Games for the Planet

Press

Trading Update

Integration on track, Hattrick quarterly revenue growth restored whilst a proportion of bookable revenue shifts into 2013

London, November 15, 2012

Zattikka, the online games entertainment group, today provides the following update on trading and operational initiatives.

While the Board has seen a material shift in bookable revenue from 2012 into 2013, it is pleased to report that the Group is making good progress with a number of key strategic initiatives. As highlighted in September’s maiden interim results, the Group’s initial focus was on successful integration. Having achieved this, we are now focussed on organic revenue opportunities and targeting selective franchise game acquisition opportunities.

Operational summary

Hattrick

The Hattrick team has a clear development and marketing roadmap, focussed on maximising revenue generating opportunities and subscriber growth. Although revenue bookings are behind expectations, the planned turnaround of the Hattrick business is now on track and is clearly demonstrated in second half results.

Product improvements and tactical marketing have resulted in a rising growth trend from both new and renewing subscribers, delivering quarter-on-quarter revenue growth, with the third quarter revenue bookings up 47% on the second quarter and the outlook for the final quarter revenue is substantially up on the third quarter. More importantly, these quarters are also up on the prior year, and September 2012 had the highest monthly revenue bookings since June 2011. In addition, operating costs have been streamlined by closing an overseas office, consolidating support activities in London and a new team structure has been established.

We continue to evolve the pricing structure and payment options for the Hattrick game and a new international pricing tariff is expected to be launched late in the fourth quarter. This will help to drive an increase in conversion in developing markets, attracting more paying subscribers to the game.

Game Development

Our newly formed studio focusing on mobile orientated games, Spellgun West, will launch mobile and tablet versions of Legacy of a Thousand Suns, a successful 5th Planet game and Facebook property, in December. The complexity of the game has delayed this launch from October, shifting the expected revenue to 2013.

As noted in our interim results announcement, at Sneaky Games, we were conducting a more rigorous review of the pre-acquisition games performance on Facebook utilising SNAP. Vampire Legacy and Monster Island were found to be not meeting acceptable monetisation levels. Sneaky Games has therefore refocused resources towards integrated Group activities and boosting the performance of Fantasy Kingdoms, through localisation into German, with other languages planned.

Sneaky Games has also begun work on a major new franchise property, “Hero Wars”. This exciting opportunity is now expected to be launched in the first half of 2013. In addition, the Sneaky team is building a ‘Zattikka Game Network’ to add to our SNAP offering with the aim of enhancing the Group’s ability to cross sell products by leveraging individual game audiences. As such it is generating significantly reduced revenue in this period.

While good progress has been made on game development, the disappointments around Vampire Legacy and Monster Island together with the delay in Legacy of a Thousand Suns and the later than expected launch of Hero Wars, will result in revenue in 2012 being lower than expected and new game revenues being pushed into 2013.

Publishing Services

At Concept Art House (“CAH”) revenues were lower than expected in September and October attributable to lower average transaction sizes. Following recent management changes, the team is focussed on expanding recurring revenue, transaction sizes and the sales pipeline. Results include an extension of work for two major clients, Riot Games (League of Legends) and Applibot (Legend of the Cryptids) and several new international clients, among them the third largest global social game company Peak Games based in Turkey. We are confident that, although the revenue dipped behind expectations, the recent changes we have made in CAH are already beginning to restore its growth.
Acquisition strategy

As outlined during the Group’s admission to AIM in April 2012, Zattikka’s growth strategy is to combine organic growth with targeted franchise game IP acquisition opportunities. At this stage we are looking to build a shared audience across the lucrative 10-40 age group that can be used to cross sell product across the product portfolio and grow the Zattikka Game Network. This strategy continues to be a significant focus for senior management with a number of attractive acquisition opportunities identified. It is the Board’s view that the sooner the Group can add a number of larger franchise game properties the greater the benefit will be to the Group’s overall growth.

Outlook

Progress since April 2012 has been steady with management placing a heavy emphasis on completing the complex integration of four separate trading entities. Whilst the rationale of these acquisitions remains sound, the shift in focus from integration to delivering growth of these assets has been slower than previously anticipated. Although growth in revenues has begun, which is particularly pleasing at Hattrick, we believe at the end of this quarter the pro-forma revenues for 2012 will now be broadly in the range of $10m to $11m.

The Board believes that the market for digital games entertainment continues to grow strongly, particularly in the key growth territories of North America and Asia where Zattikka has a good market presence. The Board remains confident that the strategy of multiple strong franchises, with diverse revenue streams, across multiple growing digital platforms will deliver shareholder value over time.

About Zattikka: 

Zattikka plc is a digital games entertainment group, developing games and providing publishing services in this sector of the rapidly evolving multi-billion dollar global digital entertainment market. Zattikka is executing a clear vision to become a large scale, diverse games publisher through strategic acquisitions and by accelerating organic growth. Headquartered in the United Kingdom with shares listed on London’s AIM (ZATT), Zattikka games studios include Sneaky Games (USA), Spellgun (USA and China) and Hattrick (Europe). Business to business services include high quality game art and design services provided by Concept Art House (USA and China) and in-game analytics insights through its bespoke SNAP technology platform developed in London.

Contact: 

Zattikka

Mark Opzoomer, Chief Executive Officer

+44 (0) 20 7491 6410

Rob Gorle, Chief Financial Officer

Canaccord Genuity Limited
(Nominated Adviser and Broker)

Simon Bridges / Peter Stewart

+44 (0) 20 7523 8000

Buchanan

Jeremy Garcia / Clare Akhurst

+44 (0) 20 7466 5000

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Zattikka

Zattikka plc is a company registered in England. Company number: 07850423
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