TIDMGFIN

RNS Number : 5557G

Gfinity PLC

30 March 2022

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

30 March 2022

Gfinity plc

("Gfinity" or the "Company")

Half Year Results

Gfinity (AIM: GFIN), a world-leading esports solutions provider, announces its unaudited results for the six-month period ended 31 December 2021.

Financial Highlights:

-- Continued improvement in financial performance through sustained strategic focus on what the Company owns, with Gfinity Digital Media ('GDM') driving growth in the business.

-- Revenue of GBP3.3m, an increase of 8% year on year (H1 21: GBP3.0m) and 22% improvement on previous 6 months (H2 21: GBP2.7m).

-- Adjusted operating loss([1]) of GBP0.4m, 53% improvement year on year (H1 21: GBP0.9m loss) and 76% improvement on previous 6 months (H2 21: GBP1.8m loss) as the business continues on its path towards profitability.

   --      Reduction in Adjusted administrative expenses([2])  of 4% to GBP2.4m (H1 21: GBP2.5m). 

-- Business well capitalised to continue to deliver on its objectives following successful fundraising, underlining confidence in the Company's long-term performance.

Operational Highlights:

Strategic focus on 'what we own' delivering improved financial performance and growth

Gfinity Digital Media:

-- Continued growth of publishing platform, with revenues up 62% year on year to GBP1.6m (H1 21: GBP1.0m) driven by increased annualised revenue per user of 23.3p (up 31% year on year) and 23% rise in Average Monthly Active Users to 13.9m.

-- 43% year on year improvement in Gross profit to GBP1.0m. Clear profitable growth engine that is driving the continuation of the Group's pathway to profitability.

-- Successful acquisitions of SiegeGG, including technology behind leading statistical analysis of Rainbow Six Siege video game, and Stock Informer which contributed GBP0.4m of revenue between acquisition completion on 13 September 2021 and 31 December 2021.

-- Renewed agreement to extend Gfinity's partnership with global advertising technology platform Venatus into its third year, driving value per user growth.

-- Significant progress in optimising site infrastructure and performance, utilising the Company's proprietary manifold content management system (CMS), leading to strong user numbers in the second half, with a record 16m monthly active users across GDM platforms in February.

Technology and Esports Solutions:

   --      Revenue from the delivery of esports solutions for third parties remained flat at GBP1.6m. 

-- Gfinity continues to be selected by global brands to deliver esports and gaming solutions, including Nintendo, Coca Cola Hellenic Bottling Company.

-- Record F1 Esports 2021 Series breaking viewership and engagement records with Gfinity retained as delivery partner of choice for 2022 season.

-- In-person publisher esports events, however, have been slow to return to pre-pandemic levels.

-- Within this segment, revenue directly relating to the licensing of Gfinity's proprietary esports technology grew 75% to GBP0.2m (H1 21: GBP0.1m).

o Platform deployed across in-app the competitive programmes for three of the largest mobile game titles featuring more than 50,000 participants in multiple languages across a number of weekends during the period

o Platform utilised for the ePremier League qualification for fourth year running

-- The major strategic focus within this segment is the productisation of this technology to allow it to be deployed at scale, with clients benefitting from automated integration into games and media owners' websites. This is expected to create a high margin, recurring revenue stream through a SaaS licensing model.

Co-Owned Esports Properties

-- Consolidation of the V10 R League, Gfinity's jointly owned digital motorsport property in conjunction with Abu Dhabi Motorsports Management, into a single season in the second half of the year has impacted comparable revenue. H1 21 revenue included GBP0.4m of revenue from this segment. Consolidation of the programme in this way is intended to allow for the creation of a live finals event, which will facilitate unlocking sponsorship revenue from the region.

-- If revenues relating to this were eliminated from the comparative period, the year on year revenue increase would be 24%.

Balance Sheet strengthened post-period end

As at 31 December 2021, Gfinity had cash reserves of GBP1.5m (30 June 2021: GBP1.4m). Post year end, the Directors took the decision to secure additional funding, believing it to be in the best interests of the Group.

On 14 March 2022, the Company successfully completed a fundraise of GBP2.7 million, before expenses, via a placing and direct subscription of new ordinary shares of 0.1p each in the Company at a price of 1.25 pence per share. 50% of this fundraise was within existing authorities and has completed, with the remaining 50% subject to shareholder confirmation at the General Meeting to be held on 1 April 2022. This provides the runway needed for the Company to be profitable on a month by month basis in 2023.

Outlook

-- Continued delivery of strategy and focus on what we own, with sustained GDM performance and good momentum heading into the second half.

-- Slower than anticipated return to live esports events will impact short term revenue and profits, but do not change the long-term prospects or future pathway to profitability in 2023.

-- Investment in Gfinity Engage platform expected to create a further owned, recurring and high margin revenue stream.

John Clarke, CEO, Gfinity said:

"We have continued to improve on financial performance during the period, despite a slower than anticipated return to live events and delays in certain revenue streams. The business remains on the right path to profitability, with increased revenues, lower operating losses and reduced operating expenditure.

We have strong momentum in our owned revenue streams, in particular our GDM business, with record engagement numbers and revenue per user up 270% since its launch. This business continues to act as the growth engine for the Group, and our focus remains firmly on building our capabilities and expertise to ensure more brands choose Gfinity as their trusted partner.

Although the sector is still recovering from the impacts of Covid-19, macro trends remain in our favour and following a successful fundraise post-period, we now have the operating liquidity we need to deliver on our target of reaching profitability by 2023."

S

Enquiries :

 
 Gfinity plc                                  www.gfinityplc.com 
  John Clarke, CEO                             Via Teneo 
 
 Teneo (Media)                                Tel: +44 7880 715975 
 Anthony Di Natale                            Gfinity@teneo.com 
 
 
   Canaccord Genuity Limited (AIM Nominated     Tel: +44 (0)207 
   Adviser & Broker)                            523 8150 
 Bobbie Hilliam / Patrick Dolaghan 
 
 

About Gfinity

Gfinity (AIM: GFIN) is a market-leading digital media publisher and technology company in the rapidly growing esports and competitive gaming sector. Created by gamers for the world's three billion gamers, Gfinity has a unique understanding of this fast-growing global community. It uses this expertise both to provide advisory services and to design, develop and deliver unparalleled experiences and winning strategies for game publishers, sports rights holders, commercial partners and media companies.

Gfinity connects its partners with the esports community in authentic and innovative ways. This consists of on--and-off-line competitions and industry--leading content production. Relationships include Activision Blizzard, EA SPORTS, F1 Esports Series Red Bull, Abu Dhabi Motorsport Management and Coca Cola.

Gfinity connects directly with tens of millions of gamers each month through its digital media group, Gfinity Digital Media. Gfinity Digital Media includes websites such as: Gfinityesports, RealSport101, Epicstream, Stock Informer, StealthOptional, RacingGames.gg, MTGRocks.com and their respective social channels.

All Gfinity services are underpinned by the Company's proprietary technology platform, delivering a level playing field for all competitors and supporting scalable multi-format leagues, ladders and knockout competitions.

Operational Review

The six months to 31 December 2021 saw Gfinity continue to make significant progress against the key strategic pillars of the business. This focus enabled a significant improvement in financial performance. The a djusted operating loss([3]) for the period of GBP0.4m represented a 53% improvement year on year (H1 21: GBP0.9m loss), which built on a 71% improvement on the performance in H1 20.

Directors believe that building the future of the business around owned, scalable, higher margin revenue streams relating to the Gfinity Digital Media segment and the ability to deploy Gfinity's proprietary esports technology at scale, represents the right strategy to deliver long term value to investors.

Gfinity Digital Media:

In the six-month period to 31 December 2021, Gfinity continued to drive growth in both the number of users engaging with written and video content on its owned digital media platforms, as well as the revenue derived from each user. As a result, revenue in the period rose 62% to GBP1.6m.

Monthly Active Users

Unique monthly active users during the period were 13.9m, which represented a year on year increase of 31%, peaking at over 15m users in December 2021. Encouragingly, growth continued into H2, which is traditionally a quieter period for gaming news and by extension user numbers. In January 2022 monthly active users were again over 15m, with growth continuing throughout February with a new monthly record of 16m monthly active users achieved. Growth is expected to be maintained with users in March expected to exceed 17 million. Including related social platforms, Gfinity's content is now reaching more than 100m users every month.

The Company continues to target 50m monthly active users on its owned channels in the short to medium term and 100m monthly active users in the longer term, through a combination of both organic growth and targeted acquisitions.

Revenue Per User

The annualised revenue per unique user during H1 grew 31% year on year to 23p, reflecting a continued growth in advertising rates, through enhanced scale, prestige and site performance. This was complimented by a diversification of revenue streams, with an increased emphasis on affiliate revenues, particularly driven by the acquisition of the Stock Informer business in September 2021.

During the period, Gfinity extended its partnership with Venatus into its third year, as its chosen partner for delivery of advertising revenue. The extended partnership continues to contribute to the acceleration of Gfinity's value per user across its fast-growing websites under the GDM.

The Company is targeting annual revenue per user of 30p in the short to medium term and 50p in the longer term, providing a significant, recurring, high-margin revenue stream for the business.

New Site Additions

Three new sites were added to the Gfinity Digital Media network during the period. The largest of these was the Stock Informer business, acquired through the acquisition of Megit Ltd, which completed on 13 September 2021. Stock Informer has built up a market leading position as an authority on hard-to-find items, with a particular focus of bringing products of relevance to gamers. Its proprietary technology enables real-time updates on availability and pricing of items, from which consumers can click through to the relevant retailers to make purchases, allowing the business to drive revenue through affiliate commissions.

In the three-and-a-half-month period following the acquisition, Stock Informer delivered GBP0.4m of high-margin revenue to the business. Directors also believe that there is significant potential for Stock Informer's technology to post relevant price comparison offers to people viewing relevant content across the whole GDM network, opening a new revenue stream for Gfinity from FY23 onwards.

Also in September 2021, Gfinity completed the acquisition of Siege.gg, a highly-engaged community for the Rainbow Six Siege game and owner of the leading proprietary statistical dataset in respect of the competitive following of the game.

The technology, team and methodology behind Siege.gg were utilised in the period to launch the new site Forerunner.gg in December 2021. This site focuses on the competitive community tied to the highly popular Halo game.

Technology:

Throughout the period, Gfinity has continued to deploy its proprietary esports technology for leading clients. Gfinity's tournament management platform has been integrated directly into 3 leading mobile game titles, powering the competitive programme for over 50,000 participants at any one time, enabling players to stay in the game, rather than going to a third-party tournament play site. The significant benefit to the game publisher is that it now keeps its players data.

Gfinity's technology has been used for a fourth consecutive year to deliver the online qualifying rounds for the ePremier League programme. Gfinity's community building tools also continued to be deployed on behalf of Nvidia.

Revenue from the direct deployment of Gfinity's technology, outside of broader managed esports programmes, rose 75% year on year to GBP0.2m.

A key strategic initiative is the productisation of this technology suite, such that it can be quickly and easily deployed directly into clients' games and media platforms, licensed under a SaaS model, without the need for custom development work from Gfinity's team. With those gamers who participate competitively, spending longer in game and spending more money in-game, this provides a valuable tool for clients to drive up both engagement and revenue. The beta version of the "Engage" product that will facilitate this, will launch during the second quarter of this calendar year.

Esports Solutions:

Gfinity continues to be selected by global brands to deliver esports and gaming solutions. In H1 22 Gfinity delivered the live component of the fourth season of the Formula 1 Pro Series. In 2021 this programme delivered record levels of engagement, including viewership up 103% year on year.

Other clients in the period included Nintendo, Amazon and Coca Cola Hellenic Bottling Company.

Co-Owned Esports Properties

During FY21, Gfinity staged the first two seasons of V10 R League, Gfinity's jointly owned digital motorsport property in conjunction with Abu Dhabi Motorsports Management. The series has created a strong basis for growth, with participation from leading teams including Red Bull, Ford, BMW, Aston Martin and McLaren among others, broadcast through distribution partners including ESPN and BT Sport.

During FY22, the decision was taken to consolidate the V10 R League into a single season in the second half of the year. This allows for a more consolidated block of content, together with live finals to be staged from Abu Dhabi, which it is believed will create a more compelling proposition for sponsorship, particularly from partners in the Middle East.

H1 21 revenue included GBP0.4m of revenue from this segment. If revenues relating to this were eliminated from the comparative period, the total year on year revenue increase for the period would be 24%.

Outlook

Directors believe that Gfinity's focus on owned, high-margin, scalable revenue streams is the right strategy to deliver significant long-term value for shareholders. The 53% reduction in operating loss, building on a 71% reduction in the prior year, demonstrates this strategy is already delivering a significantly improved financial performance. Directors expect both the audience and monetisation of its owned Gfinity Digital Media business to continue to grow, building on the 62% year on year uplift delivered in the six-month period to 31 December 2021. It is also believed that the productisation of Gfinity's esports platform will create a further revenue stream of scale over future years.

Despite this, revenue growth is not always linear and the timing of certain esports programmes cannot always be guaranteed. As a result, in March 2022, Directors took the decision to raise a further GBP2.7m before costs, accompanied by a one for one warrant at the exercise price. This over-subscribed placing has secured the business in a strong position from which to pursue its growth objectives into the second half of FY22 and beyond, continuing its path to delivering month on month profitability in 2023.

Financial Review

Revenue for the six-month period to 31 December 2021 was GBP3.3m. This represented an increase of 8% year on year (H1 21: GBP3.0m) and 22% improvement on the previous 6 months (H2 21: GBP2.7m).

The proportion of revenue attached to owned assets, including Gfinity's Digital Media network, jointly owned esports programmes and the licensing of Gfinity's proprietary esports technology, rose to 55% of total income (GBP1.8m). This compared to a figure of 49% in H1 21, despite the prior year comparative period including GBP0.4m from the first season of the V10 R League programme, now condensed into a single season in the second half of FY22.

The sharpened focus on owned, higher margin revenue streams delivered gross profit for the six-month period of GBP1.9m at a gross margin of 60% (H1 21: GBP1.5m at 50%).

This growth was achieved with a reduction of 4% in adjusted administrative expenses([4]) to GBP2.4m (H1 21: GBP2.5m). This resulted in an adjusted operating loss([5]) , reduced by 53% to GBP0.4m (FY21 H1: GBP0.9m loss).

In the period, Gfinity completed two acquisitions, supporting the strategy to grow both the audience and monetisation of the Gfinity Digital Media network.

In September 2021, Gfinity acquired the entire issued share capital of Megit Ltd, the owner of the Stock Informer brand, for consideration consisting of GBP2.5m in cash, GBP2.5m of equity in Gfinity plc and an earn out calculated at 30% of revenue in each of the first 3 years post-acquisition. The fair value of this consideration has been estimated at GBP6.6m.

Also in September, Gfinity acquired the trade and assets of Siege.gg, a leading digital community and owner of statistical information in respect of the competitive following of the Rainbow Six Siege game. Consideration for this acquisition comprised 9 million ordinary shares and an earn out amounting to 30% of revenue in the first two years post-acquisition. The fair value of this consideration has been estimated at GBP6.6m.

Directors consider the development of an easily deployed, licensable version of Gfinity's proprietary esport technology product to be a major strategic initiative, with the potential to drive significant future SaaS revenues for the business. On that basis GBP0.3m of costs invested directly in the development of this product have been capitalised in the period.

Gfinity had cash of GBP1.5m at 31 December 2021. In March 2022, the Directors announced their intention to raise a minimum of a further GBP1.0m, accompanied by a one for one warrant at the exercise price. This placing was heavily over-subscribed from a combination of both existing and new shareholders. In the light of current macro-economic conditions the Directors elected to take a total of GBP2.7m, plus potential future funds from any warrant exercises.

Group Statement of Profit or Loss

 
                                 6 months          6 months          Year to 
                                  to 31 December    to 31 December    30 June 
                                  2021              2020              2021 
                                  Unaudited         Unaudited         Audited 
                                 GBP               GBP               GBP 
 CONTINUING OPERATIONS 
 
 Revenue                         3,261,361         3,013,309         5,693,385 
 
 Cost of sales                   (1,320,260)       (1,492,205)       (3,085,409) 
 
 
 Gross profit/(loss)             1,941,101         1,521,104         2,607,976 
 
 Other Income                    697               50,280            54,354 
 
 Administrative expenses         (3,511,533)       (2,863,226)       (7,179,327) 
 
 
 Operating loss                  (1,569,735)       (1,291,842)       (4,516,997) 
 
 Disposal of Associate Gain 
  / (Loss)                       45,090            459,706           459,706 
 
 
 Finance income                  2                 -                 4 
 
 Finance Costs                   -                 (8,988)           (10,236) 
 
 
 Loss on ordinary activities 
  before tax                     (1,524,643)       (841,124)         (4,067,524) 
 
 Taxation                        117,685           -                              221,929 
                                ----------------  ----------------  --------------------- 
 
 Retained loss for the year      (1,406,958)       (841,124)         (3,845,595) 
 
 
 
 Earnings per Share              -GBP0.00          -GBP0.00          -GBP0.00 
 

Group statement of comprehensive income

 
                                         6 months          6 months          Year to 
                                          to 31 December    to 31 December    30 June 
                                          2021              2020              2021 
                                          Unaudited         Unaudited         Audited 
 
 
 Items that will not be reclassified 
  to profit or loss 
 
 Foreign exchange profit / (loss) 
  on retranslation of foreign 
  Subsidiaries                           (5,510)           (4,763)           (12,887) 
                                        ----------------  ----------------  ------------ 
 
 Other Comprehensive Income 
  for the period                         (5,510)           (4,763)           (12,887) 
 
 
 Loss and total comprehensive 
  income for the period                  (1,412,468)       (845,887)         (3,858,482) 
 
 

Group Statement of Financial Position

 
                                    As at 31 December   As at 30 June 
                                     2021                2021 
                                     Unaudited           Audited 
                                    GBP                 GBP 
 NON CURRENT ASSETS 
 Property, plant and equipment      200,110             187,366 
 Goodwill                           5,259,307           1,903,790 
 Intangible fixed assets            5,240,418           704,481 
 
                                    10,699,835          2,795,637 
 
 
 CURRENT ASSETS 
 Trade and other receivables        2,096,066           1,586,850 
 Cash and cash equivalents          1,493,549           1,375,873 
 
 
                                    3,589,615           2,962,723 
 
 
 TOTAL ASSETS                       14,289,450          5,758,360 
 
 
 EQUITY AND LIABILITIES 
 Equity 
 Ordinary shares                    1,099,697           930,513 
 Share premium account              52,488,918          46,511,089 
 Other reserves                     3,843,012           3,384,914 
 Retained earnings                  (48,709,655)        (47,302,697) 
 
 
 Total equity                       8,721,972           3,523,819 
 
 Non-current liabilities 
 Other Payables                     1,316,801           254,986 
 Deferred Tax Liabilities           1,065,626           127,835 
 
 Current liabilities 
 Trade and other payables           3,185,051           1,851,720 
 
 
 Total liabilities                  5,567,478           2,234,541 
 
 
 TOTAL EQUITY AND LIABILITIES       14,289,450          5,758,360 
 
 

Group Cash Flow Statement

 
                                        6 months          6 months          Year to 
                                         to 31 December    to 31 December    30 June 
                                         2021              2020              2021 
                                         Unaudited         Unaudited         Audited 
                                        GBP               GBP               GBP 
 
 Cash flow used in operating 
  activities 
 Net cash used in operating 
  activities                            (592,836)         (439,160)         (2,049,833) 
 
 
 Cash flow from/(used in) 
  investing activities 
 Interest received                      2                 -                 4 
 Additions to property, plant 
  and equipment                         (68,850)          (80,103)          (106,642) 
 Additions to intangible 
  assets                                (351,103)         -                 (16,030) 
 Payments to acquire trade              (2,155,630)       -                 - 
  & assets on business combination 
 Gain on disposal of associate          45,090            459,706           459,706 
 
 
 Net cash used in investing 
  activities                            (2,530,491)       379,603           337,038 
 
 Cash flow from/(used in) 
  financing activities 
 Issue of equity share capital          3,246,513         601,666           1,950,649 
 Repayment of leases                    -                 (306,486)         (439,621) 
 Bank interest payable                  -                 (1,010)           (10,236) 
 
 
 Net cash from financing 
  activities                            3,246,513         294,170           1,500,792 
 
 Net increase in cash and 
  cash equivalents                      123,186           234,613           (211,833) 
 Effect of currency translation 
  on cash                               (5,510)           (4,763)           (12,890) 
 Opening cash and cash equivalents      1,375,873         1,600,596         1,600,596 
 
 
 Closing cash and cash equivalents      1,493,549         1,830,446         1,375,873 
 
 

Statement of Changes in Equity

 
                         Ordinary    Share        Share       Retained       Forex       Total 
                          shares      premium      option      earnings                   equity 
                                                   reserve 
                         GBP         GBP          GBP         GBP            GBP         GBP 
 
 At 30 June 2020         725,868     44,405,086   3,137,831   (43,457,102)    (5,613)    4,806,070 
 
 
 Loss for the 
  period                  -           -            -           (841,124)      -           (841,124) 
 Other Comprehensive 
  Income                  -           -            -           -              (4,763)     (4,763) 
 Total comprehensive 
  income                  -           -            -           (841,124)      (4,763)     (845,887) 
                        ----------  -----------  ----------  -------------  ----------  ------------ 
 
 Proceeds of shares 
  issued                 70,645      895,810       -           -              -          966,455 
 Share Issue Costs        -           (4,789)      -           -              -           (4,789) 
 Share options 
  expensed                -           -           81,744       -              -          81,744 
 
 Total transactions 
  with owners, 
  recognised directly 
  in equity              70,645      891,021      81,744       -              -          1,043,410 
 
 
 At 31 Dec 2020          796,513     45,296,106   3,219,575   (44,298,226)    (10,376)   5,003,592 
 
 
 Loss for the 
  period                  -           -            -           (3,004,471)    -          (3,004,471) 
 Other comprehensive 
  income                  -           -            -           -              (8,124)     (8,124) 
 Total comprehensive 
  income                  -           -            -           (3,004,471)    (8,124)    (3,012,595) 
                        ----------  -----------  ----------  -------------  ----------  ------------ 
 
 Proceeds of shares 
  issued                 134,000     1,214,983     -           -              -          1,348,983 
 Share Issue Costs        -           -            -           -              -           - 
 Share options 
  expensed                -           -           183,839      -              -          183,839 
 
 Total transactions 
  with owners, 
  recognised directly 
  in equity              134,000     1,214,983    183,839      -              -          1,532,822 
 
 
 At 30 June 2021         930,513     46,511,089   3,403,414   (47,302,697)    (18,500)   3,523,819 
 
 
 Loss for the 
  period                  -           -            -          (1,406,958)     -          (1,406,958) 
 Other comprehensive 
  income                  -           -            -           -              (5,510)     (5,510) 
 Total comprehensive 
  income                  -           -            -          (1,406,958)     (5,510)    (1,412,468) 
                        ----------  -----------  ----------  -------------  ----------  ------------ 
 
 Proceeds of shares 
  issued                 169,184     6,183,150     -           -              -          6,352,334 
 Share Issue Costs        -          (205,321)     -           -              -          (205,321) 
 Share options 
  expensed                -           -           463,608      -              -          463,608 
 
 Total transactions 
  with owners, 
  recognised directly 
  in equity              169,184     5,977,829    463,608      -              -          6,610,621 
 
 
 At 31 Dec 2021          1,099,697   52,488,918   3,867,022   (48,709,655)    (24,010)   8,721,972 
 
 

Notes to the interim financial statements

   1.   General Information 

Gfinity plc is a company limited by shares, incorporated and domiciled in the United Kingdom under the Companies Act 2006. Its registered office is 16 Great Queen Street, London, England, WC2B 5AH. Its shares are quoted on the AIM market of London Stock Exchange.

The functional and presentational currency is GBP sterling because that is the currency of the primary economic environment in which the group operates. Foreign operations are included in accordance with the policies set out in note 2.

These condensed interim financial statements were approved for issue on 29 March 2022.

The financial statements have been reviewed by the Group's auditors but not audited.

   2.   Accounting Policies and Basis of Preparation 

Basis of Preparation

The interim financial statements for the six months ended 31 December 2021 have been prepared using accounting policies that are consistent with those of the audited financial statements for the period ended 30 June 2021 and in accordance with IAS 34, "Interim Financial Reporting" as adopted by the European Union. The interim financial information should be read in conjunction with the Group's Annual Report and Accounts for the year ended 30 June 2021, which has been prepared in accordance with IFRS as adopted by the European Union.

The interim financial information contained in this report has been reviewed but not audited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.

The Annual Report and Accounts for the year ended 30 June 2021 has been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under s498(2) or s498(3) of the Companies Act 2006.

Significant Accounting Policies

The critical accounting policies and presentation followed in the preparation of this interim report have been

consistently applied to all periods in these financial statements and are the same as those applied in the company's annual accounts for the year ended 30 June 2020.

A copy of the accounts to 30 June 2021 can be obtained from the company's website: www.gfinityplc.com .

Critical Accounting Judgements

The preparation of financial statements in conforming with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and assumptions are based on historical experience and other factors considered reasonable at the time, but actual results may differ from those estimates. Revisions to these estimates are made in the period in which they are recognised.

The critical accounting judgements made in preparing this interim report are the same as those in preparing the annual accounts for the Company for the year ended 30 June 2021 which can be obtained from the company's website: www.gfinityplc.com .

Going Concern

Despite the significant reduction in operating loss delivered in H1, revenue growth in such a new and rapidly evolving industry is not always linear and certain initiatives, which were originally anticipated for H2 of FY22, are now likely to take slightly longer to materialise.

As a result, in March 2022 directors announced their intention to raise a minimum of GBP1m, coupled with a one for one warrant at the exercise price to support working capital requirements and continue to support growth initiatives. The fundraise was heavily over-subscribed, confirming continued investor support for the business. As a result, in the context of an uncertain global macro-economic situation, the directors opted to raise GBP2.7m, coupled by a one for one warrant at the exercise price, to be exercised within a 12-month period.

Management have prepared forecasts to 30 June 2023, under a number of scenarios. Under each of these scenarios, following this fundraise, the Company has sufficient cash reserves to continue to operate for a further 12 months. As a result, directors believe that the going concern basis for the preparation of these accounts is appropriate.

   3.   Loss per share 

Basic earnings per share is calculated by dividing the loss attributable to shareholders by the weighted average number of ordinary shares in issue during the period.

IAS 33 requires presentation of diluted EPS when a company could be called upon to issue shares that would decrease earnings per share or increase the loss per share. For a loss-making company with outstanding share options, net loss per share would be decreased by the exercise of options and therefore the effect of options has been disregarded in the calculation of diluted EPS.

During the 6 month period to 31 December 2021, Gfinity issued 13,750,000 shares as the result of warrant exercises, 82,500,000 shares as the result of the fund raise, 1,433,331 as the results of employee option exercises and 62,500,000 of new shares in relation to the acquisition of Megit Ltd and 9,000,000 of new shares in relation to the acquisition of Siege.gg.

 
                                      6 months      6 months    Year ended 
                                       ended 31      ended 31    30 Jun 2021 
                                       Dec 2021      Dec 2020 
                                      GBP           GBP         GBP 
 Loss attributable to shareholders 
  from continuing operations          (1,412,468)   (845,887)   (3,858,482) 
 
                                      Number        Number      Number 
                                      000's         000's       000's 
 Weighted average number of 
  ordinary shares                     963,463       767,286     809,795 
 
 Loss per ordinary share for 
  continuing operations               -0.00         -0.00       -0.00 
 
   4.   Notes to the Cash Flow Statement 
 
                     6 months                        6 months                        Year to 
                      to 31 December                  to 31 December                  30 June 
                      2021                            2020                            2021 
                      Unaudited                       Unaudited                       Audited 
                     GBP                             GBP                             GBP 
 Cash flows from 
 operating 
 activities 
 Loss for the 
  financial year     (1,406,958)                     (841,124)                       (3,845,595) 
 Depreciation of 
  property, plant 
  and equipment      56,109                          62,751                          132,478 
 Depreciation on 
  right of use 
  assets                                         -   293,515                         428,305 
 Amortisation of 
  intangible fixed 
  assets             631,608                         253,108                         492,700 
 Goodwill 
  impairment                                     -                               -   901,519 
 Interest Received   (2)                                                         -   (4) 
 Interest Payable                                -   8,988                           10,236 
 Share based 
  payments           463,608                         81,744                          265,583 
 (Increase) in                                   -                               -                               - 
 Inventories 
 (Increase)/ 
  decrease in 
  trade 
  and other 
  receivables        (509,217)                       193,306                         (280,359) 
 Increase/ 
  (decrease) in 
  trade 
  and other 
  payables           334,791                         (31,657)                        300,020 
 Disposal of fixed 
  assets                                         -   (85)                            (85) 
 Gain on disposal 
  of Associate       (45,090)                        (459,706)                       (459,706) 
 Corporation tax 
  charge                                         -                               -   227,004 
 Corporation tax 
  (paid)/ R&D 
  credits 
  received           (117,685)                                                   -   (221,929) 
                    ------------------------------  ------------------------------  ------------------------------ 
 
 Cash used by 
  operating 
  activities         (592,836)                       (439,160)                       (2,049,833) 
 
 
 Net cash used by 
  operating 
  activities         (592,836)                       (439,160)                       (2,049,833) 
 
 
   5.   Segmental Information 

The Group is managed on the basis of four segments:

- Gfinity Digital Media: monetisation of Gfinity's own network of digital media sites, primarily through, advertising, sponsorship and affiliate revenues

- Owned Content: The creation of esports programmes and content, in which Gfinity owns or co-owns the output and hence shares in the commercial revenue, including sponsorship and content rights that come as a result

- Service Delivery: the delivery of esports solutions and content for third parties, including high profile game publishers, sports rights holders and brands, under a fee-based model

- Technology: Licensing and fees for the direct deployment of Gfinity's proprietary esports technology, outside of a managed esports programme.

 
                          6 months ended   6 months ended   Year ended 
                           31 Dec 2021      31 Dec 2020      30 June 2021 
                          GBP              GBP              GBP 
 Gfinity digital media    1,647,899        1,006,309        1,623,497 
 Owned content             -               382,235          728,065 
 Service delivery         1,479,697        1,530,333        3,118,975 
 Platform as a service    133,765          94,431           222,847 
 Total Revenue            3,261,361        3,013,309        5,693,385 
                         ===============  ===============  ============== 
 

Segmental information for the statement of financial position has been presented as management do view this information on a segmental basis. Intra-group recharges are not considered when monitoring performance with central charges (such as senior management costs) retained in Gfinity PLC rather than being apportioned across segments.

   6.   Revenue 

The Group's policy on revenue recognition is as outlined in note 2 of the financial statements for the year ending June 2021. The period ending December 2021 included GBP153,643 in the contract liability balance and at the beginning of the period (December 2020: GBP0.4m and year ending June 2021: GBP364,024).

The Group's revenue disaggregated by primary geographical markets is as follows:

 
                   6 months ended 31 Dec 2021 
                   Gfinity     Cevo      Megit Ltd   Total 
                   GBP         GBP       GBP         GBP 
 United Kingdom    1,563,860    -        425,547     1,989,407 
 North America     699,011     166,797    -          865,808 
 ROW               512,668      -         -          512,668 
 
 Total             2,775,538   166,797   425,547     3,367,882 
                  ==========  ========  ==========  ========== 
 
 
                    6 months ended 31 Dec 2020 
                    Gfinity     Cevo     Megit Ltd   Total 
                    GBP         GBP      GBP         GBP 
 United Kingdom     2,079,447    -        -          2,079,447 
 North America      530,306     58,465    -          588,771 
 ROW                345,090      -        -          345,090 
 
 Total              2,954,843   58,465    -          3,013,309 
                   ==========  =======  ==========  ========== 
 
 
                    Year ended 30 June 2021 
                    Gfinity     Cevo      Megit Ltd   Total 
                    GBP         GBP       GBP         GBP 
 United Kingdom     4,144,440    -         -          4,144,440 
 North America      902,408     322,741    -          1,225,149 
 ROW                539,069      -         -          539,069 
 
 Total              5,585,917   322,741    -          5,908,659 
                   ==========  ========  ==========  ========== 
 

The Group's revenue disaggregated by pattern of revenue of revenue recognition is as follows:

 
                         6 months ended 31 Dec 2021 
 
                         Gfinity     Cevo      Megit Ltd   Total 
                         GBP         GBP       GBP         GBP 
 Services transferred 
  at 
  a point in time        1,568,313   166,797   425,547     2,160,657 
 Services transferred 
  over time              1,207,226    -         -          1,207,226 
 
 Total                   2,775,538   166,797   425,547     3,367,882 
                        ==========  ========  ==========  ========== 
 
 
                         6 months ended 31 Dec 2020 
 
                         Gfinity     Cevo     Megit Ltd   Total 
                         GBP         GBP      GBP         GBP 
 Services transferred 
  at 
  a point in time        1,922,827   58,465    -          1,981,292 
 Services transferred 
  over time              1,032,017    -        -          1,032,017 
 
 Total                   2,954,844   58,465    -          3,013,309 
                        ==========  =======  ==========  ========== 
 
 
                         Year ended 30 June 2021 
 
                         Gfinity     Cevo      Megit Ltd   Total 
                         GBP         GBP       GBP         GBP 
 Services transferred 
  at 
  a point in time        3,432,959   322,741    -          3,755,700 
 Services transferred 
  over time              2,152,959    -         -          2,152,959 
 
 Total                   5,585,918   322,741    -          5,908,659 
                        ==========  ========  ==========  ========== 
 

As at 31 December 2021 the Group had the amounts shown below held on the consolidated statement of financial position in relation to contracts either performed in full during the year or ongoing as at the year end. All amounts were either due within one year or, in the case of contract liabilities, the work was to be performed within one year of the balance sheet date.

 
                          Dec-21      Jun-21 
                          GBP         GBP 
 Trade Receivables        1,363,845   1,024,696 
 Contract Assets          493,102     244,835 
 Contract Liabilities     153,643     364,024 
 

Trade receivables are non-interest bearing and are generally on 30 day terms. Credit risk of customers is low with many being large multinational corporations.

Contract assets are initially recognised for revenue earned while the services are delivered over time or when billing is subject to final agreement on completion of the milestone. Once the amounts are billed the contract asset is transferred to trade receivables.

Contract liabilities arise when amounts are paid in advance of the delivery of the service. These are then transferred to the statement of comprehensive income as either milestones are completed or work is completed overtime.

   7.   Gain on Disposal of Associate 

During the six month period to 31 December 2021, the process of winding up Gfinity Esports Australia (PTY), in which Gfinity held a 30% shareholding, was completed. On completion of this process, funds remaining in the business were re-distributed to shareholders. With all amounts invested in this venture having previously been expensed, his resulted in a one-off gain on cessation of the business of GBP45,090.

   8.   BUSINESS COMBINATIONS 

Megit Ltd

Acquisition of Megit Ltd

On 14 September 2021 Gfinity PLC acquired 100% shares of Megit Ltd, owner of the Stock Informer brand. Stock Informer has built up a market leading position as an authority on hard-to-find items, with a particular focus to products of relevance to gamers. Its proprietary technology enables real-time updates on availability and pricing of items, from which consumers can click through to the relevant retailers to make purchases, allowing the business to drive revenue through affiliate commissions.

Purchase consideration

 
 Initial consideration                             GBP 
 Shares (62,500,000 Ordinary shares at GBP0.04)    2,500,000 
 Cash                                              2,500,000 
 Acquisition cost                                  51,250 
 Total initial consideration                       5,051,250 
 
 Deferred consideration 
 Contingent consideration at fair value            1,551,677 
 Total deferred consideration                      1,551,677 
 
 Total consideration payable                       6,602,927 
                                                  ========== 
 

Contingent consideration

Contingent consideration is payable based on revenue generated from the acquired entity. The amount payable is calculated at 30% of relevant revenues received in the first, second and third 12 month periods after the acquisition date, up to a maximum of GBP1,800,000 across the 3 year period. The fair value of the contingent consideration is currently estimated to be GBP1,551,677 based on forecast revenues at the date of the acquisition.

Net assets acquired

The fair values of the assets and liabilities of the acquired of Megit Ltd as at the date of acquisition are as follows:

 
                                        GBP 
 Intangible assets: domain authority    3,944,713 
 Intangible assets: technology          715,741 
 Deferred tax liability                 (1,021,342) 
 Net identifiable assets acquired       3,639,112 
 
 Add: Goodwill                          2,963,814 
 
 Net assets acquired                    6,602,927 
                                       ============ 
 

The goodwill that arises from the business combination reflects the profitability of the acquired trade and assets and the enhanced growth prospects for the combined business. None of the goodwill is expected to be deductible for tax purposes.

Siege.gg

Acquisition of Siege.gg

On 8 September 2021 Gfinity PLC acquired trade and assets of Siege.gg, a highly-engaged community for the Rainbow Six Siege game and owner of the leading proprietary statistical dataset in respect of the competitive scene around that game.

Purchase consideration

 
 Initial consideration                              GBP 
 Shares (9,000,000 Ordinary shares at GBP0.0445)    400,500 
 Acquisition cost                                   4,380 
 Total initial consideration                        404,880 
 
 Deferred consideration 
 Contingent consideration at fair value             108,678 
 Total deferred consideration                       108,678 
 
 Total consideration payable                        513,558 
                                                   ======== 
 

Contingent consideration

Contingent consideration is payable based on revenue generated from the acquired assets. The amount payable is calculated at 30% of relevant revenues received in the first and second 12 month periods after the acquisition date, up to a maximum of 1,500,000 across the two-year period. The fair value of the contingent consideration is currently estimated to be GBP108,678 based on forecast revenues at the date of the acquisition.

Net assets acquired

The fair values of the assets and liabilities of the acquired of Megit Ltd as at the date of acquisition are as follows:

 
                                                   GBP 
 Intangible assets: statistical data and domain 
  authority                                        155,989 
 Deferred tax liability                            (34,134) 
 Net identifiable assets acquired                  121,855 
 
 Add: Goodwill                                     391,703 
 
 Net assets acquired                               513,558 
                                                  ========= 
 

The goodwill that arises from the business combination reflects the profitability of the acquired trade and assets and the enhanced growth prospects for the combined business. None of the goodwill is expected to be deductible for tax purposes.

([1]) Adjusted operating loss is before interest, tax, depreciation, amortisation, impairment and the share-based payment expense.

([2]) Adjusted administrative expenses show the underlying operating expenditure of the company, adjusting for the same items as with the adjusted operating loss.

([3]) Adjusted operating loss is before interest, tax, depreciation, amortisation, impairment and the share-based payment expense.

([4]) Adjusted administrative expenses show the underlying operating expenditure of the company, adjusting for the same items as with the adjusted operating loss

([5]) Adjusted operating loss is before interest, tax, depreciation, amortisation, impairment and the share-based payment expense.

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END

IR WPUWAWUPPUCU

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March 30, 2022 02:00 ET (06:00 GMT)

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