Remedy Entertainment Plc: Adoption of IFRS and unaudited IFRS comparison figures

Mon, Apr 25, 2022 18:30 CET

Remedy Entertainment Plc | Company Announcement 7.30 p.m. (EEST) 25 April 2022

Adoption of IFRS and unaudited IFRS comparison figures

Remedy Entertainment Plc (“Remedy” or the “Company”) announced on 10 February 2022 in its company release that it aims to transfer to the Nasdaq Helsinki official list during 2022. In connection with the list transition process, Remedy has adopted International Financial Reporting Standards (IFRS). Previously the Company has followed Finnish Accounting Standards (FAS).

Remedy will publish its first financial statements according to IFRS for the period ended 31 December 2021. The comparative information is presented from the period ended 31 December 2020 and the IFRS transition date is 1 January 2020. Previously the Company has prepared its financial statements, including business review reports and half-year reports, in accordance with the Finnish Accounting Standards (FAS).

Remedy has prepared the following unaudited IFRS financial information to provide its investors comparative information on the Company’s statement of comprehensive income, balance sheet and key figures for the year ended 31 December 2021 and 31 December 2020, as well as for the interim periods in 2021 and 2020.

The adoption of IFRS does not affect the Company’s guidance for the year 2022. Remedy expects its revenue to grow and operating profit to be on a lower level than in 2021.

Outlined below are the accounting policies that have had the most significant effects on Remedy’s financial figures due to the adoption of IFRS (profit and loss effect on fiscal year 1 January – 31 December 2021):

Reclassification of refurbishment costs according to IAS 16 (no profit and loss effect)
Recognition of leased assets according to IFRS 16 (positive effect on profit and loss of 5 thousand euros)
Capitalization of development costs and amortizations from previous periods according to IAS 38 (negative effect on profit and loss 778 thousand euros)
Recognizing share options as expenses over the vesting period according to IFRS 2 (negative effect on profit and loss of 2 457 thousand euros)
Measuring financial instruments at fair value according to IFRS 9 (positive effect on profit and loss of 1 247 thousand euros)
Altogether, the adoption of IFRS weakens the profit of the fiscal year 2021 by 1 983 thousand euros

The most significant differences comparing to the financial figures presented in FAS are described in more detail in the notes of this company announcement. Additional information about the financial figures in FAS are available in the audited financial statements as well as in the unaudited business reviews and half year reviews at the Company’s web page.

The financial information presented in this release is unaudited except for the income statement and balance sheet prepared in accordance with FAS for the period ended 31 December 2021 and for the period ended 31 December 2020.

Statement of comprehensive income 1 October – 31 December 2021 and 1 January – 31 December 2021

EUR 1 000	Note	1 Oct - 31 Dec 2021 FAS	Total effect of IFRS transition	1 Oct - 31 Dec 2021 IFRS	1 Jan - 31 Dec 2021 FAS	Total effect of IFRS transition	1 Jan - 31 Dec 2021 IFRS

Revenue		19 796	0	19 796	44 726	0	44 726
Other operating income		0	0	0	1	0	1
Materials and services	3	1 796	-1 796	0	8 489	-8 489	0
Personnel expenses	3, 5	-2 870	953	-1 917	-8 505	3 137	-5 368
Depreciation, amortisation and impaiment	3, 4	-5 696	-194	-5 890	-23 383	2 231	-21 152
Other operating expenses	2, 3	-327	-216	-543	-1 206	-1 837	-3 043
Operating profit/(loss)	2, 3, 5	-1 437	335	-1 102	-5 415	1 659	-3 757
Financial income		11 262	-919	10 343	14 708	-3 301	11 407
Financial expenses	5	7	143	150	109	143	253
Profit/(Loss) before income taxes	1, 2	-26	-6	-32	-1 338	1 020	-318
Income tax expense		11 243	-782	10 461	13 479	-2 137	11 342
Profit/(Loss) for the financial year		-2 254	-29	-2 283	-2 702	154	-2 548

Other comprehensive income/(expense)

Items that may be subsequently reclassified to profit or loss		0	0	0	0	0	0
Total other comprehensive income/(expense) for the financial year		0	0	0	0	0	0

Total comprehensive income/(expense) for the financial year		8 989	-811	8 178	10 777	-1 983	8 794

Profit/(Loss) for the financial year attributable to
Owners of the company		8 989	-811	8 178	10 777	-1 983	8 794

Total comprehensive income/(expense) attributable to
Owners of the company		8 989	-811	8 178	10 777	-1 983	8 794

Earnings per share
Basic earnings per share, euro		0.68	-0.06	0.61	0.81	-0.14	0.67
Diluted earnings per share, euro		0.63	-0.04	0.59	0.76	-0.11	0.65

Statement of comprehensive income 1 October – 31 December 2020 and 1 January – 31 December 2020
EUR 1 000	Note	1 Oct - 31 Dec 2020 FAS	Total effect of IFRS transition	1 Oct - 31 Dec 2020 IFRS	1 Jan - 31 Dec 2020 FAS	Total effect of IFRS transition	1 Jan - 31 Dec 2020 IFRS

Revenue		14 201	0	14 201	41 086	0	41 086
Other operating income		0	0	0	1	0	1
Materials and services	3	1 777	-1 777	0	5 111	-5 111	0
Personnel expenses	3, 5	-1 813	577	-1 236	-6 596	1 777	-4 818
Depreciation, amortisation and impaiment	3, 4	-6 104	552	-5 552	-20 758	1 742	-19 016
Other operating expenses	2, 3	-318	-874	-1 192	-1 068	-5 637	-6 705
Operating profit/(loss)	2, 3, 5	-1 103	397	-706	-4 530	1 231	-3 299
Financial income		6 640	-1 125	5 515	13 245	-5 997	7 248
Financial expenses	5	11	0	11	154	0	154
Profit/(Loss) before income taxes	1, 2	-139	-9	-148	-478	105	-373
Income tax expense		6 512	-1 134	5 378	12 921	-5 892	7 029
Profit/(Loss) for the financial year		-1 302	143	-1 159	-2 585	968	-1 617

Other comprehensive income/(expense)

Items that may be subsequently reclassified to profit or loss		0	0	0	0	0	0
Total other comprehensive income/(expense) for the financial year		0	0	0	0	0	0

Total comprehensive income/(expense) for the financial year		5 210	-992	4 218	10 337	-4 925	5 412

Profit/(Loss) for the financial year attributable to
Owners of the company		5 210	-992	4 218	10 337	-4 925	5 412

Total comprehensive income/(expense) attributable to
Owners of the company		5 210	-992	4 218	10 337	-4 925	5 412

Earnings per share
Basic earnings per share, euro		0.43	-0.09	0.34	0.86	-0.41	0.45
Diluted earnings per share, euro		0.40	-0.07	0.33	0.80	-0.37	0.43

BALANCE SHEET 31 December 2021

EUR 1 000	Note	31 Dec 2021 FAS	Total effect of IFRS transition	31 Dec 2021 IFRS

ASSETS
Non-current assets
Intangible assets
Development costs		15 110	-	15 110
Other intangible assets	1	599	-599	-
Total intangible assets		15 709	-599	15 110
Tangible assets	1	599	599	3 178
Right-of-use assets	2	-	1 075	1 075
Investments		-	-	3 000
Non-current receivables		705	-	705
Deferred tax assets		-	6	6
Total non-current assets		21 992	1 082	23 074

Current assets
Non-current receivables
Stock		17	-	17
Trade and other receivables		20 163	-	20 163
Contract assets		2 348	-	2 348
Other current financial assets	5	3 995	144	4 139
Cash and cash equivalents		51 384	-	51 384
Total current assets		77 909	144	78 052
			-
Total assets		99 901	1 225	101 126

EQUITY
Share capital		80	-	80
Share premium		38	-	38
Invested non-restricted equity reserve	1	56 866	-1 087	55 779
Retained earnings	2, 3, 4, 5	30 342	1 180	31 522
Total equity		87 326	93	87 419

LIABILITIES
Non-current liabilities
Government loan		1 837	-	1 837
Lease liabilities	2	-	218	218
Deferred tax liabilities		-	-	-
Total non-current liabilities		1 837	218	2 055

Current liabilities
Government loan		919	-	919
Lease liabilities	2	-	884	884
Derivative instruments		-	-	-
Trade and other payables		9 820	28	9 848
Total current liabilities		10 739	912	11 651

Total liabilities		12 575	1 131	13 706

Total equity and liabilities		99 901	1 225	101 126


BALANCE SHEET 31 December 2020

EUR 1 000	Note	31 Dec 2020 FAS	Total effect of IFRS transition	31 Dec 2020 IFRS

ASSETS
Non-current assets
Intangible assets
Development costs	3	6 621	972	7 593
Other intangible assets	1	1 052	-1 052	-
Total intangible assets		7 673	-80	7 593
Tangible assets	1	2 218	1 052	3 271
Right-of-use assets	2	-	1 936	1 936
Investments		-	-	-
Non-current receivables		553	-	553
Deferred tax assets		-	18	18
Total non-current assets		10 444	2 926	13 370

Current assets
Non-current receivables
Stock		-	-	-
Trade and other receivables		5 619	-	5 619
Contract assets		8 602	-	8 602
Other current financial assets		-	-	-
Cash and cash equivalents		23 690	-	23 690
Total current assets		37 911	-	37 911
			-
Total assets		48 355	2 926	51 281

EQUITY
Share capital		80	-	80
Share premium		38	0	38
Invested non-restricted equity reserve		13 748	-	13 748
Retained earnings	2, 3, 4, 5	21 526	706	22 232
Total equity		35 391	707	36 098

LIABILITIES
Non-current liabilities
Government loan		2 755	0	2 755
Lease liabilities	2	-	1 100	1 100
Deferred tax liabilities		-	194	194
Total non-current liabilities		2 755	1 295	4 050

Current liabilities
Government loan		919	-	919
Lease liabilities	2	-	869	869
Derivative instruments	5	-	56	56
Trade and other payables		9 289	-	9 289
Total current liabilities		10 208	925	11 133

Total liabilities		12 963	2 220	15 183

Total equity and liabilities		48 355	2 926	51 281

OPENING BALANCE 1 January 2020

EUR 1 000	Note	1 Jan 2020 FAS	Total effect of IFRS transition	1 Jan 2020 IFRS

ASSETS
Non-current assets
Intangible assets
Development costs	3	1 510	5 745	7 255
Other intangible assets	1	1 333	-1 333	-
Total intangible assets		2 843	4 412	7 255
Tangible assets	1	1 771	1 333	3 104
Right-of-use assets	2	-	2 725	2 725
Investments		-	-	-
Non-current receivables		521	-	521
Deferred tax assets		-	5	5
Total non-current assets		5 135	8 475	13 610

Current assets
Non-current receivables		-	-	-
Stock		-	-	-
Trade and other receivables		1 989	-	1 989
Contract assets		9 223	-	9 223
Other current financial assets		-	-	-
Cash and cash equivalents		19 550	-	19 550
Total current assets		30 762	-	30 762
			-
Total assets		35 896	8 476	44 372

EQUITY
Share capital		80	-	80
Share premium		38	-	38
Invested non-restricted equity reserve		13 748	-	13 748
Retained earnings	2, 3, 4, 5	12 517	4 578	17 095
Total equity		26 383	4 577	30 960

LIABILITIES
Non-current liabilities
Government loan		3 674	-	3 674
Lease liabilities	2	-	1 919	1 919
Deferred tax liabilities		-	1 149	1 149
Total non-current liabilities		3 674	3 068	6 742

Current liabilities
Government loan		-	-	-
Lease liabilities	2	-	830	830
Derivative instruments	5	-	-	-
Trade and other payables		5 840	-	5 840
Total current liabilities		5 840	830	6 670

Total liabilities		9 514	3 898	13 412

Total equity and liabilities		35 896	8 476	44 372

IFRS NOTES

Outlined below are the accounting policies that due to the adoption of IFRS have had the most significant effects on the statement of comprehensive income and balance sheet of Remedy for the fiscal year 2021, for the comparison period 2020 and for the opening balance of 1 January 2020. The Company mainly recognized deferred taxes on all adjustments except share-based payments and expenses related to paid increase in share capital, using the Finnish corporate tax rate (20 %).

1) Reclassification (IAS 16 Intangible assets): The refurbishment costs for the leased office space of the Company were shown under other intangible assets in the FAS financial statements. In the transition they were reclassified to tangible assets based on their nature (item Other tangible assets) and related amortization transferred under depreciation. Expenses related to paid increase in share capital were shown under other operating expenses in the FAS financial statements. In the transition they were reclassified to invested non-restricted equity reserve.

2) Leased assets (IFRS 16 Leases): Remedy leases office premises and machinery and equipment. Under FAS Remedy recorded all rental expenses in the financial year to which they related. Lease obligations were presented as an off-balance sheet item under commitments. In the transition an equal IFRS 16 adjustment was recognized under the right-of-use assets and financial liabilities on 1 January 2020. Lease payments previously presented under other operating expenses are now apportioned between the reduction of the lease liability and the interest charge on the lease liability. Furthermore, depreciation of the right-of-use assets is recorded in profit or loss. Remedy applied the recognition exemptions for both short-term leases (a lease term of 12 months or less) and for leases of low-value assets. Any lease accruals presented under accrued expenses have been transferred to the lease liability. In cash flow statement leased assets are presented in cash flows from investing activities in IFRS financial statement. In FAS financial statement, leased assets are part of cash flows from operating activities.

3) Development costs (IAS 38 Intangible Assets): The Company started to capitalize development costs for new projects that are based on the Company’s own game brands, effective from 1 January 2019 in its FAS financial statements. IFRS requires capitalization of development costs where the related recognition criteria are met. Therefore, in the transition the Company also capitalized development costs for a project launched prior to 1 January 2019. As a temporary difference exists between the capitalized development costs and the tax base, a deferred tax liability has been recognized. This together with the development costs capitalized in the opening IFRS balance sheet on 1 January 2020 increase the amount of amortization. The capitalized amounts are presented under Capitalization of development costs in the comprehensive income statement in FAS. In IFRS the capitalized amounts are part of materials and services, personnel expenses and other operating expenses. This together with the development costs capitalized in the opening IFRS balance sheet on 1 January 2020 increase the amount of amortization.

4) Share options (IFRS 2 Share-based Payments): Remedy has four share option plans for the key personnel and the related payments are made with equity instruments. In FAS financial statements option plans are not accounted for through profit or loss. Under IFRS share options are measured at the grant-date fair value and recognized as expenses over the vesting period. A contra-entry is made to equity, so the equity balance is not affected.

5) Financial instruments (IFRS 9 Financial instruments): Remedy had during financial years 2020 and 2021, but however not anymore at the end of reporting period 2021, open currency derivate agreements, which aren't measured at fair value in income statements according to FAS. In IFRS currency derivatives are measured at fair value at the closing date of the reporting period. In 2021 Remedy had also equity fund investments, which are measured at acquisition cost in FAS and only impairment is measured in financial statement. In IFRS these investments have been measured at fair value.

Effect of IFRS transition to shareholder’s equity and profit

Shareholder’s equity

EUR 1 000	Note	31 Dec 2021	31 Dec 2020	1 Jan 2020
Equity FAS		87 326	35 391	26 383

IFRS effects:
Leased assets	2	-22	-26	-19
Development costs	3	0	778	4596
Share options	4	0	0	0
Financial instruments	5	115	-45	0
Total effects		93	706	4578

Equity IFRS		87 419	36 097	30 961
Profit
EUR 1 000	Note	1 Oct 2021-31 Dec 2021	1 Oct 2020-31 Dec 2020	1 Jan 2021-31 Dec 2021	1 Jan 2020-31 Dec 2020
Profit FAS		8989	5210	10 777	10 337

IFRS effects:
Leased assets	2	3	4	5	-8
Development costs	3	0	-531	-778	-3819
Share options	4	-928	-419	-2457	-1054
Financial instruments	5	115	-45	1247	-45
Total effects		-810	-992	-1983	-4925

Profit IFRS		8 178	4 218	8 794	5 412

KEY FIGURES, IFRS



EUR 1 000, unless otherwise indicated	1.1.-31.12.2021	1.10.-31.12.2021	1.7.-30.9.2021	1.4.-30.6.2021	1.1.-31.3.2021	1.1.-31.12.2020
Financial key figures

Revenue	44 726	19 796	7 398	9 417	8 116	41 086
Growth in revenue, %	8,9 %	45,7 %	-29,7 %	-3,4 %	12,3 %	29,8 %
EBITDA	14 450	10 886	369	2 325	871	13 953
Operating profit (EBIT)	11 407	10 343	-212	1 477	-201	7 248
Operating profit, % of revenue	25,5 %	52,2 %	-2,9 %	15,7 %	-2,5 %	17,6 %
Result for review period	8 794	8 178	-356	1 003	-31	5 412
Result for review period, % of revenue	19,7 %	41,3 %	-4,8 %	10,6 %	-0,4 %	13,2 %
Balance sheet total	101 126	101 126	93 079	90 710	91 541	51 281
Cash flow from operations	6 052	- 2176	4 769	-755	4 215	12 586
Net cash	47 526	47 526	51 998	55 362	60 658	18 047
Cash position	51 384	51 384	56 994	60 575	66 089	23 690
Net gearing, %	-54,4 %	-54,4 %	-66,4 %	-72,3 %	-78,7 %	-50,0 %
Equity ratio, %	86,4 %	86,4 %	84,1 %	84,4 %	84,2 %	70,4 %
Capital expenditures	9 602	2 296	2 722	2 531	2 053	6 346
Average number of personnel during review period	280	282	286	280	274	265
Personnel (headcount) at the end of review period	294	294	294	293	281	275
Earnings per share, €	0,67	0,61	-0,03	0,08	0,00	0,45
Earnings per share, € (diluted)	0,65	0,61	-0,03	0,07	0,00	0,43
Number of shares at the end of period	13 298 450	13 072 150	13 072 150	13 072 150	13 072 150	12 072 150

KEY FIGURES

This announcement includes certain alternative performance measures of Remedy’s historical financial performance, financial position, and cash flows, which, in accordance with the “Alternative Performance Measures” guidance issued by the European Securities and Markets Authority (“ESMA”), are not accounting measures defined or specified in IFRS, and they must therefore be considered alternative performance measures.

Remedy presents the alternative performance measures as additional information to the financial measures presented in the income statement, balance sheet, statement of cash flows, and the notes prepared in accordance with IFRS. In Remedy’s view, alternative performance measures provide management, investors, securities market analysts, and other parties with relevant and useful additional information on Remedy’s results of operations, financial position, and cash flows.

The Definitions and Reasons for the Use of Key Figures

Key figure	Definition	Reason for the use
EBITDA	Operating profit (EBIT) added by depreciation and amortization	EBITDA describes the profitability of business operations without the effect of depreciation and amortization.
Operating profit (EBIT)	Profit (loss) before taxes and financial items.	Operating profit EBIT describes the profitability of business operations.
Operating profit, % of revenue	Operating profit (EBIT) divided by revenue.	Operating profit, %, describes the profitability of business operations.
Net cash	Cash in hand and banks subtracted by interest-bearing liabilities	Net cash describes cash position of the company taking interest-bearing liabilities into account.
Net gearing, %	Interest-bearing liabilities which is subtracted by cash in hand banks, and the total is divided by shareholder’s equity.	Net gearing describes the financial solidity of the company.
Equity ratio, %	Shareholder’s equity divided by balance sheet total, which has been subtracted by advances received.	Equity ratio describes the financial solidity of the company.
Capital expenditures	Change in tangible and intangible assets added by depreciation of these assets.	Capital expenditures describes the acquisition of non-current means of production.

MORE INFORMATION

Remedy Entertainment Plc
Terhi Kauppi, CFO
Phone: +358 40 577 5117
Email: terhi.kauppi@remedygames.com

Aktia Alexander Corporate Finance Oy, Certified Adviser
Phone: +358 50 520 4098

ABOUT REMEDY

Remedy Entertainment Plc is a globally successful video game company known for story-driven and visually stunning console and PC games such as Control, Alan Wake and Max Payne. Remedy also develops its own Northlight game engine and game development tools. Founded in 1995 and based in Finland, the company employs over 320 game industry professionals from 32 different countries. Remedy is listed on the Nasdaq First North Growth Market Finland marketplace. www.remedygames.com