Gfinity plc (AIM: GFIN), a world-leading esports provider, announces an update on half year performance and outlook for the full year, ahead of the publication of unaudited interim results for the six month period ended 31 December 2019, expected to be announced on 4 March 2020.
Trading through the first half of the financial year has continued broadly in line with management’s expectations. Gfinity expects
to report H1 revenue of circa £3.5 million, which is lower than the same period last year (H1 2019: £4.4m) primarily due to the
transition away from low margin Elite Series revenues, as explained below. Significant growth in higher margin revenue streams during H1 are expected to deliver a circa 300% increase in gross profit to £2.1 million (H1 2019: £0.5 million) whilst continued cost discipline is expected to further reduce adjusted operating loss* for the period to £2.4 million (H1 2019: £4.4 million).
Full year outlook
Over the past year, Gfinity’s leadership team has refocused the business on a Strategic Client Management model, which has helped to establish a robust pipeline of new opportunities. The Group continues to improve its revenue mix and margin as it shifts the profile of its work towards own community revenues, strategic programme consulting and higher margin content
creation, which supplement the end-to-end esports programmes the Group continues to deliver for its major partners.
This has been complemented by changes to the Group’s leadership team and wider commercial team to support the delivery of further growth.
The execution of this strategy has progressed well and the Group is committed to quickening the pace of its implementation. To facilitate this, the Board has taken the decision not to progress a material opportunity for a new contract with a customer for whom it has recently completed a major project.
This decision will enable Gfinity to pursue the strong pipeline of new
opportunities which the Board firmly believes will yield stronger company benefits for the financial year 2021 and beyond.
As a consequence, the Board now expects revenue for the year to 30 June 2020 to be broadly in line with the 2019 financial year, but with significantly improved margins compared with current market expectations.
The implementation of additional cost saving measures combined with a reprofiled client business base focused on higher margin activities, means that the Group still expects to deliver on current market expectations for full year adjusted operating loss.
The Group is also in active discussions with several potential strategic investors in the US and Europe that would create new opportunities and the further scale required to exploit the rich opportunities in the esports sector.
There are 2.2 billion gamers globally. Esports and competitive gaming continues to grow with projected esports market revenues predicted to reach $1.8 billion by 2022**.
The Group remains well positioned to benefit from existing and future opportunities in this growing marketplace.
Commercial leadership changes
To drive the Group’s aggressive growth objectives, a number of changes have been made to the commercial team and they come into effect immediately.
· John Clarke, current Gfinity Global Brand and Marcomms Officer, has now been appointed as Global Commercial and Brand Officer. John joined Gfinity as a Non-Executive Director in September 2018 and was appointed Global Brand and Marcomms Officer in May 2019.
His leadership skills combined with his communication, marketing and commercial experience derived from his time in leading international roles at The American Express Company and HEINEKEN N.V. has added significant value to the business.
· Dave Lipp has been appointed as Head of Sports and Media Rights. An experienced leader with a proven track record in transformational commercial growth, Dave has extensive experience in the media, sports, gaming and entertainment sectors. He has held senior positions at NBC Universal (NBCU Comcast), Sky and Sony Pictures.
* Adjusted operating loss is earnings before interest, tax, depreciation, impairment, amortisation, share in loss in associates and the share-based payment expense, prepared on a consistent basis as in prior guidance prior to the reclassification of any expenditure under operating leases to depreciation in line with the requirements of IFRS 16
** Source: Newzoo Global Esports Market Report (2019)