.3m) comprised a £0.1m loss from its 33% investment in Esports Awards Ltd, a leading industry awards programme, and £0.7m from Gfinity Australia. Although this business demonstrated some good early traction, the net cost of delivering the programme remained high given the local market. In August, Gfinity and HT&E plc, the majority shareholder, announced that the business would be wound down.

12

Allenby Capital

Year-end net cash of £0.6m (FY18: £3.7m) was impacted by invoice timing on a number of

projects. As a result, trade and other receivables stood at £2.3m (FY18: £2.2m). £1.8m of this was collected in July.

Cash balances were supplemented by July’s £5.25m (gross) oversubscribed placing at

4.5p/share. The net proceeds will be used to:

21 October 201921 October | | – strengthen its commercial capability through the addition of client )

management and business development expertise

GFIN.L

(

– provide funding for potential strategic opportunities, particularly I rights

ownership Gfinity plc Gfinity – invest in technology, in particularly content development and community building

Funded through to profitability As a result, the company should be funded through to profitability. This assumes no material investment is made in securing esports media rights.

13

Allenby Capital

Exhibit 10: Profit & loss PROFIT & LOSS GBP '000 GBP '000 GBP '000 GBP '000 GBP '000 Year End June FY 2017A FY 2018A FY 2019A FY 2020E FY 2021E

Revenue 2,372 4,317 7,870 14,312 26,039 201921 October | |

YoY growth 64.0% 82.0% 82.3% 81.8% 81.9% )

Cost of sales (2,776) (7,733) (6,833) (10,028) (15,577)

GFIN.L ( Gross profit (403) (3,415) 1,038 4,284 10,463 Gross margin -17.0% -79.1% 13.2% 29.9% 40.2%

Administrative expenses (4,933) (10,033) (12,107) (11,622) (11,855) Gfinity plc Gfinity YoY growth 64.8% 103.4% 20.7% -4.0% 2.0%

Reported EBIT (5,336) (13,449) (11,069) (7,339) (1,392) EBIT margin NEG NEG NEG NEG NEG

Depreciation, amortisation & share based payments (348) (1,250) (2,485) (2,000) (1,900) Depreciation of PPE (199) (442) (399) (400) (300) Amortisation of intangibles (50) (419) (1,036) (500) (500) Share based payments (99) (389) (1,050) (1,100) (1,100)

Adj. EBITDA (4,988) (12,199) (8,584) (5,339) 508 Adj. EBITDA margin NEG NEG NEG NEG 2.0%

Net interest 5 0 5 - - Share of net loss of associates - (347) (992) (300) -

Adj. Profit before tax (5,233) (13,407) (11,006) (6,539) (292) Adj. PBT margin NEG NEG NEG NEG NEG

Tax 103 222 60 100 50

Adj. Profit after tax (5,129) (13,185) (10,944) (6,439) (242) PAT margin NEG NEG NEG NEG NEG Reported Profit after tax (5,228) (13,574) (11,994) (7,539) (1,342)

Shares in issue (basic) 157.21 228.82 335.57 442.52 479.56 Shares in issue (diluted) 157.21 228.82 335.57 442.52 479.56

Adj. EPS (p) -3.26 -5.76 -3.26 -1.45 -0.05 Reported EPS (p) -3.33 -5.93 -3.57 -1.70 -0.28

Source: Company; Allenby Capital

14

Allenby Capital

Exhibit 11: Cashflow CASH FLOW STATEMENT GBP '000 GBP '000 GBP '000 GBP '000 GBP '000 Year End June FY 2017A FY 2018A FY 2019A FY 2020E FY 2021E Reported Profit after tax (5,331) (13,796) (12,056) (7,639) (1,392)

201921 October | |

Adjustments for: ) Depreciation charges 199 442 399 400 300

Amortisation charges 50 419 1,036 500 500

GFIN.L ( Share based payments 99 433 1,050 1,100 1,100 Interest received (5) (1) (6) - - Other 73 226 432 300 -

Operating profit before movements in working capital (4,915) (12,277) (9,145) (5,339) 508 Gfinity plc Gfinity

Decrease / (increase) in trade and other receivables (1,221) (625) (191) (540) (783) Increase / (decrease) in trade and other payables 588 243 710 1,026 1,441 Corporation tax (paid)/received 103 153 94 100 50 Cash generated from operating activities (5,435) (12,506) (8,533) (4,752) 1,215

Interest received 5 1 6 - - (Purchase)/disposal of property, plant and equipment - (312) (124) (300) (300) Acquisition of subsidiaries, net of cash (600) (1,050) - - - Investment in associates - (316) (271) (200) - Proceeds from sale of discontinued operations - - 18 - - Net cash flow from investing activities (595) (1,677) (370) (500) (300)

Issue of equity share capital 9,950 13,700 6,000 5,250 - Share issue costs (231) (358) (192) (168) - Net cash flow from financing activities 9,719 13,343 5,808 5,082 - Net increase/(decrease) in cash and cash equivalents 3,689 (884) (3,095) (170) 915

Cash and cash equivalents at beginning of period 830 4,519 3,679 587 416 Cash and cash equivalents at end of period 4,519 3,679 587 416 1,332

Source: Company; Allenby Capital

Exhibit 12: Summary balance sheet BALANCE SHEET GBP '000 GBP '000 GBP '000 GBP '000 GBP '000 Year End June FY 2017A FY 2018A FY 2019A FY 2020E FY 2021E ASSETS Non-Current Assets 999 5,638 4,062 3,462 2,962 Property, plant and equipment 876 759 483 383 383 Goodwill 0 2,545 2,545 2,545 2,545 Intangible fixed assets 73 2,070 1,034 534 34

Current Assets 6,180 5,992 2,971 3,279 4,977 Trade and other receivables 1,660 2,160 2,322 2,862 3,645 Cash and cash equivalents 4,519 3,679 648 416 1,332 Current tax assets 0 153 0 0 0 TOTAL ASSETS 7,179 11,630 7,032 6,740 7,939

LIABILITIES Non-Current Liabilities - (366) (323) (323) (323)

Current Liabilities (1,746) (2,455) (2,985) (4,011) (5,452) Trade and other payables (1,746) (2,238) (2,985) (4,011) (5,452) Accrued expenses - - - - - Derivative financial instruments - (217) - - -

TOTAL LIABILITIES (1,746) (2,822) (3,308) (4,334) (5,774) NET ASSETS 5,433 8,809 3,725 2,406 2,164

Source: Company; Allenby Capital

15

Allenby Capital

Disclaimer Allenby Capital Limited (“Allenby”) is incorporated in England no. 6706681; is authorised and regulated by the Financial Conduct Authority (“FCA”) (FRN: 489795) and is a member of the London Stock Exchange. This communication is for information only it should not be regarded as an offer or solicitation to buy the securities or other instruments mentioned in it. It is a marketing communication and non-independent research, and has not been prepared in accordance with the legal requirements designed to promote the independence of investment research, and is not subject to any prohibition on dealing ahead of the dissemination of investment research. The cost of Allenby research product on independent companies is paid for by research clients.

This communication is for the use of intended recipients only and only for distribution to investment professionals as that term is defined in article 19(5) of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. Its contents are not directed at, may not be suitable for and should not be relied upon by anyone who is not an investment professional including retail clients. Any such persons should seek professional advice before investing. For the purposes of this communication Allenby is not acting for you, will not treat you as a client, will not be responsible for providing you with the protections afforded to clients, and is not advising you on the relevant transaction or stock. This communication or any part of it do not form the basis of and should not be relied upon in connection with any contract.

Allenby uses reasonable efforts to obtain information from sources which it believes to be reliable. The communication has been prepared without any substantive analysis undertaken into the companies concerned or their securities, and it has not been independently verified. No representation or warranty, express or implied is made, or responsibility of any kind accepted by Allenby its directors or employees as to the accuracy or completeness of any information in this communication. Opinions expressed are our current opinions as of the date appearing on this material only and are subject to change without notice. There is no regular update series for research issued by Allenby.

No recommendation is being made to you; the securities referred to may not be suitable for you and this communication should not be relied upon in substitution for the exercise of independent judgement. Neither past performance or forecasts are a reliable indication of future performance and investors may realise losses on any investment. Allenby shall not be liable for any direct or indirect damages including lost profits arising from the information contained in this communication.

Allenby and any company or persons connected with it, including its officers, directors and employees may have a position or holding in any investment mentioned in this document or a related investment and may from time to time dispose of any such security or instrument. Allenby may have been a manager in the underwriting or placement of securities in this communication within the last 12 months, or have received compensation for investment services from such companies within the last 12 months, or expect to receive or may intend to seek compensation for investment services from such companies within the next 3 months. Accordingly, recipients should not rely on this communication as being impartial and information may be known to Allenby or persons connected with it which is not reflected in this communication. Allenby has a policy in relation to management of conflicts of interest which is available upon request.

This communication is supplied to you solely for your information and may not be reproduced or redistributed to any other person or published in whole or part for any purpose. It is not intended for distribution or use outside the European Economic Area except in circumstances mentioned below in relation to the United States. This communication is not directed to you if Allenby is prohibited or restricted by any legislation or registration in any jurisdiction from making it available to you and persons into whose possession this communication comes should inform themselves and observe any such restrictions.

Allenby may distribute research in reliance on Rule 15a-6(a)(2) of the Securities and Exchange Act 1934 to persons that are major US institutional investors, however, transactions in any securities must be effected through a US registered broker-dealer. Any failure to comply with this restriction may constitute a violation of the relevant country’s laws for which Allenby does not accept liability. By accepting this communication, you agree that you have read the above disclaimer and to be bound by the foregoing limitations and restrictions. Research Disclosure David Johnson is the author of this research and is employed by Allenby Capital Limited as an Equity Analyst. Unless otherwise stated the share prices used in this publication are taken at the close of business for the day prior to the date of publication. Information on research methodologies, definitions of research recommendations, and disclosure in relation to interests or conflicts of interests can be found at www.allenbycapital.com. Allenby Capital acts as Nomad and broker to Gfinity plc. Allenby Capital, 5 St Helen’s Place London EC3A 6AB, +44 (0)20 3328 5656, www.allenbycapital.com