CI Games 1

Smooth operator

CI Games 24 November 2022 Update
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CI Games

Smooth operator

Q322 results

Software and comp services

24 November 2022

Price

PLN2.75

Market cap

PLN503m

PLN4.52/US$

Net cash (PLNm) at 30 September 2022

(excludes PLNm4.5m lease liabilities)

6.8

Shares in issue

182.9m

Free float

71%

Code

CIG

Primary exchange

Warsaw Stock Exchange

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

8.3

27.6

62.2

Rel (local)

(10.8)

23.4

114.0

52-week high/low

PLN2.86

PLN1.34

Business description

Founded in 2002, CI Games is a Warsaw-based developer and publisher of AA+/AAA multi-platform video games for a global audience. It specialises in first-person shooter and action-driven titles, with IPs including the Sniper Ghost Warrior and Lords of the Fallen franchises. FY23 looks set to be a transformational year for the group following the release of its next major game, The Lords of the Fallen, which will be the first release as part of the FY23–27 strategy roadmap.

Next events

FY22 results

April 2023

Analysts

Max Hayes

+44 (0)20 3077 5700

Katherine Thompson

+44 (0)20 3077 5730

CI Games is a research client of Edison Investment Research Limited

CI Games’ Q322 results reflect investments in its next major games release The Lords of the Fallen (TLotF) and the hiatus between releases. Its performance in the year to date has been driven by its back catalogue, resulting in year-on-year falls in revenue and profitability. However, margin compression in Q322 primarily relates to the group’s marketing push for the release of TLotF, which has been confirmed for FY23. Positive newsflow around TLotF gives us confidence in rapid sales growth and significant margin expansion in FY23. TLotF is the first in a line of new releases as part of the group’s new strategic roadmap for FY23–27, which will see an increase in the frequency of new releases and will provide greater consistency of performance year-on-year.

Year end

Revenue*
(PLNm)

EBITDA*
(PLNm)

PBT**
(PLNm)

Diluted EPS**
(PLN)

EV/EBITDA
(x)

P/E
(x)

12/20

46.0

27.8

8.5

0.03

18.0

79.1

12/21

105.5

62.5

44.9

0.16

8.0

16.8

12/22e

59.5

16.7

9.4

0.04

30.0

69.2

12/23e

270.0

206.9

131.5

0.57

2.4

4.8

Note: *Estimates are based on sales forecasts largely denominated in euros and US dollars, and therefore vary with exchange rate movements to the Polish zloty. **Normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Back catalogue characterises Q322 results

FY22 has been a fallow year for major new games releases at CI Games, ahead of FY23 when its major title TLotF is expected to be launched. In the first nine months of the year, net revenue fell by 49.6% to PLN41.3m and adjusted EBITDA declined by 72.3% to PLN13.5m at a margin of 33%. The margin decline is primarily related to the advance marketing drive for TLotF, which started in August for a late FY23 release. We expect that a successful marketing campaign in H222 could be accretive to FY23 margins, as it should drive sales growth without the need to elevate costs correspondingly.

Forecasts revised; FY23 expected TLotF boost

We have updated our FY22 forecasts, leaving net revenues materially unchanged but reducing EBITDA to reflect greater than anticipated opex and selling costs in H2, in line with Q3 results, primarily related to the advance marketing costs for TLotF. We believe anticipated sales growth and the group’s operating leverage should benefit the FY23 EBITDA margin (+25.3pp on prior estimate). Now that Sniper Ghost Warrior Contracts is fully depreciated, we also reduce our FY22 depreciation charge, offsetting some of the cost impact on operating profit. As CI Games’ sales are primarily international, we forecast our revenue in US dollars. The recent strength of the US dollar, with costs largely in zloty and euros, has a material impact on our forecasts, which have risen c 10% in FY22 and FY23 as a consequence.

Valuation: Anticipation building for TLotF in FY23

Gameplay reveal, together with gamers’ reception of TlotF, remains a potential catalyst for the shares. The London dual listing should help internationalise the story, which has so far been a Polish domestic one. CI Games trades on 2.4x our EV/EBITDA estimate for FY23 and on a 4.8x FY23 P/E. This leaves scope for further material upside if the launch of TlotF is successful in FY23.

Q322 results review

With no new releases in 2022, revenue during the year has been driven by the group’s back catalogue (principally previous iterations of the Sniper Ghost Warrior franchise), resulting in significant revenue declines year-on-year that have accelerated as the year has progressed. The rise in gross margin in the first nine months of 2022 reflects the increased share of digital sales over 2021, largely due to the lack of any new releases and the associated physical box sales that typically accompany new releases, together with reduced amortisation costs.

However, on a quarterly basis the gross margin fell by 17.1pp q-o-q, mainly relating to the marketing campaign for TlotF, which started in August 2022. The same marketing drive also led to an adjusted EBITDA loss of PLN2.5m in Q322. We note that CI Games splits its marketing spend between COGS and opex.

Exhibit 1: Summary of Q322 results

PLNm

Q322

Q222

q-o-q change (%)

Q321

y-o-y change (%)

9M22

9M21

y-o-y change (%)

Net revenue

10.8

17.6

(38.5)

32.7

(66.9)

41.3

81.9

(49.6)

Gross profit

6.9

14.2

(51.5)

20.9

(67.0)

29.4

49.8

(40.8)

margin

64%

81%

(17.1pp)

64%

(0.1pp)

71%

61%

10.6pp

Selling costs

(6.9)

(2.1)

222.9

(4.2)

63.3

(10.7)

(13.3)

(19.2)

General and administrative costs

(4.7)

(5.3)

(10.2)

(2.1)

121.4

(12.2)

(5.4)

123.5

Other operating cost and income

(0.0)

(0.2)

(95.2)

(0.5)

(98.0)

(0.3)

0.4

NM

Operating profit

(4.7)

6.8

N/A

14.0

N/A

6.3

31.4

(80.0)

margin

(44%)

39%

N/A

43%

N/A

15%

38%

(23.1pp)

Adjusted EBITDA

(2.5)

9.6

N/A

19.3

N/A

13.5

48.9

(72.3)

margin

(23%)

54%

N/A

59%

N/A

33%

60%

(26.9pp)

Net profit

(3.9)

9.2

N/A

13.6

N/A

9.5

27.2

(65.2)

margin

(36%)

53%

N/A

42%

N/A

23%

33%

(10.3pp)

Net debt/(cash)*

(2.3)

(13.1)

(82.4)

(37.2)

(93.8)

(2.3)

(37.2)

(93.8)

Net debt/(cash) ex financial leases

(6.8)

(17.7)

(61.6)

(37.8)

(82.0)

(6.8)

(37.8)

(82.0)

Source: CI Games. Note: *Includes financial leases.

Despite falling into an operating loss in Q322, CI Games remained in a net cash position, of PLN6.8m (PLN2.3m including financial leases), at end Q322. We expect that a successful marketing campaign in H222 could be accretive to FY23 margins, as it should drive sales growth without the need to elevate costs correspondingly. Our FY23 forecasts suggest that CI Games will expand its net cash position to PLN79.3m by year end.

Refining our forecasts

We raise our gross profit estimate to PLN42m from PLN27m in FY22, at a margin of 70%, reflecting the group’s higher-margin product mix (digital sales), which should offset an expected increase in H222 marketing costs. Given the positive momentum around TLotF, we believe management may want to push higher marketing spend towards the end of the year. This margin compression is in line with its Q3 results.

Exhibit 2: Historical and prospective margin trend, FY21–22e

Source: CI Games, Edison Investment Research

CI Games maintained adjusted EBITDA margins between 50% and 60% in FY21 and H122, with margins rising from 50% in Q122 to 54% in Q222 (Exhibit 2). We expect this to fall to 28% for the full year, driven by an end-of-year marketing push for the FY23 game releases. TLotF’s release will drive sales growth in FY23, while the operational leverage built in H222 should benefit margins; we have raised our FY23 EBITDA margin forecast by 25.3pp to 76.6%. We also note that gross margins in FY23 could be affected by a higher volume of physical sales relating to the release of TLotF.

Previously we had overestimated the levels of depreciation for FY22, not recognising that depreciation would reduce materially now that Sniper Ghost Warrior Contracts is fully depreciated. Lower levels of depreciation mitigate the impacts of heightened selling costs on our FY22 pre-tax profit forecast.

Exhibit 3: Summary of forecast changes

PLN000s

FY21

FY22e (old)

FY22 (new)

Estimate change (%)

y-o-y change (%)

FY23e (old)

FY23e (new)

Estimate change (%)

y-o-y change (%)

Revenue

105,528

56,901

59,482

5

(44)

268,138

270,044

1

354

COGS

(39,602)

(30,154)

(17,845)

(41)

(55)

(116,531)

(94,515)

(19)

430

Gross profit

65,926

26,747

41,637

56

(37)

151,607

175,528

16

322

Adjusted EBITDA

62,486

34,067

16,666

(51)

(73)

137,430

206,880

51

1,141

Profit before tax (reported)

42,819

14,459

6,892

(52)

(84)

117,074

131,458

12

1,807

Profit after tax (reported)

31,401

11,567

7,514

(35)

(76)

93,659

105,166

12

1,300

EPS - normalised (PLN)

0.16

0.06

0.04

(34)

(76)

0.51

0.57

11

1,331

Revenue growth (%)

129.4

(47.8)

(43.6)

371.2

354.0

Gross margin (%)

62.5

47.0

70.0

56.5

65.0

EBITDA margin (%)

59.2

59.9

28.0

51.3

76.6

Net margin (%)

36.3

22.9

11.6

34.9

47.8

Closing net debt/(cash)

(32,950)

(30,780)

6,193

N/A

(119)

(75,370)

(79,384)

5

N/A

Source: CI Games, Edison Investment Research

It is worth highlighting that we forecast sales revenues in US dollars, which means that the strength of the US dollar also has a material impact our forecasts; with CI Games reporting in Polish zloty this has caused our FY22 forecasts to rise by over 10%. The strong US dollar drives our FY23 estimates 9–12% higher due to CI Games’ dollar-based sales and its zloty and euro cost base. Management has recently entered into a series of currency forward contracts to hedge against future foreign currency changes.

Lords of the Fallen rebooted (TLotF)

The anticipated performance of TLotF, CI Games’ most expensive title to date, underpins our forecasts for FY23. Our base case estimates c PLN201m in sales for TLotF in FY23 (74% of sales), based on c 2m units sold at $21 using a current exchange rate of PLN4.78/US$. The other potential major release is an ‘early access’ release for Project Survive, together with potentially two United Label titles, neither of which yet has been named nor had release dates confirmed: firstly, a sci-fi game with a Chicago-based studio; and a second title by Odd Bug Studios (developer of Tails of Iron).

Exhibit 4: TLotF cinematic launch trailer

Source: CI Games, YouTube

The marketing campaign for TLotF kicked off in August 2022, with the launch of the official trailer at Gamescom, one of the largest European games events. Management has stated that the game is expected to be substantially complete by year end, before an extended period of polishing ahead of its launch in FY23. The title appears to have captured players’ attention at Gamescom and is already in the top 40 of Steam’s wish list rankings.

Strategic roadmap FY23–27

The seven pillars of wisdom

CI Games has established itself as a Pan-European games developer and publisher that specialises in first-person shooter and action-driven role-playing games. Over the years the company has become a global player, with offices in Poland (headquarters), the UK, the United States, Spain and Romania, with its games selling worldwide. Management believes it is unlikely that the previously announced dual listing of its shares in London (alongside Warsaw) will happen in 2022, but instead expects it in early 2023; the listing should help further internationalise the story.

In its strategic roadmap for games releases for FY23–27, announced on 24 October 2022, management stated that it expects to raise the frequency of new releases, increasing its current four pillars to seven, to provide greater consistency of performance year-on-year.

Exhibit 5: FY23–27 strategic roadmap

Management has previously identified four pillars underpinning CI Games’ future growth:

1.

The Lords of the Fallen – following the successful launch of the original TLotF in 2014, CI Games is set to launch a reboot of that original title in FY23 developed by internal studio Hexworks. The exact timing of release has not yet been confirmed, but major launches typically have a 12-month marketing phase ahead of launch (the cinematic trailer was released at Gamescom in August 2022). Based on the roadmap, Project III (ie TLotF 3) is expected in FY25–26, with the timing and scope to be determined by the success of TLotF, but with an open-world sandbox game a clear consideration by management.

2.

The Sniper Ghost Warrior (SGW) franchise – this franchise has been the mainstay of the business over the past few years, with five iterations since 2011, having sold over 13m units in total. The latest iteration was Sniper Ghost Warrior: Contracts 2, released in June 2021, which has sold over 1m units since it launched. The next iteration of SGW (SGW NEXT) is expected to be released in FY24–25, developed by an external developer, overseen by the internal studio Underdog.

3.

Project Survive – developed by external developer Batfields (overseen by internal studio Hexworks), on the Unreal Engine 5, Project Survive is a survival game that has been compared to The Forest series and Green Hell. The roadmap indicates a release in FY23–24; however, based on management commentary, it appears that CI Games is giving serious consideration to an ‘early access’ strategy, with an FY23 release. An ‘early access’ strategy is where a game is made available to a limited player base at a discounted price before its official release, to get user feedback on the direction of the game and content, in order to build engagement with the title and ultimately build a committed player community.

4.

United Label – United Label is CI Games’ indie publisher. Indie games are lower budget titles created by small independent development teams. Having bought out most of the minority holding, CI Games now owns over 90% of United Label’s equity. United Label remains focused on low numbers of high-quality indie games, with three titles – Roki, Tails of Iron and Eldest Souls – having been released in FY21 and none so far in FY22. United Label expects to release one to three new titles per year.

To these four pillars, three further pillars have been added to sustain and build future growth:

1.

Project Scorpio – the team at Underdog, one of CI Games’ two internal development teams, who up to now have worked on the SGW franchise (and will oversee SGW NEXT), will primarily be focused on Project Scorpio, a new premium IP multiplayer squad-based tactical shooter, due for release in FY24–25. This will follow a games-as-a-service (GAAS) model, with live operational support (eg World of Warcraft, Fortnite, Candy Crush). This means that following the base game release, there is a regular stream of new content, in-game purchases, expansions and events to try to build and retain a committed player base, substantially extending the life of the game and the lifetime value to CI Games.

2.

Project Potential – CI Games is exploring the potential to partner with a strong external IP with the potential to cross over into gaming. CI Games would bring its proven development expertise and re-purpose its existing franchise engines and technology to create a game based around the new IP. The target launch date would be FY25–27.

3.

Project Expand – the final pillar, targeted for the period FY25–27, is where CI Games looks to capitalise on the success of its games by licensing its own IP to external partners (eg CD Projekt’s The Witcher). Although CI Games has no firm plans yet, options would be to take existing IP to new formats (eg mobile, VR), as well as potentially to new media (eg film, TV) or into other entertainment products (eg table-top games, books). Companies such as Rebellion have been very successful in following such multimedia strategies.

Strategic update and dual listing

CI Games’ strategic review, first announced in August 2021, continues. Ci Games’ adviser, Drakestar, has accelerated the process following the release of the TLotF cinematic trailer and players’ warm reception to the title. Management confirmed it is considering both minority and majority investors and progress will be reported when appropriate. Management also stated that a dual listing in London was now unlikely to happen in 2022, with early 2023 seeming more likely and it has no intention to raise funds on listing. The slight delay in timing to FY23 reflects the challenging macroeconomic climate and affords the benefit of allowing additional time for strategic conversations around TLotF to mature.

Valuation: Market fixated on FY22, not factoring in FY23

Over the next five years, CI Games wants to build on its presence as one of Europe’s major games developers and publishers, building its existing franchises and launching new games on a more regular basis as set out in the FY23–27 strategic plan. FY22 has been a fallow year for major new games releases, with FY23 seeing the release of TLotF as the first in the line of new games. If momentum continues and TlotF is well received by gamers, then its success should be the start of a transformation in the group’s profitability (Exhibit 6).

Exhibit 6: Pan-Europe peer group

Name

Year end

Share price

Quoted ccy

Market cap (€m)

EV
(€m)

Sales growth FY2e (%)

EBITDA margin FY2 (%)

EV/sales 1FY (x)

EV/sales 2FY (x)

EV/ EBITDA 1FY (x)

EV/ EBITDA 2FY (x)

P/E 1FY (x)

P/E 2FY (x)

CI Games

Dec-22

2.8

PLN

107

107

354.0

76.6

8.4

1.9

30.0

2.4

69.2

4.8

CD Projekt

Dec-22

138.6

PLN

2,944

2,734

15.2

50.5

15.8

13.7

33.5

27.1

49.6

45.7

Team17 Group

Dec-22

463.0

GBp

771

708

8.7

35.2

4.9

4.5

14.2

12.7

20.2

18.3

Frontier Developments

May-23

1164.0

GBp

525

503

19.2

31.7

3.8

3.2

13.0

10.2

61.2

25.2

Devolver Digital

Dec-22

68.5

GBp

346

270

12.0

21.2

2.1

1.8

11.3

8.7

18.0

16.1

11 Bit Studios

Dec-22

512.0

PLN

257

236

268.1

74.1

17.7

4.8

48.1

6.5

83.5

8.6

Remedy EntertaiNAent

Dec-22

22.5

EUR

300

248

6.1

2.1

5.6

5.3

82.7

NM

NM

NM

Tinybuild Inc

Dec-22

109.5

GBp

255

213

10.5

40.2

3.3

3.0

8.5

7.5

15.6

13.3

Mean

48.5

36.4

7.6

5.2

30.2

12.1

41.3

21.2

Median

12.0

35.2

4.9

4.5

14.2

9.4

34.9

17.2

Source: Refinitiv, Edison Investment Research. Note: Priced at 24 November 2022.

Given this dynamic, our valuation focuses on FY23. A group of pan-European peers, which we believe most closely resembles CI Games, is trading on a mean EV/EBITDA of c 30.2x in FY22, falling to 12.1x in FY23. This compares with CI Games, on 30.0x our FY22 EV/EBITDA and 2.4x in FY23. Similarly, for P/E multiples, the peer group trades on 41.3x consensus FY22 earnings and 21.2x FY23. This compares to CI Games on 69.2x FY22 and then 4.8x FY23e.

Looking at our FY23 forecasts, the peer group valuation suggests there could be material upside as CI Games’ valuation normalises towards the mean of the select and wider European peer group, with the forthcoming dual listing an obvious trigger point for a re-evaluation of the story, together with the potential for strategic newsflow, as well as positive game-related announcements as we move towards the launch of TLotF. In addition to Frontier Developments and Remedy Entertainment, we also note that CI Games is one of few peers in the group that conducts its own in-house game development and can build on games franchises using its own IP.


Exhibit 7: Financial summary

PLN'k

2018

2019

2020

2021

2022e

2023e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

21,985

47,478

46,010

105,528

59,482

270,044

COGS

(17,131)

(29,013)

(26,683)

(39,602)

(17,845)

(94,515)

Gross Profit

4,854

18,465

19,327

65,926

41,637

175,528

Adj. EBITDA

 

 

4,172

20,514

27,829

62,486

16,666

206,880

Depreciation and amortisation

 

 

(11,506)

(19,467)

(19,100)

(20,179)

(9,767)

(77,921)

Normalised operating profit

 

 

(7,334)

1,047

8,729

42,307

6,899

128,959

Amortisation of acquired intangibles

0

0

0

0

0

0

Exceptionals

(15,044)

0

0

(2,040)

(2,500)

0

Share-based payments

0

0

0

0

0

0

Reported operating profit

(22,378)

1,047

8,729

40,267

4,399

128,959

Net Interest

431

(828)

(197)

2,552

2,493

2,499

Joint ventures & associates (post tax)

0

0

0

0

0

0

Exceptionals

0

0

0

0

0

0

Profit Before Tax (norm)

 

 

(6,903)

219

8,532

44,859

9,392

131,458

Profit Before Tax (reported)

 

 

(21,947)

219

8,532

42,819

6,892

131,458

Reported tax

(746)

(3,096)

(1,435)

(4,476)

(1,732)

(17,747)

Profit After Tax (norm)

(4,832)

153

5,972

31,401

7,514

105,166

Profit After Tax (reported)

(22,693)

(2,877)

7,097

38,343

5,160

113,711

Minority interests

0

0

(138)

(1,535)

(164)

0

Discontinued operations

0

0

0

0

0

0

Net income (normalised)

(4,832)

153

5,834

29,866

7,350

105,166

Net income (reported)

(22,693)

(2,877)

6,959

36,808

4,996

113,711

Average number of shares outstanding (m)

151

151

155

168

183

183

EPS - normalised (PLN)

 

 

(0.03)

0.00

0.03

0.16

0.04

0.57

EPS - diluted normalised (PLN)

 

 

(0.03)

0.00

0.03

0.16

0.04

0.57

EPS - basic reported (PLN)

 

 

(0.15)

(0.02)

0.04

0.20

0.03

0.62

Dividend (PLN)

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

(78.7)

116.0

(3.1)

129.4

(43.6)

354.0

Gross Margin (%)

22.1

38.9

42.0

62.5

70.0

65.0

Adj EBITDA Margin (%)

19.0

43.2

60.5

59.2

28.0

76.6

Normalised Operating Margin

(33.4)

2.2

19.0

40.1

11.6

47.8

BALANCE SHEET

Fixed Assets

 

 

60,261

62,297

69,137

90,767

141,493

144,112

Intangible Assets

52,282

54,828

58,987

80,959

131,615

134,457

Tangible Assets

1,083

376

437

1,774

1,562

1,339

Right-of-use assets

0

1,133

6,484

4,391

4,673

4,673

Investments & other

6,896

5,960

3,229

3,643

3,643

3,643

Current Assets

 

 

19,433

34,803

41,150

61,345

19,171

135,197

Stocks

2,687

3,118

1,576

2,614

1,124

5,926

Debtors

3,110

19,921

6,833

13,144

10,593

40,610

Cash & cash equivalents

12,612

6,659

28,207

37,843

2,732

84,004

Other

1,024

5,105

4,534

7,744

4,721

4,658

Current Liabilities

 

 

(8,615)

(30,308)

(5,570)

(10,164)

(14,133)

(19,262)

Creditors

(3,375)

(4,675)

(4,351)

(4,972)

(4,393)

(13,827)

Tax and social security

(450)

0

0

(41)

(41)

(41)

Short term borrowings

(3,468)

(24,051)

(33)

(13)

(4,305)

0

Lease liabilities

(224)

(634)

(324)

(955)

(1,237)

(1,237)

Other

(1,098)

(948)

(862)

(4,183)

(4,157)

(4,157)

Long Term Liabilities

 

 

(17,209)

(6,474)

(8,173)

(6,839)

(6,297)

(6,297)

Long term borrowings

(12,744)

0

0

0

0

0

Lease liabilities

(303)

(269)

(5,867)

(3,925)

(3,383)

(3,383)

Other long-term liabilities

(4,162)

(6,205)

(2,306)

(2,914)

(2,914)

(2,914)

Net Assets

 

 

53,870

60,318

96,544

135,109

140,234

253,750

Minority interests

0

0

(169)

(1,704)

(1,868)

(1,868)

Shareholders equity

 

 

53,870

60,318

96,375

133,405

138,366

251,882

CASH FLOW

Op Cash Flow before WC and tax

4,603

19,686

27,632

65,038

19,159

209,379

Working capital

(848)

(379)

533

350

(2,753)

153

Exceptional & other

5,040

(20,665)

13,991

(6,505)

7,524

(25,384)

Tax

0

(136)

(1,547)

(4,838)

(1,732)

(17,747)

Operating cash flow

 

 

8,795

(1,494)

40,609

54,045

22,198

166,400

Capex

(1,107)

(2,059)

(2,597)

(4,761)

(5,318)

(5,343)

Capitalised development costs

(24,386)

(18,255)

(19,864)

(39,648)

(54,648)

(74,648)

Acquisitions/disposals

0

0

0

0

0

0

Equity financing

20

9,279

29,124

0

0

0

Change in borrowing

16,212

7,703

(24,018)

(20)

4,292

(4,305)

Dividends

0

0

0

0

0

0

Other

(406)

(1,127)

(1,690)

33

(1,634)

(833)

Net Cash Flow

(872)

(5,953)

21,564

9,649

(35,111)

81,271

Opening net debt/(cash)

 

 

(13,335)

4,127

18,295

(21,983)

(32,950)

6,193

FX

0

0

(16)

(14)

0

0

Other non-cash movements

(16,590)

(8,215)

18,730

1,332

(4,032)

4,305

Closing net debt/(cash)

 

 

4,127

18,295

(21,983)

(32,950)

6,193

(79,384)

Closing net debt/(cash) ex financial leases

3,600

17,392

(28,174)

(37,830)

1,573

(84,004)

Source: Edison Investment Research, company accounts

General disclaimer and copyright

This report has been commissioned by CI Games and prepared and issued by Edison, in consideration of a fee payable by CI Games. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

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United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by CI Games and prepared and issued by Edison, in consideration of a fee payable by CI Games. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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