Letter from the Management Board
Total Page:16
File Type:pdf, Size:1020Kb
LETTER FROM THE MANAGEMENT BOARD Warsaw, March 26th 2018 Dear Shareholders and Investors Please be invited to read the consolidated full-year report of 11 bit studios S.A. for 2017. Please note that besides the results of 11 bit studios S.A. it also includes the results of its subsidiary, Games Republic Limited. On April 11th 2017, 11 bit studios S.A. closed the sale of this company to Lousva Trading Limited. As of that date, the 11 bit studios Group ceased to exist. In 2017, Games Republic Limited did not carry out operating activities. For 11 bit studios S.A., 2017 was a time of hard work on Frostpunk, a game that is anticipated to drive the Company's financial performance in the coming quarters and years. That is why we are absolutely determined to make sure that Frostpunk is of top quality, which, combined with its unique theme and great interest from gamers around the world, warrants expectations of solid sales. We will see whether these expectations come true on April 24th, when the game is planned to be launched on the market. In 2017, we also continued development of This War of Mine, which led to the release (November 14th) of Father’s Promise, the first of three expansion packs in the TWoM: Stories series. The product was very favourably received by the players community. The release of the other two expansion packs is scheduled for 2018. The Company also initiated work on a game with a working title Project 8, planned to go on sale after Frostpunk. Its production, already supported by a nearly 20-person team, proceeds as scheduled. In 2017, the 11 bit publishing division released two games created by third-party development studios: Beat Cop and Tower 57. Both projects yielded profits for 11 bit studios S.A., and revenues from the publishing business in 2017 had a sizeable, over 10% share in the Company’s total revenues. For the whole of 2017, 11 bit studios S.A. generated PLN 19.15m in revenue, PLN 7.62m in operating profit, and almost PLN 3.42m in net profit. The figures were worse than in 2016 owing to two factors. In September 2017, the Company decided to postpone the premiere of Frostpunk until 2018 so revenue from this source will be reported this year. The gap could not be filled despite very good, better than expected, sales of This War of Mine. The second factor that had an adverse impact on the Company's profitability was changes in international foreign exchange markets, quite unfavourable from our point of view. Due to a large share of cash assets denominated in currencies other than the Polish zloty 11 bit studios S.A. is exposed to exchange rate fluctuations. Thus, the Company's results for 2017 were affected by significant finance costs on asset remeasurement, exceeding PLN 3.4m. They were largely non-monetary items and did not reduce the Company’s available cash balances. As at the end of December 2017, 11 bit studios S.A. reported almost PLN 28.2m in cash and cash equivalents, and in addition over PLN 3m invested in units of a conservative investment fund. This means that total cash available to the Company, thanks to strict cost control, rose by over 7% compared with the end of 2016, despite growing expenditures on game production and development of the publishing business. 2018 will be a breakthrough year for 11 bit studios S.A., the planned April premiere of Frostpunk being one of the reasons. In the following months, Moonlighter and Children of Morta, two games released by our publishing division, will reach the market. We highly rate their commercial potential. We strongly believe that these titles will appeal to players, which will positively contribute to their sales and, consequently, our financial results. Therefore, we expect the current year to be a record one in the Company’s history and to confirm our position as a major player in the global computer games industry. Yours faithfully Grzegorz Miechowski Bartosz Brzostek Przemysław Marszał Michał Drozdowski President of the Member of the Member of the Member of the Management Board Management Board Management Board Management Board 2 TABLE OF CONTENTS LETTER FROM THE MANAGEMENT BOARD ........................................................................................................................................... 2 TABLE OF CONTENTS ............................................................................................................................................................................... 3 CONSOLIDATED FINANCIAL HINGHLIGHTS ............................................................................................................................................ 5 Statement of financial position .......................................................................................................... 5 Statement of profit or loss ................................................................................................................ 5 Statement of cash flows................................................................................................................... 5 CONSOLIDATED FINANCIAL STATEMENTS OF 11 BIT STUDIOS S.A. FOR 2017 .................................................................................. 6 1. OVERVIEW ................................................................................................................................................................................... 7 1.1. General information about the Parent.......................................................................................... 7 1.2. Covered periods .................................................................................................................... 7 1.3. Composition of the Parent’s governing bodies as at December 31st 2017 ................................................. 7 1.4. Auditors ............................................................................................................................. 8 1.5. Parent’s shareholding structure as at December 31st 2017.................................................................. 8 1.6. Parent shares held by members of its management and supervisory staff ................................................ 9 1.7. Reference to published estimates ............................................................................................... 9 1.8. Headcount .......................................................................................................................... 9 1.9. Functional and presentation currency .......................................................................................... 9 1.10. Representation by the Management Board of the Parent .................................................................... 9 2. CONSOLIDATED FINANCIAL STATEMENTS OF 11 BIT STUDIOS S.A. ..................................................................................... 10 2.1. Consolidated statement of profit or loss and other comprehensive income (PLN) ..................................... 10 2.2. Consolidated statement of financial position (PLN) ........................................................................ 11 2.3. Consolidated statement of changes in equity ............................................................................... 12 2.4. Consolidated statement of cash flows (PLN) ................................................................................. 13 3. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .................................................................................................... 14 3.1. International Financial Reporting Standards applied by the Company ................................................... 14 3.2. Statement of accounting policies ............................................................................................. 15 3.3. Significant judgements and estimates ........................................................................................ 22 3.4. Revenue (PLN).................................................................................................................... 23 3.5. Operating segments (PLN) ...................................................................................................... 23 3.6. Finance income (PLN) ........................................................................................................... 26 3.7. Finance costs (PLN) .............................................................................................................. 26 3.8. Other income and expenses (PLN) ............................................................................................. 27 3.9. Income tax relating to continuing operations (PLN) ........................................................................ 27 3.10. Depreciation and amortisation ................................................................................................. 29 3.11. Earnings per share (PLN) ........................................................................................................ 29 3.12. Property, plant and equipment (PLN) ........................................................................................ 30 3.13. Intangible assets ................................................................................................................. 31 3.14. Trade and other receivables (PLN) ............................................................................................ 32 3.15. Disposal of the subsidiary (PLN) ..............................................................................................