The directors present the strategic report for the year ended 31 December 2023.
The principal activity of the company is as a technology-based distribution partner between digital video games producers and online retailers. The business combines a cloud-based market-leading technology stack with a wraparound product management and marketing service to effectively manage product launch and promotional sales campaigns between more than 130 content creators and a network in excess of 300 digital sales channels. The company works with many of the world's top 10 video games publishers and some of the largest global online retail channels.
For the year under review, the overall profit for the period before tax was £5,270,600 (2022: £3,535,008), which the Directors consider a very positive result as continued profitable growth was achieved.
Financial Highlights which include our financial key performance indicators are as follows:
- Turnover for the year of £104,668,517 was up from £89,019,077 (up 18%) on 2022
- Gross profit of £9,356,271 up from £8,271,050 (up 13%) on 2022
- Operating profit of £5,303,169 up from £3,534,296 (up 50%) on 2022
- Profit before tax of £5,270,600 was up from £3,535,008 (up 49%) on 2022
The company's net assets have increased by £4,188,979 to £8,317,190. Cash balances at the year-end had decreased from £13,538,232 to £5,896,477.
Non- financial key performance indicators are included below.
Over the course of the 12-month period, the company grew by using several levers. Firstly, the number of publisher relationships for distributing content grew to almost 197 by the end of 2023 with a 52% increase of new Publishers signed compared to 2022 plus the scope of the geographical distribution rights expanded, with most agreements covering global distribution.
Secondly, the number of (direct and indirect affiliate) sales channels grew to over 500, covering more than 200 countries across the globe - increasing the penetration in ASIA and North America.
Thirdly, the number of relationships between the existing GENBA network increased enormously. Monthly unique promotional relationships (a proxy for the scale of sales campaigns) have grown 47% from an average of 1,870 in 2022 to 2,744 in 2023.
There were more than 13m units sold in the 12 months of 2023. Promotional sales continued to perform strongly while we also achieved an increase in new release sales.
Being part of the wider Azerion Group (Azerion Group NV), has enabled Genba to offer additional services to the market via advertising campaigns to improve awareness, sales and data analytics for our partners. This opportunity has been growing within the games industry with the first campaigns being driven in December 2022.
As the Genba business consolidates further into the Azerion network, a new Azerion London office was opened in November 2022 in London which now includes Genba within this building. This move has made for a more cost effective solution for the Azerion Group and Genba, bringing further benefits to the employees.
The company's customer base is concentrated within the gaming industry, and consequently, the principal risk to the business is posed by a potential reduction in demand, both in the UK and abroad of the sale of digital content via third parties.
An area of uncertainty is the future business model of Valve who supply the Steam keys for 3rd party distribution. Should they restrict or charge for Steam keys, this would have a detrimental effect on Genba's ability to service the market.
The dedicated account management team ensures that the company remains close to its clients and their changing demands within the digital video games and software industries.
The main technological risk is that the GENBA platform could become obsolete or develop significant technical debt. The investment of the Genba inhouse technical resources and the additional resources from the acquiring company, Azerion, will ensure that the GENBA platform remains amongst best in class and can handle the demands of clients across the globe from a volume, efficiency, resilience and security perspective.
The Company has budgetary and financial reporting procedures, supported by Key Performance Indicators (KPI's) to manage credit, liquidity and other financial risk.
As Genba continues to grow its business, the debt management becomes an increased focus in order to reduce risk via the implementation of more stringent credit controls with our eTailers.
Given that the company principal activity is to collect large amounts of royalty payments from across the globe on a monthly basis, the company is exposed to some exchange rate risk as royalty amounts collected in one of three currencies don't always match the payments in each currency. The company uses natural hedging to limit this potential financial risk.
In the period under review, the GENBA platform technology that manages the secure distribution of digital content across the globe in real time has proven resilient since its upgrade in 2021.
The platform continues to manage millions of transactions a month while delivering a secure method of key storage and delivery. Constant KPI reviews and investment have been made on the platform throughout 2023 in order to ensure the relevance and integrity.
Section 172 of The Companies Act 2006 states that a director of a company must act in the way it considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole. In doing so a director of a company must have regard (amongst other matters) to:-
The likely consequences of any decision in the long term;
The interests of the company’s employees;
The need to foster the company’s business relationships with suppliers, customers and others;
The impact of the company’s operations on the community and the environment;
The desirability of the company maintaining a reputations for high standards of business conduct;
The need to act fairly as between members of the company.
The Board reviewed their current approach to corporate governance and decision making, engagement with stakeholders and the Company’s impact on the environment. The following summarises how the company’s Board fulfils its duties under Section 172.
Decision Making
The Board fulfils its duties to act in good faith to promote the success of the company through its implementation of Genba Digital’s growth strategy. Our ambition is to make Genba the worlds leading provider of digital PC content, outside of first party platforms such as steam and Epic.
The company strategy allows us to be competitive, flexible and resilient whilst responding to the ever changing landscape of the digital gaming world.
Employee Engagement
Our workforce is our most valuable asset. The company invests in training, coaching, and skills acquisition. Personal development of our employees is a key pillar of the Company’s strategy. We aim to be a responsible employer in our approach to the pay and benefits of employees. The wellbeing of our employees is one of the primary considerations in the way we do business.
Business Relationships
The Board engages with a variety of stakeholders, including customers and suppliers, to inform and enable balanced decisions that incorporate multiple viewpoints, whilst maintaining the Company’s Strategy. In making decisions the Board considers outcomes from engagements with stakeholders as well as the importance of maintaining the Company’s integrity, brand and reputation.
Community and Environment
With Genba being part of the wider Azerion N.V group, our values and initiatives align with the CSR strategy of the group. Initiatives include:
Volunteering work for charities and various other not for profit organisations
Being part of the Dutch Dream foundation, which looks to empower young entrepreneurs and help them on their growth journeys
The path to becoming a carbon neutral group. A cherry orchard was planted in Turkey to help offset the groups carbon footprint. Further similar initiatives will begin to be put in place over the coming years to help the group achieve this goal.
Culture and values
The company’s culture is characterised by clear responsibility, mutual respect and trust. Lawful conduct and fair competition are integral to its business activities and an important condition for maintaining a reputation for high standards of business conduct securing long term success. The company is focused on people, with both customers and employees being at the heart of its business. The company embraces diversity, flexibility, sustainability and continuous improvement throughout the organisation. The company has a customer centric philosophy with transparent, fair and simple processes. The Board and senior management have taken active steps to drive cultural change and to ensure corporate strategy and customer orientation principles and values are embraced across the organisation.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 10.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The Genba business continually reviewed throughout 2023 the work processes and demands on the teams to ensure best practises are being implemented and maintained.
The Commercial teams have built great working relationships with suppliers and content sellers while the operations/finance teams ensure the smooth running of the Genba functions. KPIs were in place for employees to monitor and benchmark the company goals.
Employees welfare is kept at the forefront of decision making with additional company benefits being offered to employees.
Genba has continued to work with UKIE within the UK to help drive the games industry and ensure environmental, economic, etc, standards are being worked towards in line with UK Government targets and legislation.
In accordance with the company's articles, a resolution proposing that Moore Kingston Smith LLP be reappointed as auditor of the company will be put at a General Meeting.
The company is part of the wider group headed by Azerion Holding B.V., and disclosures relating to emissions, energy consumption and energy efficiency activities are reported in the publicly available consolidated financial statements.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs (UK) we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the company.
Our approach was as follows:
We obtained an understanding of the legal and regulatory requirements applicable to the company and considered that the most significant are the Companies Act 2006, UK financial reporting standards as issued by the Financial Reporting Council, and UK taxation legislation.
We obtained an understanding of how the company complies with these requirements by discussions with management and those charged with governance.
We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance.
We inquired of management and those charged with governance as to any known instances of non-compliance or suspected non-compliance with laws and regulations.
Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
The Profit and Loss Account has been prepared on the basis that all operations are continuing operations.
Genba Digital Limited is a private company limited by shares incorporated in England and Wales. The registered office is The Crane Building, 22 Lavington Street, London, United Kingdom, SE1 0NZ.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of Azerion Group N.V, a company registered in the Netherlands. These consolidated financial statements are available from its from its website, https://www.azerion.com.
Turnover is recognised at the fair value of the consideration received or receivable for services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
At each reporting period end date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The Directors do not deem there to be any critical judgements and accounting estimates.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2022 - 1).
Included in the above is £30,000 (2022: £nil) paid to a former director as part of a settlement agreement entered into in the year.
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
A prior period restatement has been made to reclassify a material debtor of £11,237,873 from trade debtors to amounts owed by group undertakings to better reflect the true nature of the trading relationship. The intercompany loan is interest free and repayable on demand.
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
After the year end, the immediate parent company Azerion Games en Content Holdings B.V. merged with Azerion Tech Holdings B.V.. As a result, Azerion Tech Holdings B.V. became the immediate parent company.
The company has taken advantage of the exemption available in FRS 102 Paragraph 33.1A whereby it has not disclosed transactions with any wholly owned subsidiary undertaking.
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Azerion Group N.V. is the smallest and largest group for which consolidated financial statements including the company are prepared. The consolidated financial statements of Azerion Group N.V. are available from its website, https://www.azerion.com.