DRIVEN BY AMBITION ANNUAL REPORT & ACCOUNTS 2020 w FOR OVER 30 YEARS CODEMASTERS HAS BEEN PUSHING BOUNDARIES 2020 WAS NO DIFFERENT. WE’VE ONLY JUST STARTED. STRATEGIC REPORT Our Highlights 02 Company Overview 02 Chairman’s Statement 04 Market Overview 06 Chief Executive’s Review 10 Our Strategy 14 Strategy in Action 16 12 Months at Codemasters 18 DiRT Rally 2.0 24 F1 2019 26 F1 Mobile Racing 28 GRID 29 Financial Review 30 Principal Risks and Mitigations 34 GOVERNANCE Board of Directors 36 Corporate Governance Statement 38 Audit Committee Report 42 Remuneration Committee Report 44 Directors’ Report 47 Statement of Directors Responsibilities 48 Independent Auditor’s Report to the Members of Codemasters Group Holdings plc 49 Codemasters produces FINANCIAL STATEMENTS iconic games and is a world leader in the Consolidated Income Statement 56 Consolidated Statement of Comprehensive Income 57 development and Statement of Changes in Equity 58 publishing of racing titles. Consolidated Statement of Financial Position 59 Consolidated Cash Flow Statement 60 Notes to the Consolidated Financial Statements 61 Company Statement of Financial Position 96 Company Statement of Changes in Equity 97 Notes to the Company Financial Statements 98 Company Information 102 S trategic R eport G IN POLE POSITION overnance Codemasters is a world-leader in the F inancial development and publishing of racing games across console, PC, streaming, S and mobile. It is the home of revered tatements franchises including DiRT, GRID and the F1® series of videogames. In November 2019, the Group acquired Slightly Mad Studios and added the award-winning Project CARS franchise to its portfolio alongside Fast & Furious Crossroads. ANNUAL REPORT ANNUAL AN ENGINE FOR GROWTH Codemasters has a clear, multi-pronged, content strategy creating the most diverse racing games portfolio. The benefit enables the Group to offer something for all racing fans from casual racing enthusiasts to esports professionals. GLOBAL POWERHOUSE With the addition of Project CARS and Fast & Furious Crossroads via its acquisition of SMS, Codemasters has further cemented its position as a world leader of high-quality racing games. Codemasters will continue to grow in the coming years through a larger portfolio and investment into games across all new platforms and devices. 01/ SR COMPANY OVERVIEW RACING AHEAD. £76.0m 85.7% £24.8m REVENUE GROSS MARGIN NET CASH 11.6p £18.2m £15.9m ADJUSTED EARNINGS ADJUSTED EBITDA2 OPERATING PROFIT PER SHARE1 2020 KEY FINANCIAL HIGHLIGHTS 1 Adjusted earnings per share is a non-GAAP measure presented as a meaningful comparison of earnings per share across periods. It is defined as Adjusted net income per share (which is a non-GAAP measure used as a proxy for cash earnings), where the number of shares across each period is the outstanding amount of Ordinary Shares in issue as at 31 March 2020, given the significant variance in average number of shares in issue between periods, an adjusted measure has been presented. Adjusted net income is defined as Adjusted EBITDA less cash interest and tax paid. 2 Adjusted EBITDA, is a non-GAAP measure used by the Group, which is defined as profit before finance costs on borrowings (restricted to represent cash basis), tax, capitalisation, depreciation, amortisation, non-recurring items, share based payments and takes into account the phasing of milestone payments received from publishers. SR /02 S trategic R eport G OUR OPPORTUNITY PORTFOLIO overnance Codemasters is a world-leading developer and publisher with a ® F heritage of 34 years in the games F1 2019 – RELEASED 28 JUNE 2019 inancial industry. Headquartered in Southam, F1® 2019 features a series of firsts including the FIA Formula 2 Championship™. The game launched Warwickshire, Codemasters also has S ™ offices and studios in Birmingham, with an F2 light story mode: a scenario-based tatements introduction which alters the outcome of the game Cheshire (Runcorn), London and an based on the player’s success, actions and art facility in Kuala Lumpur. responses. The game also included Driver Transfers Codemasters specialises in racing which give the potential for unlikely partnerships as games and is the proud owner of the drivers can move teams at the end of the season. DiRT, GRID and F1® series of video game franchises. In November 2019, GRID – RELEASED 11 OCTOBER 2019 the Group acquired renowned racing GRID gives race fans intense wheel-to-wheel action developers, Slightly Mad Studios, on some of the most challenging street tracks and adding the Project CARS and Fast race circuits. The game isn’t about a procession of cars; with 400 AI personalities, 104 career events & Furious video game franchises to across 12 race locations including battles against its roster. World Champion racing driver, Fernando Alonso and the return of the revered Ravenwest Motorsport. GRID won the prestigious Best Racing REPORT ANNUAL Game at the gamescom Awards 2019. DIRT RALLY 2.0 GAME OF THE YEAR EDITION (GOTY)– RELEASED 24 MARCH 2020 DiRT Rally 2.0 GOTY celebrates the best of rally and rallycross, with a combined package of 81 cars across 26 locations. Featuring four rally and rallycross season packs, GOTY also includes the Colin McRae FLAT OUT pack with a new location, Perth and Kinross, and 40 race scenarios. 2020 PERFORMANCE F1® contract extension Annual release F1® 2019 Extended contract with Formula One Management for Launched on 28 June 2019 and earlier in the season than any exclusive game rights for the FIA Formula One World previous iteration, F1® 2019, players had the option of an Championship (“F1”) franchise from 2021 until 2025, with a additional deluxe Legends Edition which featured Alain Prost further option for the 2026 and 2027 seasons, representing and Ayrton Senna. Featuring F2™ for the first time, players the longest agreement in the partnership’s history. were also introduced to the game via a light story mode, giving returning players a new experience. F1® 2019 was the Successful £20m fundraise and highest-rated racing game of 2019 with an average Metacritic acquisition of Slightly Mad Studios (SMS) score of 87%. SMS has been established for 10 years and will provide Codemasters further diversified revenue streams through Release of GRID additional proven franchises including Project CARS 3 which Released on 11 October 2019, GRID gave race fans intense launches late summer 2020, access to a blockbuster movie wheel-to-wheel action on some of the most challenging street game with the launch of the Fast & Furious Crossroads title tracks and race circuits. The game isn’t about a procession of confirmed for release on 7 August 2020 in the second quarter cars; with 400 AI personalities, 104 career events across 12 of the Group’s current financial year, a new free-to-play mobile race locations including battles against World Champion game Project CARS Go in the second half of the year and the racing driver, Fernando Alonso and the return of the revered addition of over 150 product developers. Ravenwest Motorsport. GRID won the prestigious Best Racing Game at the gamescom Awards 2019. 03/ SR CHAIRMAN’S STATEMENT DELIVERING ON OUR POTENTIAL. Overview we are increasingly well positioned to take advantage of FY20 was the first full financial year following the a strong growth market and the continued shift to Group’s admission to trading on AIM and I am pleased digital distribution and post launch services. Other to report that it was one of considerable achievement, opportunities include increasing the Group’s both in terms of performance during the year and, more penetration into existing and new markets, as well as importantly, putting in place the building blocks for the new opportunities from Next Gen consoles and continued future success. streaming platforms. A broader IP portfolio allows us to further establish the Codemasters brand as the go to Results racing channel for both gamers and licensors hence The Group has delivered FY20 revenue of £76.0 raising competitive barriers to entry. million, Adjusted EBITDA comfortably ahead of initial expectations at £18.2 million and profit before tax of Share Placings and Acquisition £12.2 million. At the year end, the Group had net cash At the start of the financial year, Reliance Big of £24.8 million; cash of £25.6 million with £0.8 million Entertainment, owners of the Company prior to IPO, of debt within SMS which is due for repayment in H1 of held 29.5% of the equity. Through placings in June and FY21. The results were delivered with just two titles November 2019 we were able to welcome new being launched in the financial year: GRID and F1® institutional shareholders to the register whilst providing 2019, along with the Game of the Year Edition of DiRT Reliance with a highly satisfactory exit and thus ending Rally 2.0 supported by the ongoing strength of our our nine year relationship with them. An issue of back catalogue of games and key partnerships. The additional ordinary shares, raising approximately £20 increasing shift to digital, amplified at the end of the million before expenses, took place in November 2019 financial year by the outbreak of COVID-19, continues to finance the initial cash consideration for the to improve margins. Digital sales represented 67.7% of acquisition of Slightly Mad Studios (“SMS”). On behalf the total sales in the year, up from 59.2% in FY19. of the Board, I would like to thank all of our shareholders, past and present, for their support. Strategy The Group’s immediate strategy remains as follows: The addition of Slightly Mad Studios was an exciting – strengthen Codemasters’ development for the Company, bringing diversified overall leadership position in racing; revenue streams through additional proven owned IP – grow the audience; and Project CARS, access to a licenced blockbuster movie – increase average revenue per user.