TM17 Team17 Group Plc

17 September 2024

Team17 Group plc

("Team17" or the "Group")

Half Year Results

Back catalogue and first-party IP growth underpins a strong trading performance across the Group

Team17, a leading global independent ("Indie") games developer and publisher of premium video games and apps, is pleased to announce its unaudited results for the six months ended 30 June 2024 ("H1 2024" or the "period").

H1 2024 financial summary:

H1 2024 operational highlights

·    Strong organic growth of 11% delivers record revenues of £80.6m (H1 2023: £72.4m).

·    The Group launched 9 new games which included 3 new apps during the period (H1 2023: 8) while 4 existing games were released on additional platforms (H1 2023: 2).

·    The Group's first-party IP grew 25%, now representing 42% of total revenues (H1 2023: 37%).

·    Continued exceptional lifecycle management delivered back catalogue revenue growth of 30%, significantly ahead of the sector, accounting for 92% of Group revenues (H1 2023: 79%)

·    The new release market across H1 2024 has continued to remain challenging, contributing to the decision to make a combined £4.6m impairment across a small number of titles (H1 2023: nil) for FY24 and FY25 release

·    The Group saw strong overall revenue performance as well as new releases across each of its divisions:

o  Games Label revenues grew 9% to £51.3m (H1 2023: £47.1m), with strong back catalogue sales growth of 54%, and significant first-party sales growth of 33%. Games Label released 4 new titles in H1 2024: Border Bots, Classified France '44, Undead Inc and Autopsy Simulator. Hell Let Loose was launched on Game Pass and 15 (H1 2023: 20) new downloadable content ("DLC") packages were released in the period. In line with the decisions made following the strategic review undertaken within Games Label in H2 2023, the team is refocused on its core Indie business model.

o  astragon delivered 13% revenue growth to £18.5m (H1 2023: £16.4m), underpinned by strong performances from Construction Simulator and Police Simulator, driving an increase in first-party sales of 17%. astragon launched 2 new titles: Construction Simulator 4 (on Switch and mobile) and Lawn Mowing Simulator (on Switch) with 3 existing titles launched on additional platforms. 5 new DLC packages were released across the Police Simulator and Construction Simulator franchises.

o  StoryToys revenues increased 23% to £10.9m (H1 2023: £8.9m), driven by 242 app updates over the period (H1 2023: 134), including updates on the 3 newly launched apps: Sesame Street Mecha Builders, Thomas & Friends™: Let's Roll and LEGO® DUPLO® Peppa Pig. Active subscribers increased to over 350,000 (H1 2023: over 310,000).

·    The Group remains committed to its strategy to accelerate growth, with a renewed focus on its Indie strengths. This is evidenced by the further increase in first-party IP and evergreen franchise titles, improving profitability as a result of tighter cost controls, and a sharpened greenlighting process.

Outlook

·    Following the Group's H1 2024 results and performance so far in H2 2024, the Board is confident of delivering full year results in line with market expectations for FY 2024.

·    New release revenues are expected to be higher in H2 2024, in part driven by the anticipated physically distributed third-party new releases at astragon. While H1 2024 did benefit from the favourable phasing of license deals, together with strong summer sales and social media support on key titles, the Group's back catalogue is expected to deliver another good performance in H2 2024.

·    Due to the timing of new releases and market conditions, the Group expects to deliver a more evenly balanced adjusted EBITDA performance across the first and second half of FY 2024 than in previous years.

·    Management remains excited about the Indie gaming sector, the first-party and third-party games currently being greenlit, signed and developed across the Group and is confident that the initiatives underway will enable accelerated revenue growth and profitability over the medium term.

Steve Bell, CEO of Team17, commented:

"I am pleased with the Group's performance during the first half as we continue to focus on driving sales through first-party IP titles and across our extensive portfolio, with strong demand for our games and apps across the Group.

"I'd like to thank Ann, Tim, Julia, Emmett and the rest of the leadership team for their support in leading our Group, as well as all of our people and development partners. Their passion, dedication and knowledge are fundamental to making our business a success, and I am grateful to all for their contribution.

"Looking ahead, there is significant growth potential in our core markets - Indie, edutainment and working simulation games. Our focus on creating a portfolio of games and apps with evergreen longevity, and leveraging our excellent lifecycle management capabilities, ideally positions us to capitalise on this and build a lifetime of play within our growing portfolio and player base."

Footnotes:

¹ 2023 revenues and margins have been restated for platform revenue recognition. Due to a change in accounting policy, revenue from digital sales through Apple and Google app stores is now recognised gross of any platform fees charged where historically the net amount was recognised. For these platforms only, the platforms are deemed to be an agent in the transaction under IFRS15, this change has no impact on profits in either the current or prior year, but does impact both gross margin and adjusted EBITDA margin percentages

² Adjusted EBITDA reflects the EBITDA of the Group in a steady state, without the impact of acquisition-related costs which vary year on year based on acquisition activity. In addition, we include the impact of amortisation and impairment of development costs as this reflects the primary costs incurred by the Group in generating revenue

³ Operating cash conversion is defined as cash generated from operating activities adjusted to add back payments made to satisfy pre-acquisition liabilities recognised under IFRS 3 "Business Combinations", divided by earnings before interest, tax, depreciation and amortisation ("EBITDA")

Analyst and institutional investor webcast

A presentation for analysts and institutional investors will be held on Tuesday, 17 September 2024 at 8.30 a.m. BST in London. To register for this event, or to join the live stream on the day, please contact Vigo on team17@vigoconsulting.com.

Retail investor webcast

A webcast for retail investors will be held on Friday, 20 September 2024 at 1.00 p.m. BST. The presentation will be hosted on the Investor Meet Company platform. Questions can be submitted pre-event via the Investor Meet Company dashboard up until 9.00 a.m. the day before the meeting or at any time during the live presentation.

Investors can sign up for free and add to meet Team17 via the following link: https://www.investormeetcompany.com/team17-group-plc/register-investor

Enquiries:

About Team17   

Team17 Group plc is a leading global developer and publisher of video games entertainment to a broad audience. The Group includes a games entertainment label and creative partner for Indie developers, a developer and publisher of educational apps appealing to children under the age of eight, and a working simulation games developer and publisher.

Visit www.team17.com for more info.  

Operational review

Introduction

The Group has traded strongly in H1 2024, delivering double digit revenue and adjusted EBITDA growth, with positive contributions across the divisions.

The Group has continued to focus on driving sales through its extensive back catalogue, and ensuring new titles have the maximum chance of commercial success by deploying flexible marketing strategies to drive discoverability of our games. The strength of the back catalogue performance in H1 2024 has again demonstrated the Group's continued success and expertise in lifecycle management, franchise building, first-party IP and third-party IP management, all of which underpin stable and scalable revenue streams.

The new release market across H1 2024 has been extremely competitive, with 8,410 titles released on Steam alone in the period, 26% more than in H1 2023, with data also suggesting that consumers are prioritising spending on games released in prior years. This has unfortunately resulted in the impairment of a small number of FY24 and FY25 titles in the period. Despite this, the strong adjusted EBITDA growth is a testament to the Group's portfolio management and improved cost discipline. 

The Group has made steady progress against its stated strategy to accelerate growth alongside improving profitability and return on investment ("ROI"), which is evidenced by a renewed focus on first-party IP and evergreen franchise titles, as well as tighter cost controls. Games Label has sharpened its greenlight process to ensure games have the right investment profile and that it has the appropriate skillset to promote them accordingly. In addition, a number of initiatives have been introduced to strengthen the Group's internal structure, which has put it in a stronger position to leverage attractive acquisition opportunities as they arise, as well as foster greater collaboration between both teams and divisions.

Group Financial Performance

Revenues in H1 2024 grew 11% to a record £80.6m (H1 2023: £72.4m¹). This pleasing trading performance is underpinned by strong back catalogue sales, which grew 30% to £74.3m (H1 2023: £57.1m), in particular driven both by the Group's established first-party IP as well as third-party titles launched in 2023. In a competitive new release environment, the Group delivered revenues from new releases of £6.3m, against a tough comparator (H1 2023: £15.2m) which included the highly successful break-out title, Dredge. First-party titles performed particularly well in H1 2024, with revenues up 25% compared to H1 2023, now accounting for 42% of Group revenues (H1 2023: 37%), while third-party revenues also delivered growth, up 4%.

Revenues improved across each division, with Games Label revenues up 9% to £51.2m (H1 2023: £47.1m), astragon revenues up 13% to £18.5m (H1 2023: £16.4m) and StoryToys continuing its growth performance, delivering revenues up 23% to £10.9m (H1 2023: £8.9m).

Group gross profit increased 9% to £32.9m (H1 2023: £30.2m). The margin performance was positively impacted by lower expensed development costs year-on-year resulting from a combination of studio cost restructuring in H2 2023 and ongoing tighter cost controls on development spend. This was offset by higher development cost amortisation, including £4.6m (H1 2023: nil) of impairment charges across select titles following the lower-than-expected performance of new releases in H1 2024 and a more prudent view of the H2 2024 and FY 2025 new release market. Royalties as a percentage of sales remained in line with the prior year at 30.7%, with the benefit from higher first-party IP title sales offset by strong performance on certain third-party titles with a higher royalty payment profile.

Administrative expenses were £20.8m (H1 2023: £21.7m) and include £7.2m of acquisition-related adjustments (H1 2023: £6.9m) which are outlined in the table below.  The movement in acquisition-related adjustments is impacted by a reduction in contingent consideration charges. This is offset by changes in amortisation charges associated with reassessed and subsequently increased acquired intangible assets in astragon as outlined in the FY 2023 Report and Accounts, as well as acquisition-related management incentive payments in the period which were nil in the same period in the prior year.

The reduction in the underlying administrative cost base predominantly reflects lower marketing costs specifically within Games Label where these have now returned to historic levels as a percentage of sales. Following the restructuring within Games Label in H2 2023, overall headcount at the period end was 352 (H1 2023: 438). This is modestly above the level at 31 December 2023 (348), due to a headcount increase at StoryToys offsetting the reduction within Games Label. Attrition rates within the period fell towards prior levels. While Games Label staff costs are now lower than the previous year, Group staff costs rose year-on-year due to acquisition-related management incentive payments, along with increased staff costs in other parts of the Group.

Overall, despite the impairment charge in the period, the positive revenue and gross profit performance combined with lower administrative costs led to a 40% increase in operating profit to £12.2m (H1 2023: £8.5m). Adjusted EBITDA² increased 18% to £19.4m (H1 2023: £16.5m) with an adjusted EBITDA margin of 24.1% (H1 2023: 22.8%¹).

Alternative Performance Measures adjustments table

Earnings per Share for the period increased 76% to 6.9 pence (H1 2023: 3.9 pence), reflecting higher operating profits as well as significantly higher interest income and a lower effective tax rate. Adjusted Earnings per Share (adding back share-based compensation costs, acquisition-related costs and adjustments) increased 17% to 10.1 pence (H1 2023: 8.6 pence), which the Directors believe better reflects the Group's underlying performance in the period.

Operating cash conversion³ was slightly lower in the period at 109% (H1 2023: 132%), primarily due to a lower net working capital inflow. Cash and cash equivalents at the end of the period increased to £54.3m (H1 2023: £45.2m), due to lower acquisition-related payments in the period of £5.0m (H1 2023: £12.4m) and lower capitalised development costs, which fell to £11.6m (H1 2023: £18.3m) due to new investment limits within Games Label as well as the phasing of development project spend, of which Games Label accounted for £5.4m, astragon £4.6m and for StoryToys £1.4m.

Games Label

As a result of the strategic review undertaken within Games Label in H2 2023, the business has refocused on its core Indie model. This is the founding strength of the business and results in unrivalled knowledge in delivering successful franchises that continue to generate significant revenues over many years. Games Label remains focused on building successful franchises, alongside launching both first-party and third-party IP.

Revenues grew 9% to £51.3m (H1 2023: £46.9m¹), driven by back catalogue sales which increased an impressive 54%, and first-party sales which increased 33%. The Overcooked! franchise enjoyed strong sales thanks to focussed marketing activity and lifecycle management. New additions to the back catalogue including Dredge, Blasphemous 2 and Trepang² also recorded a strong performance. Games Label revenues also benefitted from the successful Steam publisher sale in the run up to the Steam summer sale as well as favourable phasing of license deals.

Games Label released four new titles in H1 2024: Border Bots, Classified France '44, Undead Inc and Autopsy Simulator. Hell Let Loose was launched on Game Pass and 15 new downloadable content ("DLC") packages were released in the period (H1 2023: 17).

So far in H2 2024, three new titles have been launched: Conscript, Thalassa Edge of the Abyss and Warcana. Dredge: The Iron Rig DLC was also released in August, further extending the success of the popular 2023 title.  A number of additional titles are expected to launch in H2 2024, including the Worms Armageddon Anniversary Edition and the enhanced update of Autopsy Simulator, focusing on simulation game play, also being launched on console.

Despite the challenging new release market, the positive reviews from and engagement with the community, along with planned updates for some of these titles, provide an opportunity for improved future performance within the back catalogue, driven by the team's proven lifecycle management expertise.

Looking further ahead, management is confident about both the continued strength of the Indie games market overall and Games Label's position within that market. The pipeline of first-party and third-party games currently being greenlit, signed and developed for FY 2025 and beyond looks very promising, and the team is focused on implementing innovative marketing models to give our games the best possible profile and opportunity for successful launch.

astragon

astragon delivered a positive first half revenue performance with growth of 13% to £18.5m (H1 2023: £16.4m¹), underpinned by the ongoing strong performances from Construction Simulator and Police Simulator, driving an increase in first-party sales of 17% in the period and further highlighting the attraction of the working simulation gaming segment as well as  astragon's ability to develop strong first-party IP franchises and drive steady back catalogue sales.

astragon launched two new titles: Construction Simulator 4 on Switch and mobile (part of the successful first-party IP franchise) and Lawn Mowing Simulator on Switch (a third-party publishing title). Additionally, astragon saw three titles launching on additional platforms, including ABRISS and Tram Simulator on console, and Howl on mobile and console.

In addition to the new releases, four new DLC packages and one Year-2 season pass were released and well received across the Police Simulator and Construction Simulator franchises which continue to be leading first-party IP titles within astragon and the Group.

Planned new releases in H2 2024 include Police Simulator on Switch, as well as the much-anticipated next release of Farming Simulator for which astragon will provide the physical distribution within Germany.

StoryToys

StoryToys delivered another record performance, outperforming the edutainment segment as a whole with revenues up 23% to £10.9m (H1 2023: £8.9m¹). StoryToys continues to build its reputation as a leading and trusted partner for brands looking to expand into the edutainment space. 

In the first half of the year, StoryToys launched 242 app updates (H1 2023: 134) across the increased number of titles, including LEGO® DUPLO® WORLD, LEGO® DUPLO® MARVEL-, Disney Coloring World, Barbie Color Creations, and Hungry Caterpillar Play School.

Furthermore, StoryToys published three new apps in the period the result of new brand agreements and contract extensions with existing partners: Sesame Street Mecha Builders, Thomas & Friends™: Let's Roll and LEGO® DUPLO® Peppa Pig, the latter another example of a leading brand choosing to partner with StoryToys to expand their offering in the edutainment space.  Thomas & Friends™: Let's Roll was designed in conjunction with an autism specialist, building on StoryToys' reputation for developing apps that promote inclusivity. As is typical of these apps, we expect sales to continue to build in the coming years.

Total subscriptions and renewals have continued to trend upwards in H1 2024, with StoryToys now boasting over 350,000 active subscribers (H1 2023: over 310,000).

StoryToys was proud to be included in The Sunday Times "Best Places to Work" 2024 list, one of only 35 companies in Ireland to be recognised.

Looking ahead, StoryToys will continue to grow existing licensing relationships in addition to pursuing opportunities and, where appropriate, to further expand its network of global license partners.

Strategy and Key Priorities

In the FY 2023 results, announced in April 2024, CEO Steve Bell communicated an action plan to accelerate growth and improve profitability and ROI. The Group is making good progress on these key priorities with the full impact expect to be realised in future periods.

Accelerating growth:

·    Double down on Indie focus: The Indie segment offers great opportunities to Games Label due to its faster and more innovative growth, differentiated and more affordable proposition for gamers, and lower risk ROIs compared to the AA/AAA segment. All new games signed in the current year to date are firmly within this Indie segment.

·    Prioritise evergreen franchises to drive back catalogue: The Group's core established franchises provide the most visible and reliable revenue streams. This was demonstrated by the 30% growth in back catalogue revenues in the period, driven by strong performance in key franchises, including Overcooked!, Hell Let Loose, Golf With Your Friends, Construction Sim and Police Sim, supported by a combination of platform deals, DLCs, marketing and influencer engagement.

·    M&A: The M&A market in gaming is highly active and the Group's strong cash position provides a clear opportunity to acquire quality assets, including established IP to support the back catalogue, as opportunities arise. The Group is in the process of strengthening its internal structure and is making targeted senior hires (such as a Group Legal Director), which put it in a stronger position to fully scale and leverage attractive opportunities as they arise.

·    Progressive Participation Marketing: With more games released across platforms, discoverability is crucial. Traditional marketing techniques such as game trailers are no longer enough to sufficiently break through, and marketing innovation is essential. The marketing teams are constantly looking at ways to blend more traditional marketing tactics with more innovative participative experiences for our audiences.

·    Innovative publishing models: As the needs and priorities of game developers change, publishers must adapt their offering. The Group is investing in its leaders, ensuring they have the capabilities to tailor its publishing services to maintain a compelling proposition for developers, including multi-platform reach, access to insight-driven data and financial resources.

Improving profitability & ROI:

·    Increase sales mix of first-party IP: Increasing the mix of first-party IP is an important lever to gross margin improvement, therefore, first-party IP investment projects have been accelerated in the last six months. First-party sales increased from 17% in FY 2019 to 35% in FY 2023. While this journey will not always be linear, first-party IP titles performed particularly well in H1 2024, with revenues up 25%, now accounting for 42% of Group revenues (H1 2023: 37%). The Group has active investment programmes underway for its key first-party IP titles, including Worms, Hell Let Loose, The Escapists, Golf With Your Friends, Police Simulator and Construction Simulator.

·    Games Label investment limits: As part of Games Label's renewed Indie focus, investment limit guidance of £1.5m has been set for third-party Games Label titles. While the reduction in capitalised development costs in the period partly reflects some project phasing, we now expect capitalised development costs for FY 2024 to be broadly in line with FY 2023 levels.

·    Tightened cost controls: The focus on cost control is Group-wide and a leaner cost base will support improved profitability over the mid-term. Total development costs fell 36% in the period. Administrative costs also fell, with the return of marketing costs to historic levels, a further indicator of the Group's greater cost discipline.

·    Sharpened greenlight process: Games Label saw a record number of submissions to our publishing label in the first half of the year, highlighting that the Group is still the go-to publisher for developers. We continue to implement strict controls and reviews as part of the greenlight process to ensure we identify the highest quality games that are primed for success, and the right games to complement our existing portfolio. Speed is essential to remain competitive, and with a framework in place to enable quicker decisions with fewer people involved, Games Label is now benefitting from a higher number of titles signed.

Outlook

Following the Group's H1 2024 results and performance so far in H2 2024, the Board is confident of delivering full year results in line with market expectations for FY 2024.

New release revenues are expected to be higher in H2 2024, in part driven by the anticipated physically distributed third-party new releases at astragon.  While H1 2024 did benefit from the favourable phasing of license deals, together with strong summer sales and social media support on key titles, the Group's back catalogue is expected to deliver another good performance in H2 2024. 

Due to the timing of new releases and market conditions, the Group expects to deliver a more evenly balanced adjusted EBITDA performance across the first and second half of FY 2024 than in previous years.

The Board remains excited about the Indie gaming sector together with the future impact of the first-party and third-party games currently being greenlit, developed and published across the Group and is confident that the initiatives underway will enable accelerated revenue growth and profitability over the medium term.

Footnotes:

¹ 2023 revenues and margins have been restated for platform revenue recognition. Due to a change in accounting policy, revenue recognition on digital sales through Apple and Google app stores is now recognised gross of any platform fees charged where historically the net amount was recognised. For these platforms only, the platforms are deemed to be an agent in the transaction under IFRS15, this change has no impact on profits in either the current or prior year, however, does impact both gross margin and adjusted EBITDA margin percentages

² Adjusted EBITDA reflects the EBITDA of the Group in a steady state, without the impact of acquisition-related costs which vary year on year based on acquisition activity. In addition, we include the impact of amortisation and impairment of development costs as this reflects the primary costs incurred by the Group in generating revenue

³ Operating cash conversion is defined as cash generated from operating activities adjusted to add back payments made to satisfy pre-acquisition liabilities recognised under IFRS 3 "Business Combinations", divided by earnings before interest, tax, depreciation and amortisation ("EBITDA")

Condensed Consolidated Income Statement

All results relate to continuing activities.

¹Adjusted EBITDA is defined as operating profit adjusted to add back depreciation of property, plant and equipment, amortisation of intangible assets (excluding capitalised development costs), share based compensation and all acquisition related adjustments and fees.

Condensed Consolidated Statement of Comprehensive Income

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Changes in Equity

Condensed Consolidated Statement of Cash Flows

Notes to the Condensed Consolidated Interim Financial Statements

1. Nature of operations and general information

Team17 Group Plc and its subsidiaries (The Group) are a global games label, creative partner and developer of independent ("indie"), premium video games and developer and publisher of educational entertainment ("edutainment") apps for children and a leading working simulation games developer and publisher.

2. Basis of preparation

These condensed consolidated interim financial statements have been prepared in accordance with the AIM rules and UK adopted IAS 34 "Interim Financial Reporting". The condensed consolidated interim financial statements for the 6 months ended 30 June 2024 should be read in conjunction with the financial statements of Team17 Group Plc for the year ended 31 December 2023 (the "Prior year financial statements") which includes the financial results of the Group prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 ('IFRS') and the applicable legal requirements of the Companies Act 2006.

The report of the auditors for the prior year financial statements for the year ended 31 December 2023 was unqualified, did not contain an emphasis of matter paragraph and did not include a statement under Section 498 of the Companies Act 2006. The Group's condensed consolidated interim financial statements is not audited and does not constitute statutory financial statements as defined in Section 434 of the Companies Act 2006. These condensed consolidated interim financial statements were approved for issue on 16 September 2024.

Going concern

Management has produced forecasts that have also been sensitised to reflect plausible downside scenarios which have been reviewed by the directors. These demonstrate the Group is forecast to generate profits and cash in the year ending 31 December 2025 and beyond and that the Group has sufficient cash reserves to enable the Group to meet its obligations as they fall due for a period of at least 12 months from the release of these results.

As such, the directors are satisfied that the Group has adequate resources to continue to operate for the foreseeable future. For this reason they continue to adopt the going concern basis for preparing this interim report.

Accounting policies

The Group's principal accounting policies used in preparing this information are as stated on pages 55 to 63 of the prior year financial statements. There has been no change to any accounting policy from the date of the prior year financial statements. A review of revenue recognition focussing on the recognition of revenue as either Gross or Net is currently underway recognising the changing nature of the games sector.

3. Segmental information

The Group has three different operating segments within the business which are as follows: 

·      Games Label - Developing and publishing video games for the digital and physical market

·      Simulation - Developing and publishing simulation games for the digital and physical market

·      Edutainment - Developing educational entertainment apps for children

The chief operating decision maker ("CODM") of the Group is considered to be Steve Bell and Mark Crawford, the group executive directors. The CODM review's the Group's internal reporting in order to assess performance and allocate resources. The CODM determines the operating segments based on these reports and on the internal reporting structure.

The CODM considered the aggregation criteria set out within IFRS 8 "Operating Segments" where two or more operating segments can be combined for reporting purposes so long as aggregation provides financial statement users with information to evaluate the business and the environment in which it operates.

After assessing this criteria, the CODM deems it appropriate for all three operating segments to be aggregated and reported as a single segment. Each segment develops and publishes games and apps using own and third-party IP through similar distribution methods with similar margins in the same regulatory environments. Therefore all figures reported in these results are reported as a single aggregated reporting segment.

4. Revenue

Whilst the CODM considers there to be only one reportable segment, the Company's portfolio of games is split between first-party IP (those based on IP owned by the Group) and third-party IP incurring royalties. Therefore, to aid the readers understanding of our results, the split of revenue from these two categories is shown below:

Revenue by First Party/Third Party IP:

The Group does not provide any information on the geographical location of sales as the majority of revenue is through third-party distribution platforms which are responsible for the data of consumers.

5. Alternative Performance Measures

Operating cash conversion

Operating cash conversion is defined as cash generated from operating activities as per the statement of cash flows activities adjusted to add back payments made to satisfy pre-acquisition liabilities recognised under IFRS 3 "Business Combinations", divided by earnings before interest, tax, depreciation and amortisation ("EBITDA").

6. Earnings per share

The calculation of the basic earnings per share is based on the profits attributable to the shareholders of Team17 Group plc divided by the weighted average number of shares in issue. The weighted average number of shares takes into account treasury shares held by the Team17 Employee Benefit Trust. The diluted earnings per share uses the same calculation however the number of shares in issue are adjusted to include shares considered to be dilutive under the treasury stock method. An option is considered to be dilutive when the total proceeds per option is less than the average share price for the period. At 30 June 2024, 404,985 (30 June 2023: 247,243) outstanding share options had met the required performance criteria.

The calculation of adjusted earnings per share is based on the profit attributable to shareholders as shown in the Statement of Comprehensive Income plus additional costs added back during the year as shown in note 5. The weighted average diluted number of shares includes share options considered to be dilutive under the treasury stock method as described above.

7. Intangibles

 8. Share Capital