If there is one sector benefiting from the coronavirus lockdown it is the video games space. The gaming market was growing dramatically before the coronavirus struck, forecast to be worth around $200bn globally by 2022. But the requirement to stay home in the fight against the virus has if anything increased playing time and popularity.
For Mark Crawford, CFO of UK games firm Team 17, the opportunities available in such a vast market were of paramount interest when he joined last year. But what attracted him most to the Wakefield-based firm was its combination of strong back catalogue games in its 30 history as much as its pipeline of new titles and ventures.
It’s that diverse mix that has seen the share price of the firm, led by CEO Debbie Bestwick, more than double since it launched on junior market AIM two years ago, giving it a market value of around £720m by the end of June.
In its results to December 2019 Team 17 saw sales rise 43 percent to £61.8m, while pre-tax profit more than doubled to £19.2m, with seven new game launches, culminating in over 300 digital revenue lines from which it generates back catalogue revenues, finishing the year with £42m in cash.
In a trading update on 16 June, Team 17 said: “During these unprecedented times the company has seen above expected demand for its back catalogue, which has outperformed pre C-19 expectations, especially at the height of the lock down during April and May.”
In the update, the firm said it had signed an additional seven new games in the first half of the year for release in future years and had added first-time partners in Mexico and Russia. “It said “We have successfully launched three new games during remote working with Moving Out and Golf with Your Friends console version being released as planned in April and May respectively. Furthermore, on 11 June 2020, Main Assembly was launched into early access.”
For Crawford, who has a background in blue chips and a quoted online travel firm, says: “It is very entrepreneurial and ambitious business, with lots of scale opportunities,” he says.
As well as the legacy of a track record producing over 100 games, including Worms that is still selling well 25 years after its launch, many of Team 17’s titles are social games which come into their own in a world of social distancing- including Hell Let loose, Team 17’s first 100 player game launched las year.
“We’ve not been impacted the way many other businesses and sectors have been,” says Crawford. “In fact, people are still actively downloading our games that are very social, very interactive,” he says.
But as well as producing games in the Wakefield studio where most of the group’s 220 staff are based there is also a 40-strong publishing arm in Nottingham, engaged with a wide variety of partners developing games. All told, the business model is diversified to capture value across the gaming spectrum.
Crawford, who joined as interim CFO but was made permanent finance chief earlier this year, says the finance team plays a key role in ensuring the right investment decisions are made across the group. “We’ve built a finance team that’s got a commercial capability, to support a green light process, which is all about identifying potential gains in development partners of the future.
“Team 17 looks at hundreds of games on the market that are in various stages of development and review them from a gaming and commercial perspective, from a production and development perspective.
“My team adds commercial insight to challenge the commercial decisions, to understand what return on investment would look like, what would be the basis of royalty income versus investment to those titles,” he adds.
Blue chip background
Crawford arrived at Team 17 via a succession of roles at global corporates after undertaking a degree in human biological sciences at Loughborough University. A graduate trainee role at drugs giant GlaxoSmithKline (GSK) saw him receive “truly incredible” support in a “a world class structured finance team,” followed by a broader commercial position at beverages giant PepsiCo, working across its European supply chain.
Crawford moved to southern Africa to develop the regional finance team of Yum! Brands, the carved-out restaurant group of PepsiCo, which he describes as “a tough environment requiring lots of negotiating and leadership skills.”
After a period as a consultant, Crawford returned to the restaurant space at Gondola Group, owner of the Pizza Express, Ask and Zizzi brands that was floated by its private equity owners. “The challenge was setting something up from scratch, building teams and a supply chain,” he says.
When the business de-listed, a move to AIM-listed TP Group, a tech, engineering and defence firm, for a first CFO role featured a foray into corporate finance with a fundraising and several acquisitions. “The six years in that business gave me a lot of background into investor relations and the M&A side of things,” he says.
At retail giant Kingfisher for 18 months as interim finance director for logistics for brands including B&Q, Screwfix and Castorama and then CFO of online travel firm TravelUp, Crawford amassed a breadth of experience across different roles, sectors, size companies and ownership structures.
All this know-how he could bring to Team 17, especially the aspects of communicating to shareholders and analysts the group’s vision and direction of travel. He says that under Bestwick the firm was recognised as fast growing and had an ambitious growth plan, “but because it was nearly 30 years old it had some robustness about the business,” he says.
“Debbie had found a way to get through the boom and bust of the gaming industry, she has never had a catastrophe or spent more than £1m developing a game. By taking on development partners from around the world and helping them develop better games, publishing them and bringing them to market quickly, as well as developing their own games, she’s developed a good business model,” adds Crawford.
Crawford says Bestwick wanted to list Team 17 in order to keep control of the firm’s future when its private equity owners exited. It also provided firepower to expand, he says.
“Her plan is to grow the business into a developer and publisher that can operate on a global stage and compete with some of the biggest and best. One of the ways to do that is to acquire other companies, by accessing funds from the listing. The listed status can also attract more and better people to our management teams and across the breadth of our business,” he says.
Crawford’s experience will be hugely valuable, both in terms of M&A “looking at other complimentary businesses that might align with a strategy for growth”, but also in the investor relations side in terms of building the shareholder base.
“Aside from the UK, we’re looking at the next steps for growing the shareholder base on a wider scale geographically. As a global digital company, we’re on the radar for investors in other parts of the world.
“We also need to make sure we’re fit for purpose as we grow, so we will undertake finance system reviews as we go forward,” says Crawford, who also heads up IT and HR.
Crawford says that the recent strength in Team 17’s share price is a reflection of shareholder enthusiasm for its diverse approach to game development and investment. “Most of our investment is in our people and support of our third party development partners, so it’s a relatively low cost base in that sense, but we’ve generated in the last few years some good earnings and converted it all into cash. That allows us to support our business going forward,” he says.
As well as recently acquiring a studio in Manchester called Yippee at the start of the year, the first acquisition in the planned M&A programme, Crawford says Team 17 will continue to hire in the next few months, despite the impact of coronavirus.
“We’ve not furloughed anybody. My IT team did an incredible job to take what was a very studio-based, office-based business to working from home. Within two weeks we had everybody working from home,” he says.
But while the business is well placed to ride the economic storm ahead, Crawford says there are inevitably concerns about the scale of the likely recession. “We’re in a pretty good place, but if lockdown continues and the economy changes, there are some concerns about what is the economic environment going to be like in the next three, six or 12 months?
“Whilst we can work from home, if people can’t put their children into childcare, if our development partners can’t get their teams, if people don’t have the money to spend on entertainment, then there are cautions for the economies around the world,” he adds.
In the recent trading statement Team 17 said: “There clearly remains a degree of uncertainty as to the longevity and socio-economic effects of the coronavirus on our markets. This, combined with next generation consoles and new IP launches across the second half of the year, creates a more unpredictable backdrop to maximise the best commercial opportunities for each game both digitally and physically.”
Crawford says his confidence in the future is maintained by working closely with Bestwick. “Debbie is a very inspirational leader, with buckets of experience in the sector. There isn’t a business she doesn’t know or a game title she doesn’t understand, which makes the job of sitting alongside her in investor meetings a lot easier,” he says.
There was also plenty of support from the wider team on his arrival, “including the studio side helping me understand the gaming side,” which he’s hoping to put to good use by playing more of when he gets an opportunity. His picks are family-oriented cooking game Overcook, physics-based Moving Out that launched at the end of April and strategy game The Escapist. “I’m hoping to spend a bit more time getting into them,” he says.