For immediate release
27 November 2023
("Gfinity" or the "Company")
The Board of Gfinity plc (AIM:GFIN) announces that the Company has today disposed of its remaining 27.5 per cent. interest in Athlos Game Technologies Limited ("Athlos"), its former proprietary esports technology business, to Tourbillon Group UK Limited (the "Disposal").
Athlos was originally created by Gfinity as an extension to its online platform and was used by the Esports Solutions Division, to deliver online esports tournaments.
However, the Athlos division cost Gfinity approximately £2m per year to operate which became unsustainable, given Gfinity's low share price and poor market conditions. As previously announced in June 2023, following a restructuring and refocus on digital media and its significant position in the Gamer website industry, the Company sold 72.5% of Athlos to Tourbillon Group UK Limited ("Tourbillon"). Liabilities associated with Athlos were assumed by Tourbillon, with the buyer also providing initial working capital to support the business. Gfinity retained a 27.5% shareholding in Athlos and the consideration payable to Gfinity by Tourbillon was £1.
Since the Disposal, Tourbillon has restructured Athlos, but the Athlos business still remains substantially loss making and requires ongoing funding from its shareholders, including Gfinity from December. The Board of Gfinity estimate that its share of the ongoing funding commitment is likely to amount to in excess of £25,000 per month for the next year.
Following the restructuring earlier this year, Gfinity is focusing its resources on its continuing digital media interests and accordingly, Gfinity is unable fund any further investment into a legacy business such as Athlos, even if the Board believed that the potential long-term prospects for Athlos were positive.
Accordingly, as Gfinity is both unwilling and unable to recommence funding Athlos from December, the Board has agreed to sell Gfinity's remaining 27.5 per cent. interest in Athlos to Tourbillon for an immediate payment of £260,000 in cash. The cash consideration, which will be used for investment in development of Gfinity's digital media business and general working capital purposes, significantly improves Gfinity's financial position and establishes a stronger base to implement its new plans and reach a turnaround position. Following the disposal, Gfinity will have no further interest in or commitment to Athlos.
As David Halley is the controlling shareholder and chief executive of Tourbillon, the disposal is a related party transaction pursuant to Rule 13 of the AIM Rules for Companies. Accordingly, the Independent Directors (being the Board other than David Halley) consider, having consulted with the Company's Nominated Adviser, that the disposal is fair and reasonable insofar as Gfinity's Shareholders are concerned. In particular, the Independent Directors have taken into account that:
- In the current financial year ending 30 June 2024, Athlos is estimated to require funding from Gfinity at the rate of in excess of £25,000 per month.
- Gfinity is currently unable fund any such further investment into a legacy business such as Athlos.
- In the absence of the sale, Gfinity would expect to be significantly diluted in Athlos and would have no certainty that it would be able to sell its remaining diluted interest for any value.
- The proposed consideration values Athos at approximately £0.95m, which represents a value multiple of approximately three times revenue which the Independent Directors believe is in line with market parameters for an early-stage tech company, with a similar record and prospects.
Further AIM Disclosures
In the last published audited accounts for the year ended 30 June 2022, Athlos generated revenue of £0.3m, with a loss before tax of £0.5m. If capitalised development expenditure were expensed, the loss before tax would have been £1.2m. The assets of Athlos as at December 2022 were £0.7 million.
As previously announced on 6 June 2023, in the year to December 2022, Athlos generated revenue of £0.4m, with a loss before tax of £0.5m. If capitalised development expenditure were expensed, the loss before tax would have been £1.2m. The assets of Athlos as at December 2022 were £1.2m. In the 12 months to the end of May 2023, Athlos absorbed £1.5m of Group cash. The financials as at December 2022 were unaudited.
The sale to Tourbillon in June 2023 was completed before David Halley either became a director of Gfinity or acquired an interest in the Company.
Further information on the Company including a copy of this announcement is available from the Company's website: www.gfinityplc.com
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR"). The person who arranged for the release of this announcement on behalf of the Company was Neville Upton, Chairman.
Beaumont Cornish Limited
Nominated Adviser and Broker
+44 (0)207 628 3369
Beaumont Cornish Limited ("Beaumont Cornish") is the Company's Nominated Adviser and is authorised and regulated by the FCA. Beaumont Cornish's responsibilities as the Company's Nominated Adviser, including a responsibility to advise and guide the Company on its responsibilities under the AIM Rules for Companies and AIM Rules for Nominated Advisers, are owed solely to the London Stock Exchange. Beaumont Cornish is not acting for and will not be responsible to any other persons for providing protections afforded to customers of Beaumont Cornish nor for advising them in relation to the proposed arrangements described in this announcement or any matter referred to in it.