SUMO GROUP PLC UNAUDITED HALF YEAR RESULTS 2019
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SUMO GROUP PLC UNAUDITED HALF YEAR RESULTS 2019
01 DISCLAIMER Certain statements included or incorporated by reference within this presentation may constitute “forward-looking statements” in respect of the Group’s operations, performance, prospects and/or financial condition. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions and actual results or events may differ materially from those expressed or implied by those statements. Accordingly, no assurance can be given that any particular expectation will be met and reliance should not be placed on any forward-looking statement. Additionally, forward- looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. No responsibility or obligation is accepted to update or revise any forward-looking statement resulting from new information, future events or otherwise. Nothing in this presentation should be construed as a profit forecast. This presentation does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any shares or other securities in the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendation regarding the shares and other securities of the Company. Past performance cannot be relied upon as a guide to future performance and persons needing advice should consult an independent financial adviser. Statements in this presentation reflect the knowledge and information available at the time of its preparation. Liability arising from anything in this presentation shall be governed by English Law. Nothing in this presentation shall exclude any liability under applicable laws that cannot be excluded in accordance with such laws.
02
INTRODUCTION
H1 19 results in line Strong growth in
Mobile focussed
with expectations Acquisition of headcount to 711 at
Leamington Spa
with significant Red Kite Games in end of August – 20%
studio opened in
H2 weighting as January 2019 increase from
March 2019
previously flagged December 2018
Two Own-IP games Current trading in
Announcement of announced for release: line with
work with 2K at Strong cashflow
• Pass the Punch management
Sheffield and performance YTD
expectations and
Red Kite Games • Dear Esther iOS outlook positive
Appointment of Ian Livingstone as Chairman
03
FINANCIAL HIGHLIGHTS
ALL FIGURES IN THIS PRESENTATION ARE UNAUDITED UNLESS STATED OTHERWISE
Revenue Adjusted gross profit Adjusted gross margin
Utilisation (Group)
excluding royalties
£20.8m £9.8m 46.3% 94.8%
+7.5% +13.7% (H1 18: 43.6%) (H1 18: 93.2%)
(H1 18: £19.3m) (H1 18: £8.6m)
Net cash Contracted/near-contracted
Adjusted EBITDA Cash flow from operations development fees
£5.2m £3.5m £4.3m 94.6% 2019
June 2019
+4.5% (H1 18: £(3.4m) outflow)
(Dec 18 £3.7m) 41.1% 2020
(H1 18: £5.0m) at September 2019
Definition of financial terms shown in the appendix
04
CONSOLIDATED INCOME STATEMENT
H1 19 H1 18 FY 18 YoY growth Notes
Y/e 31 December
£m £m £m
Revenue
Core development fees 20.4 18.9 37.5
Own IP 0.1 0.3 0.4 Snake Pass launched March 2017
FY 18 includes £0.2m recognition of
Royalties 0.3 0.1 0.8 variable consideration under IFRS 15
Total Revenue 20.8 19.3 38.7 7.5%
Includes IFRS 15 adjustment of £0.2m in H1 18
Adjusted revenue 20.8 19.6 38.9 6.1% and FY 18
Adjusted gross profit 9.8 8.6 18.8 13.7%
Gross Margin 44.8% 43.1% 47.6%
Adjusted gross margin excluding royalties 46.3% 43.6% 47.6%
Adjusted EBITDA 5.2 5.0 10.4 4.5%
Adjusted EBITDA margin 25.1% 25.5% 26.8%
Profit / (loss) before tax 1.3 (2.1) (0.9)
05
REVENUE AND GROSS PROFIT
Revenue Gross profit
H1 19 H1 18 FY 18 H1 19 H1 18 FY 18
£m £m £m £m £m £m
Statutory 20.8 19.3 38.7 9.3 8.3 18.4
Customer
revenue included
- 0.3 0.4 - 0.3 0.4
within finance
income
Accrued royalty
not yet received
- - (0.2) - - (0.2)
and contingent
on future sales
Investment in
co-funded - - - 0.5 - 0.2
games expensed
Adjusted 20.8 19.6 38.9 9.8 8.6 18.8
06
EBITDA
H1 19 H1 18 FY 18
£m £m £m
Statutory operating profit / (loss) 1.4 (2.1) (1.1)
Amortisation 0.5 5.0 6.9
Depreciation 1.0 0.5 1.1
Share based payments charge after prior year adjustment 2.0 1.3 3.0
Customer revenue included within finance income - 0.3 0.4
Accrued royalty not yet received and contingent on future sales - - (0.2)
Investment in co-funded games expensed 0.5 - 0.2
Operating lease costs capitalised under IFRS 16 (0.5) - -
Exceptional items (transaction fees) 0.3 - 0.1
Adjusted EBITDA 5.2 5.0 10.4
07
CONSOLIDATED BALANCE SHEET
June 2019 June 2018 December 2018 Notes
£m £m £m
Goodwill and intangibles 23.4 23.4 22.4
Additions include computer hardware £1.1m and
PPE 8.2 2.6 2.5 IFRS 16 right of use asset £5.3m
Deferred tax asset 2.7 1.7 2.0
Trade and other receivables 29.3 18.2 25.2
Cash 4.3 6.5 3.7 No debt. Cash at end August 2019 £8.9m
Trade and other payables (15.6) (11.0) (11.5)
Corporation tax payable (0.7) (0.9) (0.8)
IFRS 16 lease liabilities > 1 year (4.0) - -
Net assets 47.6 40.5 43.5 Positive net tangible assets
08
TRADE AND OTHER RECEIVABLES & TRADE AND OTHER PAYABLES
June 2019 June 2018 December 2018
£m £m £m
Revenue in excess of billings
Contract 1 2.3 5.3 7.8
Contract 2 2.3
Contract 3 - 2.6 -
Contract 4 - - 1.9
Other 1.0 0.5 1.6
Trade debtors* 11.1 2.7 5.9
Work in progress 0.8 - -
VGTR 10.0 5.7 6.3
Other 1.8 1.4 1.5
29.3 18.2 25.2
Trade creditors (6.3) (3.8) (4.6)
Contract liabilities (0.8) (1.0) (0.5)
IFRS 16 lease liabilities > 1 year (1.0) - -
Other provisions (7.5) (6.2) (6.4)
(15.6) (11.0) (11.5)
*Includes £3.5m for Contract 1 for which cash was received 9 July 2019
09
WORKING CAPITAL
£16.0
£14.0
£12.0
£10.0
£m
£8.0
£6.0
£4.0
£2.0
£0.0
Jun-18 Dec-18 Jun-19 Aug-19
Cash Net Working Capital
June 2018 December 2018 June 2019 August 2019
£m £m £m £m
Net contract debtors 10.1 16.9 16.7 11.3
VGTR 5.7 6.3 10.0 5.3
Other debtors 1.4 1.5 1.8 1.0
Trade creditors (3.8) (4.6) (6.3) (2.3)
Other creditors* (6.2) (6.4) (7.5) (6.3)
Net working capital 7.2 13.7 14.7 9.0
Cash 6.5 3.7 4.3 8.9
*Excludes IFRS 16 liability10
CONSOLIDATED CASH FLOW STATEMENT
H1 19 H1 18 FY 18 Notes
Y/e 31 December
£m £m £m
Operating profit / (loss) 1.4 (2.1) (1.1)
Depreciation 1.0 0.5 1.1
Amortisation 0.6 5.0 6.9 Accelerated amortisation in 2018 from 2017
Share based payment charges 2.0 1.3 3.0
Movement in trade and other receivables (4.1) (8.1) (13.7)
Movement in trade and other payables 2.6 - (1.1)
Net cash flow from operating activities 3.5 (3.4) (4.9)
Net finance costs (0.1) - 0.2
Tax paid (0.8) (1.0) (1.7)
Capex (1.6) (1.5) (2.2)
Outflow of financial debt – IFRS 16 (0.4)
Net cash flow 0.6 (5.9) (8.6)11
GUIDANCE / UPDATE
Tax • Tax charge driven by deferred tax on share based payment charge, VGTR and timing of game launches
• Net working capital reduced from £14.7m at 30 June 2019 to £9.0m at 31 August 2019
Working capital
• Expected inflow in 2019
• Now expecting c £4.5m in 2019 on premises and new systems including audio studio and Leeds
Capex
• c £5m in FY 20 including audio studio and Newcastle
• Expect £0.2m EBITDA in 11 months to December 2019
Red Kite Games • Transaction costs £0.1m
• Capital cost of investment low – relocation to Leeds
Foreign • Significant contracted revenue in US $ as previously flagged
Currency • Hedging in place
• Adopted in FY19 using grandfathering , short-term and low-value lease exemptions & modified
IFRS 16 retrospective methodology
• Impact on EBITDA expected to be c £1m : details in appendix
FY 2019 • Expecting significant H2 weighting due to phasing of projects including Own-IP and royalties12
CLIENT AND PROJECT CONCENTRATION
FY 2017 FY 2018 H1 2019
A 1ST 2 PROJECTS 2ND 2 PROJECTS 3RD 3 PROJECTS
B 2ND 1 PROJECT
CLIENT
C 3RD 3 PROJECTS 1ST 3 PROJECTS 1ST 3 PROJECTS
D 3RD 1 PROJECT
E 2ND 2 PROJECTS
6 PROJECTS 6 PROJECTS 8 PROJECTS
58% 53% 65%13
VIDEO GAMES TAX RELIEF
Maintains
Included
H1 2019: £3.7m with Direct
broad
(H1 2018: £3.0m) political
Costs
support14 RECENT GAMES RELEASED AND GAMES OR CLIENTS ANNOUNCED STRATEGIC PARTNERS
15
LIVE PROJECTS
ANNOUNCED UNANNOUNCED
SUMO DIGITAL
SHEFFIELD PUNE, INDIA NOTTINGHAM NEWCASTLE BRIGHTON HUDDERSFIELD LEAMINGTON ATOMHAWK
(THE CHINESE ROOM) (RED KITE GAMES)
275 116 84 51 31 28 13 46
MORTAL KOMBAT
NEW-IP
SPYDER PASS THE PUNCH LITTLE ORPHEUS 11 - DLC
WORK-FOR-HIRE (Focus Home CO-DEVELOPMENT NEW-IP
(Apple) (New-IP) (Apple) (NetherRealm/
Interactive)
WB Games)
MINECRAFT EARTH
NEW-IP NEW-IP WORK-FOR-HIRE
(Microsoft)
NEW-IP CO-DEVELOPMENT WORK-FOR-HIRE
+14 OTHER LIVE
PROJECTS
NEW-IP PORTING WORK-FOR-HIRE INCLUDING:
MULTIPLE AAA
NEW-IP
FRANCHISE
MULTIPLE AAA
LICENSED IP
CO-DEVELOPMENT
Headcount figures are studio based staff at 31 August 201916
CAPITAL MARKETS DAY 2ND JULY 2019
GAME DESIGN & BALANCE SUMO TECHNOLOGY ART IMPLEMENTATION
• “Goldilocks Zone” – neither too • Challenges, experience & • Characters, vehicles, environments
hard nor too easy expertise • Inter-action with physical media
• Player satisfaction & • In-house engine technology
engagement • Starlight, Sumo Engine &
• Design → Implement → Tune Sumo Libraries
• Make change → Gather data • AMP
• Tinker Tool – proprietary Sumo • Cloud Technology
software
• Playtesting / Beta testing
GAME DEV PROCESS
Project initiation → Concept → Prototype → Pre-production → Production → Feature Complete → Content Complete → Post-launch → Project Closedown
• Gated Process17
GROSS MARGIN
Underpinned by:
Strong demand Core tech Cost structure18
ROYALTIES
• Prevalent in development
contracts
Recognise
Promote long-term Align publisher and
importance of • Terms vary
relationships developer interests
developer • Timing of receipt outside
developers control
H1 19 H1 18 FY 18
£’000s £’000s £’000s
Royalties received 168 100 515
Accrued royalty 91 - 250
Reported Royalty 259 100 765
Royalty accrued in H2 18 excluded 250
from FY18 Adjusted EBITDA
50919
OWN-IP
OWN-IP RELEASED OWN-IP ANNOUNCED FUTURE ROYALTIES FROM OWN-IP
iOS20
BOOSTING SUMO’S CREATIVITY
CONCEPT
TEAM
PROTOTYPING
REGULAR
GAME JAMS21 SUMO DIGITAL AND ATOMHAWK STUDIOS NEWCASTLE VANCOUVER BRAND STUDIOS CITY STUDIOS
22
HEADCOUNT, RECRUITMENT AND UTILISATION
Headcount 31 December 2018 30 June 2019 31 August 2019
Direct 488 560 588
Indirect 104 119 123
Total 592 679 711
Recruitment Utilisation
• Proven track record of out performing targets • Based on available billable Man Months
• Attractions of Sumo Digital include multiple • Factors in annual holiday entitlement and reflects
platforms, genres & technologies the delivery model - very little administration or
• Multiple locations & talent pools business development responsibilities for most
• Strong relationships with universities • Aim for 95% utilisation – achieved 94.8% for the
group in H1 19 (93.2% in H1 18 and 94.7% in FY18)
• Incentive structures
• Use contractors for specialist skills or capacity –
• Attrition rates running at acceptable levels – 6.4% can be up to 10% of revenue – 4.8% of revenue in
YTD to August in UK and 8.3% in India H1 19 (FY18 : 4.9%)23
THE MARKET AND GROWTH DRIVERS
2019 2022
$152BN $196BN AVERAGE AGE 34*
PLAYSTATION
E-SPORTS
SWITCH
MOBILE
XBOX
PC 45% FEMALE*
VR
APPLE ARCADE TAX INCENTIVES
GOOGLE STADIA UK UNIVERSITIES
Sources: Newzoo, ESA, UK Government, IDC, British Council, UKIE, Deloitte, Statista, *in the US24
STRATEGY
Accelerated organic growth
• Headcount growth achieved across 9 studios
• New studio locations UK, India & Europe since IPO
• Leverage concept creation opportunities while keeping relatively
low risk model
H1 2019 – organic revenue growth 2.0%
M&A
• Atomhawk: June 2017
• CCP Newcastle: January 2018
• The Chinese Room: August 2018
• Red Kite Games: January 2019
H1 2019 – revenue growth including acquisitions 7.5%
• New UK studio locations actively being explored
• Strong acquisitions pipeline25
SUMMARY AND OUTLOOK
• H1 2019 results in line with management expectations following
successful transition to new projects
• Increased investment in Own-IP on low risk basis
• Acquisition of Red Kite Games
• Opened Leamington Spa studio focussed on mobile games
• On track to deliver significant revenue and profit growth in FY 19
• Investing in people and systems for future growth
• Strengthening strategic partnerships
• Strong pipeline of opportunities in growing market
• Board confident in the prospects of the Group in the near term and beyond
WELL POSITIONED TO DELIVER THE GROWTH STRATEGY26 APPENDICES
27 FINANCIAL CALENDAR Announcement of half-year results 26 September 2019 Financial year end 31 December 2019 Preliminary announcement of full-year results April 2020 Publication of Annual Report and Accounts May 2020 Annual General Meeting June 2020
28
THE TEAM
Carl Cavers Paul Porter David Wilton
Co-Founder & Chief Executive Officer Co-Founder & Chief Operating Officer Chief Financial Officer
• Co-founded Sumo Digital in 2003 • Co-founded Sumo Digital in 2003 • Big Four qualified chartered accountant
with c.30 years post-qualified
experience as Finance Director, Non
• Over 20 years of industry experience • Over 25 years of industry experience Executive Director and Consultant.
having previously been VP of having previously been Head of Core Previously worked in M&A with
Development at Infogrames Technology at Gremlin Interactive Rothschild
• 2015 recipient of the TIGA Most • Previously Managing Director of Sumo • Experience of PLC and Private Equity
Outstanding Individual Award Digital roles including as Group Finance
Director of WYG plc and as Non
• Led secondary buy-out with Perwyn in • Appointed COO in April 2019 Executive Director and Chair of the Audit
2016 Committee of Sweett Group plc
• Appointed CFO in 201729
SUMO’S REVENUE MODEL
1430
THE SUMO CORE DEVELOPMENT REVENUE MODEL
Visibility of development fees with upside from back-end royalties
Concept & Pre- Production Production and Finalisation Downloadable Content & Games as a Service
Contracted Development Fees – Paid on a 4-6 week development cycle based on milestones
Royalties
Illustrative Project
1,000
900
800
700
Revenue and cost profile (£’000)
600
500
400
300
200
100
T0 T1 T2 T3 T4 T5 T6 T7 T8 T9 T10 T11 T12 T13 T14 T15 T16 T17 T18 T19 T20 T21 T22 T23 T24 T25 T26 T27 T28 T29 T30 T31 T32 T33 T34 T35 T36 T37 T38 T39 T40 T41 T42 T43 T44 T45
Revenue – Development Fees (LHS) Revenue – DLC (LHS) Revenue – Royalties (LHS)
Sumo control production and delivery… … and share in upside on strategic projects31
NOW HAVE THREE TYPES OF CONTRACT
*NEW*
Original concept creation
Contract type Game Development Own IP developed in partnership
(Turn Key or Co-Dev)
with third party
Co-funded with or fully funded by
Funding Publisher Sumo or third party
partner
Publisher
Control of IP Publisher Sumo
(Sumo may retain legal ownership)
Milestones payments plus royalties Game sale revenues or guaranteed
Payment model as earned royalty (if developed by a third party)
Milestones and royalties
Development fees recognised using
estimate of contract margin & Recognise revenue as earned or
percentage of completion guaranteed royalties as contractual Development fees as for publisher
obligation triggered funding
Accounting Royalties earned subject to IFRS 15
recognition principles Capitalise development costs as Sumo investment expensed as
intangible asset with regular incurred
Development costs expensed as impairment reviews (IAS 38)
incurred
0632
KEY RISKS
Sumo has consistently grown
Strong growth sector with limited headcount with active recruitment in
RECRUITMENT & RETENTION supply of high quality talent several talent pools & relatively low
attrition
UK VGTR committed to 2023 and has
demonstrably created jobs and tax
£3.7m in H1 2019 (H1 2018: £3.0m)
TAX INCENTIVES (VGTR IN UK) included within direct costs
revenue
Tax incentives in many other countries
including Canada, US and France
Relatively small number of publishers Strong strategic partnerships with
CLIENT CONCENTRATION who are often very large global large publishers and winning new
corporations clients including Apple33
VIDEO GAMES TAX RELIEF
Gaming tax credits make the UK more competitive whilst As the video game developer, Sumo is eligible to claim the VGTR
increasing HMRC receipts
• Sumo sets up SPVs to maximise and ring fence the VGTR
• VGTR introduced in 2014 as part of Creative Sector Tax relief and we believe
has cross-party support • Moved to short accounting periods for SPVs to improve cash flows
• The EU commission announced in 2017 that the VGTR scheme will continue • Agree the basis of VGTR treatment with customers
until at least 2023
• Provides tax relief at the lower of 100% EEA core expenditure (designing, • VGTR (which is typically around 20% of contract value) can benefit Sumo in
producing and testing), or 80% total core expenditure the following ways:
• Since April 2014 £230m paid for 770 claims on 480 video games • Receive full cash flow benefit
• To qualify for VGTR a game must satisfy three conditions:
• Reinvest to achieve improved back-end royalty deal
• Intended for supply to general public
• Pass to customer for increased contract margin
• Passes a points based British cultural test
• At least 25% core expenditure on the game must arise in the EEA • Majority of current Sumo games qualify for VGTR and Sumo is the UK’s
largest developer
• Similar tax incentive arrangements in place in other countries including
Canada, the US and France and being considered in Germany, the Republic
of Ireland and Poland
BFI report in October 2018 shows in 2016:
• Total development spend in video games sector was £1.25bn of which
£390m accessed VGTR
• For every £1 spend, the UK has seen an additional £4 of gross value
added and VGTR has helped generate c9,170 FTEs34
VIDEO GAME ECOSYSTEM
Hardware Royalty/
Licence Fees Manufacturing fee Hardware Revenue Game sales
Middleware/Tool Hardware Retail and
Game Developers Game Publishers Consumer
Providers manufacturing Distribution
Prepaid Development Fees & Incremental Royalty Software Revenue
Game Developers
IN-HOUSE DEVELOPERS INDEPENDENT THIRD PARTY DEVELOPERS35 STUDIO TIMELINE Over 60 Games released to-date and many more on the way... 2004 2008 2012 2016 2019 -
36
ANALYSTS AND SHAREHOLDERS
The analysts who have published research on Sumo The shareholders who own Sumo
Number of
Significant shareholders % Holding
shares
Mike Allen & Perwyn Bidco (UK) Limited 41,170,961 27.3%
Damian Dunn Patrick O’Donnell Andy Bryant
BlackRock Inc 14,395,963 9.6%
Directors & related holdings 14,141,475 9.4%
James Lockyer Benjamin May Katie Cousins
Liontrust Investment Partners LLP 8,000,000 5.3%
Swedbank Robur Fonder AB 7,807,391 5.2%
Ken Rumph Peter Smedley Steve Robertson Schroder Investment Management 6,500,000 4.3%
Aghoco 1337 Limited (as trustee of the
4,618,735 3.1%
Sumo Group plc EBT)*
Also comments from
Total number of shares in issue 150,578,159
Kevin Ashton
Fully diluted share capital 157,861,430
*Includes 6,601,907 shares owned by Carl Cavers and 6,202,091 shares owned by Paul Porter37
SHARE BASED PAYMENTS
2018 2019 2020 2021 Total
Management incentive schemes Actual
£m £m £m £m £m
Nil cost options at or after IPO 0.8 0.4 - - 1.3
LTIP awards 2.1 3.4 3.4 1.2 10.1
Share Incentive Plan with 3:1 matching and 200 free
0.1 - 0.1 - 0.2
shares – launched July 2018
Total 3.0 3.8 3.4 1.2 11.6
Redesigned bonus scheme introduced from 2018
• SMART objectives
• Broader and deeper participation – additional c.50 senior employees provided with specific targets including Operating Board, Studio Directors, Discipline
Directors and Development Directors, some of whom had smaller discretionary bonuses in the past
• Scope for self-funded element for outperformance38
IFRS 16: LEASES
Impact on
Pre IFRS 16 Movement Post IFRS 16
• Adopted in FY19 using the modified H1 19
transition
in the year H1 19
1 Jan 19
retrospective approach
£m £m £m £m
• Right of use assets recognised as if IFRS16
has always applied Income statement
Gross profit 9.3 - - 9.3
• Taken advantage of the short term and low
Operating expenses excluding depreciation,
value exemptions amortisation & exceptional items
(6.5) - 0.5 (6.0)
• This resulted in the recognition of a right of EBITDA 2.7 - 0.5 -
use asset of £5.2m on transition and a lease Depreciation, amortisation, exceptional items & net
(1.5) - (0.5) (2.0)
liability of £5.4m, offset by the release of a finance costs
lease liability of accrual for £0.2m Profit before taxation 1.2 - 0.0 1.3
• The impact of the transition on EBITDA for
the full year 2019 is expected to be an Balance sheet
increase of £1.0m Assets 63.1 5.15 (0.36) 67.9
Liabilities (15.5) (5.16) 0.36 (20.3)
Net assets 47.6 (0.01) 0.00 47.6
The impact on the H1 19 accounts is as follows:
Cash Flow
Cash generated from operating activities 3.0 - 0.51 3.5
Tax and interest cash flows (0.8) - (0.07) (0.9)
Cash generated from financing and investing
(1.5) - (0.44) (2.0)
activities
Net increase in cash 0.6 - - 0.639
RECONCILIATIONS
Unaudited H1 19 Adjustment Underlying H1 19 Unaudited H1 18 Adjustment Underlying HY 18
£m £m £m £m £m £m
Revenue 20.8 - 20.8 19.3 0.3 19.6
Gross Profit 9.3 0.5 9.8 8.3 0.3 8.6
Operating expenses excluding depreciation, amortisation &
(6.0) - (6.0) (4.9) - (4.9)
exceptional items
Customer revenue included within finance income - - - 0.3 (0.3) -
Investment in co-funded games expensed 0.5 (0.5) - - - -
Operating lease costs capitalised under IFRS 16 (0.5) - (0.5) - - -
Share based payments 2.0 - 2.0 1.3 - 1.3
Adjusted EBITDA 5.2 - 5.2 5.0 - 5.0
Depreciation (1.0) - (1.0) (0.5) - (0.5)
Amortisation of software (0.1) - (0.1) (0.1) - (0.1)
Net finance costs (0.2) - (0.2) 0.1 (0.1) (0.1)
Customer revenue included within finance outcome - - - (0.3) 0.3 -
Investment in co-funded games expensed (0.5) 0.5 - - - -
Operating lease costs capitalised under IFRS 16 0.5 - 0.5 - - -
Adjusted profit before tax, share based payment charge,
exceptional items and amortisation of customer contracts and 4.0 - 4.5 4.2 - 4.3
customer relationships
(4.9)
Amortisation of customer contracts and customer relationships (0.5)
Share based payment charges (2.0) (1.3)
Operating expenses – exceptional (0.3) -
Profit / (loss) before taxation 1.3 (2.1)40 DEFINITIONS 1. Adjusted revenue is stated after inclusion of £0.3m of customer revenue included in finance income as required by IFRS 15. No adjustment has been made for H1 19. 2. Adjusted Gross Profit is stated after the adjustments to revenue included in note 1 above and excluding expenses incurred on investment in co-funded games (H1 19 £0.5m, H1 18 £Nil) 3. Adjusted gross margin excluding royalties is calculated as adjusted gross profit excluding royalty income, as a percentage of adjusted revenue excluding royalty income 4. Adjusted EBITDA is profit before tax stated after the adjustments in notes 1 and 2 above and before finance costs, depreciation, amortisation, share based payment charges, exceptional costs of £0.3m (H1 18: nil) and the impact of IFRS 16 on operating expenses 5. Adjusted profit before tax is stated after adjustments included in notes 1 and 2 above, excluding share based payment charges, exceptional costs and the amortisation of customer contracts and relationships of £0.5m (H1 2018: £5.0m).
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