Gfinity (AIM:GFIN ) FY20 results were reviewed as a year of “transition” as the group strengthened its market positioning and slashed its losses.
In March 2020, Gfinity announced a major restructuring which has enabled it to reduce its operating cost base of the business by more than 50% over a 12-month period. The majority of this has already been achieved, with further small amounts to be realised through FY21.
Gfinity said the impact of these changes can already be seen in its FY20 results.
Financial Highlights
- 167% Gross Margin Expansion - Higher value and higher margin revenue streams drove 167% improvement in gross profit to £2.8m (FY19: £1m).
- 50% reduction in Overheads - the esports and gaming provider cut its cost base following a major restructuring of the Business in March
- 36% Reduction in Operating Losses - Operating losses reduced to £5.5m (FY19: £8.6m).
The positive financial performance was driven by higher value activities, including, inter alia, revenues driven through Gfinity's own Digital Media Group, content creation activities for clients like Amazon and BT Sport and delivering major esports programmes for organisations including Formula 1.
Operating Highlights
During the year the Company announced strategic agreements with global broadcasters for the V10 R-League as part of the multi-year deal signed with Abu Dhabi Motorsport Management in May, and new opportunities in the MENA region.
“We are delighted that our sharpened focus on three core areas is now driving improved financial performance and we have significantly strengthened our market positioning to create an exciting platform for future growth,” said John Clarke, Chief Executive of Gfinity.
He added, “Our commitment to building our own community as part of the Gfinity Digital Media group has gone from strength to strength and we have created new partnerships, designing and delivering ideas that capture the imagination of gamers around the world.”
Outlook
Looking ahead, Gfinity said it continues forward with confidence at a time when market dynamics are rapidly, and permanently, changing ‘in favour’ of the Company's offering.
“We work in one of the most exciting and fast-growing industry sectors in the world, and I am excited about the opportunities for Gfinity as it continues to deliver against its strategy and enters its next phase of growth,” said Clarke.
Gfinity expects to see a further reduction in operating loss in FY21, as its revenue streams continue to grow, the full year impact of cost reductions delivered in FY20 are reflected and further reductions in the cost base are made as existing lease commitments come to an end.
Following the significant cost reduction announced in March 2020, this leaves the business ‘well capitalised’ to deliver against the market opportunities in the growing esports market.
Significant growth and expansion of the group’s newly launched digital media group, Gfinity Digital Media means it is on target to generate revenue of over £2m in financial year 2021.
The Company added that a strategic review of options is underway in order to explore all options to capitalise on market opportunities and deliver shareholder value.
Shares in GFIN have soared over 42% during the past month from 2.8p on 1 October to open at 4.0p following publication of the FY20 results.
3 Reasons to Follow GFIN
The esports industry represents an exciting investment opportunity for Gfinity which is the only established UK listed company in the esports sector. In 2018, global esports revenue grew by 38%, with a projected esports market value of $1.5bn by 2020.
- Earlier this month, Gfinity launched a formal sales process as part of a strategic review which it said will help it continue its current pathway towards profitability forecasted for Q1 2021.
- Gfinity has seen three major progressions with regards to joint ventures and partnerships, including partnerships with BT Sport, ViacomCBS and Abu Dhabi Motorsport Management.
- The group said it is on track to deliver target revenues for this financial year of around £2m, leading the Company towards its maiden profit.
GFIN is currently technically in an offer period post the announcement of its strategic review on 9 October 2020.
‘While the Company continues on its current pathway towards profitability, at this point in time it is important to all its stakeholders to ensure that it has explored all strategic options to capitalise on the potential market opportunity,’ Gfinity noted.